Full Year Revenue Reached $165.3 Million and Net Income Climbed to $10.9 Million
TAIYUAN, China, April 11 /Xinhua-PRNewswire-FirstCall/ -- Puda Coal, Inc. (OTC Bulletin Board: PUDC) (“Puda Coal” 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 fourth quarter and fiscal year ended December 31, 2007.
Fourth Quarter 2007 Highlights
-- Fourth quarter net revenue was $49.2 million, up 13.4% from the fourth
quarter of 2006
-- Operating income totaled $6.3 million, down 11.3% from the fourth
quarter of 2006
-- Net income was $4.3 million, or $0.04 per share on a fully diluted
basis
-- Adjusted net income was $3.6 million, or $0.03 per diluted share
-- Sales of cleaned coal totaled 585,000 metric tons (MT), up 6.8% from
the fourth quarter of 2006
-- Average selling price of cleaned coal was $84 per MT in the fourth
quarter of 2007 and 2006 (after adjusting for exchange rate difference)
Full Year 2007 Highlights
-- Net revenue climbed to $165.3 million, up 20% from 2006
-- Operating income rose to $23.4 million, up 2.9% from 2006
-- Net income totaled $10.9 million, or $0.11 per share on a fully diluted
basis
-- Adjusted net income was $12.8 million, or $0.13 per diluted share
-- Sales of cleaned coal reached 2.0 million metric tons, up 14.5% from
2006
-- Average selling price of cleaned coal was $82 per MT in 2007 and 2006
(after adjusting for exchange rate difference)
-- Completed acquisition of Lingshi plant, increasing annual coal washing
capacity to 3.5 million MT
-- Streamlined corporate structure at recommendation of independent
directors and audit committee
-- Enhanced corporate governance by establishing audit, compensation and
nominating and corporate governance committees
“In the fourth quarter of 2007, net revenue and operating income both improved from the third quarter of 2007, due to increased sales to our existing customers. We also sold through a portion of our inventory and generated positive cash flow from operations,” commented Mr. Ming Zhao, Chairman and Chief Executive Officer of Puda Coal. “While we achieved record net revenue and operating income in 2007, we continued to experience intense competition and significant price increases for raw coal. These factors resulted in lower gross margin and slower growth in operating income.”
Results for the Fourth Quarter 2007
For the quarter ended December 31, 2007, net revenue was $49.2 million, up 13.4% from $43.4 million in the fourth quarter of 2006. Sales of cleaned coal were 585,000 MT in the fourth quarter of 2007, up 6.8% from 548,000 MT in the same period last year, due to increased sales to existing customers. The average selling price was approximately $84 per MT in the fourth quarter of 2007 and 2006 (after adjusting for exchange rate difference).
Gross profit for the quarter was $7.8 million, down 12.3% from $8.9 million in the fourth quarter of 2006. Gross margin was 15.9% in the quarter, down from 20.6% in the same period last year. The decrease was due to an increase in the average price of raw coal.
Operating expenses for the fourth quarter of 2007 were $1.5 million, down 16.3% from the same period last year. Selling expenses declined due to lower shipping charges from decreased tonnage sales to customers outside Shanxi Province during the quarter. As a percentage of net revenue, operating expenses were 3.1% in the fourth quarter of 2007, compared to 4.1% in the same quarter last year.
Operating income was $6.3 million, or 12.8% of net revenue, down 11.3% from $7.1 million, or 16.4% of net revenue, in the fourth quarter of 2006.
Net income was $4.3 million, or $0.04 per share on a fully diluted basis, compared to net income of $6.0 million, or $0.07 per share on a fully diluted basis, in the fourth quarter 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 $3.6 million, or $0.03 per share on a fully diluted basis, in the fourth quarter of 2007, down from adjusted net income of $4.0 million, or $0.05 per share on a fully diluted basis, in the same period of 2006.
