omniture

General Steel Announces Second Quarter 2009 Results

2009-08-11 00:36 1102

-- Company achieves record shipment volume and total revenues

-- Income from operations was $12.9 million

BEIJING, Aug. 10 /PRNewswire-Asia/ -- 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 second quarter ended June 30, 2009.

Second Quarter of 2009 Highlights

-- Aggregate shipment volume reached a record high of 956,321 metric tons,

an increase of 62.7% year-over-year

-- Total revenues increased 5.7% to a record $408.9 million from $387.0

million in the year-ago period

-- Gross margin was 5.5%, compared to 4.0% in the previous quarter and

5.9% in the second quarter of 2008

-- Income from operations was $12.9 million

-- Adjusted non-GAAP net income grew to $1.4 million, or earnings per

basic and diluted share of $0.04 (adjusted non-GAAP net income is

defined as GAAP net income less non-operating, non-cash expenses

associated with the Company's December 2007 convertible bond issuance)

-- Relocated an 800,000 metric ton capacity rebar processing line from the

Company's Maoming facility to its Longmen Joint Venture ("Longmen JV")

in order to meet strong demand and take advantage of higher selling

prices

-- Logged utilization rates in excess of 85% at the Company's two new

1,280 cubic meter blast furnaces brought on-line in late 2008 and

January of 2009

First Half of 2009 Highlights

-- Aggregate shipment volume reached a record high of 1.67 million metric

tons, an increase of 50.4% year-over-year

-- Total revenues increased 7.8% to a record $731.7 million from $678.6

million in the year-ago period

-- Gross margin was 4.8%, compared to 5.3% in the year-ago period

-- Income from operations was $16.7 million

-- Adjusted non-GAAP net income grew to $4.6 million, or earnings per

basic and diluted share of $0.12 (adjusted non-GAAP net income is

defined as GAAP net income less non-operating, non-cash expenses

associated with the Company's December 2007 convertible bond issuance)

"Building off of the momentum we established in the first quarter, we were able to achieve record shipment volume and total revenues during second quarter," said Mr. Henry Yu, General Steel's chairman and chief executive officer. "Government growth initiatives such as 'Go West' development, aggressive stimulus spending on infrastructure in rural China and the newly announced Guanzhong-Tianshui Special Economic Zone helped to insulate us from the economic slowdown. In addition, our centrally located, Shaanxi-based Longmen facility enables us to cost-effectively supply construction-related steel throughout central and western areas of China which continues to shield us from the glut of overcapacity along the eastern seaboard."

Mr. Yu continued, "During the quarter, we saw gross margin at our largest subsidiary, Longmen JV, expand to nearly seven percent. This is a significant accomplishment as it validates that our strategy of improving the profitability of acquired assets is working. As the impetus for consolidation strengthens, our deep market understanding, established track record and distinctive ability to align interests at the provincial and local levels of government as well as among management teams, creates numerous opportunities for consolidation."

Selected Financial Results for the Second Quarter and First Half of 2009

Total revenues for the second quarter of 2009 increased 5.7%

year-over-year to $408.9 million from $387.0 million in the year-ago period. Total revenues for the first half of 2009 increased 7.8% year-over-year to $731.7 million from $678.6 million in the year-ago period.

The increase in total revenues was predominantly due to increased shipment volume at the Company's Longmen JV, which in the first half of 2009 increased 51.3% year-over-year, and Baotou Steel Pipe JV, which in the first half of 2009 increased 41.7% year-over-year. The Company noted that these increases in shipment volume helped to offset lower selling prices and declines at its Daqiuzhuang Metal subsidiary. The increase in total revenues was also attributable to the Company's Maoming acquisition, which took place on June 25, 2008. Total revenues for the first half of 2009 reflect a full six months of operations, whereas the subsidiary did not exist in the same period last year.

Cost of Sales

Total cost of sales for the second quarter of 2009 increased 6.1%

year-over-year to $386.4 million from $364.2 million in the year-ago period. Total cost of sales for the first half of 2009 increased 8.3% year-over-year to $696.3 million from $642.7 million in the year-ago period. Cost of sales principally consists of the cost of raw materials, labor, utilities, manufacturing costs, manufacturing-related depreciation and other fixed costs. The increase in cost of sales was mostly attributable to an increase in shipment volumes at the Company's Longmen JV in response to demand created by earthquake reconstruction and stimulus measures, and at Baotou Steel Pipe JV, which saw increased activity due to China's investment in

infrastructure-related stimulus projects.

