2007 Revenue Reaches Record $772 Million, Up 454% Year-over-year, with
4Q Revenues of $268 Million
BEIJING, April 1 /Xinhua-PRNewswire/ -- General Steel Holdings, Inc. ("General Steel") ("The Company") (NYSE Arca: GSI), one of China's leading non-state owned steel products producer; today announced its results for the fourth quarter and year ended December 31, 2007.
Fourth Quarter 2007 Results
Q4 2007 Q4 2006 vs. Q4 2006
Revenue $268.2 million $42.5 million +531%
Gross Profit $21.0 million ($0.34) million --
Net Income $12.1 million $0.51 million +2272%
EPS (Fully Diluted) $0.36 $0.01 +3500%
Fiscal Year 2007 Results
FY 2007 FY 2006 vs. FY 2006
Revenue $772.4 million $139.5 million +454%
Gross Profit $56.7 million $4.17 million +1259%
Net Income $22.4 million $1.03 million +2071%
EPS (Fully Diluted) $0.69 $0.03 +2200%
Recent Company Highlights
-- In December 2007, completed a private placement with net proceeds of
approximately $36.4 million
-- In January 2008, acquired a controlling interest in Hancheng Tongxing
Metallurgy Co., Ltd.
-- In March 2008, approved for listing on the NYSE Arca
"We continued to experience solid growth as evidenced by our ability to make successful acquisitions and deliver measurable revenue growth," said Henry Yu, CEO and Chairman of General Steel Holdings, Inc. "Our 2007 revenue more than quadrupled the prior year. The pipeline of potential acquisitions remains strong as we continue to grow organically and expand our customer base," added Mr. Yu. "We are well positioned to capitalize on what we believe is the beginning of a long-term, secular growth opportunity in steel production." Mr. Yu concluded, "Our proven strategy to grow through aggressive mergers, joint ventures and acquisitions brings us closer to our vision of becoming one of the largest non-government owned steel companies in China."
Fourth Quarter Financial Results
Net sales for the fourth quarter of 2007 increased 531% to $268.2 million compared to $42.5 million for the same quarter in 2006. Cost of sales for the three months ended December 31, 2007 increased 477% to $247.2 million compared to $42.8 for the same period in 2006. Quarterly gross profit for the fourth quarter of 2007 was $21.0 million, compared to -0.34 million for the same period last year, with fourth quarter gross margins of 7.8%. Selling, general and administrative expenses were $5.9 million for the three months ended December 31, 2007, compared to $0.27 million for the same period of 2006. Net income for the 2007 fourth quarter increased to $12.1 million, representing earnings per share of $0.36, from $0.51 million in net income, or $0.01 per share during the fourth quarter of 2006.
Year End Financial Results
Net sales increased approximately 454% to $772.4 million for year ended December 31, 2007, as compared to $139.5 million for 2006. Gross profit for 2007 was approximately $56.7 million, an increase of 1259% or $52.5 million from $4.17 million for 2006. Gross profit margin increased to 7.3 percent from 2.9 percent for 2007 and 2006 respectively. Operating income was $40.5 million, compared to $1.7 million for 2006. Net income was $22.4 million for 2007, compared with $1.03 million in 2006, an increase of $21.4 million, or approximately 2071%. This equated to earnings of $0.69 per share (fully diluted) compared to $0.03 per share for 2006.
Pursuant to SFAS 133 and EITF 00-19, the Company determined that both the warrants and the conversion option embedded in the Notes it issued on December 13, 2007 met the definition of a derivative instrument and must be carried as a liability and marked to market each reporting period. As such, depending upon the price of the Company's common stock at the end of the quarter or year there could be an associated gain or loss which are non-cash in nature but will be recurring until such time as the notes are either redeemed or converted and the warrants are exercised. On December 31, 2007, the fair value of derivative liabilities was recalculated and decreased $6,235,754, including $1,659,583 for the decrease in fair value of the warrants and $4,576,171 for the decrease in fair value of the conversion option. The decrease net of $189,432 amortization expense was included in other income (expense), net, which amounted to an impact of $0.19 per diluted share. Net income excluding this gain was $16,379,599, with earnings of $0.50 per share, based on 32,558,350 diluted shares.
