2007 Revenue Reaches Record $772 Million, Up 454% Year-over-year,
with 4Q Revenues of $268 Million BEIJING, March 31, 2008
/Xinhua-PRNewswire-FirstCall/ -- 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 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 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.
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