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

01 Feb, 2013, 09:13 ET from General Steel Holdings, Inc.

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