* Revenue Increases 80% to $37.4 Million
* Net Income Rose to $3.8 Million
* Adjusted Net Income Rose 79%
TAIYUAN, Shanxi, China, May 22 /Xinhua-PRNewswire-FirstCall/ -- Puda Coal, Inc. (OTC Bulletin Board: PUDC) (“Puda” or “the Company”), a leading supplier of China’s high grade metallurgical coking coal used to make coke for the purposes of steel manufacturing, today announced its financial results for the first quarter ended on March 31, 2007.
First Quarter 2007 Highlights
-- First quarter revenue reached a record $37.4 million, up 80% from the
first quarter of 2006
-- Operating income totaled $6.3 million, up 66% from the first quarter of
2006
-- Net income rose to $3.8 million, or $0.04 per diluted share, compared
to a net loss of $6.4 million in the first quarter of 2006
-- Adjusted net income totaled $4.0 million, or $0.04 per diluted share,
up 79% from adjusted net income of $2.2 million in the first quarter of
2006
-- Sales of cleaned coal totaled 467,000 tons, up 75% from the first
quarter of 2006
-- Average selling price of cleaned coal was $80 per ton, slightly down
from $81 per ton in the comparable period of 2006
-- Renewed sales contract with the largest two clients: Baotou Steel Group
and Xuanhua Steel Group
First Quarter 2006 Results
“While the first quarter is one of our seasonally slowest quarters, our results reflected favorable cleaned coal market conditions and the positive impact of renewed contracts with several of our customers. Our margins were impacted by slightly higher prices of raw coal, but the average selling prices of our cleaned coal product were relatively stable. During the quarter, we increased our inventory of raw coal in order to mitigate the impact of higher raw coal price,” said Mr. Zhao Ming, chairman and chief executive officer of Puda Coal, Inc.
“During the first quarter, we began implementing our advanced mix control technology and management systems at our Zhongyang plant, which will help reduce our costs while maintaining high quality,” stated Mr. Zhao.
Net revenue for the first quarter was $37.4 million, an increase of 80.0% from $20.8 million in the first quarter of 2006. The increase in net revenue was the result of strong market demand for high grade cleaned coal and relatively stable selling prices for cleaned coal. Sales of cleaned coal increased approximately 200,000 MT from approximately 267,000 MT in the three months ended March 31, 2006 to approximately 467,000 MT in the three months ended March 31, 2007. The increase in tonnage sales was primarily due to increased orders of cleaned coal from existing customers. The selling price of cleaned coal was approximately $80 per ton (after adjusting for exchange rate differences), down slightly from $81 per ton in the comparable period of 2006.
Gross profit for the first quarter was US$7.5 million, an increase of 66% from the comparable period in 2006. Gross margin for the first quarter of 2007 was 20.1%, slightly lower than the gross margin of 21.7% in the first quarter of 2006. The decrease was due to an increase in the average price of raw coal from $44 per ton in the three months ended March 31, 2006 to approximately $47 per ton in the three months ended March 31, 2007.
Operating expenses for the first quarter were $1.2 million, up 68% from $0.7 million in the first quarter of 2006. The increase was due to higher selling and marketing expenses related to new market development and expansion of the Company’s sales force. As a percentage of revenue, operating expenses were 3.2% in the first quarter of 2007, compared to 3.4% in the same quarter last year, reflecting operational efficiencies as the Company has grown in scale.
Operating income was $6.3 million, up 66% from $3.8 million in the first quarter of 2006.
Net income for the first quarter of 2007 was $3.9 million or $0.04 per basic and diluted basis, versus a net loss of $6.4 million, or $0.09 per share per basic and diluted share in the comparable period of 2006. Adjusting net income to exclude non-cash debt financing and other expenses related to the Company’s convertible debt and warrants, adjusted net income was $4.0 million, or $0.04 per fully diluted share, in the first quarter of 2007, up 79% from adjusted net income of $2.2 million, or $0.03 per diluted share in the first quarter of 2006.
Financial Condition
As of March 31, 2007, Puda Coal had $27.4 million in cash and cash equivalents, approximately $40.4 million in working capital and a current ratio 4.0:1. Puda Coal generated $2.4 million in cash flow from operations in the quarter ended at March 31, 2007, compared to $5.6 million in the first quarter of 2006. Inventory increased $1.9 million to $17.5 million from $15.7 million at December 31, 2006, as the Company increased its purchases of raw coal in an effort to minimize the impact of rising prices. Long-term debt totaled $10.1 million, excluding current portion, and shareholders’ equity stood at $28.7 million at March 31, 2007.
Business Outlook
The Company anticipates continued strong demand for high grade metallurgic cleaned coal driven by large infrastructure projects, a prosperous national real estate market as well as the ongoing western development plan. Puda Coal plans to increase its annual production capacity to 4.0 million by the end of 2007 and conduct technical upgrades to all coal washing plants.