Full Year 2007 Results
Net revenue for 2007 was $165.3 million, up 20.0% from $137.8 million in 2006. Gross profit was $28.6 million, or 17.3% of net revenue, up slightly from $28.4 million, or 20.6% of net revenue in 2006. Operating profit was $23.4 million, or 14.2% of net revenue, up 2.9% from $22.8 million, or 16.5% of net revenue in 2006. Net income was $10.9 million, or $0.11 per share on a fully diluted basis, up from $1.4 million, or $0.02 per share on a fully diluted basis, in 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 $12.8 million, or $0.13 per share on a fully diluted basis, in 2007, up from $12.5 million, or $0.16 per share on a fully diluted basis, in 2006.
Financial Condition
As of December 31, 2007, Puda Coal had $16.1 million in cash and cash equivalents, $43.7 million in working capital and a current ratio 3.29:1. Long-term debt, excluding current portion, was $13.6 million and shareholders’ equity stood at $48.6 million.
In the first nine months of 2007, Puda Coal increased its inventory of raw coal in an effort to mitigate rising raw materials prices. In the fourth quarter of 2007, Puda Coal reduced inventory of raw materials by approximately $6.9 million and generated $14.3 million in cash flow from operating activities.
Business Outlook
Demand for steel and high-grade metallurgical coking coal is expected to increase steadily in the 2008. Based on information from the China Iron and Steel Association, crude steel production is expected to reach 520 million tons in 2008, up 6.3% from 2007. However, the Company continues to experience higher raw coal prices and increased competition as the larger steel groups have begun sourcing more of their coal washing needs from internal coke mills and many coal mining companies have begun to integrate downstream by establishing their own coal washing operations. The increased competition limits the Company’s ability to raise prices at the same rate as the increase in the cost of raw coal, which will reduce gross margin in 2008. The Company is actively seeking to acquire coal mines in an effort to vertically integrate its coal washing operations and improve profitability over the long-term.
“While we expect the market to remain competitive in 2008, we will actively seek to increase our sales while attempting to preserve operating margin," said Mr. Zhao. “Given the current environment, we are actively seeking to acquire coal mines to take advantage of the strong demand for raw coal in China and improve our profitability.”
Conference Call
The Company will host a conference call at 9:00 am EDT on Monday, April 14, 2008, to discuss results for the fourth quarter and full year 2007. To participate in the conference call, please dial the following number five to ten minutes prior to the scheduled conference call time: (888) 482-0024. International callers should dial (617) 801-9702. The passcode for the call is 216 118 72. If you are unable to participate in the call at this time, a replay will be available on Monday, April 14 at 11:00 a.m. EDT, through Monday, April 27 at 12:00 a.m. EDT. To access the replay, dial (888) 286-8010. International callers should dial (617) 801-6888. The conference passcode is 39860810.
Use of Non-GAAP Financial Information
GAAP results for the three and twelve month periods ended December 31, 2007 and December 31, 2006 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, which are adjusted net income and adjusted earnings per share, 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 subsidiaries in China, supplies premium grade coking coal to the steel making industry for use in making coke. The Company currently possesses 3.5 million metric tons of annual coking coal cleaning 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. For example, our business strategies, such as our plan to acquire coal mines, are subject to, among other things, the risks and uncertainties relating to the market condition beyond our control. 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.