As of December 31, 2007, the balance of derivative liabilities was $28,483,308, which consisted of $7,638,461 for the warrants and $20,844,847 for the conversion option, and the carrying value of the Notes was $5,440,416. Amortization of the debt discount totaled $159,478 was recorded as interest expense for the year ended December 31, 2007. The unamortized financing cost was $3,564,546 as of December 31, 2007 and $29,954 was amortized to interest expense for the period.
Balance Sheet
Cash and cash equivalents at December 31, 2007 were $52.1 million. Common shares outstanding at December 31, 2007 were 34.6 million. Accounts receivable were $11.8 million. Inventory grew to $77.9 million as we started two new Joint Ventures with large operations.
Growth Strategy
General Steel is striving to become one of the largest non-government owned steel companies in China:
-- Growth through aggressive mergers, joint ventures, and acquisitions
targeting State-Owned Enterprise (SOE) steel companies and selected
entities with outstanding potential.
-- Once acquired, improve profitability by introducing western management
practices, expanding production processes through prudent capital
expenditure allocations, and enhancing working capital utilization.
Conference Call
The earnings conference call will take place at 5:00 p.m. EDT on Monday, March 31, 2008. Interested participants in the United States should call
1-800-860-2442. Callers should utilize the pass code: General Steel Holdings.
This conference call will be broadcast live over the Internet and can be accessed by clicking this link: http://www.videonewswire.com/event.asp?id=46965
For those unable to participate during the live broadcast, a replay will be available shortly after the call on General Steel Holdings' website http://www.gshi-steel.com for 90 days.
About General Steel Holdings, Inc.
General Steel Holdings, Inc., headquartered in Beijing, operates a diverse portfolio of Chinese steel companies. With 3 million tons aggregate production capacity, its companies serve various industries and produce a variety of steel products including rebar, hot-rolled carbon and silicon sheet and spiral-weld pipe. The Company has steel operations in Shaanxi province, Inner Mongolia Autonomous Region and Tianjin municipality
Information Regarding 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. Such forward-looking statements may be affected by inaccurate assumptions or by known or unknown risks or uncertainties. Actual results may vary materially from those expressed or implied by the statements herein. For factors that could cause actual results to vary, perhaps materially, from these forward-looking statements, please refer to the Company's Form 10-K, filed with the Securities and Exchange Commission, and other subsequent filings. 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.
Financial Statements
GENERAL STEEL HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2007 AND 2006
A S S E T S
2007 2006
CURRENT ASSETS:
Cash $ 43,713,346 $ 6,831,549
Restricted cash 8,391,873 4,231,523
Accounts receivable, net of allowance
for doubtful accounts of $148,224
and $137,132 as of December 31, 2007
and December 31, 2006,
respectively 11,225,678 17,095,718
Accounts receivable - related parties 565,631 --
Notes receivable 4,216,678 537,946
Notes receivable - Restricted 12,514,659 --
Short term loan receivable - Related
Party 1,233,900 --
Other receivables 1,280,853 268,784
Other receivables - related parties 1,913,448 850,400
Inventories 77,928,925 12,489,290
Advances on inventory purchases 58,170,474 2,318,344
Advances on inventory purchases -
related parties 9,944,012 --
Prepaid expenses - current 1,059,866 46,152
Prepaid expenses related party - current 49,356 --
Deferred tax assets 399,751 --