Gross Profit

Gross profit for the second quarter of 2009 decreased 1.6% year-over-year to $22.5 million from $22.9 million in the year-ago period. Gross profit for the first half of 2009 decreased 1.2% year-over-year to $35.4 million from $35.9 million in the year-ago period. Gross margin for the second quarter of 2009 was 5.5%, compared to 5.9% in the year-ago period. Gross margin for the first half of 2009 was 4.8%, compared to 5.3% in the year-ago period.

Operating Expenses

Selling, general and administrative expenses for the second quarter of 2009 increased 0.6% to $9.6 million, compared to $9.5 million in the year-ago period. Selling, general and administrative expenses for the first half of 2009 increased 16.8% to $18.7 million from $16.0 million in the year-ago period. Selling, general and administrative expenses were 2.3% and 2.5% of total revenues in the second quarter of 2009 and 2008, respectively, versus 2.6% and 2.4% in the first half of 2009 and 2008, respectively. The Company noted that the year-over-year increase in selling, general and administrative expenses in the first of half of 2009 was attributable to the addition of the Company's Maoming facility, which did not exist in the year-ago period as well as the 51.3% increase in shipment volume at the Company's Longmen JV.

Finance and interest expenses for the second quarter of 2009 were $4.9 million, compared to $6.3 million in the year-ago period. Finance and interest expenses for the first half of 2009 were $7.8 million, compared to $12.3 million in the year-ago period. The reductions in finance and interest expenses were primarily due to make-whole interest on the conversion of the convertible debt, interest paid on bank loans and on early redemption of notes receivables and various bank fees.

Net Income

Net loss for the second quarter of 2009 was $23.4 million, compared to net loss of $20.3 million in the year-ago period. Net loss for the first half of 2009 was $12.1 million, compared to net loss of $16.6 million in the year-ago period.

Basic and diluted losses per share were $0.80 for second quarter of 2009 and $0.69 in the year-ago period. Basic and diluted losses per share were $0.65 in the first half of 2009, compared to $0.63 in the year-ago period.

The Company believes that the GAAP net earnings before the impact of a derivative gain or loss and make whole expense, which was $1.4 million or $0.04 per basic and diluted share, based on 39.5 million basic and diluted shares, is a better measurement of its performance.

According to the conversion feature and warrants associated with the $40.0 million Convertible Bond ("CB') the Company obtained in December of 2007, generally accepted accounting principles (GAAP) requires the Company to value a portion of the CB and the warrants on its balance sheet as financial derivative instruments that are "marked-to-market" each quarter. This part of the CB and the warrants appear on the Company's balance sheet as derivative liabilities. According to accounting rules, the derivative instrument value and associated gain or loss is linked to the Company's stock price. The gain or loss of this instrument has no impact on cash flow.

The Company's CB has a 5-year term to maturity. At the end of 5 years, if the holders of the CB have not converted the bond to equity, the Company must pay back the principal of the bond in cash. The terms of the Company's CB include a make whole incentive as an incentive for the holders of the Company's CB to convert before maturity and the Company accounts for this as an expense.

Both the derivative instrument gain or loss and the make whole expense are non-operating, non-cash gain or loss related to the convertible bond and warrants issued in December of 2007.

Balance Sheet

As of June 30, 2009, General Steel had cash and restricted cash of $264.1 million, compared to $145.6 million as of December 31, 2008. Accounts receivable was $16.0 million as of June 30, 2009, compared to $8.3 million as of December 31, 2008. Convertible notes payable decreased to $3.0 million as of June 30, 2009, compared to $7.2 million as of December 31, 2008. Because $21.7 million notes were converted to 5,104,596 shares of common stock from May 7, 2009 to June 30, 2009, total outstanding shares increased to 43.3 million shares as of June 30, 2009.

Conference Call

General Steel management will hold an earnings conference call at 8:00 a.m. U.S. Eastern Time on August 10, 2009 (8:00 p.m. Beijing/Hong Kong Time on August 10, 2009). Management will discuss results and highlights from the quarter 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=61133

Additionally, an archived Web cast of this call will be available on 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 http://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.

