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General Steel Reports Second and Third Quarter 2011 Financial Results

Company Files Quarterly Reports on Form 10-Q for the Periods Ended June 30 and September 30, 2011

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BEIJING, Feb. 1, 2013 /PRNewswire/ -- 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 announced financial results for the second quarter ended June 30, 2011 and the third quarter ended September 30, 2011. In conjunction with this announcement, the Company has filed the corresponding Quarterly Reports on Form 10-Q with the U.S. Securities & Exchange Commission ("SEC").

"The completion of these financial reports marks an important step forward for General Steel. Our finance team and audit partners continue to work diligently to complete the additional quarterly and annual filings to bring the Company current in its reporting obligations and to regain compliance with NYSE continued listing requirements," said Henry Yu, Chairman and Chief Executive Officer of General Steel. "We have made a great deal of operational progress. I believe that our business is markedly stronger as a result of favorable trends in our core market of Western China, as well as internal measures we have taken to improve our business at the manufacturing level and elsewhere. I would like to thank our team for their tireless efforts to complete these filings and our shareholders for their continued support of the Company."

General Steel is currently preparing its Annual Report on Form 10-K for the year ended December 31, 2011 and expects to file it around February 15, 2013. General Steel is also preparing its Quarterly Reports on Form 10-Q for the first, second and third quarters of 2012, and plans to file these reports with the SEC as soon as practicable.

Second Quarter 2011 Financial Summary

  • Revenue increased 111.6% year-over-year to $1.1 billion in the second quarter of 2011, from $502.0 million in the second quarter of 2010.
  • Second quarter 2011 sales volume totaled approximately 1.8 million metric tons, compared with 1.0 million metric tons in the second quarter of 2010.
  • Gross profit increased 216.9% year-over-year to $23.3 million, or 2.2% of revenue, up from $7.4 million, or 1.5% of revenue in the second quarter of 2010.
  • Operating loss for the quarter was $(3.7) million, compared with an operating loss of $(6.3) million in the second quarter of 2010.
  • Net loss attributable to the Company was $(22.9) million, or $(0.42) per diluted share based on 54.3 million weighted average shares outstanding, compared with a net loss of $(2.0) million, or $(0.04) per diluted share based on 52.1 million weighted average shares outstanding in the second quarter of 2010. The increased net loss for the second quarter of 2011 was primarily attributable to a $5.4 million increase in impairment charge on equipment, an increase of $6.7 million in interest expense on capital lease and a decrease of $8.9 million related to the change in fair value of derivative liabilities, partially offset by an increase of $3.4 million in gain from debt extinguishment. In addition, we determined the net operating loss carry forward may not be fully realizable and provided 100% valuation allowance charges of $19.3 million on our deferred tax assets.

Third Quarter 2011 Financial Summary

  • Revenue increased 116.9% year-over-year to $998.2 million, from $460.3 million in the same period in 2010.
  • Sales volume in the third quarter of 2011 totaled approximately 1.7 million metric tons, compared with approximately 0.9 million metric tons for the same period in 2010.
  • Gross profit increased 150.6% to $34.1 million, or 3.4% of revenue, compared with $13.6 million, or 3.0% of revenue for the same period in 2010.
  • Operating income totaled $9.7 million, compared with $4.0 million for the same period in 2010.
  • Net loss attributable to the Company was $(13.8) million, or $(0.25) per diluted share, based on 55.2 million weighted average shares outstanding, compared with a net loss of $(3.8) million, or $(0.07) per diluted share, based on 53.9 million weighted average shares outstanding in the third quarter of 2010. The increase in net loss for the third quarter of 2011 was primarily related to an increase of $5.5 million in impairment charges on equipment, an increase of $10.6 million in interest expense on capital lease and a $14.3 million increase in interest expense on bank borrowings, partially offset by $9.7 million in operating income.