Deferred notes issuance cost 3,564,546 --
Total current assets 236,172,996 44,669,706
PLANT AND EQUIPMENT, net 218,263,367 26,606,594
OTHER ASSETS:
Advances on equipment purchases 742,061 --
Long term investment 822,600 --
Prepaid expenses - non current 506,880 740,868
Prepaid expenses related party -
non current 142,467 --
Intangible assets, net of accumulated
amortization 21,756,709 1,804,440
Total other assets 23,970,717 2,545,308
Total assets $ 478,407,080 $ 73,821,608
L I A B I L I T I E S A N D S H A R E H O L D E R S' E Q U I T Y
CURRENT LIABILITIES:
Accounts payable $ 102,241,708 $ 3,001,775
Accounts payable - related parties 14,302,738 --
Short term loans - bank 93,019,608 30,284,686
Short term loans - others 19,156,070 --
Short term loans - related parties 7,317,027 --
Short term notes payable 15,163,260 8,153,520
Other payables 3,343,684 355,142
Other payable - related parties 2,126,383 --
Accrued liabilities 5,248,863 1,064,012
Customer deposits 37,872,698 1,093,602
Customer deposits - related parties 9,211,736 --
Deposits due to sales representatives 3,068,298 2,051,200
Taxes payable 27,576,240 5,391,602
Investment payable 6,580,800 --
Distribution payable to minority
shareholder 2,820,803 --
Shares subject to mandatory redemption -- 2,179,779
Total current liabilities 349,049,916 53,575,318
NOTES PAYABLE, net of debt discount
$34,559,584 5,440,416 --
DERIVATIVE LIABILITIES 28,483,308 --
Total liabilities 382,973,640 53,575,318
MINORITY INTEREST 42,044,266 6,185,797
SHAREHOLDERS' EQUITY:
Preferred stock, $0.001 par value,
50,000,000 shares authorized,
3,092,899 and 0 shares
issued and outstanding as
of December 31, 2007 and
December 31, 2006,
respectively 3,093
Common Stock, $0.001 par value,
200,000,000 shares authorized,
34,634,765 and 32,426,665 shares
(including 1,176,665
redeemable shares) issued
and outstanding as of December 31,
2007 and December 31, 2006,
respectively 34,635 31,250
Paid-in-capital 23,429,153 6,871,358
Retained earnings 22,686,590 4,974,187
Statutory reserves 3,632,325 1,107,010
Contribution receivable (959,700) -
Accumulated other comprehensive income 4,563,078 1,076,688
Total shareholders' equity 53,389,174 14,060,493
Total liabilities and
shareholders' equity $ 478,407,080 $ 73,821,608
GENERAL STEEL HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE
INCOME
FOR THE YEARS ENDED DECEMBER 31, 2007, 2006 AND 2005
2007 2006 2005
Restated
REVENUES $ 416,900,597 $ 139,494,624 $ 89,739,899
REVENUES - RELATED PARTIES 355,538,568 -- --
TOTAL REVENUES 772,439,165 139,494,624 89,739,899
COST OF SALES 389,614,876 135,324,190 81,165,850
COST OF SALES - RELATED
PARTIES 326,135,528 -- --
TOTAL COST OF SALES 715,750,404 135,324,190 81,165,850
GROSS PROFIT 56,688,761 4,170,434 8,574,049
SELLING, GENERAL AND
ADMINISTRATIVE
EXPENSES 16,163,956 2,421,285 2,781,070
INCOME FROM OPERATIONS 40,524,805 1,749,149 5,792,979
OTHER INCOME (EXPENSE), NET (1,261,817) 82,830 (1,680,842)
INCOME BEFORE PROVISION FOR
INCOME
TAXES 39,262,988 1,831,979 4,112,137
AND MINORITY INTEREST
PROVISION (BENEFIT) FOR
INCOME TAXES
Current 5,224,722 -- --
Deferred (388,525) -- --
Total provision
for income taxes 4,836,197 -- --
INCOME BEFORE MINORITY
INTEREST 34,426,791 1,831,979 4,112,137
LESS MINORITY INTEREST 12,000,870 798,771 1,371,918
NET INCOME 22,425,921 1,033,208 2,740,219
FOREIGN CURRENCY TRANSLATION
GAIN 3,486,390 677,500 399,188
COMPREHENSIVE INCOME $ 25,912,311 $ 1,710,708 $ 3,139,407
WEIGHTED AVERAGE NUMBER OF
SHARES
Basic 32,424,652 31,250,000 31,250,000
Diluted 32,558,350 31,250,000 31,250,000
EARNINGS PER SHARE
Basic $ 0.69 $ 0.03 0.09
Diluted $ 0.69 $ 0.03 0.09
GENERAL STEEL HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2007, 2006 AND 2005
2007 2006 2005
(Restated)
