First Quarter revenue reaches a record $291.6 million increasing
675% year over year BEIJING, May 15 /Xinhua-PRNewswire-FirstCall/
-- General Steel Holdings, Inc. ("General Steel") ("Company") (NYSE
Arca: GSI), one of China's leading non-state owned steel products
producer; today announced its financial results for the first
quarter of 2008. First Quarter 2008 Results Q1 2008 Q1 2007 vs. Q1
2007 Revenue $291.6 million $37.6 million +675 % Gross Profit $13.0
million $1.7 million +649 % Net Income $2.2 million $0.47 million
+361 % EPS (Fully $0.063 $0.015 +320 % Diluted) Recent Company
Highlights -- In January 2008, acquired a controlling interest in
Hancheng Tongxing Metallurgy Co., Ltd. -- In March 2008, approved
for listing on the NYSE Arca -- In March 2008, initiated Chicago
Board of Exchange Option Trading -- December 2007, completed a
private placement with net proceeds of approximately $36.4 million
"We are pleased to begin 2008 with our best-ever first quarter
revenue in the history of General Steel," said Henry Yu, CEO and
Chairman of General Steel Holdings, Inc. "Our revenues continue to
be robust as we experience strong demand for our products. The
pipeline of potential acquisitions remains strong as we see
consolidation in the industry gaining traction," added Mr. Yu. "We
believe we are in a unique and outstanding position to capitalize
on the domestic steel industry changes and emerge as one of the
largest non- government owned steel companies in China." First
Quarter 2008 Financial Results Net sales for the three months ended
March 31, 2008 were approximately $291.6 million compared to $37.6
million in the same period of 2007, an increase of 675%. The sharp
increase in net sales is a result of our acquiring controlling
interest position in the Longmen Joint Venture in June 2007, and to
a lesser extent the starting of our Baotou Steel Pipe Joint Venture
which began sales in July 2007. Cost of sales increased to $278.6
million for the three months ended March 31, 2008 from $35.9
million for the same period of 2007, an increase of 676%. Gross
profit for the three months ended March 31, 2008 was approximately
$13.0 million, an increase of 649% or $11.3 million from $1.7
million for the same period of 2007. Gross profit margin decreased
a fraction to 4.5% for the three months ended March 31, 2008 from
4.6% for the same period of 2007. Selling, general and
administrative expenses were $6.5 million for the three months
ended March 31, 2008, compared to $0.6 million for the same period
of 2007. This increase is largely attributable to the operations of
the Longmen Joint Venture, and accounted for approximately $4.4
million in SG&A expense in the first quarter 2008. Net income
was $2.2 million for the three months ended March 31, 2008,
compared to $0.47 million for the same period of 2007, an increase
of 361%. This equated to earnings of $0.063 per share (fully
diluted) compared to $0.015 per share for the same period of 2007.
The increase is largely attributable to the contributions from the
Longmen Joint Venture and the amount of $1.9 million recorded for
the change in fair value of the derivative instrument, net of the
amortization of the discount on notes and interest, in connection
with the issuance of the convertible notes in the fourth quarter of
2007. Pursuant to SFAS 133 and EITF 00-19, the Company determined
that both the warrants and the conversion option embedded in the
Notes 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
March 31, 2008, the fair value of derivative liabilities was
recalculated and decreased $2.7 million including $0.7 million for
the decrease in fair value of the warrants and $2.0 million for the
decrease in fair value of the conversion option. The decrease net
of $0.8 million amortization expense and effective interest charges
was included in other income (expense), net, which amounted to an
impact of $0.055 per diluted share. Net income excluding this gain
was $0.3 million with earnings of $0.008 per share, based on
34,923,614 diluted shares. As of March 31, 2008, the balance of
derivative liabilities was $25.8 million, which consisted of $6.9
million for the warrants and $18.9 million for the conversion
option, and the carrying value of the Notes was $6.1 million.
