omniture

Puda Coal Announces Third Quarter Results

2007-11-16 18:37 1376


TAIYUAN, China, Nov. 16 /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 quarter ended September 30, 2007.

Third Quarter 2007 Highlights

-- Third quarter revenue was $40.5 million, down 5% from the third

quarter of 2006

-- Operating income totaled $5.5 million, down 23% from the third quarter

of 2006

-- Net income was $3.4 million, or $0.03 per fully diluted share, up 55%

from the third quarter of 2006

-- Sales of cleaned coal totaled 492,000 metric tons (MT), down 10% from

the third quarter of 2006

-- Average selling price of cleaned coal was $81 per ton, unchanged from

the third quarter of 2006

-- Streamlined corporate structure at recommendation of independent Audit

committee

-- Enhanced corporate governance by establishing Compensation and

Nominating and Corporate Governance committees

-- Signed letter of intent to acquire Jingle Muguashan coal mine in Jingle

County

-- Engaged Deloitte & Touche to assist with Sarbanes-Oxley compliance

“We achieved modest growth in revenue and operating income from the second quarter of 2007. However, we faced significant competition during the quarter, which resulted in lower tonnage sales year-over-year. This, combined with higher raw coal prices negatively impacted our margins,” commented Mr. Zhao Ming, Chairman and Chief Executive Officer of Puda Coal.

Results for the Third Quarter 2007

For the quarter ended September 30, 2007, net revenue was $40.5 million, down 5.0% from $42.7 million in the third quarter of 2006. The revenue decline was mainly due to increased competition. Sales of cleaned coal were 492,000 MT in the third quarter of 2007, down from 546,000 MT in the same period last year. The average selling price was approximately $81 (after adjusting for exchange rate differences), unchanged from the same quarter of 2006.

Gross profit for the quarter was $6.7 million, down 25.4% from gross profit of $9.0 million in the third quarter of 2006. Gross margin was 16.4% in the quarter, down from 20.9% in the same period last year. The decrease was due to an increase in the average price of raw coal from $47 per ton in the third quarter of 2006 to approximately $50 per ton in the current quarter.

Operating expenses for the third quarter of 2007 were $1.1 million, down 35.7% from the same period last year, due to lower legal and professional fees. Selling expenses also declined, due to lower shipping charges from decreased tonnage sales to customers outside Shanxi Province in the third quarter of 2007. As a percentage of revenue, operating expenses were 2.8% in the third quarter of 2007, compared to 4.2% in the same quarter last year.

Operating income was $5.5 million, or 13.6% of revenue, down 22.9% from $7.1 million, or 16.8% of revenue, in the third quarter of 2006.

Net income was $3.4 million, or $0.03 per fully diluted share, compared to a net income of $2.2 million, or $0.02 per fully diluted share, in the third 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 $3.0 million, or $0.03 per fully diluted share, in the third quarter of 2007, down from adjusted net income of $4.0 million, or $0.03 per diluted share, in the same period of 2006.

Results for the Nine Months ended Sep 30, 2007

Net revenue was $116.0 million in the first nine months of 2007, up 23.0% from $94.4 million in the same period last year. Gross profit was $20.8 million, or 17.9% of revenue, up 6.8% from $19.5 million, or 20.6% of revenue in the same period last year. Operating income was $17.1 million, or 14.7% of revenue, up 9.3% from $15.6 million, or 16.6% of revenue in the same period last year. Net income was $6.5 million, or $0.07 per fully diluted share, compared to a net loss $4.6 million, or $(0.06) per fully diluted share, in the same period last year. 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 $9.2 million, or $0.10 per fully diluted share, in the first nine months of 2007, up 8.2% from $8.5 million, or $0.11 per fully diluted share, in the same period last year.

Financial Condition

As of September 30, 2007, Puda Coal had $1.8 million in cash and cash equivalents, $39.6 million in working capital and a current ratio 3.5:1. Puda Coal used $17.4 million in cash flow from operations in the first nine months of 2007, which includes a $20.0 million increase in raw coal inventory in an effort to mitigate rising raw materials prices. Long-term debt, excluding current portion, was $18.8 million and shareholders’ equity stood at $39.5 million.