Balance Sheet

As of September 30, 2011, General Steel had cash and restricted cash of approximately $282.4 million, compared to $263.1 million as of December 31, 2010. The Company had an inventory balance of approximately $432.1 million as of September 30, 2011 compared to $453.6 million as of December 31, 2010. As of September 30, 2011, the Company had total liabilities of approximately $2.8 billion.

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 subsidiaries 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.

To be added to the General Steel email list to receive Company news, please send your request to generalsteel@tpg-ir.com.

Forward-Looking Statements

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.

Contact Us

In China:
Jenny Wang
General Steel Holdings, Inc.
Tel: +86-10-5775-7691
Email: jenny.wang@gshi-steel.com

In the US:
Joyce Sung
General Steel Holdings, Inc.
Tel: (347) 534-1435
Email: joyce.sung@gshi-steel.com

The Piacente Group, Inc.
Investor Relations
Brandi Floberg or Lee Roth
Tel: (212) 481-2050
Email: generalsteel@tpg-ir.com

 

GENERAL STEEL HOLDINGS INC. AND SUBSIDIARIES









CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

(In thousands)









ASSETS






September 30,


December 31,






2011


2010









CURRENT ASSETS:






 Cash 

$

91,713

$

65,271


 Restricted cash 


190,681


197,797


 Notes receivable 


30,907


49,147


 Restricted notes receivable 


516,662


240,298


 Accounts receivable, net 


38,362


18,500


 Accounts receivable - related parties 


10,594


4,160


 Other receivables, net 


20,132


11,150


 Other receivables - related parties 


87,748


10,938


 Inventories 


432,144


453,636


 Advances on inventory purchase 


108,031


24,577


 Advances on inventory purchase - related parties 


79,893


6,187


 Prepaid expense 


898


5,018


 Prepaid value added tax 


15,170


37,323


 Short term investment 


2,660


-


 Deferred tax assets 


166


15,301


      TOTAL CURRENT ASSETS 

1,625,761


1,139,303









 PLANT AND EQUIPMENT, net 


1,213,799


602,612









 OTHER ASSETS: 






 Advances on equipment purchase 


11,268


14,898


 Investment in unconsolidated subsidiaries 


10,522


17,456


 Long-term deferred expense  




679


1,439


 Intangible assets, net of accumulated amortization 


23,824


23,672


      TOTAL OTHER ASSETS 


46,293


57,465










           TOTAL ASSETS 

$

2,885,853

$

1,799,380









 LIABILITIES AND EQUITY 









 CURRENT LIABILITIES: 






 Short term notes payable 

$

554,931

$

480,152


 Accounts payable 


404,960


241,367


 Accounts payable - related parties 


114,309


79,694


 Short term loans - bank 


402,428


285,198


 Short term loans - others 


227,198


127,712


 Short term loans - related parties 


15,650


14,548


 Other payables and accrued liabilities 


37,962


30,087


 Other payable - related parties 


14,905


18,214


 Customer deposit 


192,153


133,464


 Customer deposit - related parties 


54,385


54,922


 Deposit due to sales representatives 


21,488


52,079


 Taxes payable 


12,020


6,237


 Deferred lease income, current 


2,091


1,971


 Capital lease obligations, current 


18,505


-


      TOTAL CURRENT LIABILITIES 


2,072,985


1,525,645









 NON-CURRENT LIABILITIES: 






 Long-term loans - related party 


107,695


91,020


 Deferred lease income, noncurrent 


76,358


55,620


 Capital lease obligations, noncurrent 


281,510


-


 Profit sharing liability, noncurrent 


296,723


-


      TOTAL NON-CURRENT LIABILITIES 


762,286


146,640

















DERIVATIVE LIABILITIES


48


5,573










      TOTAL LIABILITIES 


2,835,319


1,677,858









 COMMITMENT AND CONTINGENCIES 













 EQUITY: 






 Preferred stock, $0.001 par value, 50,000,000 shares authorized, 3,092,899 shares 






       issued and outstanding as of September 30, 2011 and December 31, 2010 


3


3


 Common Stock, $0.001 par value, 200,000,000 shares authorized, 56,435,838 






      and 54,678,803 issued, 55,344,860 and  54,522,973 outstanding as of  






      September 30, 2011 and December 31, 2010, respectively


55


55


 Treasury stock, at cost, 1,090,978 and 316,760 shares as of September 30, 2011 






      and December 31, 2010, respectively. 