GENERAL STEEL HOLDINGS INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

AS OF JUNE 30, 2009 AND DECEMBER 31, 2008

ASSETS

June 30, December 31,

2009 2008

Unaudited

CURRENT ASSETS:

Cash $63,930,960 $14,895,442

Restricted cash 200,216,250 130,700,335

Notes receivable 33,243,064 38,207,312

Accounts receivable, net of

allowance for doubtful accounts of

$601,754 and $401,109 as of June 30,

2009 and December 31, 2008, respectively 16,037,008 8,329,040

Other receivables, net of allowance

for doubtful accounts of $563,963

and $563,616 as of June 30, 2009

and December 31, 2008, respectively 5,551,193 5,099,469

Other receivables - related parties 15,467,140 523,024

Dividend receivable 4,950,550 630,481

Inventories 143,713,281 59,548,915

Advances on inventory purchases 35,823,700 47,153,869

Advances on inventory purchases -

related parties 15,699,234 2,374,637

Prepaid expenses - current 356,728 494,370

Deferred tax assets 5,312,504 7,487,380

540,301,612 315,444,274

PLANT AND EQUIPMENT, net 538,475,953 491,705,028

OTHER ASSETS:

Advances on equipment purchases 5,889,360 8,965,382

Investment in unconsolidated

subsidiaries 18,909,182 13,959,432

Prepaid expenses - non current 1,099,045 1,195,073

Prepaid expenses related party -

non current 184,590 211,248

Long term other receivables 3,651,182 4,872,584

Intangible assets, net of

accumulated amortization 24,216,780 24,555,655

Note issuance cost 1,449,664 4,217,974

Plant and equipment to be disposed 1,244,461 586,508

Total other assets 56,644,264 58,563,856

Total assets $1,135,421,829 $865,713,158

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:

Short term notes payable $274,013,600 $206,040,150

Accounts payable 208,631,197 149,239,317

Accounts payable - related parties 30,583,551 15,326,524

Short term loans - bank 97,196,890 67,840,256

Short term loans - others 101,360,240 87,833,706

Short term loans - related parties 7,339,650 7,349,670

Other payables 19,715,682 3,182,661

Other payables - related parties 16,419,308 677,013

Accrued liabilities 10,854,900 7,779,488

Customer deposits 157,061,121 141,101,584

Customer deposits - related parties 3,946,437 7,216,319

Deposits due to sales

representatives 40,056,218 8,149,279

Taxes payable 1,149,824 13,916,636

Distribution payable to former

shareholders 19,193,149 18,765,209

Total current liabilities 987,521,767 734,417,812

CONVERTIBLE NOTES PAYABLE, net of

debt discount of $8,500,381 and

$26,094,942 as of June 30, 2009

and December 31, 2008, respectively 3,049,619 7,155,058

DERIVATIVE LIABILITIES 11,053,276 9,903,010

COMMITMENT AND CONTINGENCIES

Total liabilities 1,001,624,662 751,475,880

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,

43,301,428 and 36,128,833 shares

issued and outstanding as of June

30, 2009 and December 31, 2008,

respectively 43,301 36,129

Paid-in-capital 69,812,604 37,128,641

Retained earnings (deficits) (14,622,511) 10,091,829

Statutory reserves 5,162,401 4,902,641

Contribution receivable -- (959,700)

Accumulated other comprehensive

income 8,393,270 8,407,359

Total equity 68,792,158 59,609,992

NONCONTROLLING INTERESTS 65,005,009 54,627,286

Total equity 133,797,167 114,237,278

Total liabilities and equity $1,135,421,829 $865,713,158

GENERAL STEEL HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME

(UNAUDITED)

Three months ended June 30, Six months ended June 30,

2009 2008 2009 2008

REVENUES $324,460,829 $277,514,917 $586,875,245 $456,007,084

REVENUES - RELATED

PARTIES 84,486,318 109,514,019 144,865,798 222,587,851

TOTAL REVENUES 408,947,147 387,028,936 731,741,043 678,594,935

COST OF SALES 301,849,136 259,734,698 553,851,240 426,449,361

COST OF SALES -

RELATED PARTIES 84,599,318 104,425,433 142,468,991 216,294,654

TOTAL COST OF

SALES 386,448,454 364,160,131 696,320,231 642,744,015

GROSS PROFIT 22,498,693 22,868,805 35,420,812 35,850,920

SELLING, GENERAL

AND ADMINISTRATIVE

EXPENSES 9,564,057 9,503,221 18,732,318 16,036,042

INCOME FROM

OPERATIONS 12,934,636 13,365,584 16,688,494 19,814,878

OTHER EXPENSE, NET

Interest

income 763,764 877,099 1,642,397 1,457,417

Finance/interest

expense (4,854,138) (6,289,868) (7,792,916) (12,276,375)