Business Outlook

Management anticipates that China’s strong economic growth will continue in 2007 and believes that this will drive the demand for steel and high-grade metallurgical coking coal. Despite the strong demand, Puda Coal is experiencing higher raw coal prices and increased competition as the larger steel groups have begun sourcing a more of their coal washing needs from internal coke mills and many coal mining companies have begun to integrate downstream by establishing coal washing operations.

As a result, the company has modified its strategy and is seeking to acquire coal mines in an effort to vertically integrate its coal washing operations. In September 2007, the Company entered into an agreement to purchase the Jingle Muguashan coal mine in Jingle County, Shanxi Province. The Jingle Muguashan agreement is contingent on the Company’s receipt of a mining permit.

“While we expect the market to remain competitive over the next several quarters, we will actively seek to increase our sales while attempting to preserve our margins," said Mr. Zhao. “Given the current environment, we are seeking to acquire coal mines to take advantage of the strong demand for raw coal in China and improve profitability. We have already identified one potential acquisition and are carefully reviewing a number of other opportunities.”

For fiscal 2007 Puda Coal expects revenues of approximately $160 million and operating income of approximately $22 million.

Subsequent Events

In October 2007, Puda Coal announced the establishment of Compensation and Nominating and Corporate Governance committees as part of its ongoing effort to improve corporate governance. The Compensation and Nominating and Corporate Governance committees are comprised of Puda Coal’s three independent directors: Jianfei Ni, C. Mark Tang and Lawrence S. Wizel. Mr. Jianfei Ni will serve as the chair of the Compensation committee and Mr. C. Mark Tang will serve as chair of the Nominating and Corporate Governance committee. The Company’s Audit committee was established in August 2007, and is chaired by Mr. Wizel.

In November 2007, the Company announced it engaged Deloitte & Touch Tohmatsu CPA Ltd. (“Deloitte & Touche”) to assist the Company in reaching compliance with Section 404 of the Sarbanes-Oxley Act of 2002. Under the consulting agreement, Deloitte & Touche will assist Puda Coal and its subsidiaries in reviewing and documenting its internal controls for financial reporting and disclosure, providing recommendations regarding remediation of any deficiencies and overseeing the implementation of these recommendations.

Conference Call

The Company will host a conference call at 9:00 am EST on Monday, November 19, 2007, to discuss results for the third quarter ended September 30, 2007. To participate in the conference call, please dial the following number five to ten minutes prior to the scheduled conference call time: (866) 800-8648. International callers should dial (617) 614-2702. The passcode for the call is 886 223 15. If you are unable to participate in the call at this time, a replay will be available on Monday, November 19 at 11:00 a.m. EST, through Monday, November 26, 2007 at 11:00 a.m. EST. To access the replay, dial (888) 286-8010. International callers should dial (617) 801-6888. The conference passcode is 497 690 37.

Use of Non-GAAP Financial Information

GAAP results for the three and nine month periods ended September 30, 2007 and September 30, 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 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 3.5 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 BALANCE SHEETS

September 30, 2007 and December 31, 2006

(In thousands of United States dollars)

September 30, December 31,

2007 2006

ASSETS (unaudited)

CURRENT ASSETS

Cash and cash equivalents $1,817 $24,943

Restricted cash 233 233

Accounts receivable, net 7,754 7,186

Other receivables

- Related parties 7 9

- Third parties 6 40

Advances to suppliers

- Related parties 597 602

- Third parties 1,205 538

VAT recoverable 958 --

Deferred charges -- 171

Inventories 42,854 15,663

Total current assets 55,431 49,385

PROPERTY, PLANT AND EQUIPMENT, NET 15,264 9,870

INTANGIBLE ASSETS, NET 3,503 3,729

TOTAL ASSETS $74,198 $62,984

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES

Current portion of long-term debt

- Related party $1,300 $1,300

Accounts payable

- Related parties 205 221

- Third parties 2,714 2,531

Other payables

- Related parties 3,626 901

- Third parties 2,672 2,113

Accrued expenses 1,021 951

Income taxes payable 1,901 2,485

VAT payable -- 1,204

Distribution payable 1,069 1,026

Penalty payable 1,342 204

Total current liabilities 15,850 12,936

LONG-TERM LIABILITIES

Long-term debt

- Related party 9,425 10,400

Convertible notes 1,798 3,108

Derivative conversion feature 1,149 2,406

Derivative warrants 6,453 8,380

Total long-term liabilities 18,825 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

