General Steel Provides Operational Update and Comments on the Status of its Filings on Forms 10-Q and 10-K
BEIJING, March 30, 2012 /PRNewswire-Asia-FirstCall/ -- General Steel Holdings, Inc. ("General Steel" or "the Company") (NYSE: GSI), one of China's leading non-state-owned producers of steel products and aggregators of domestic steel companies, today provided an update on key operating achievements, strategic initiatives and recent developments within the primary end-markets served by its subsidiary, Shaanxi Longmen Iron and Steel Co., Ltd. also known as "Longmen Joint Venture".
"In 2011, we signed a Unified Management Agreement with Shaanxi Iron and Steel Group, Co. Ltd. ("Shaanxi Steel") and Shaanxi Coal and Chemical Industry Group Co., Ltd. ("Shaanxi Coal"), which significantly bolstered output at our Longmen facility and led to record full-year sales volume of approximately 5 million to 5.5 million metric tons and sales revenue of approximately $3 billion to $3.6 billion in 2011, while also helped reduce expenses through efficiency optimization, reduced energy consumption and improved cost structure," said General Steel Chairman and Chief Executive Officer, Mr. Henry Yu.
"The markets we serve have remained strong. Government supported housing and infrastructure development projects in the Western region of China are driving demand, particularly in Shaanxi Province, which is the center of Western China's development. Although steel prices faced pressure in the second half of 2011, they have rebounded in 2012 which, coupled with the strong end-market demand, should support growth in sales of rebar and other steel products. Notably, during the 2012 National People's Congress, the central government raised its 2012 fiscal spending budget 14% year-over-year to $1.92 trillion. Under this new budget, public housing has risen to 23% of total spending, which we believe presents a meaningful opportunity to support the ongoing infrastructure growth in Western China."
In 2011, General Steel completed the installation and testing of a one million ton high-speed wire production line and a 1.2 million ton rebar production line, both of which were transferred to the Longmen facility from the Company's Maoming facility to leverage economies of scale. Having these production lines at the Longmen facility allows the Company to roll high-speed wire and produce rebar from freshly manufactured steel billet, and thus reduce the production costs by eliminating the process of cooling, transporting and re-heating of steel billet for processing at another location.
General Steel remains committed to increasing shareholder value. In addition to the Company's prior share repurchase program, which authorized the purchase of up to 2 million shares of its common stock in 2010 and 2011, General Steel's Board of Directors approved a new share repurchase program on March 27, 2012. Under the terms of the newly authorized repurchase program, General Steel may repurchase up to an aggregate of 2 million shares of its common stock in the open market or in privately negotiated transactions in accordance with applicable federal securities laws, without an expiration date. Together with the previous share repurchase program, the Company may now repurchase up to a total of 4 million shares of its common stock.
In addition, the Company provided an update on the status of its delayed filing of quarterly reports on Form 10-Q for the periods ended June 30, 2011 and September 30, 2011 and its upcoming annual report on Form 10-K for the year ended December 31, 2011. In 2011, PricewaterhouseCoopers Zhong Tian CPAs Limited Company ("PwC") was engaged by the Company as the Company's independent registered public accountant to conduct the audit of the Company's consolidated financial statements for the year ended December 31, 2011. The Company has delayed its filings because it has been reassessing the accounting treatment with regard to its collaboration with Shaanxi Steel on the construction of equipment by Shaanxi Steel for the period from June 2009 to December 2010. Due to these delays, the Company also announced that it has filed a Notification of Late Filing on Form 12b-25 with respect to its annual report on Form 10-K for the year ended December 31, 2011.
As part of this process, the Company submitted documentation related to the aforementioned item to the Office of Chief Accountant ("OCA") of the U.S. Securities & Exchange Commission ("SEC"), with a request that the OCA provide their view on the Company's accounting treatment for this item. Following receipt of the OCA's view on this matter, the Company will file its quarterly reports on Form 10-Q and its Annual Report on Form 10-K as soon as practicable. The Company has had ongoing discussions with the members of its Audit Committee to ensure they are well-informed on the progress related to these delayed filings. To date, the Company has gone through several rounds of discussion with the staff at OCA.
"General Steel is committed to upholding the highest standards of internal controls and accounting policies. Our finance team is working diligently with the OCA and PwC on the accounting treatment issue in an effort to resolve the matter," said John Chen, Chief Financial Officer of General Steel. "We are committed to completing and publishing our financial statements and submitting our filings with the SEC as soon as possible once a final determination is made."
The Company also announced that the New York Stock Exchange (the "NYSE") will be notifying the Company that it has fallen below the NYSE's continued listing standard that requires a minimum average closing price of $1.00 per share over 30 consecutive trading days. Under NYSE rules, the Company has a cure period of six months from receipt of the notice to cure the deficiency by regaining compliance with the minimum share price requirement. The Company can regain compliance at any time during the six-month cure period if on the last trading day of any calendar month during the cure period the Company has a closing share price of at least $1.00 and an average closing share price of at least $1.00 over the 30 trading-day period ending on the last trading day of that month.
Subject to compliance with the NYSE's other continued listing requirements and subject to ongoing oversight, the Company's common stock will continue to be listed and trade on the NYSE during the six-month cure period. The Company will send a letter to the NYSE within ten business days following its receipt of the notice to indicate its intention to cure this deficiency. The Company intends to actively monitor the closing bid price of its comment stocks during the cure period, and will evaluate available options to resolve the deficiency and regain compliance with the SEC rules. The Company's business operations and SEC reporting requirements are not affected by the receipt of the NYSE notification.
About General Steel Holdings, Inc.
General Steel Holdings, Inc., (NYSE: GSI), headquartered in Beijing, China, operates a diverse portfolio of Chinese steel companies. With 7 million metric tons of crude steel production capacity under management, its companies serve various industries and produce a variety of steel products including rebar, high-speed wire and spiral-weld pipe. General Steel Holdings, Inc. has steel operations in Shaanxi and Guangdong provinces, Inner Mongolia Autonomous Region and Tianjin municipality. For more information, please visit www.gshi-steel.com.
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This press release may contain certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on management's current expectations or beliefs about future events and financial, political and social trends and assumptions it has made based on information currently available to it. The Company cannot assure that any expectations, forecasts or assumptions made by management in preparing these forward-looking statements will prove accurate, or that any projections will be realized. Actual results could differ materially from those projected in the forward-looking statements as a result of inaccurate assumptions or a number of risks and uncertainties. These risks and uncertainties are set forth in the Company's filings under the Securities Act of 1933 and the Securities Exchange Act of 1934 under "Risk Factors" and elsewhere, and include: (a) those risks and uncertainties related to general economic conditions in China, including regulatory factors that may affect such economic conditions; (b) whether the Company is able to manage its planned growth efficiently and operate profitable operations, including whether its management will be able to identify, hire, train, retain, motivate and manage required personnel or that management will be able to successfully manage and exploit existing and potential market opportunities; (c) whether the Company is able to generate sufficient revenues or obtain financing to sustain and grow its operations; (d) whether the Company is able to successfully fulfill our primary requirements for cash; and (e) other risks, including those disclosed in the Company's Form 10-K, filed with the SEC. Forward-looking statements contained herein speak only as of the date of this release. The Company does not undertake any obligation to update or revise publicly any forward-looking statements, whether to reflect new information, future events or otherwise.
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