(2,795)


(871)


 Paid-in-capital 


107,698


104,970


 Statutory reserves 


6,475


6,202


 Accumulated deficits 


(97,455)


(51,793)


 Accumulated other comprehensive income  


13,071


10,987


      TOTAL GENERAL STEEL HOLDINGS, INC. EQUITY 


27,052


69,553









 NONCONTROLLING INTERESTS 


23,482


51,969










      TOTAL EQUITY 


50,534


121,522










           TOTAL LIABILITIES AND EQUITY 

$

2,885,853

$

1,799,380

 

GENERAL STEEL HOLDINGS, INC. AND SUBSIDIARIES










CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE INCOME (LOSS)

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2011 AND 2010

(UNAUDITED)

(In thousands, except per share data)












For the three months ended June 30,


For the six months ended June 30,



2011


2010


2011


2010

SALES

$

814,599

$

383,173

$

1,316,078

$

700,801










SALES - RELATED PARTIES


247,132


118,506


456,117


253,901

    TOTAL SALES


1,061,731


501,679


1,772,195


954,702










COST OF GOODS SOLD


793,298


369,433


1,291,213


686,996










COST OF GOODS SOLD - RELATED PARTIES


245,093


124,882


452,593


254,596

    TOTAL COST OF GOODS SOLD


1,038,391


494,315


1,743,806


941,592










GROSS PROFIT     


23,340


7,364


28,389


13,110










SELLING, GENERAL AND  ADMINISTRATIVE EXPENSES         


27,033


13,677


41,534


25,813










LOSS FROM OPERATIONS


(3,693)


(6,313)


(13,145)


(12,703)










OTHER INCOME (EXPENSE)









    Interest income


816


617


1,879


1,737

    Finance/interest expense


(23,117)


(16,464)


(37,236)


(27,427)

    Change in fair value of derivative liabilities


1,839


10,729


5,391


14,668

    Gain on debt settlement


3,430


-


3,430


-

    Gain (loss) on disposal of equipments


387


(227)


(10)


(343)

    Income from equity investments


1,856


3,074


3,511


3,229

    Foreign currency transaction gain


1,030


-


1,649


-

    Lease income


512


184


964


320

    Other non-operating income (expense), net


(455)


855


(150)


1,014

         Other expense, net


(13,702)


(1,232)


(20,572)


(6,802)










LOSS BEFORE PROVISION FOR INCOME TAXES









    AND NONCONTROLLING INTEREST


(17,395)


(7,545)


(33,717)


(19,505)










PROVISION FOR INCOME TAXES









    Current


-


170


207


584

    Deferred


18,198


(2,973)


15,240


(5,324)

           Provision (benefit) for income taxes


18,198


(2,803)


15,447


(4,740)










NET LOSS


(35,593)


(4,742)


(49,164)


(14,765)










Less: Net loss attributable to noncontrolling interest


(12,678)


(2,738)


(17,332)


(7,149)










NET LOSS ATTRIBUTABLE TO GENERAL STEEL HOLDINGS, INC.

$

(22,915)

$

(2,004)

$

(31,832)

$

(7,616)










NET LOSS

$

(35,593)

$

(4,742)

$

(49,164)

$

(14,765)










OTHER COMPREHENSIVE LOSS 









    Foreign currency translation adjustments


(287)


312


1,400


151










COMPREHENSIVE LOSS


(35,880)


(4,430)


(47,764)


(14,614)










Less: Comprehensive loss attributable to noncontrolling interest


(12,858)


(2,740)


(17,270)


(7,032)










COMPREHENSIVE LOSS ATTRIBUTABLE TO GENERAL STEEL HOLDINGS, INC.