“During the first quarter, we began implementing our advanced mix control technology and management system at our Zhongyang plant, which will help reduce our costs without sacrificing quality. These improvements should help us maintain our margins at current levels despite increases in the price of coal,” stated Mr. Zhao. “In the coming months, we plan to acquire another coal mine to increase our capacity to meet demand and increase our market share.”
Puda Coal expects revenues for the full year 2007 to be in the range of $210 to $220 million, and full year 2007 operating income between $34 million and $36 million.
Conference Call
The Company will host a conference call at 9:00 a.m. EDT on Tuesday, May 22, 2007, to discuss results for the first quarter of 2007. To participate in the conference call, please dial the following number five to ten minutes prior to the scheduled conference call time: (888) 481-7939. International callers should dial (617) 847-8707. The passcode for the call is 51054241. If you are unable to participate in the call at this time, a replay will be available on Tuesday, May 22 at 11:00 am EDT, through Tuesday, May 29 at 11:00 am EDT. To access the replay, dial (888) 286-8010. International callers should dial (617) 801-6888. The conference passcode is 61384137.
Use of Non-GAAP Financial Information
GAAP results for the fourth quarter and full years ended December 31, 2006 and December 31, 2005 include certain non-cash debt financing and other expenses related to the Company’s convertible notes and warrants. To supplement the Company’s condensed consolidated financial statements presented on a GAAP basis, the Company has provided non-GAAP financial information excluding the impact of these items in this release. The Company’s management believes that these non-GAAP measures provide investors with a better understanding of how the results relate to the Company’s historical performance. A reconciliation of adjustments to GAAP results appears below. This additional non-GAAP information is not meant to be considered in isolation or as a substitute for GAAP financials. The non-GAAP financial information that the Company provides also may differ from the non-GAAP information provided by other companies.
About Puda Coal, Inc.
Puda Coal, through its affiliates and controlled entities, supplies premium grade coking coal to the steel making industry for use in making coke. The Company currently possesses 2.7 million metric tons of annual coking coal cleaning capacity, and management believes it is the largest coking coal cleaning Company in terms of capacity in Shanxi Province, China. Shanxi Province provides 20 - 25% of China’s coal output and supplies nearly 50% of China’s coke.
Forward-Looking Statements
The information contained herein includes forward-looking statements. These statements relate to future events or to our future financial performance, and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance, or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. You should not place undue reliance on forward-looking statements since they involve known and unknown risks, uncertainties and other factors which are, in some cases, beyond our control and which could, and likely will, materially affect actual results, levels of activity, performance or achievements. Any forward-looking statement reflects our current views with respect to future events and is subject to these and other risks, uncertainties and assumptions relating to our operations, results of operations, growth strategy and liquidity. We assume no obligation to publicly update or revise these forward-looking statements for any reason, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future. The safe harbor for forward-looking statements contained in the Securities Litigation Reform Act of 1995 protects companies from liability for their forward-looking statements if they comply with the requirements of the Act.
-- FINANCIAL TABLES FOLLOW --
PUDA COAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(US$ in thousands, except per share data, Unaudited)
Three months ended March 31,
2007 2006
NET REVENUE 37,415 20,771
COST OF REVENUE (29,910) (16,258)
GROSS PROFIT 7,505 4,513
OPERATING EXPENSES
Selling expenses 842 276
General and administrative expenses 352 434
TOTAL OPERATING EXPENSES 1,194 710
INCOME FROM OPERATIONS 6,311 3,803
INTEREST INCOME 25 9
INTEREST EXPENSE (489) (566)
DEBT FINANCING COSTS (767) (4,953)
DERIVATIVE UNREALIZED FAIR
VALUE
GAIN/(LOSS) 868 (3,500)
INCOME/(LOSS) BEFORE INCOME 5,948 (5,207)
TAXES
INCOME TAXES (2,101) (1,238)
NET INCOME/(LOSS) 3,847 (6,445)
OTHER COMPREHENSIVE INCOME
Foreign currency translation adjustment 400 148
COMPREHENSIVE INCOME/(LOSS) 4,247 (6,297)
NET INCOME/(LOSS) 3,847 (6,445)
LESS: DIVIDENDS
Option holder preference dividend (2,717) (2,717)
Common dividend -- --
UNDISTRIBUTED EARNINGS 1,130 (9,162)
BASIC EARNINGS/(LOSS) PER SHARE
- Option holder preference 0.04 0.04
- Other common holders 0.00 (0.13)
0.04 (0.09)
DILUTED EARNINGS/(LOSS) PER SHARE
- Option holder preference 0.04 0.04
- Other common holders 0.00 (0.13)
0.04 (0.09)
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING
- BASIC 94,085,190 75,514,605
- DILUTED 108,673,971 75,514,605
PUDA COAL, INC.