Balance Sheet Cash and restricted cash at March 31, 2008 were $60.7
million. Common shares outstanding at March 31, 2008 were 34.9
million. Accounts receivable and accounts receivable-related party
were $27.8 million as of March 31, 2008 compared to $11.8 million
on December 31, 2007. Growth Strategy General Steel is striving to
become one of the largest non-government owned steel companies in
China: -- Acquire Chinese steel companies and increase their
profitability and efficiencies with the infusion of applied western
management practices, advanced production technologies and capital
resources. -- Grow through aggressive mergers, joint ventures and
acquisitions targeting state-owned enterprise steel companies and
selected entities with outstanding potential. Conference Call The
earnings conference call will take place at 4:30 p.m. EDT on
Thursday, May 15, 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=48594 . 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. For more information, please contact:
Ross Warner, General Steel Holdings, Inc. Tel: +86-10-5879-7346
(Beijing) Email: Skype: ross.warner.generalsteel Ted Haberfield, HC
International, Inc. Tel: +1-760-755-2716 (USA) Email: Web:
hcinternational.net Financial Statements GENERAL STEEL HOLDINGS
INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS AS OF MARCH 31,
2008 AND DECEMBER 31, 2007 A S S E T S March 31, December 31, 2008
2007 (Unaudited) CURRENT ASSETS: Cash $ 13,247,096 $ 43,713,346
Restricted cash 47,482,412 8,391,873 Accounts receivable, net of
allowance for doubtful accounts of $270,235 and $148,224 as of
March 31, 2008 and December 31, 2007, respectively 13,079,339
11,225,678 Accounts receivable - related parties 14,682,192 565,631
Notes receivable 18,569,839 4,216,678 Notes receivable - restricted
4,359,863 12,514,659 Short-term loan receivable - related parties
1,285,200 1,233,900 Other receivables 786,133 1,280,853 Other
receivables - related parties 2,144,266 1,913,448 Dividend
receivable 613,719 -- Inventories 100,804,450 77,928,925 Advances
on inventory purchases 57,775,966 58,170,474 Advances on inventory
purchases - related parties 37,496,745 9,944,012 Prepaid expenses -
current 1,239,190 1,059,866 Prepaid expenses related party -
current 51,408 49,356 Deferred tax assets 637,598 399,751 Deferred
notes issuance cost 5,120,152 3,564,546 319,375,568 236,172,996
PLANT AND EQUIPMENT, net 255,879,989 218,263,367 OTHER ASSETS:
Advances on equipment purchases 347,848 742,061 Investment in
unconsolidated subsidiaries 9,666,132 822,600 Prepaid expenses - -
non-current 522,193 506,880 Prepaid expenses related party - -
non-current 244,188 142,467 Intangible assets, net of accumulated
amortization 22,575,599 21,756,709 Total other assets 33,355,960
23,970,717 Total assets $ 608,611,517 $ 478,407,080 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 $ 129,291,728 $ 102,241,708 Accounts
payable - related parties 7,795,581 14,302,738 Short-term loans -
bank 93,131,304 93,019,608 Short-term loans - others 34,896,184
19,156,070 Short-term loans - related parties -- 7,317,027
Short-term notes payable 75,327,000 15,163,260 Employee loans
2,356,200 -- Other payables 3,754,540 3,343,684 Other payable -
related parties 21,171 2,126,383 Accrued liabilities 7,164,386
5,248,863 Customer deposits 60,883,030 37,872,698 Customer deposits
- related parties -- 9,211,736 Deposits due to sales
representatives 2,734,620 3,068,298 Taxes payable 22,404,489
27,576,240 Investment payable 6,854,400 6,580,800 Distribution
payable to minority shareholder 2,330,858 2,820,803 Total current
liabilities 448,945,491 349,049,916 NOTES PAYABLE, net of debt
discount $33,861,956 6,138,044 5,440,416 DERIVATIVE LIABILITIES
25,812,545 28,483,308 MINORITY INTEREST 65,701,909 42,044,266
SHAREHOLDERS' EQUITY: Preferred stock, $0.001 par value, 50,000,000
shares authorized, 3,092,899 shares issued and outstanding 3,093
3,093 Common Stock, $0.001 par value, 200,000,000 shares
authorized, 34,861,365 and 34,634,765 shares (including 1,176,665
redeemable shares) issued and outstanding as of March 31, 2008 and
December 31, 2007, respectively 34,861 34,635 Paid-in-capital