$

(23,022)

$

(1,690)

$

(30,494)

$

(7,582)










WEIGHTED AVERAGE NUMBER OF SHARES









    Basic and Diluted


54,318


52,112


54,233


51,883










LOSS PER SHARE









    Basic and Diluted

$

(0.42)

$

(0.04)

$

(0.59)

$

(0.15)

 

GENERAL STEEL HOLDINGS, INC. AND SUBSIDIARIES










CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE INCOME (LOSS)

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2011 AND 2010

(UNAUDITED)

(In thousands)












For the three months ended


For the nine months ended



September 30,


September 30,



2011


2010


2011


2010

SALES

$

662,437

$

340,703

$

1,978,515

$

1,041,504










SALES - RELATED PARTIES


335,724


119,574


791,841


373,475

TOTAL SALES


998,161


460,277


2,770,356


1,414,979










COST OF GOODS SOLD


639,239


334,856


1,930,452


1,021,852










COST OF GOODS SOLD - RELATED PARTIES


324,872


111,832


777,465


366,428

TOTAL COST OF GOODS SOLD


964,111


446,688


2,707,917


1,388,280










GROSS PROFIT


34,050


13,589


62,439


26,699










SELLING, GENERAL AND ADMINISTRATIVE EXPENSES


24,309


9,560


65,843


35,373










INCOME (LOSS) FROM OPERATIONS


9,741


4,029


(3,404)


(8,674)










OTHER INCOME (EXPENSE)









Interest income


1,201


1,739


3,080


3,476

Finance/interest expense


(35,081)


(10,190)


(72,317)


(37,617)

Change in fair value of derivative liabilities


135


(1,089)


5,526


13,579

Gain on debt settlement


-


-


3,430


-

Gain (loss) on disposal of equipment


689


(2,781)


679


(3,124)

Government grant


-


1,381


-


1,381

Income from equity investments


790


838


4,301


4,067

Foreign currency transaction gain


1,271


-


2,920


-

Lease income


525


277


1,489


598

Other non-operating expense, net


(1,047)


1,141


(1,197)


2,154

Other expense, net


(31,517)


(8,684)


(52,089)


(15,486)










LOSS BEFORE PROVISION FOR INCOME TAXES









AND NONCONTROLLING INTEREST


(21,776)


(4,655)


(55,493)


(24,160)










PROVISION FOR INCOME TAXES









Current


410


5,332


617


860

Deferred


144


(5,676)


15,384


(5,944)

Provision (benefit) for income taxes


554


(344)


16,001


(5,084)










NET LOSS


(22,330)


(4,311)


(71,494)


(19,076)










Less: Net loss attributable to noncontrolling interest


(8,500)


(527)


(25,832)


(7,676)










NET LOSS ATTRIBUTABLE TO GENERAL STEEL HOLDINGS, INC.

$

(13,830)

$

(3,784)

$

(45,662)

$

(11,400)










NET LOSS

$

(22,330)

$

(4,311)

$

(71,494)

$

(19,076)










OTHER COMPREHENSIVE LOSS









Foreign currency translation adjustments


999


3,295


2,399


3,446










COMPREHENSIVE LOSS


(21,331)


(1,016)


(69,095)


(15,630)










Less: Comprehensive loss income attributable to noncontrolling interest


(8,247)


553


(25,517)


(6,479)










COMPREHENSIVE LOSS ATTRIBUTABLE TO GENERAL STEEL HOLDINGS, INC.