-- FINANCIAL TABLES FOLLOW --
PUDA COAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three and Twelve Months ended December 31, 2007 and 2006
(In thousands of United States dollars, except for per share data)
Three months ended Twelve months ended
December 31, December 31,
2007 2006 2007 2006
(Unaudited) (Unaudited)
NET REVENUE $49,219 $43,407 $165,267 $137,771
COST OF REVENUE (41,392) (34,482) (136,652) (109,381)
GROSS PROFIT 7,827 8,925 28,615 28,390
OPERATING EXPENSES
Selling expenses 735 1,039 2,975 3,231
General and
administrative
expenses 771 760 2,215 2,387
TOTAL OPERATING
EXPENSES 1,506 1,799 5,190 5,618
INCOME FROM
OPERATIONS 6,321 7,126 23,425 22,772
INTEREST INCOME 25 21 83 59
INTEREST EXPENSE (231) (2,085) (1,577) (4,441)
DEBT FINANCING COSTS (501) (1,156) (2,422) (10,669)
DERIVATIVE UNREALIZED
FAIR VALUE GAIN/(LOSS) 917 4,564 (343) 1,237
INCOME BEFORE INCOME
TAXES 6,531 8,470 19,166 8,958
INCOME TAXES (2,199) (2,474) (8,292) (7,604)
NET INCOME/(LOSS) 4,332 5,996 10,874 1,354
OTHER COMPREHENSIVE
INCOME
Foreign currency
translation
adjustment 1056 437 2,860 985
COMPREHENSIVE
INCOME/(LOSS) 5,388 6,433 13,734 (2,339)
NET INCOME/(LOSS) 4,332 5,996 10,874 1,354
LESS: DIVIDENDS
Option holder
preference dividend -- -- -- (2,717)
Common dividend -- -- -- --
UNDISTRIBUTED
EARNINGS 4,322 5,996 10,874 (1,363)
BASIC EARNINGS/(LOSS)
PER SHARE
- Option holder
preference -- -- $0.04
- Other common
holders $0.04 $0.07 $0.11 $(0.02)
$0.04 $0.07 $0.11 $0.02
DILUTED EARNINGS/
(LOSS) PER SHARE
- Option holder
preference -- -- $0.04
- Other common
holders $0.04 $0.07 $0.11 $(0.02)
0.04 0.07 0.11 0.02
WEIGHTED AVERAGE
NUMBER OF SHARES
OUTSTANDING
- BASIC 100,117,465 86,821,002 98,404,914 80,167,110
WEIGHTED AVERAGE
NUMBER OF SHARES
OUTSTANDING
- DILUTED 113,390,962 86,830,685 100,591,136 80,329,032
PUDA COAL, INC.
AUDITED CONSOLIDATED BALANCE SHEETS
December 31, 2007 and December 31, 2006
(In thousands of United States dollars)
December 31, December 31,
2007 2006
ASSETS
CURRENT ASSETS
Cash and cash equivalents $16,138 $24,943
Restricted cash 233 233
Accounts receivable, net 8,137 7,186
Other receivables
- Related parties 4 9
- Third parties 6 40
Advances to suppliers
- Related parties 685 602
- Third parties 1,363 538
Deferred charges -- 171
Inventories 35,953 15,663
Total current assets 62,762 49,385
PROPERTY, PLANT AND EQUIPMENT, NET 15,018 9,870
INTANGIBLE ASSETS, NET 3,484 3,729
TOTAL ASSETS $81,264 $62,984
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Current portion of long-term debt
- Related party $1,300 $1,300
Accounts payable
- Related parties 182 221
- Third parties 2,140 2,531
Other payables
- Related parties 1,851 901
- Third parties 2,916 2,113
Accrued expenses 1,350 951
Income taxes payable 2,223 2,485
VAT payable 1,379 1,204
Distribution payable 1,096 1,026
Convertible notes 1,841 --
Derivative conversion feature 1,100 --
Penalty payable 1,725 204
Total current liabilities 19, 103 12,936
LONG-TERM LIABILITIES
Long-term debt
- Related party 9,100 10,400
Convertible notes -- 3,108
Derivative conversion feature -- 2,406
Derivative warrants 4,480 8,380
Total long-term liabilities 13,580 24,294
COMMITMENTS AND CONTINGENCIES
TEMPORARY EQUITY
Option to buy-out Shanxi Coal -- 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 105,252,176 (2006:92,881,301) 105 93
Paid-in capital 28,304 16,506
Statutory surplus reserve fund 1,366 1,366
Retained earnings 14,807 3,933
Accumulated other comprehensive income 3,999 1,139
Total stockholders’ equity 48,581 23,037
TOTAL LIABILITIES AND STOCKHOLDERS’
EQUITY
$81,264 $62,984
PUDA COAL, INC.
AUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Twelve Months ended December 31, 2007 and 2006
(In thousands of United States dollars)
2007 2006
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income/(loss) $10,874 $1,354
Adjustments to reconcile net
income/(loss) to net cash provided
by operating activities
Amortization of land-use rights 78 78
Depreciation 1,252 953
Provision for doubtful debts 1 10
Amortization of debt issue costs 6 838
Amortization of discount on convertible
notes and warrants 895 8,627
Derivative unrealized fair value loss 343 (1,237)
Discount on converted shares and
exercised warrants 663 2,898
Stock compensation expense 46 --
Issue of common stock for services -- 21
Issue of common stock for penalty -- 1,000
Changes in operating assets and
liabilities:
Increase in accounts receivable (444) (2,972)
Decrease/(increase) in other
receivables 41 4
(Increase)/decrease in advances to
suppliers (799) 1,819
Increase in inventories (18,518) (8,104)
Increase in accounts payable (596) 1,426
Increase in accrued expenses 289 588
Increase in other payables 1,553 1,432
(Decrease)/increase in income tax
payable (415) 1,088
(Decrease)/increase in VAT payable 90 887
Increase in penalty payable 1,521 204
Decrease in restricted cash -- 382
Net cash (used in)/provided by
operating activities
(3,120) 11,296
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchase of property, plant and
equipment (6,111)
Payment for the purchase of equity
interest in Shanxi Coal (1,799) --
Net cash used in investing activities (7,910) --
CASH FLOWS FROM FINANCING ACTIVITIES:
Exercise of warrants 3,600 1,860
Repayment of long-term debt (1,300) (1,300)
Net cash provided by financing
activities 2300 560
Effect of exchange rate changes on cash 168 1,020
Net (decrease)/increase in cash and
cash equivalents (8,562) 12,876
Cash and cash equivalents at beginning
of period 24,943 12,067
Cash and cash equivalents at end of
period $16,381 $24,943
PUDA COAL, INC.
RECONCILIATION OF NON-GAAP FINANCIAL DATA
For the Three Months For the Three Months
ended ended
Adjusted Net income December 31, 2007 December 31, 2006
($ in thousands except
per share data)
Net Income (Loss) Diluted
EPS Net Income Diluted EPS Net Income Diluted EPS
Adjusted Amount 3,557 0.03 3,958 0.05
Adjustments
Non cash debt financing
costs(1) 117 0.00 773 0.01
Unrealized derivative
fair value (Gain)/Loss(2) (917) (0.01) (4,564) (0.05)
Discount on converted
shares and exercised
warrants(3) 25 0.00 1,753 0.02
Amount per consolidated
statement of operations 4,332 0.04 5,996 0.07
(1) Non cash debt financing costs for Q4 2007 includes amortization of
debt issue costs of $0, amortization of discount on convertible notes
and warrants of $117,000; Non cash debt financing costs for Q4 2006
includes amortization of debt issue costs of $17,000, amortization of
discount on convertible notes and warrants of $756,000
(2) Derivative unrealized fair value gain for Q4 2007 was $917,000;
derivative unrealized fair value gain for Q4 2006 was $4,564,000
(3) Discount on converted shares and exercised warrants for Q4 2007 was
$25,000; Discount on converted shares and exercised warrants for Q4
2006 was $1,753,000
For the Year ended For the Year ended
Adjusted Net income December 31, 2007 December 31, 2006
($ in thousands except
per share data)
Net Income (Loss) Diluted
EPS Net Income Diluted EPS Net Income Diluted EPS
Adjusted Amount 12,781 0.13 12,480 0.16
Adjustments
Non cash debt financing
costs(1) 901 0.01 9,465 0.12
Unrealized derivative
fair Value (Gain)/Loss(2) 343 0.00 (1,237) (0.02)
Discount on converted
shares and exercised
warrants(3) 663 0.01 2,898 0.04
Amount per consolidated
statement of operations 10,874 0.11 1,354 0.02
(1) Non cash debt financing costs for 2007 includes amortization of debt
issue costs of $6,000, amortization of discount on convertible notes
and warrants of $895,000; Non cash debt financing costs for 2006
includes amortization of debt issue costs of $838,000, amortization
of discount on convertible notes and warrants of $8,627,000
(2) Derivative unrealized fair value loss for 2007 was $343,000;
Derivative unrealized fair value gain for 2006 was $1,237,000
(3) Discount on converted shares and exercised warrants for 2007 was
$663,000; Discount on converted shares and exercised warrants for
2006 was $2,898,000
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, COO and Director of Investor Relations
Puda Coal, Inc.
Tel: +86-351-228-1302
Email: awtian@yahoo.com