25,541,882 23,429,153 Retained earnings 24,527,303 22,686,590
Statutory reserves 3,980,072 3,632,325 Contribution receivable
(959,700) (959,700) Accumulated other comprehensive income
8,886,017 4,563,078 Total shareholders' equity 62,013,528
53,389,174 Total liabilities and shareholders' equity $ 608,611,517
$ 478,407,080 GENERAL STEEL HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007 (UNAUDITED) 2008
2007 REVENUES $ 178,492,167 $ 37,607,971 REVENUES - RELATED PARTIES
113,073,832 -- TOTAL REVENUES 291,565,999 37,607,971 COST OF SALES
166,714,663 35,874,966 COST OF SALES - RELATED PARTIES 111,869,221
-- TOTAL COST OF SALES 278,583,884 35,874,966 GROSS PROFIT
12,982,115 1,733,005 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
6,532,821 630,200 INCOME FROM OPERATIONS 6,449,294 1,102,805 OTHER
EXPENSE, NET 2,366,155 220,676 INCOME BEFORE PROVISION FOR INCOME
TAXES AND MINORITY INTEREST 4,083,139 882,129 PROVISION FOR INCOME
TAXES Current 666,356 127,270 Deferred (216,533) -- Total provision
for income taxes 449,823 127,270 NET INCOME BEFORE MINORITY
INTEREST 3,633,316 754,859 LESS MINORITY INTEREST 1,444,856 279,994
NET INCOME 2,188,460 474,865 OTHER COMPREHENSIVE INCOME: Foreign
currency translation adjustments 4,322,939 223,551 COMPREHENSIVE
INCOME $ 6,511,399 $ 698,416 WEIGHTED AVERAGE NUMBER OF SHARES
Basic 34,836,394 31,320,251 Diluted 34,923,614 31,320,251 EARNING
PER SHARE Basic $ 0.063 $ 0.015 Diluted $ 0.063 $ 0.015 GENERAL
STEEL HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF
CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007
(UNAUDITED) 2008 2007 CASH FLOWS FROM OPERATING ACTIVITIES: Net
income $ 2,188,460 $ 474,865 Adjustments to reconcile net income to
cash provided by (used in) operating activities: Minority interest
1,444,856 279,994 Depreciation 4,499,873 561,709 Amortization
205,146 76,524 Loss on disposal of equipment 9,492 -- Stock issued
for services and compensation 548,456 23,760 Interest expense
accrued on mandatory redeemable stock -- 114,726 Amortization of
deferred note issuance cost 8,894 -- Amortization of discount on
convertible notes 697,628 -- Change in fair value of derivative
instrument (2,670,763) -- Deferred tax assets (216,533) -- Changes
in operating assets and liabilities Accounts receivable (1,459,682)
5,898,381 Accounts receivable - related parties 7,631,355 -- Notes
receivable (13,832,292) (1,517,176) Notes receivable- restricted
8,491,027 -- Other receivables 1,533,823 82,939 Other receivables -
related parties (148,056) 333,000 Inventories (17,647,149)
(1,760,231) Advances on inventory purchases 6,516,616 (11,340,142)
Advances on inventory purchases - related parties (26,563,452) --
Prepaid expense - current (132,390) (123,161) Prepaid expense - -
non-current 5,639 -- Prepaid expense - - non-current - related
parties (93,765) -- Accounts payable 11,144,259 1,951,381 Accounts
payable - related parties (6,951,111) -- Other payables (2,579,136)
(275,480) Other payable - related parties (2,118,101) -- Accrued
liabilities 522,377 (41,648) Customer deposits 20,885,570 1,631,391
Customer deposits - related parties (9,391,133) -- Taxes payable
(9,585,924) 783,398 Net cash used in operating activities
(27,056,016) (2,845,770) CASH FLOWS FROM INVESTING ACTIVITIES: Cash
acquired from subsidiary 702,237 -- Deposits due to sales
representatives (451,457) (411,542) Advance on equipment purchases
416,045 -- Equipment purchases (28,097,609) (126,928) Intangible
assets purchases 143,465 -- Net cash used in investing activities
(27,287,319) (538,470) CASH FLOWS FINANCING ACTIVITIES: Restricted
cash (33,726,504) (2) Borrowings on short-term loans - bank
24,893,037 8,785,581 Payments on short-term loans - bank
(28,568,988) (7,495,481) Borrowings on short-term loans - related
parties 6,168,050 -- Payments on short-term loans - related parties
(5,153,320) -- Borrowings on short-term loan - others 23,147,344 --
Payments on short-term loans - others (16,733,731) -- Borrowings on
short-term notes payable 62,896,500 1,161,090 Payments on
short-term notes payable (11,614,887) (1,161,090) Borrowings on
employee loans 2,306,205 -- Payment to minority shareholders