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income $ 22,425,921 $ 1,033,208 $ 2,740,219
Adjustments to reconcile
net income to cash
provided by (used in)
operating activities:
Minority Interest 12,000,870 798,771 1,371,918
Depreciation 9,740,317 1,619,267 1,053,976
Amortization 596,538 297,933 289,938
Loss on disposal of
equipment 10,404 28,137 25,992
Deferred tax assets (383,918) -- --
Stock issued for
services and
compensation 595,776 -- --
Interest expense
accrued on mandatory
redeemable stock 114,135 458,904 114,724
Amortization of
deferred note issuance
cost 29,954 -- --
Amortization of
discount on convertible
notes 159,478 -- --
Change in fair value of
derivative
instrument (6,235,754) -- --
Allowance for bad debt 1,510 132,895 --
(Increase) decrease in
assets:
Accounts receivable 16,247,520 (15,871,902) (451,095)
Accounts receivable -
related parties (543,228) -- --
Notes receivable (9,491,608) (521,888) 373,785
Other receivables (453,072) (152,111) 108,860
Other receivables -
related parties (990,037) (850,400) --
Loan receivable (1,185,030) -- --
Inventories (8,853,823) (1,366,266) 2,378,597
Advances on inventory
purchases (45,012,751) 8,581,191 3,042,837
Advances on inventory
purchases - related
parties (9,550,168) -- --
Prepaid expense -
current (949,243) -- (63,709)
Prepaid expense - non
current 252,872 44,559 (659,742)
Prepaid expense -
current - related
parties (47,401) -- --
Prepaid expense - non
current - related
parties (136,825) -- --
Increase (decrease) in
liabilities:
Accounts payable 88,355,643 2,106,005 523,624
Accounts payable -
related parties 13,736,262 -- --
Other payables 823,345 135,275 (364,090)
Other payable - related
party (76,863,715) (980,000) (10,000)
Accrued liabilities 2,440,134 259,000 506,214
Customer deposits 2,559,598 (221,532) (771,235)
Customer deposits -
related parties 8,846,895 -- --
Taxes payable 20,799,845 3,577,364 (240,347)
Net cash (used in)
provided by
operating activities 39,040,444 (891,590) 9,970,466
CASH FLOWS FROM INVESTING
ACTIVITIES:
Cash acquired from
subsidiary 508,906 - -
Restricted cash 236,655 (1,374,495) 861,897
Notes receivable - related
party - 3,013,680 (2,932,800)
Proceeds from short term
investment - 37,671 -
Acquire long term
investment (790,020) - -
Deposits due to sales
representatives 840,055 732,073 (1,222)
Advance on equipment
purchases (712,671) 1,066,504 (1,037,881)
Prepayments for land use
rights - (72,031) -
Equipment purchases (21,523,962) (2,401,860) (627,941)
Construction in progress - (6,865,560) (4,169,895)
Cash proceeds from sale of
equipment 63,422 - 8,552
Increase in investment
payable 6,320,160
Net cash used in
investing activities (15,057,455) (5,864,018) (7,899,290)
CASH FLOWS FINANCING
ACTIVITIES:
Borrowings on short term
loans - bank 56,812,972 29,663,401 31,967,520
Payments on short term
loans - bank (53,111,728) (27,462,159) (31,246540)
Payments on short term
loans - related parties (17,117) - -
Borrowings on short term
loans - others 5,230,372 - -
Payments on short term
loans - others (12,640,320) - -
Borrowings on short term
notes payable 14,562,702 7,986,252 11,266,840
Payments on short term (12,782,120
notes payable (38,210,634) (5,474,852) (12,782,120)
Cash received from
issuance of convertible
note 36,855,500 - -
Contribution received from
minority shareholders 790,020 - -
Payment to original
shareholders (2,813,644) - -
Cash received from
warrants converted to
common stock 5,300,000 - -
Cash received on issuance
of mandatory
redeemable stock - - 1,606,151
Net cash provided by
financing
activities 12,758,123 4,712,642 811,851
EFFECTS OF EXCHANGE RATE
CHANGE IN
CASH 140,685 226,142 217,536
INCREASE (DECREASE) IN CASH 36,881,797 (1,816,824) 3,100,563
CASH, beginning of year 6,831,549 8,648,373 5,547,810
CASH, end of year $ 43,713,346 $ 6,831,549 $ 8,648,373