100,902,176 101 93

Paid-in capital 24,613 16,506

Statutory surplus reserve fund 1,366 1,366

Retained earnings 10,475 3,933

Accumulated other comprehensive income 2,968 1,139

Total stockholders’ equity 39,523 23,037

TOTAL LIABILITIES AND STOCKHOLDERS’

EQUITY

$74,198 $62,984

PUDA COAL, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

For the three and nine months ended September 30, 2007 and 2006

(In thousands of United States dollars, except for per share data)

Three months Three months Nine months Nine months

ended ended ended ended

30-Sep-07 30-Sep-06 30-Sep-07 30-Sep-06

NET REVENUE 40,536 42,650 116,048 94,364

COST OF REVENUE (33,881) (33,725) (95,260) (74,899)

GROSS PROFIT 6,655 8,925 20,788 19,465

OPERATING EXPENSES

Selling expenses 694 1,145 2,240 2,192

General and

administrative

expenses 452 636 1,444 1,627

TOTAL OPERATING

EXPENSES 1,146 1,781 3,684 3,819

INCOME FROM

OPERATIONS 5,509 7,144 17,104 15,646

INTEREST INCOME 18 26 58 38

INTEREST EXPENSE (345) (577) (1,346) (2,356)

DEBT FINANCING COSTS (515) (1,672) (1,921) (9,513)

DERIVATIVE UNREALIZED

FAIR VALUE

GAIN/(LOSS) 588 (314) (1,260) (3,327)

INCOME BEFORE INCOME

TAXES 5,255 4,607 12,635 488

INCOME TAXES (1,890) (2,441) (6,093) (5,130)

NET INCOME/(LOSS) 3,365 2,166 6,542 (4,642)

OTHER COMPREHENSIVE

INCOME

Foreign currency

translation

adjustment 654 321 1,804 548

COMPREHENSIVE

INCOME/(LOSS) 4,019 2,487 8,346 (4,094)

NET INCOME/(LOSS) 3,365 2,166 6,542 (4,642)

LESS: DIVIDENDS

Option holder

preference dividend -- (2,717) -- (2,717)

Common dividend -- -- -- --

UNDISTRIBUTED

EARNINGS 3,365 (551) 6,542 (7,359)

BASIC EARNINGS/(LOSS)

PER SHARE

- Option holder

preference -- 0.04 -- 0.04

- Other common

holders 0.03 (0.01) 0.07 (0.10)

0.03 0.03 0.07 (0.06)

DILUTED

EARNINGS/(LOSS)

PER SHARE

- Option holder

preference -- 0.04 -- 0.04

- Other common

holders 0.03 (0.02) 0.07 (0.10)

0.03 0.02 0.07 (0.06)

WEIGHTED AVERAGE

NUMBER OF SHARES

OUTSTANDING

- BASIC 100,188,544 80,654,578 97,017,522 77,920,661

- DILUTED 116,548,514 118,452,056 97,023,280 77,920,661

PUDA COAL, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the nine months ended September 30, 2007 and 2006

(In thousands of United States dollars)

Nine months ended September 30,

2,007 2,006

CASH FLOWS FROM OPERATING

ACTIVITIES:

Net income/(loss) 6,542 (4,642)

Adjustments to reconcile net

income/(loss) to net cash

provided by operating activities

Amortization of land-use rights 59 58

Depreciation 872 711

Provision for doubtful debts 1 12

Amortization of debt issue costs 6 821

Amortization of discount on convertible

notes and warrants 777 7,871

Derivative unrealized fair value loss 1,260 3,327

Discount on converted shares and

exercised warrants 638 1,146

Issue of common stock for services -- 21

Changes in operating assets and

liabilities:

Increase in accounts receivable (265) (3,760)

