General Steel Reports Results for Full Year and Fourth Quarter 2009
Full-year total revenues increase 23.5% year-over-year to a record $1.7 billion;
Company achieves record full-year gross profit of $88.6 million
Beijing, China, March 16, 2010 -- 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 its financial results for the full-year and fourth quarter ended December 31, 2009.
Full year 2009 highlights include record numbers in total revenues, shipment volume and income from operations.
| · | Full-year total revenues increased 23.5% year-over-year to a record $1.7 billion. |
| · | Aggregate shipment volume increased 66.1% year-over-year to a record 3.8 million metric tons. |
| · | Gross margin swung from 0.6% in 2008 to 5.3% in 2009 and the Company achieved a record full-year gross profit of $88.6 million. |
| · | Income from operations in 2009 was the highest in the Company’s history, reaching $47.5 million, compared to an operating loss of $29.0 million in 2008. |
| · | Adjusted non-GAAP EBITDA1 in 2009 was $93.2 million, a significant increase from $3.2 million in 2008. |
| · | The Company successfully passed a Sarbanes-Oxley compliance audit. |
| · | Secured commitments for 70% of 2010 estimated production at Longmen Joint Venture (“Longmen JV”) through signed contracts from established distributors. |
| · | Completed $25 million capital raise through the issuance of common stock and warrants. |
“Despite the challenging macro environment in the beginning of the year, we achieved record total revenues, shipment volume and income from operations in 2009,” said General Steel's Chairman and Chief Executive Officer Henry Yu. “We were able to achieve these results by leveraging our leading market position in Shaanxi province and fulfilling strong construction-related steel demand driven by ongoing government investment in infrastructure development. These widespread and multi-year infrastructure projects will drive growth for many years to come.”
Selected Financial Results for the Full Year and Fourth Quarter Ended December 31, 2009
Total revenues for the full year increased 23.5% to $1.7 billion from $1.4 billion in 2008. Total revenues in the fourth quarter increased 73.1% to $451.9 million from $261.1 million in the fourth quarter of 2008.
The year-over-year increase in total revenues for 2009 was largely the result of consistently strong demand for construction steel products in the Company’s principal markets of Shaanxi province and western China, as well as favorable raw material prices in the first three quarters of the year. The Company’s Longmen JV, which comprised 92% of 2009 total revenues, continues to benefit from several large-scale regional infrastructure projects fueled by the government’s stimulus plan and “Go West” economic development initiative. In addition, the new capacity attributable to the two 1,280 cubic meter blast furnaces that were brought on-line in December of 2008 and January of 2009 helped realize a 66.1% increase in aggregate year-over-year shipment volume. Total revenues for 2009 also reflected a full twelve months of operations from the Company’s most recent Maoming acquisition.
1 Adjusted non-GAAP EBITDA is defined as GAAP net income before interest, tax, depreciation and amortization less non-operating, non-cash expenses associated with the Company’s December 2007 convertible note issuance.
Cost of Revenues
Total cost of revenues for the full year increased 17.6% to $1.6 billion from $1.3 billion in 2008. Total cost of revenues for the fourth quarter increased 55.2% to $438.6 million from $282.7 million in the fourth quarter of 2008.
Cost of revenues principally consists of the cost of raw materials, labor, utilities, manufacturing costs, manufacturing-related depreciation and other fixed costs. Cost of iron ore and coke account for approximately 76% of the Company’s total cost of revenues. The Company noted it was able to successfully stockpile raw material inventory, especially iron ore at a relatively low price throughout the year. Moreover, it was able to control cost of revenues at its Longmen JV in 2009, which utilizes coke and iron ore in a more efficient manner.
Gross Profit
Gross profit for the full year was $88.6 million, a significant increase from $7.9 million in 2008. Gross profit for the fourth quarter was $13.4 million, compared to a gross loss of $21.6 million in the fourth quarter of 2008.
The increase in gross profit for the full year and fourth quarter of 2009 was mainly attributable to a 66.1% increase in shipment volume at the Company’s Longmen JV. The year-over-year improvement in gross profit was driven by lower raw material costs, strict cost controls in production and greater efficiencies in raw material usage.
