Record Full Year Revenue Increases 166%
Full Year Adjusted Net Income Climbs 123% to $12.5 Million
TAIYUAN, China, April 17 /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 fourth quarter and year ended December 31, 2006.
Fourth Quarter 2006 Highlights
-- Fourth quarter revenue reached a record $ 43.4 million, up 110% from
the fourth quarter of 2005
-- Operating income totaled $7.1 million, up 78% increase from the
fourth quarter of 2005
-- Net income rose to $6.0 million, or $0.07 per fully diluted share
-- Adjusted net income totaled $4.0 million, or $0.05 per diluted share,
up 60% from adjusted net income of $2.5 million in the fourth quarter
of 2005
-- Sales of cleaned coal totaled 548,000 metric tons (MT), up 105%
from the fourth quarter of 2005
-- Average selling price of cleaned coal was $78 per ton, compared to
$77 per ton in the fourth quarter of 2005
2006 Full Year Highlights
-- Revenue climbed to $137.8 million, up 166% from 2005
-- Operating income rose to $22.8 million, up 148% from 2005
-- Net income was $1.4 million, up 40% from 2005
-- Adjusted net income totaled $12.5 million, or $0.16 per fully
diluted share, up 123% from adjusted net income of $5.6 million, or
$0.07 per diluted share, in 2005
-- Sales of cleaned coal reached 1.8 million metric tons, up 165% from
2005
-- Average selling price of cleaned coal was $78 per ton, up from $77
per ton in 2005
-- Opened Zhong Yang coal washing plant, adding 1.2 million MT in total
annual capacity
-- Added Xuanhua Steel Group and Gengyang Coal as new customers
Fourth Quarter 2006 Results
"Our strong fourth quarter performance was driven by strong demand from new and existing customers. The addition of our new coal washing plant in Zhong Yang provided us the capacity to meet this demand," said Mr. Zhao Ming, Chairman and Chief Executive Officer of Puda Coal. "Our margins were impacted by slightly higher prices for raw coal, driven by strong industry demand for metallurgical quality coking coal. Competitive pressures have limited our ability to increase selling prices this year, and our current expectations are for margins to stabilize at current levels."
For the quarter ended December 31, 2006, total revenue was $43.4 million, up 110% from $20.7 million in the fourth quarter of 2005. This strong revenue growth was driven by larger customer order volume. Sales of cleaned coal were 548,000 MT in the fourth quarter of 2006, up from 267,000 MT in the same period last year.
Gross profit for the quarter was $8.9 million, up 88.7% from gross profit of $4.7 million in the fourth quarter of 2005. Gross margin was 20.6% in the quarter, down from 22.9% in the same period last year. This decline was primarily due to the higher prices of raw coal, as well as higher depreciation expenses associated with the new coal washing plant in Zhong Yang. The average selling price of cleaned coal was approximately $78 per ton in the fourth quarter of 2006, up from $77 per ton in the fourth quarter of 2005.
Operating expenses were $1.8 million, or 4.1% of revenue, up 149.9% from $720,000, or 3.5% of revenue, in the fourth quarter of 2005. This increase was primarily due to higher expenses from new business, including expanding the sales force to support increased capacity. In addition, the Company also incurred higher legal and professional fees as a result of being a public company.
Operating income was $7.1 million, or 16.4% of revenue, up 77.7% from $4.0 million, or 19.4% of revenue, in the fourth quarter of 2005.
Net income was $6.0 million, or $0.07 per fully diluted share, compared to a net loss of $2.2 million, or $0.03 per fully diluted share, in the fourth quarter of 2005. 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 $0.05 per fully diluted share, in the fourth quarter of 2006, up 60% from adjusted net income of $2.5 million, or $0.03 per diluted share in the fourth quarter of 2005.
At year end, total annual production capacity was 2.7 million MT, up from 1.5 million MT at the end of 2005. This increase was due to the Company’s new coal washing facility in Zhong Yang, which commenced operations in March 2006 and has annual production capacity of 1.2 million metric tons. The plant was operating at full capacity at the end of 2006.