Convertible

note make

whole

interest (6,454,683) -- (6,454,683) --

Change in fair

value of

derivative

liabilities (26,726,167) (27,786,632) (22,611,599) (25,115,869)

Gain from debt

Extinguishment -- -- 2,930,200 --

Government

grant -- -- 3,519,890 --

Income from

equity

investments 2,752,664 -- 2,698,032 --

Other non-

operating

income, net 142,348 649,871 652,564 1,019,142

Total

other

expense,

net (34,376,212) (32,549,530) (25,416,115) (34,915,685)

LOSS BEFORE

PROVISION FOR

INCOME TAXES AND

NONCONTROLLING

INTEREST (21,441,576) (19,183,946) (8,727,621) (15,100,807)

PROVISION FOR

INCOME TAXES

Current 3,229,810 1,292,890 3,394,031 1,959,246

Deferred (1,221,850) (206,100) -- (422,633)

Total

provision

for income

taxes 2,007,960 1,086,790 3,394,031 1,536,613

NET LOSS BEFORE

NONCONTROLLING

INTEREST (23,449,536) (20,270,736) (12,121,652) (16,637,420)

Less: Net income

attributable to

noncontrolling

interest 8,339,676 4,000,490 12,332,928 5,445,346

NET LOSS

ATTRIBUTABLE TO

CONTROLLING

INTEREST (31,789,212) (24,271,226) (24,454,580) (22,082,766)

OTHER COMPREHENSIVE

INCOME (LOSS):

Foreign

currency

translation

adjustments 162,842 4,841,277 (14,089) 6,457,227

Comprehensive

(loss) income

attributable to

noncontrolling

interest (1,031,639) 1,498,426 (1,106,385) 4,205,415

COMPREHENSIVE LOSS $(32,658,009) $(17,931,523) $(25,575,054) $(11,420,124)

WEIGHTED AVERAGE

NUMBER OF SHARES

Basic 39,533,099 34,928,576 37,918,177 34,883,740

Diluted 39,533,099 34,928,576 37,918,177 34,883,740

LOSS PER SHARE

Basic $(0.804) $(0.69) $(0.645) $(0.63)

Diluted $(0.804) $(0.69) $(0.645) $(0.63)

GENERAL STEEL HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

Preferred stock Common stock

Shares Par value Shares Par value

BALANCE, January 1, 2008 3,092,899 $3,093 34,634,765 $34,635

Net loss

Acquired noncontrolling

interest

Adjustment to statutory

reserve

Common stock issued for

compensation, $7.16 76,600 77

Common stock issued for

compensation, $10.43 150,000 150

Common stock issued for

compensation, $6.66 87,400 87

Common stock transferred by

CEO for compensation, $6.91

Foreign currency translation

adjustments

BALANCE, June 30, 2008,

Unaudited 3,092,899 $3,093 34,948,765 $34,949

Net income

Acquired noncontrolling

interest

Adjustment to statutory

reserve

Common stock issued for

compensation, $10.29 90,254 90

Common stock issued for

consulting fee, $3.6 100,000 100

Common stock issued for public

relations, $3.6 25,000 25

Common stock issued for

compensation, $3.5 87,550 88

Common stock transferred by

CEO for compensation, $6.91

Common stock issued at

$5/share 140,000 140

Notes converted to common

stock 541,299 541

Make whole shares issued on

notes conversion 195,965 196

Foreign currency translation

adjustments

BALANCE, December 31, 2008 3,092,899 $3,093 36,128,833 $36,129

Net Loss

Disposal of subsidiaries

Distribution of dividend to

noncontrolling shareholders

Adjustment to statutory

reserve

Common stock issued for

compensation, $1.85 109,250 109

Common stock issued for

compensation, $2.77 106,750 107

Common stock issued for

interest payment, $3.66 152,240 152

Common stock issued for

repayment of debt, $6.00 300,000 300

Notes converted to common

stock 5,104,596 5,105

Make whole shares issued on

notes conversion 1,399,759 1,399

Common stock transferred by

CEO for compensation, $6.91

Reduction of Registered

Capital

Foreign currency translation

adjustments

BALANCE, June 30, 2009,

unaudited 3,092,899 $3,093 43,301,428 $43,301

Retained earnings

Paid-in Statutory

capital reserves Unrestricted

BALANCE, January 1, 2008 $23,429,153 $3,632,325 $22,686,590

Net loss (22,082,766)