Gross margin for the full year was 5.3%, compared to 0.6% in 2008. Gross margin for the fourth quarter was 3.0%, compared to (8.3)% in the fourth quarter of 2008. The increase in gross margin year-over-year was mainly the result of strong demand in the second and third quarters of 2009, and stockpiling raw materials, especially iron ore, at relatively low prices throughout the year.
Operating Expenses
Selling, general and administrative expenses for the full year increased 11.2% to $41.1 million from $36.9 million in 2008. Selling, general and administrative expenses for the fourth quarter increased 38.2% to $11.9 million from $8.6 million in the fourth quarter of 2008. Selling, general and administrative expenses were 2.5% of total revenues for the full year and 2.6% for the fourth quarter ended December 31, 2009, compared to 2.7% and 3.3% for the same periods last year.
Finance and interest expenses for the full year increased 20.2% to $27.8 million from $23.2 million in 2008. Finance and interest expenses for the fourth quarter increased 134.5% to $9.4 million from $4.0 million in the fourth quarter of 2008. The increase was primarily due to make-whole interest payable upon the conversion of the convertible debt.
Income from operations
Income from operations reached a record $47.5 million in 2009, a sharp turnaround from an operating loss of $29.0 million in 2008. In the fourth quarter, income from operations increased to $1.5 million, compared to an operating loss of nearly $30.2 million in the fourth quarter of 2008.
Net Income
Net loss for the full year was $25.2 million, compared to net loss of $11.3 million in 2008. Net loss for the fourth quarter was $11.1 million, compared to net loss of $9.7 million in the fourth quarter of 2008.
Basic and diluted losses per share were $0.6 in 2009. Basic and diluted losses per share were $0.26 in the fourth quarter of 2009.
The Company’s net income was materially impacted by a non-cash, non-operating expense that was due to the change in fair value of derivative liabilities related to the conversion of the Company’s outstanding convertible note. To supplement the consolidated financial statements, which are prepared and presented in accordance with GAAP, the Company uses EPS as adjusted for the impact of non-cash, non-operating expense related to the change in the fair value of derivative liabilities related to the conversion option in its outstanding convertible notes. The Company noted that it believes these adjusted measures are useful in analyzing the underlying operating performance of its business.
These measures may be inconsistent with similar measures presented by other companies and should only be used in conjunction with the Company’s results reported according to accounting principles generally accepted in the United States.
A reconciliation of earnings per share as reported and operating income as reported to adjusted non-GAAP earnings per share and adjusted non-GAAP operating income follows:
(USD in thousands) | FY2009 | FY 2008 |
GAAP Net Income (Loss) | ($25,244) | ($11,323) |
Non-cash Expense: | | |
Change in fair value of derivative – conversion option | ($33,159) | $12,821 |
| Adjusted to Non-GAAP Net Income | $7,915 | ($24,144) |
| GAAP Earnings per share | | |
| Basic | ($0.603) | ($0.320) |
| Diluted | ($0.603) | ($0.320) |
| Non-GAAP Earnings per share | | |
| Basic | $0.189 | ($0.682) |
| Diluted | $0.189 | ($0.682) |
Balance Sheet
As of December 31, 2009 General Steel had cash and restricted cash of $274.2 million, compared to $145.6 million as of December 31, 2008. Accounts receivable and accounts receivable – related parties were $8.5 million as of December 31, 2009, compared to $8.3 million as of December 31, 2008.
Inventory increased to $208.1 million as of December 31, 2009, from $59.5 million as of December 31, 2008. The increase was attributable to the large capacity expansion at the Company’s Longmen JV and stocking piling of raw materials at relatively low prices.