$

(13,084)

$

(1,569)

$

(43,578)

$

(9,151)










WEIGHTED AVERAGE NUMBER OF SHARES









Basic and Diluted


55,166


53,941


54,547


52,577










LOSS PER SHARE









Basic and Diluted

$

(0.25)

$

(0.07)

$

(0.84)

$

(0.22)










 

GENERAL STEEL HOLDINGS, INC. AND SUBSIDIARIES










CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2011 AND 2010

(UNAUDITED)

(In thousands)
















Nine months ended September 30,







2011


2010

CASH FLOWS FROM OPERATING ACTIVITIES:






Net loss

$

(71,494)

$

(19,076)


Adjustments to reconcile net loss to cash provided by (used in) operating activities:






Depreciation and amortization


40,385


31,175


Impairment of plant and equipment


5,412


1,737


Bad debt allowance


127


-


Stock issued for services and compensation


1,288


2,018


Make whole shares interest expense on notes conversion


-


1,130


Change in fair value of derivative liabilities


(5,526)


(13,579)


Gain on stock issued as loan repayment


(3,430)


-


(Gain) loss on disposal of equipment


(679)


3,124


Amortization of deferred note issuance cost and discount on convertible notes


-


17


Amortization of deferred financing cost on capital lease


17,282


-


Income from equity investments


(3,887)


(3,983)


Deferred tax assets


15,384


(5,885)


Deferred lease income


5,286


2,265


Foreign currency transaction gain


(2,920)


-


Changes in operating assets and liabilities






Notes receivable


19,497


(36,702)


Notes receivable - restricted


(264,708)


(12,530)


Accounts receivable


(18,986)


(12,190)


Accounts receivable - related parties


(6,207)


-


Other receivables


(8,626)


1,323


Other receivables - related parties


(50,311)


(26,404)


Inventories


35,305


(44,861)


Advances on inventory purchases


(81,430)


(12,921)


Advances on inventory purchases - related parties


(72,402)


(52,665)


Prepaid expense


4,214


-


Long-term deferred expense


793


-


Prepaid value added tax


22,982


-


Accounts payable


153,604


12,513


Accounts payable - related parties


31,609


30,294


Other payables and accrued liabilities


6,819


(3,542)


Other payables - related parties


(3,827)


18,510


Customer deposits


53,645


(19,283)


Customer deposits - related parties


(2,241)


43,045


Taxes payable


5,501


811


Net cash used in operating activities


(177,541)


(115,659)










CASH FLOWS FROM INVESTING ACTIVITIES:






Restricted cash


13,173


9,281


Acquired long term investment


-


(1,277)


Proceeds from disposal of long-term investment


-


3,678


Dividend receivable


-


938


Cash made to short term investment


(2,620)


-


Cash proceeds from sales of equipment


1,271


306


Advance on equipment purchases


-


(12,698)


Equipment purchase and intangible assets


(54,494)


(56,906)


Net cash used in investing activities


(42,670)


(56,678)










CASH FLOWS FINANCING ACTIVITIES:






Capital contributed by noncontrolling interest


-


1,177


Dividend made to dividend distribution


-


(3,835)


Payments made for treasury stock acquired


(1,925)


-


Borrowings on short term loans - bank


446,532


224,425


Payments on short term loans - bank


(337,038)


(198,770)


Borrowings on short term loan - others


245,381


128,115


Payments on short term loans - others


(151,375)


(137,413)


Borrowings on short term loan - related parties


15,414


91,202


Payments on short term loans - related parties


(9,912)


(11,783)


Borrowings on short term notes payable


859,561


573,413


Payments on short term notes payable


(800,873)


(531,850)


Deposits due to sales representatives


(31,753)


(4,028)


Borrowings on long term loans - related parties


13,587


-


Net cash provided by financing activities


247,599


130,653










EFFECTS OF EXCHANGE RATE CHANGE IN CASH


(946)


1,344










INCREASE (DECREASE) IN CASH


26,442


(40,340)










CASH, beginning of period


65,271


82,118










CASH, end of period

$

91,713

$

41,778

 

SOURCE General Steel Holdings, Inc.



RELATED LINKS
http://www.gshi-steel.com

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