Acquired noncontrolling interest

Adjustment to statutory reserve 648,363 (648,363)

Common stock issued for

compensation, $7.16 548,379

Common stock issued for

compensation, $10.43 1,564,350

Common stock issued for

compensation, $6.66 581,997

Common stock transferred by CEO

for compensation, $6.91 69,100

Foreign currency translation

adjustments

BALANCE, June 30, 2008,

unaudited $26,192,979 $4,280,688 $(44,539)

Net income 10,758,321

Acquired noncontrolling interest

Adjustment to statutory reserve 621,953 (621,953)

Common stock issued for

compensation, $10.29 928,582

Common stock issued for

consulting fee, $3.6 359,900

Common stock issued for public

relations, $3.6 89,975

Common stock issued for

compensation, $3.5 306,337

Common stock transferred by CEO

for compensation, $6.91 138,200

Common stock issued at $5/share 699,860

Notes converted to common stock 6,102,691

Make whole shares issued on

notes conversion 2,310,117

Foreign currency translation

adjustments

BALANCE, December 31, 2008 $37,128,641 $4,902,641 $10,091,829

Net Loss (24,454,580)

Disposal of subsidiaries

Distribution of dividend to

noncontrolling shareholders

Adjustment to statutory reserve 259,760 (259,760)

Common stock issued for

compensation, $1.85 202,003

Common stock issued for

compensation, $2.77 295,591

Common stock issued for interest

payment, $3.66 557,709

Common stock issued for

repayment of debt, $6.00 1,799,700

Notes converted to common stock 24,125,324

Make whole shares issued on

notes conversion 5,565,436

Common stock transferred by CEO

for compensation, $6.91 138,200

Reduction of Registered Capital

Foreign currency translation

adjustments

BALANCE, June 30, 2009,

unaudited $69,812,604 $5,162,401 $(14,622,511)

Accumulated

other Non-

Contribution comprehensive controlling

receivable income interest Totals

BALANCE, January 1, 2008 $(959,700) $3,285,278 $43,322,066 $95,433,440

Net loss 5,445,346 (16,637,420)

Acquired noncontrolling

interest 15,767,571 15,767,571

Adjustment to statutory

reserve --

Common stock issued for

compensation, $7.16 548,456

Common stock issued for

compensation, $10.43 1,564,500

Common stock issued for

compensation, $6.66 582,084

Common stock transferred

by CEO for compensation,

$6.91 69,100

Foreign currency

translation adjustments 6,457,227 4,205,415 10,662,642

BALANCE, June 30, 2008,

unaudited $(959,700) $9,742,505 $68,740,398 $107,990,373

Net income (13,987,183) (3,228,862)

Acquired noncontrolling

interest 127,915 127,915

Adjustment to statutory

reserve --

Common stock issued for

compensation, $10.29 928,672

Common stock issued for

consulting fee, $3.6 360,000

Common stock issued for

public relations, $3.6 90,000

Common stock issued for

compensation, $3.5 306,425

Common stock transferred

by CEO for compensation,

$6.91 138,200

Common stock issued at

$5/share 700,000

Notes converted to

common stock 6,103,232

Make whole shares issued

on notes conversion 2,310,313

Foreign currency

translation adjustments (1,335,146) (253,844) (1,588,990)

BALANCE, December 31,

2008 $(959,700) $8,407,359 $54,627,286 $114,237,278

Net Loss 12,332,928 (12,121,652)

Disposal of subsidiaries (292,820) (292,820)

Distribution of dividend

to noncontrolling

shareholders (556,000) (556,000)