Conference Call
General Steel management will hold an earnings conference call at 8:00 a.m. U.S. Eastern Time on March 16, 2010. Management will discuss results and highlights from the quarter and full-year and answer questions. The dial-in number and passcode for the conference call are as follows:
U.S. Toll Free: +1-800-860-2442
Passcode: General Steel Holdings
The conference call will be broadcast live over the Internet and can be accessed by clicking the following link: http://www.visualwebcaster.com/event.asp?id=66966
Additionally, an archived Web cast of this call will be available on the Investor Relations section of the General Steel’s website at http://www.gshi-steel.com.
About General Steel Holdings, Inc.
General Steel Holdings, Inc., (NYSE: GSI), headquartered in Beijing, China, operates a diverse portfolio of Chinese steel companies. With 6.3 million metric tons aggregate production capacity, its companies serve various industries and produce a variety of steel products including rebar, hot-rolled carbon and silicon sheet, 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.
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 investor and media inquiries please contact:
In China:
Ms. Jing Ou-Yang
General Steel Holdings, Inc.
Tel: +86-10-5879-7346
Email: jing.ouyang@gshi-steel.com
Mr. Justin Knapp
Ogilvy Financial, Beijing
Tel: +86-10-8520-6556
Email: justin.knapp@ogilvy.com
In the United States:
Ms. Jessica Barist Cohen
Ogilvy Financial, New York
Tel: +1-646-460-9989
Email: jessica.cohen@ogilvypr.com
GENERAL STEEL HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2009 AND 2008
(In thousands, except per share data)
| ASSETS | |
| | | December 31, | | | December 31, | |
| | | 2009 | | | 2008 | |
| CURRENT ASSETS: | | | | | | |
| Cash | | $ | 82,118 | | | $ | 14,895 | |
| Restricted cash | | | 192,041 | | | | 130,700 | |
| Notes receivable | | | 29,185 | | | | 38,207 | |
| Accounts receivable, net of allowance for doubtful accounts of $490 | | | | | | | | |
| and $401 as of December 31, 2009 and 2008, respectively | | | 8,525 | | | | 8,329 | |
| Other receivables, net of allowance for doubtful accounts of $14 | | | | | | | | |
| and $685 as of December 31, 2009 and 2008, respectively | | | 5,357 | | | | 5,101 | |
| Other receivables - related parties | | | 32,670 | | | | 523 | |
| Dividend receivable | | | 2,372 | | | | 631 | |
| Inventories | | | 208,087 | | | | 59,549 | |
| Advances on inventory purchases | | | 28,407 | | | | 47,154 | |
| Advances on inventory purchases - related parties | | | 2,995 | | | | 2,375 | |
| Prepaid expenses - current | | | 692 | | | | 494 | |
| Prepaid value added tax | | | 19,488 | | | | - | |
| Deferred tax assets | | | 3,341 | | | | 7,487 | |
| Total current assets | | | 615,278 | | | | 315,445 | |
| | | | | | | | | |
| PLANT AND EQUIPMENT, net | | | 555,111 | | | | 491,705 | |
| | | | | | | | | |
| OTHER ASSETS: | | | | | | | | |
| Advances on equipment purchases | | | 7,361 | | | | 8,965 | |
| Investment in unconsolidated subsidiaries | | | 20,022 | | | | 13,959 | |
| Prepaid expense - non-current | | | 900 | | | | 1,195 | |
