EX-99.1 2 v418631_ex99-1.htm EXHIBIT 99.1

 

Exhibit 99.1

 

 

 

General Steel Reports Second Quarter 2015 Financial Results

 

BEIJING – August 20, 2015 – General Steel Holdings, Inc. (“General Steel” or the “Company”) (NYSE: GSI), a leading non-state-controlled steel producer in China, today announced its financial results for the second quarter ended June 30, 2015.

 

Ms. Yunshan Li, Chief Executive Officer of General Steel commented, “Since being appointed as CEO of General Steel in late July, my top priority has been reviewing and integrating the Company’s resources in order to chart the best course for our business transformation. During our strategic reviews, we noted that General Steel is one of the most efficient steel producers in China and that it has excellent experience, resources and expertise. And as we further evaluated General Steel’s total value chain, we believe that the more an organization moves upstream towards energy-saving and environmental protection solutions, the higher its return on investments and sustainability will be. As such, we are very excited about the potential possibilities for the Company in the clean-tech and environmental protection sector.”

 

Ms. Li added, “China is now the world’s largest energy consumer and has the largest number of coal-fired power plants and steel mills. The Chinese government is fully aware of the impact from fossil-fuel pollution and is launching the tightest-ever restrictions on emission standards. In my view, General Steel not only has its own demand for clean-tech and environmental protection solutions, but also rich industry resources to promote clean-tech adoption. We feel confident that the combination of my direct knowledge, expertise, and access to emission reduction technology and GSI’s excellent experience, resources and expertise will enable us to successfully produce and sell leading clean-tech solutions in China.”

 

John Chen, Chief Financial Officer of General Steel, commented, “As we forge ahead with our business transformation, in the second quarter we proactively revalued our steel-manufacturing equipment in Longmen Joint Venture, and took a write-down of $973.9 million in its carrying value to better reflect the current market conditions. We believe this will lighten future depreciation burden and better enable the Company to adopt new business models.”

 

Second Quarter 2015 Financial Information

 

·Sales volume from Longmen Joint Venture increased by 30.2% year-over-year to approximately 1.70 million metric tons, compared with 1.31 million metric tons in the second quarter of 2014.
·Sales totaled $528.8 million, compared with $588.0 million in the second quarter of 2014.
·Gross loss was $(64.3) million, or (12.2%) of total sales, compared with gross profit of $28.1 million, or 4.8% of total sales in the second quarter of 2014.
·Loss from operations totaled $(1.0) billion, compared with income from operations of $6.3 million in the second quarter of 2014.
·Net loss attributable to the Company was $(615.0) million, or $(9.80) per diluted share, compared with $(11.0) million, or $(0.20) per share in the second quarter of 2014.
·As of June 30, 2015, the Company had cash and restricted cash of $266.5 million.

 

 

General Steel Holdings, Inc.

 Page 2 of 7

 

Second Quarter 2015 Financial and Operating Results

 

Total Sales

 

Total sales for the second quarter of 2015 decreased by 10.1% year-over-year to $528.8 million, compared with $588.0 million in the second quarter of 2014. The year-over-year sales decrease was primarily due to the significant decreases in the average selling price of rebar, partially offset by the higher sales volume.

 

·Total sales volume from Longmen Joint Venture in the second quarter of 2015 was 1.70 million metric tons, an increase of 30.2% compared with 1.31 million metric tons in the second quarter of 2014.
·The average selling price of rebar at Longmen Joint Venture in the second quarter of 2015 decreased to approximately $311.2 per metric ton, down by 30.8% from $450.0 per metric ton in the second quarter of 2014.

 

Gross (Loss) Profit

 

Gross loss for the second quarter of 2015 was $(64.3) million, or (12.2)% of total sales, as compared with gross profit of $28.1 million, or 4.8% of total sales in the second quarter of 2014. The decrease in gross margin was mainly due to a steeper decrease in the average selling price of rebar, compared with the decrease in unit cost of manufactured rebar.