Decrease/(increase) in other

receivables 38 (1)

(Increase)/decrease in advances to

suppliers (602) 1,760

Increase in VAT recoverable (938) --

Increase in inventories (26,007) (6,041)

Increase in accounts payable 51 1,184

Increase in accrued expenses 34 236

Increase in other payables 877 902

(Decrease)/increase in income tax

payable (673) 1,056

(Decrease)/increase in VAT payable (1,228) 218

Increase in penalty payable 1,138 821

Decrease in restricted cash -- 382

Net cash (used in)/provided by

operating activities (17,420) 6,082

CASH FLOWS FROM INVESTING

ACTIVITIES:

Purchase of property, plant and

equipment (5,977) --

Net cash used in investing activities (5,977) --

CASH FLOWS FROM FINANCING

ACTIVITIES:

Exercise of warrants 1,110 1,800

Repayment of long-term debt (975) (975)

Net cash provided by financing

activities 135 825

Effect of exchange rate changes on cash 136 569

Net (decrease)/increase in cash and

cash equivalents (23,126) 7,476

Cash and cash equivalents at beginning

of period 24,943 12,067

Cash and cash equivalents at end of

period 1,817 19,543

PUDA COAL, INC.

RECONCILIATION OF NON-GAAP FINANCIAL DATA

Adjusted Net income Q3 2007 Q3 2006

($ in thousands except per share data) Net Diluted Net Diluted

Net Income (Loss) Diluted EPS Income EPS Income EPS

Adjusted Amount 3,039 0.03 3,966 0.03

Adjustments

Non cash debt financing

costs (1) 132 0.00 1,288 0.01

Unrealized derivative fair

value gain/Loss (2) (588) (0.01) 314 0.00

Discount on converted shares

and exercised warrants(3) 130 0.00 198 0.00

Amount per consolidated statement of

operations 3,365 0.03 2,166 0.02

(1) Non cash debt financing costs for Q3 2007 includes amortization of

debt issue costs of $0, amortization of discount on convertible

notes and warrants of $132,000; Non cash debt financing costs for Q3

2006 includes amortization of debt issue costs of $53,000,

amortization of discount on convertible notes and warrants of

$1,235,000.

(2) Derivative unrealized fair value gain for Q3 2007 was 588,000;

derivative unrealized fair value loss for Q3 2006 was $314,000.

(3) Discount on converted shares and exercised warrants for Q3 2007 was

$130,000; Discount on converted shares and exercised warrants for Q3

2006 was $198,000.

Nine months Nine months

ended ended

Adjusted Net income Sep 30, 2007 Sep 30, 2006

($ in thousands except per share data) Net Diluted Net Diluted

Net Income (Loss) Diluted EPS Income EPS Income EPS

Adjusted Amount 9,224 0.10 8,522 0.11

Adjustments

Non cash debt financing

costs (1) 784 0.01 8,692 0.11

Unrealized derivative fair

value gain/Loss (2) 1,260 0.01 3,327 0.04

Discount on converted shares

and exercised warrants(3) 638 0.01 1,145 0.01

Amount per consolidated statement of

operations 6,542 0.07 (4,642) (0.06)

(1) Non cash debt financing costs for the nine months ended Sep 30, 2007

includes amortization of debt issue costs of $6,000,

amortization of discount on convertible notes and warrants of $778,000;

Non cash debt financing costs for the nine months ended Sep

30, 2006 includes amortization of debt issue costs of $821,000,

amortization of discount on convertible notes and warrants of

$7,871,000.

(2) Derivative unrealized fair value loss for the nine months ended Sep

30, 2007 was $1,260,000; Derivative unrealized fair value loss

for the nine months ended Sep 30, 2006 was $3,327,000.

(3) Discount on converted shares and exercised warrants for the nine

months ended Sep 30, 2007 was $638,000; Discount on converted shares

and exercised warrants for the nine months ended Sep 30, 2006 was

$1,145,000.

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, Director of Investor Relations

Puda Coal, Inc.

Tel: +86-351-228-1302

Email: awtian@yahoo.com

Source: Puda Coal, Inc.
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