| Prepaid expense related parties - non-current | | | 158 | | | | 211 | |
| Long-term deferred expense | | | 2,069 | | | | - | |
| Long-term other receivable | | | - | | | | 4,873 | |
| Intangible assets, net of accumulated amortization | | | 23,733 | | | | 24,556 | |
| Note issuance cost | | | 406 | | | | 4,218 | |
| Equipment to be disposed | | | 3,026 | | | | 587 | |
| Total other assets | | | 57,675 | | | | 58,564 | |
| | | | | | | | | |
| Total assets | | $ | 1,228,064 | | | $ | 865,714 | |
| | | | | | | | | |
| LIABILITIES AND EQUITY | |
| | | | | | | | | |
| CURRENT LIABILITIES: | | | | | | | | |
| Short term notes payable | | $ | 254,608 | | | $ | 206,040 | |
| Accounts payable | | | 158,126 | | | | 149,239 | |
| Accounts payable - related parties | | | 48,151 | | | | 15,327 | |
| Short-term loans - bank | | | 148,968 | | | | 67,840 | |
| Short-term loans - others | | | 110,358 | | | | 87,834 | |
| Short-term loans - related parties | | | 11,751 | | | | 7,350 | |
| Other payables | | | 5,627 | | | | 3,183 | |
| Other payables - related parties | | | 3,706 | | | | 677 | |
| Accrued liabilities | | | 10,595 | | | | 7,779 | |
| Customer deposits | | | 208,765 | | | | 141,102 | |
| Customer deposits - related parties | | | 3,791 | | | | 7,216 | |
| Deposit due to sales representatives | | | 49,544 | | | | 8,149 | |
| Taxes payable | | | 6,921 | | | | 13,917 | |
| Distribution payable to former shareholders | | | 16,434 | | | | 18,765 | |
| Total current liabilities | | | 1,037,345 | | | | 734,418 | |
| | | | | | | | | |
| | | | | | | | | |
| CONVERTIBLE NOTES PAYABLE, net of debt discount of $2,250 and | | | | | | | | |
| $26,095 as of December 31, 2009 and 2008, respectively | | | 1,050 | | | | 7,155 | |
| | | | | | | | | |
| DERIVATIVE LIABILITIES | | | 23,340 | | | | 9,903 | |
| | | | | | | | | |
| Total liabilities | | | 1,061,735 | | | | 751,476 | |
| | | | | | | | | |
| EQUITY: | | | | | | | | |
| SHAREHOLDERS' EQUITY: | | | | | | | | |
| Preferred stock, $0.001 par value, 50,000,000 shares authorized, 3,092,899 shares | | | | | | | | |
| issued and outstanding as of December 31, 2009 and 2008, respectively | | | 3 | | | | 3 | |
| Common Stock, $0.001 par value, 200,000,000 shares authorized, 51,618,595 and | | | | | | | | |
| 36,128,833 shares issued and outstanding as of December 31, 2009 and 2008, respectively | | | 52 | | | | 36 | |
| Paid-in-capital | | | 95,588 | | | | 37,128 | |
| Statutory reserves | | | 6,162 | | | | 4,902 | |
| Retained (deficits) earnings | | | (16,410 | ) | | | 10,094 | |
| Contribution receivable | | | - | | | | (960 | ) |
| Accumulated other comprehensive income | | | 8,336 | | | | 8,705 | |
| Total shareholders' equity | | | 93,731 | | | | 59,908 | |
| | | | | | | | | |
| Noncontrolling interest | | | 72,598 | | | | 54,330 | |
| Total equity | | | 166,329 | | | | 114,238 | |
| Total liabilities and equity | | $ | 1,228,064 | | | $ | 865,714 | |
The accompanying notes are an integral part of these consolidated financial statements.
See report of independent registered public accounting firm.