 

Operating Expenses and (Loss) Income from Operations

 

Selling, general and administrative expenses for the second quarter of 2015 were $22.1 million, an increase of 17.2% from $18.8 million in the second quarter of 2014. General and administrative expenses increased to $11.7 million in the second quarter of 2015, compared with $9.1 million in the second quarter of 2014, which was primarily due to higher expenses for environment protection and a higher local tax rate. Selling expenses increased slightly to $10.4 million in the second quarter of 2015, compared with $9.7 million in the same period of 2014.

 

The Company accrued unallocated overheads expenses of $5.3 million in its operating expenses for the second quarter of 2015, which was mainly due to the reallocation of fixed overheads from cost of goods sold to general and administrative in accordance with GAAP, as the Company had abnormally low production in May 2015 because it temporarily shut down of one its furnaces to perform maintenance and mechanical adjustments.

 

The Company recorded non-cash impairment charges of approximately $973.9 million in the second quarter of 2015, in connection with the write-down of the carrying value of Longmen Joint Venture’s long-lived assets. The impairment was primarily related to the continuous worsen condition for China steel industry, and is assessed based on discounted cash flows fair value measurements.

 

Other operating income from a change in the fair value of profit sharing liability during the second quarter of 2015 was $57.5 million, compared with a loss on change in fair value of profit sharing liability of $(2.9) million in the same period of last year.

 

 

General Steel Holdings, Inc.

 Page 3 of 7

 

Correspondingly, loss from operations for the second quarter of 2015 totaled $(1.0) billion, compared with income from operations of $6.3 million for the second quarter of 2014. Excluding the one-time non-cash impairment charges, adjusted loss from operations for the second quarter of 2015 would have been $(34.2) million.

 

Finance Expense

 

Finance and interest expense in the second quarter of 2015 was $29.6 million, of which $5.2 million was the non-cash interest expense on capital lease, as compared with $5.7 million in the same period of 2014, and $24.4 million was the interest expense on bank loans and discounted note receivables, as compared with $21.0 million in the same period of 2014.

 

Net Loss and Net Loss per Share

 

Net loss attributable to General Steel for the second quarter of 2015 was $(615.0) million, or $(9.80) per diluted share, based on 62.7 million weighted average shares outstanding. Excluding the one-time non-cash impairment charges, adjusted net loss attributable to General Steel for the second quarter of 2015 would have been $(36.7) million. This compares to a net loss attributable to General Steel of $(11.0) million, or $(0.20) per share, based on 55.8 million weighted average shares outstanding in the second quarter of 2014.

 

Balance Sheet

 

As of June 30, 2015, the Company had cash and restricted cash of approximately $266.5 million, compared to $367.3 million as of December 31, 2014. The Company had an inventory balance of $153.1 million as of June 30, 2015, compared to $156.3 million as of December 31, 2014.

 

Conference Call and Webcast:

 

General Steel will hold a corresponding conference call and live webcast at 8:00 a.m. EDT on Thursday, August 20, 2015 (which corresponds to 8:00 p.m. Beijing/Hong Kong Time on Thursday, August 20, 2015) to discuss the results and answer questions from investors. Listeners may access the call by dialing:

 

US Toll Free: 1-888-346-8982
International Toll: 1-412-902-4272
China Toll Free: 400-120-1203
Hong Kong Toll Free: 800-905-945
Conference ID: General Steel Holdings

 

The call will also be available as a live, listen-only Webcast under the "Events and Presentations" page on the "Investor Relations" section of the Company's Website at http://www.corpasia.net/us/GSI/irwebsite/index.php?mod=event. Following the live Webcast, an online archive of the Webcast will be available for 90 days.

 

A replay of the conference call may be accessed through August 27, 2015 by dialing:

 

 

General Steel Holdings, Inc.

 Page 4 of 7

 

US Toll Free: 1-877-344-7529  
International Toll: 1-412-317-0088  
Access Code: 10071183  

 

About General Steel

 

General Steel is a leading non-state-owned steel maker headquartered in Beijing, China. With seven million metric tons of crude steel production capacity under management and operations in Tianjin municipality and China’s Shaanxi and Guangdong provinces, the Company produces a variety of steel products including rebar and high-speed wire.

 

In addition to its steel business, the Company also designs, manufactures, and integrates radio frequency identification (“RFID”) systems. The Company’s RFID technology provides real-time data on supplies, inventory, and goods, thereby greatly enhancing its customers’ administration and planning processes, as well as asset tracking and supply chain management.