Adjustment to statutory

reserve --

Common stock issued for

compensation, $1.85 202,112

Common stock issued for

compensation, $2.77 295,698

Common stock issued for

interest payment, $3.66 557,861

Common stock issued for

repayment of debt,

$6.00 1,800,000

Notes converted to

common stock 24,130,429

Make whole shares issued

on notes conversion 5,566,835

Common stock transferred

by CEO for compensation,

$6.91 138,200

Reduction of Registered

Capital 959,700 959,700

Foreign currency

translation adjustments (14,089) (1,106,385) (1,120,474)

BALANCE, June 30, 2009,

unaudited $-- $8,393,270 $65,005,009 $133,797,167

GENERAL STEEL HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30

(UNAUDITED)

2009 2008

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income attributable to

controlling interest $ (24,454,580) $ (22,082,766)

Net income attributable to

noncontrolling interest 12,332,928 5,445,346

Consolidated net income (12,121,652) (16,637,420)

Adjustments to reconcile net income

to cash provided by (used in)

operating activities:

Depreciation 13,073,512 8,868,941

Amortization 404,564 444,670

Debt waiver (2,930,200) --

(Gain) Loss on disposal of

equipment (3,431,337) --

Stock issued for services and

compensation 636,010 1,199,640

Income from investment (2,698,500) --

Amortization of deferred note

issuance cost 43,282 20,429

Amortization of discount on

convertible notes -- 1,626,184

Change in fair value of derivative

instrument 22,611,599 25,115,869

Convertible note make whole

interest 6,454,683 --

Deferred tax assets 2,165,702 (422,633)

Changes in operating assets and

liabilities

Accounts receivable (7,924,301) (13,657,403)

Accounts receivable - related

parties -- (21,068,625)

Notes receivable 4,914,506 (13,961,703)

Notes receivable - restricted -- --

Other receivables (618,596) (1,219,841)

Other receivables - related parties (14,992,788) 1,471,397

Loan receivable -- 1,276,560

Inventories (84,204,445) (44,931,442)

Advances on inventory purchases 11,271,266 33,110,981

Advances on inventory purchases -

related parties (13,021,451) (8,517,117)

Prepaid expense - current 126,940 (245,115)

Prepaid expense - non current 91,871 11,443

Prepaid expense - non current -

related parties 38,207 (82,388)

Accounts payable 59,067,210 1,188,213

Accounts payable - related parties 15,283,470 1,440,412

Other payables 16,545,247 (2,250,089)

Other payable - related parties 15,748,520 (1,208,217)

Dividend payable 440,230 (391,165)

Accrued liabilities 2,198,275 2,598,366

Customer deposits 16,159,621 90,831,063

Customer deposits - related parties (3,574,353) (3,998,027)

Taxes payable (12,768,702) (4,147,173)

Net cash provided by operating

activities 28,988,390 36,465,810

CASH FLOWS FROM INVESTING ACTIVITIES:

Acquired long term investment (6,592,500) --

Cash acquired from subsidiary -- 1,256,385

Deposits due to sales representatives 31,933,299 (1,053,871)

Proceeds from short term investment -- 2,340,360

Long term other receivables 1,215,339 --

Advance on equipment purchases 3,065,263 674,550

Cash proceeds from sale of equipment 4,413,964 --

Equipment purchases (60,289,090) (93,010,998)

Intangible assets purchases (99,020) (186,623)

Payment to original shareholders -- (7,092,000)

Net cash used in investing

activities (26,352,745) (97,072,197)

CASH FLOWS FROM FINANCING ACTIVITIES:

Restricted cash (69,727,403) (55,759,041)

Notes receivable - restricted -- 12,947,333

Borrowings on short term loans -

bank 72,815,976 27,141,084

Payments on short term loans - bank (43,352,782) (41,610,454)

Borrowings on short term loans -

related parties -- 7,106,184

Payments on short term loans -

related parties 2,931,400 --

Borrowings on short term loan -

others 79,354,464 42,641,359

Payments on short term loans -

others (63,899,468) (33,772,944)

Borrowings on short term notes

payable 371,613,578 109,642,320

Payments on short term notes

payable (303,326,615) (26,325,504)

Net cash provided by financing

activities 46,409,150 42,010,337

EFFECTS OF EXCHANGE RATE CHANGE IN

CASH (9,277) 1,792,862

INCREASE (DECREASE) IN CASH 49,035,518 (16,803,188)

CASH, beginning of period 14,895,442 43,713,346

CASH, end of period $ 63,930,960 $ 26,910,158

Source: General Steel Holdings, Inc.
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