RECONCILIATION OF NON-GAAP FINANCIAL DATA
Adjusted Net income
($ in thousands except per share
data) Q1 2007 Q1 2006
Net Diluted Net Diluted
Net Income (Loss) Diluted EPS Income EPS Income EPS
Adjusted Amount 4,003 0.04 2,240 0.03
Adjustments
Non cash debt financing costs (1) 392 0.00 4,895 0.07
Unrealized derivative value
gain/Loss (2) -868 (0.00) 3,500 0.05
Discount on converted shares
and exercised warrants(3) 232 0.00 142 0.00
Amount per consolidated statement
of operations 4,247 0.04 (6,297) (-0.08)
(1) Non cash debt financing costs for Q1 2007 includes amortization of
debt issue costs of $6,000, amortization of discount on convertible
notes and warrants of $386,000. Non cash debt financing costs for Q1
2006 includes amortization of debt issue costs of $591,000,
amortization of discount on convertible notes and warrants of
$4,304,000.
(2) Derivative unrealized fair value gain for Q1 2007 was 868,000.
Derivative unrealized fair value loss for Q1 2006 was 3,500,000.
(3) Discount on converted shares and exercised warrants for Q1 2007 was
232,000. Discount on converted shares and exercised warrants for Q1
2006 was 142,000.
PUDA COAL, INC.
CONSOLIDATED BALANCE SHEETS
(US$ in thousands)
March 31, December 31,
2007 2006
ASSETS (unaudited)
CURRENT ASSETS
Cash and cash equivalents 27,421 $24,943
Restricted cash 233 233
Accounts receivable, net 7,671 7,186
Other receivables
- Related parties 9 9
- Third parties 38 40
Advances to suppliers
- Related parties 599 602
- Third parties 508 538
Deferred charges 58 171
Inventories 17,523 15,663
Total current assets 54,060 49,385
PROPERTY, PLANT AND EQUIPMENT, NET 9,625 9,870
INTANGIBLE ASSETS, NET 3,709 3,729
TOTAL ASSETS 67,394 $62,984
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Current portion of long-term debt
- Related party $1,300 $1,300
Accounts payable
- Related parties -- 221
- Third parties 3,148 2,531
Other payables
- Related party 906 901
- Third parties 2,708 2,113
Accrued expenses 872 951
Income taxes payable 2,107 2,485
VAT payable 1,004 1,204
Distribution payable 1,037 1,026
Penalty payable 579 204
Total current liabilities 13,661 12,936
LONG-TERM LIABILITIES
Long-term debt
- Related party 10,075 10,400
Convertible notes 2,794 3,108
Derivative conversion feature 2,001 2,406
Derivative warrants 7,461 8,380
Total long-term liabilities 22,331 24,294
COMMITMENTS AND CONTINGENCIES TEMPORARY EQUITY
Option to buy-out Shanxi Coal 2,717 2,717
STOCKHOLDERS’ EQUITY
Preferred stock, authorized 5,000,000
shares, par value $0.01, issued and
outstanding None -- --
Common stock, authorized 150,000,000
shares, par value $0.001, issued and
outstanding 94,731,301 95 93
Paid-in capital 17,905 16,506
Statutory surplus reserve fund 1,366 1,366
Retained earnings 7,780 3,933
Accumulated other comprehensive income 1,539 1,139
Total stockholders’ equity 28,685 23,037
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $67,394 $62,984
PUDA COAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the quarters ended March 31, 2007 and 2006
(US$ in thousands, unaudited)
Three months ended March 31,
2007 2006
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income/(loss) $3,847 $(6,445)
Adjustments to reconcile net income to net
cash provided by operating activities
Amortization of land-use rights 20 19
Depreciation 245 236
Provision for doubtful debts 1 (1)
Amortization of debt issue costs 6 591
Amortization of discount on convertible
notes and warrants 386 4,304
Derivative unrealized fair value
(gain)/loss (868) 3,500
Discount on converted shares and exercised
warrants 232 142
Issue of common stock for services -- 21
Changes in operating assets and
liabilities:
(Increase)/decrease in accounts
receivable (409) 416
Decrease/(increase) in other receivables 2 (3)
Decrease in advances to suppliers 45 1,216
(Increase)/decrease in inventories (1,692) 401
Increase in accounts payable 366 267
(Decrease)/increase in accrued expenses (87) 58
Increase in other payables 574 161
Decrease in income tax payable (403) (156)
(Decrease)/increase in VAT payable (212) 468
Increase in penalty payable 375 58
Decrease in restricted cash -- 382
Net cash provided by operating activities 2,428 5,635
CASH FLOWS FROM FINANCING ACTIVITIES:
Exercise of warrants 120 --
Repayment of long-term debt (325) (325)
Net cash used in financing activities (205) (325)
Effect of exchange rate changes on cash 255 155
Net increase in cash and cash equivalents 2,478 5,465
Cash and cash equivalents at beginning of
period 24,943 12,067
Cash and cash equivalents at end of period $27,421 $17,532
For more information, please contact:
Investor Relations Contact:
Crocker Coulson, President
CCG Elite
Tel: +1-646-213-1915
Email: crocker.coulson@ccgir.com
Company Contact:
Wenwei Tian, Director of Investor Relations
Puda Coal, Inc.
Tel: +86-351-228-1302
Email: awtian@yahoo.com