 

For more information, please visit www.gshi-steel.com. To be added to the General Steel email list to receive Company news, or to request a hard copy of the Company’s Annual Report on Form 10-K, please send your request to investor.relations@gshi-steel.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, including those disclosed in the Company's most recent Annual Report on Form 10-K, filed with the United States Securities and Exchange Commission. 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

 

General Steel Holdings, Inc.

Joyce Sung

Tel: +1-347-534-1435

Email: joyce.sung@gshi-steel.com

 

Asia Bridge Capital Limited

Carene Toh

Tel: +1-888-957-3362

Email: generalsteel@asiabridgegroup.com

 

 

General Steel Holdings, Inc.

 Page 5 of 7

 

 

  GENERAL STEEL HOLDINGS, INC. AND SUBSIDIARIES

  CONDENSED CONSOLIDATED BALANCE SHEETS

  (UNAUDITED) (In thousands)

 

    June 30,      December 31,  
ASSETS   2015     2014  
CURRENT ASSETS:            
             
 Cash   $ 36,250     $ 11,641  
 Restricted cash     230,240       355,685  
 Notes receivable     5,736       10,290  
 Restricted notes receivable     39,111       111,801  
 Loans receivable     42,595       36,001  
 Loans receivable - related parties     6,110       34,713  
 Accounts receivable, net     11,205       9,321  
 Accounts receivable - related parties     3,198       8,498  
 Other receivables, net     62,626       63,746  
 Other receivables - related parties     7,329       39,670  
 Inventories     153,129       156,327  
 Advances on inventory purchase     53,389       73,819  
 Advances on inventory purchase - related parties     13,411       45,617  
 Prepaid expense and other     6,230       4,803  
 Prepaid taxes     4,242       5,789  
 Short-term investment     7,670       2,688  
TOTAL CURRENT ASSETS     682,471       970,409  
                 
PLANT AND EQUIPMENT, net     569,477       1,543,136  
                 
OTHER ASSETS:                
 Advances on equipment purchase     2,520       11,438  
 Investment in unconsolidated entities     16,749       16,823  
 Long-term deferred expense     446       458  
 Intangible assets, net of accumulated amortization     22,706       22,960  
TOTAL OTHER ASSETS     42,421       51,679  
                 
TOTAL ASSETS   $ 1,294,369     $ 2,565,224  
                 
LIABILITIES AND DEFICIENCY                
                 
CURRENT LIABILITIES:                
                 
 Short term notes payable   $ 531,869     $ 661,635  
 Accounts payable     596,466       612,801  
 Accounts payable - related parties     211,149       207,783  
 Short term loans - bank     153,989       257,502  
 Short term loans - others     65,158       60,717  
 Short term loans - related parties     279,950       46,380  
 Other payables and accrued liabilities     61,805       55,488  
 Other payable - related parties     80,028       87,252  
 Customer deposits     86,860       92,974  
 Customer deposits - related parties     33,923       132,616  
 Deposit due to sales representatives     15,782       17,871  
 Deposit due to sales representatives - related parties     2,872       2,509  
 Taxes payable     7,984       5,201  
 Deferred lease income, current     2,180       2,176  
 Capital lease obligations, current     9,942       8,508  
TOTAL CURRENT LIABILITIES     2,139,957       2,251,413  
                 
 NON-CURRENT LIABILITIES:                
 Long-term loans - related party     353,067       339,549  
 Deferred lease income, noncurrent     71,757       72,713  
 Capital lease obligations, noncurrent     401,283       393,252  
 Profit sharing liability     -       70,422  
 TOTAL NON-CURRENT LIABILITIES     826,107       875,936  
TOTAL LIABILITIES     2,966,064       3,127,349  
                 