GENERAL STEEL HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE (LOSS) INCOME
(in thousands, except per share data)
| | | For the years ended December 31, | |
| | | 2009 | | | 2008 | | | 2007 | |
| | | | | | | | | | |
| REVENUES | | $ | 1,202,708 | | | $ | 1,004,848 | | | $ | 416,901 | |
| | | | | | | | | | | | | |
| REVENUES - RELATED PARTIES | | | 465,738 | | | | 346,355 | | | | 355,539 | |
| | | | | | | | | | | | | |
| TOTAL REVENUES | | | 1,668,446 | | | | 1,351,203 | | | | 772,440 | |
| | | | | | | | | | | | | |
| COST OF REVENUES | | | 1,139,630 | | | | 999,318 | | | | 389,615 | |
| | | | | | | | | | | | | |
| COST OF REVENUES - RELATED PARTIES | | | 440,262 | | | | 343,957 | | | | 326,136 | |
| | | | | | | | | | | | | |
| TOTAL COST OF REVENUES | | | 1,579,892 | | | | 1,343,275 | | | | 715,751 | |
| | | | | | | | | | | | | |
| GROSS PROFIT | | | 88,554 | | | | 7,928 | | | | 56,689 | |
| | | | | | | | | | | | | |
| SELLING, GENERAL AND ADMINISTRATIVE EXPENSES | | | 41,074 | | | | 36,942 | | | | 16,164 | |
| | | | | | | | | | | | | |
| INCOME FROM OPERATIONS | | | 47,480 | | | | (29,014 | ) | | | 40,525 | |
| | | | | | | | | | | | | |
| OTHER INCOME (EXPENSE), NET | | | | | | | | | | | | |
| Interest income | | | 3,334 | | | | 4,251 | | | | 871 | |
| Finance/interest expense | | | (27,843 | ) | | | (23,166 | ) | | | (9,297 | ) |
| Change in fair value of derivative liabilities | | | (33,159 | ) | | | 12,821 | | | | 6,236 | |
| Gain from debt extinguishment | | | 7,331 | | | | 7,169 | | | | - | |
| Government grant | | | 3,430 | | | | - | | | | - | |
| Loss on disposal of fixed assets | | | (4,643 | ) | | | - | | | | - | |
| Income from equity investments | | | 4,730 | | | | 1,896 | | | | - | |
| Other non-operating income, net | | | 1,812 | | | | 767 | | | | 928 | |
| Total other income (expense), net | | | (45,008 | ) | | | 3,738 | | | | (1,262 | ) |
| | | | | | | | | | | | | |
| INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES | | | | | | | | | | | | |
| AND NONCONTROLLING INTEREST | | | 2,472 | | | | (25,276 | ) | | | 39,263 | |
| | | | | | | | | | | | | |
| PROVISION (BENEFIT) FOR INCOME TAXES | | | | | | | | | | | | |
| Current | | | 2,155 | | | | 1,424 | | | | 5,225 | |
| Deferred | | | 3,998 | | | | (6,835 | ) | | | (389 | ) |
| Total provision (benefit) for income taxes | | | 6,153 | | | | (5,411 | ) | | | 4,836 | |
| | | | | | | | | | | | | |
| NET (LOSS) INCOME BEFORE NONCONTROLLING INTEREST | | | (3,681 | ) | | | (19,865 | ) | | | 34,427 | |
| | | | | | | | | | | | | |
| Less: Net income (loss) attributable to noncontrolling interest | | | 21,563 | | | | (8,542 | ) | | | 12,001 | |
| | | | | | | | | | | | | |
| NET (LOSS) INCOME ATTRIBUTABLE TO CONTROLLING INTEREST | | | (25,244 | ) | | | (11,323 | ) | | | 22,426 | |
| | | | | | | | | | | | | |
| OTHER COMPREHENSIVE INCOME (LOSS) : | | | | | | | | | | | | |
| Foreign currency translation adjustments | | | (369 | ) | | | 5,420 | | | | 1,656 | |
| Comprehensive income (loss) attributable to noncontrolling interest | | | 303 | | | | 3,654 | | | | (978 | ) |
| | | | | | | | | | | | | |
| COMPREHENSIVE (LOSS) INCOME | | $ | (25,310 | ) | | $ | (2,249 | ) | | $ | 23,104 | |
| | | | | | | | | | | | | |
| WEIGHTED AVERAGE NUMBER OF SHARES | | | | | | | | | | | | |
| Basic | | | 41,860,238 | | | | 35,381,210 | | | | 32,424,652 | |
| Diluted | | | 41,860,238 | | | | 35,381,210 | | | | 32,558,350 | |
| | | | | | | | | | | | | |
| (LOSS) EARNINGS PER SHARE | | | | | | | | | | | | |
| Basic | | $ | (0.60 | ) | | $ | (0.32 | ) | | $ | 0.69 | |
| Diluted | | $ | (0.60 | ) | | $ | (0.32 | ) | | $ | 0.69 | |
The accompanying notes are an integral part of these consolidated financial statements.
See report of independent registered public accounting firm.
GENERAL STEEL HOLDINGS, INC. AND SUBSIDIARIES