(594,336) -- Net cash provided by financing activities 23,019,370
1,290,098 EFFECTS OF EXCHANGE RATE CHANGE IN CASH 857,715 60,407
INCREASE (DECREASE) IN CASH (30,466,250) (2,033,735) CASH,
beginning of year 43,713,346 6,831,550 CASH, end of year $
13,247,096 $ 4,797,815 GENERAL STEEL HOLDINGS, INC. AND
SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY FOR
THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007 Preferred stock
Common stock Par Par Paid-in Shares value Shares value capital
BALANCE, January 1, 2007 -- $ -- $31,250,000 $ 31,250 $6,871,358
Net income Common stock issued for conversion of redeemable stock,
$1.95/share 176,665 177 344,328 Common stock issued for service,
$1.32/share 18,000 18 23,742 Foreign currency translation
adjustments BALANCE, March 31, 2007, unaudited -- $ -- $31,444,665
$31,445 $7,239,428 Net income Adjustment to statutory reserve
Registered Capital to be received from Baotou Steel by 05/21/09
Common stock issued for acquisition net of dividend distribution to
Tianjin Victory New 3,092,899 3,093 8,370,907 Conversion of
redeemable stock, $1.95 1,000,000 1,000 1,948,992 Conversion of
warrants, $2.50 2,120,000 2,120 5,297,880 Common stock issued for
compensation, $8.16 70,100 70 571,946 Foreign currency translation
gain BALANCE, December 31, 2007 3,092,899 $ 3,093 34,634,765
$34,635 $23,429,153 Net income Adjustment to statutory reserve
Common stock issued for compensation, $8.16 76,600 77 548,379
Common stock issued for compensation, $10.43 150,000 150 1,564,350
Foreign currency translation adjustments BALANCE, March 31, 2008,
unaudited 3,092,899 $ 3,093 $34,861,365 $34,861 $25,541,882
Retained earnings Statutory reserves Unrestricted BALANCE, January
1, 2007 $ 1,107,010 $ 4,974,187 Net income 474,865 Common stock
issued for conversion of redeemable stock, $1.95/share Common stock
issued for service, $1.32/share Foreign currency translation
adjustments BALANCE, March 31, 2007, unaudited $ 1,107,010 $
5,449,052 Net income 21,951,056 Adjustment to statutory reserve
2,525,315 (2,525,315) Registered Capital to be received from Baotou
Steel by 05/21/09 Common stock issued for acquisition net of
dividend distribution to Tianjin Victory New (2,188,203) Conversion
of redeemable stock, $1.95 Conversion of warrants, $2.50 Common
stock issued for compensation, $8.16 Foreign currency translation
gain BALANCE, December 31, 2007 $ 3,632,325 $ 22,686,590 Net income
2,188,460 Adjustment to statutory reserve 347,747 (347,747) Common
stock issued for compensation, $8.16 Common stock issued for
compensation, $10.43 Foreign currency translation adjustments
BALANCE, March 31, 2008, unaudited $ 3,980,072 $ 24,527,303
Accumulated other Subscriptions comprehensive receivable income
Totals BALANCE, January 1, 2007 $ -- $ 1,076,688 $ 14,060,493 Net
income 474,865 Common stock issued for conversion of redeemable
stock, $1.95/share 344,505 Common stock issued for service,
$1.32/share 23,760 Foreign currency translation adjustments 223,551
223,551 BALANCE, March 31, 2007, unaudited $ -- $ 1,300,239 $
15,127,174 Net income 21,951,056 Adjustment to statutory reserve --
Registered Capital to be received from Baotou Steel by 05/21/09
(959,700) (959,700) Common stock issued for acquisition net of
dividend -- distribution to Tianjin Victory New 6,185,797
Conversion of redeemable stock, $1.95 1,949,992 Conversion of
warrants, $2.50 5,300,000 Common stock issued for compensation,
$8.16 572,016 Foreign currency translation gain 3,262,839 3,262,839
BALANCE, December 31, 2007 $ (959,700) $ 4,563,078 $ 53,389,174 Net
income 2,188,460 Adjustment to statutory reserve -- Common stock
issued for compensation, $8.16 548,456 Common stock issued for
compensation, $10.43 1,564,500 Foreign currency translation
adjustments 4,322,939 4,322,939 BALANCE, March 31, 2008, unaudited
$ (959,700) $ 8,886,017 $ 62,013,528 DATASOURCE: General Steel
Holdings, Inc. CONTACT: Ross Warner of General Steel Holdings,
Inc., +86-10-5879-7346 (Beijing), or , or Skype,
ross.warner.generalsteel; or Ted Haberfield of HC International,
Inc., +1-760-755-2716, or , for General Steel Holdings, Inc. Web
site: http://www.gshi-steel.com/
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