 COMMITMENTS AND CONTINGENCIES                
                 
DEFICIENCY:                
Preferred stock, $0.001 par value, 50,000,000 shares authorized, 3,092,899 shares issued and outstanding as of June 30, 2015 and December 31, 2014     3       3  
Common stock, $0.001 par value, 200,000,000 shares authorized, 66,456,588 shares and 64,458,588 shares issued, 63,984,282 shares and 61,986,282 shares outstanding as of June 30, 2015 and December 31, 2014, respectively     66       64  
Treasury stock, at cost, 2,472,306 shares as of June 30,2015 and December 31, 2014     (4,199 )     (4,199 )
 Paid-in-capital     117,274       115,494  
 Statutory reserves     6,583       6,472  
 Accumulated deficits     (1,123,701 )     (463,521 )
 Accumulated other comprehensive income     (1,259 )     644  
TOTAL GENERAL STEEL HOLDINGS, INC. DEFICIENCY     (1,005,233 )     (345,043 )
                 
 NONCONTROLLING INTERESTS     (666,462 )     (217,082 )
TOTAL DEFICIENCY     (1,671,695 )     (562,125 )
                 
TOTAL LIABILITIES AND DEFICIENCY   $ 1,294,369     $ 2,565,224  

 

 

General Steel Holdings, Inc.

 Page 6 of 7

 

 

                  GENERAL STEEL HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2015 AND 2014

(UNAUDITED)

(In thousands, except per share data)

 

    Three months ended June 30,      Six months ended June 30,  
    2015     2014     2015     2014  
SALES   $ 454,855     $ 508,637     $ 725,624     $ 1,020,642  
SALES - RELATED PARTIES     73,926       79,376       131,321       161,582  
  TOTAL SALES     528,781       588,013       856,945       1,182,224  
COST OF GOODS SOLD     509,185       482,011       806,750       1,012,755  
COST OF GOODS SOLD - RELATED PARTIES     83,865       77,908       146,611       163,936  
  TOTAL COST OF GOODS SOLD     593,050       559,919       953,361       1,176,691  
                                 
GROSS PROFIT(LOSS)     (64,269 )     28,094       (96,416 )     5,533  
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES     (22,083 )     (18,849 )     (39,438 )     (39,902 )
UNALLOCATED OVERHEADS EXPENSES     (5,309 )     -       (24,443 )     -  
IMPAIRMENT EXPENSE     (973,860 )     -       (973,860 )     -  
CHANGE IN FAIR VALUE OF PROFIT SHARING LIABILITY     57,499       (2,920 )     70,423       (2,969 )
                                 
INCOME (LOSS) FROM OPERATIONS     (1,008,022 )     6,325       (1,063,734 )     (37,338 )
OTHER INCOME (EXPENSE)                                
  Interest income     2,741       4,066       5,072       7,258  
  Finance/interest expense     (29,575 )     (26,619 )     (50,145 )     (55,314 )
  Loss on disposal of equipment and intangible assets     (44 )     (142 )     (28 )     (96 )
  Income(loss) from equity investments     34       54       (3 )     67  
  Foreign currency transaction loss     (249 )     (963 )     (1,122 )     (1,817 )
  Lease income     545       542       1,088       1,088  
  Other non-operating income (expense), net     378       302       601       126  
    Other expense, net     (26,170 )     (22,760 )     (44,537 )     (48,688 )
                                 
LOSS BEFORE PROVISION FOR INCOME TAXES AND NONCONTROLLING INTEREST     (1,034,192 )     (16,435 )     (1,108,271 )     (86,026 )
PROVISION FOR INCOME TAXES     111       107       141       112  
NET LOSS     (1,034,303 )     (16,542 )     (1,108,412 )     (86,138 )
Less: Net loss attributable to noncontrolling interest     (419,276 )     (5,523 )     (448,232 )     (31,555 )
                                 
NET LOSS ATTRIBUTABLE TO GENERAL STEEL HOLDINGS, INC.   $ (615,027 )   $ (11,019 )   $ (660,180 )   $ (54,583 )
                                 
NET LOSS   $ (1,034,303 )   $ (16,542 )   $ (1,108,412 )   $ (86,138 )
OTHER COMPREHENSIVE LOSS                                
  Foreign currency translation adjustments     (2,274 )     (929 )     (3,127 )     3,741  
                                 
COMPREHENSIVE LOSS     (1,036,577 )     (17,471 )     (1,111,539 )     (82,397 )
                                 
Less: Comprehensive loss attributable to noncontrolling interest     (420,128 )     (5,875 )     (449,456 )     (30,101 )
COMPREHENSIVE LOSS ATTRIBUTABLE TO GENERAL STEEL HOLDINGS, INC.   $ (616,449 )   $ (11,596 )   $ (662,083 )   $ (52,296 )
                                 
WEIGHTED AVERAGE NUMBER OF SHARES                                
  Basic and Diluted     62,777       55,842       62,384       55,828  
                                 
LOSS PER SHARE                                
  Basic and Diluted   $ (9.80 )   $ (0.20 )   $ (10.58 )   $ (0.98 )

 

 

General Steel Holdings, Inc.

 Page 7 of 7

 

 

GENERAL STEEL HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED) (In thousands)    

 

    For the
Six months ended June 30,
 
    2015     2014  
CASH FLOWS FROM OPERATING ACTIVITIES:            
Net loss   $ (1,108,412 )   $ (86,138 )
Adjustments to reconcile net loss to cash provided by (used in) operating activities:                
Depreciation, amortization and depletion     56,596       47,788  
Impairment of plant and equipment     973,860          
Change in fair value of profit sharing liability     (70,423 )     2,969  
Gain on disposal of equipment and intangible assets     28       96  
Provision (recovery) for doubtful accounts     2,548       (250 )
Reservation of mine maintenance fee     187       278  
Stock issued for services and compensation     382       219  
Amortization of deferred financing cost on capital lease     9,765       9,253  
Income (loss) from equity investments     3       (67 )
Foreign currency transaction loss     1,122       1,817  
Deferred lease income     (1,088 )     (1,088 )
Changes in operating assets and liabilities                
Notes receivable     5,238       45,931  
Accounts receivable     (1,888 )     (1,008 )
Accounts receivable - related parties     5,307       (2,875 )
Other receivables     (1,188 )     (307 )
Other receivables - related parties     32,353       (4,275 )
Inventories     2,631       1,286  
Advances on inventory purchases     20,528       (13,968 )
Advances on inventory purchases - related parties     39,581       (36,971 )
Prepaid expense and other     (19 )     (1,947 )
Long-term deferred expense     14       111  
Prepaid taxes     1,555       15,747  
Accounts payable     (22,969 )     (18,050 )
Accounts payable - related parties     2,978       28,204  
Other payables and accrued liabilities     6,223       2,637  
Other payables - related parties     (7,334 )     4,824  
Customer deposits     (6,274 )     49,187  
Customer deposits - related parties     (191,619 )     78,667  
Taxes payable     2,769       (413 )
                 
Net cash provided by operating activities     (247,546 )     121,657  
CASH FLOWS FROM INVESTING ACTIVITIES:                
Restricted cash     125,868       (51,820 )
Loans to unrelated parties     (6,516 )     -  
Loans receivable - related party     114,127       -  
Cash proceeds from short term investment     2,606       -  
Payments for short term investment     (7,575 )     -  
Cash proceeds from sales of equipment and intangible assets     -       24  
Equipment purchase and intangible assets     (40,174 )     (112,713 )
Net cash provided by (used in) investing activities     188,336       (164,509 )
CASH FLOWS FINANCING ACTIVITIES:                
Restricted notes receivable     72,762       286,485  
Borrowings on short term notes payable     497,497       900,202  
Payments on short term notes payable     (628,240 )     (1,035,408 )
Borrowings on short term loans - bank     97,026       185,023  
Payments on short term loans - bank     (201,944 )     (285,100 )
Borrowings on short term loan - others     109,420       19,949  
Payments on short term loans - others     (82,814 )     (25,417 )
Borrowings on short term loan - related parties     223,974       32,576  
Payments on short term loans - related parties     (56,394 )     (19,233 )
Deposits due to sales representatives     (2,119 )     (2,736 )
Deposit due to sales representatives - related parties     358       (326 )
Borrowings on long-term loans - related party     56,201          
Payments on long-term loans - related party     (815 )     -  
Principal payment on capital lease obligation     (1,077 )        
Net cash provided by (used in) financing activities     83,835       56,015  
                 
EFFECTS OF EXCHANGE RATE CHANGE IN CASH     (16 )     (381 )
                 
INCREASE IN CASH     24,609       12,782  
                 
CASH, beginning of period     11,641       31,967  
                 
CASH, end of period   $ 36,250     $ 44,749