Full Year 2006 Results
Net revenue was $137.8 million in the year ended December 31, 2006, up 166.4% from $51.7 million in the year ended December 31, 2005. Full-year sales of cleaned coal increased 165% to 1.8 million MT in the year ended December 31, 2006, compared to 680,000 MT in the year ended December 31, 2005. The average selling price of cleaned coal was $78 per ton, up from $77 per ton in 2005. Gross profit was $28.4 million, or 20.6% of revenue, up 143.4% from $11.7 million, or 22.6% of revenue, in 2005. Operating income was $22.8 million, or 16.5% of revenue, up 148.0% from $9.2 million, or 17.8% of revenue, in 2005. Net income was $1.4 million, or $0.02 per fully diluted share, up 40.3% from $1.0 million, or $0.01 per fully diluted share, in 2005. 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 $12.5 million, or $0.16 per fully diluted share in 2006, up 123% from $5.6 million, or $0.07 per fully diluted share, in 2005.
Financial Condition
As of December 31, 2006, Puda Coal had $24.9 million in cash and cash equivalents, $36.5 million in working capital and a current ratio 3.8:1. Puda Coal generated $11.3 million in cash flow from operations in 2006, compared to $1.6 million in 2005. Long-term debt totaled $13.5 million, and shareholders’ equity stood at $23.0 million at year end.
Business Outlook
The Chinese steel industry continues to experience a strong outlook for growth. Several huge infrastructure projects and a prosperous real estate market are expected to drive demand for high grade metallurgic cleaned coking coal in the near term, while China’s western development plan will drive demand in the long term. In order to take advantage of these significant growth opportunities, Puda Coal intends to increase its annual production capacity to 4.0 million MT by the end of 2007. This will allow the Company to fill larger orders from existing clients, and puts it in a better position to win new customers. The Company also plans to increase its sales force in its efforts to win additional new customers.
Puda expects that its revenues for the full year 2007 will be in the range of $210 to $220 million, and full year 2007 operating income between $34 million and $36 million.
"In 2007, we look forward to another year of strong revenue growth and profitability. We will concentrate on increasing capacity to meet demand, expanding our sales force and improving our operational efficiency by implementing our advanced mix control technology and management system at each of our coal washing facilities," said Mr. Zhao. "We believe we are well positioned relative to our competitors, and we expect to increase our market share as we continue to build our corporate and brand identity as the premier high grade metallurgical coking coal supplier in China."
Subsequent Events
On March 21, 2007, Puda Coal filed an amendment to its registration statement on form SB-2/A filed with the U.S. Securities and Exchange Commission related to the sale of up to 47,764,373 shares of its common stock by certain existing holders of its securities. Shares registered in the filing include 8,250,000 shares of common stock that that may become issuable upon conversion of principal on convertible promissory notes, related warrants to purchase 21,050,000 shares, warrants issued to the placement agent, its employees and other persons acting on behalf of the placement agent to purchase 135,085 shares, and 13,854,288 shares of Common Stock issued upon conversion of the notes and exercise of the warrants. The Company will respond diligently to any and all SEC comments as they are received, but can not give any estimate as to when it expects the registration statement to become effective.
This press release shall not constitute an offer to sell or a solicitation of an offer to buy, nor shall there be any sale of these securities in any state or jurisdiction in which such an offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction.
Conference Call
The Company will host a conference call at 9:00 am EDT on Tuesday, April 17, 2007, to discuss results for the fourth quarter and year ended December 31, 2006. 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 69973993. If you are unable to participate in the call at this time, a replay will be available on Tuesday, April 17, at 11:00 am EDT, through, Tuesday, April 24 at 11:00 am EDT. To access the replay, dial (888) 286-8010. International callers should dial (617) 801-6888. The conference passcode is 60397597.
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. hanxi 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
(In thousand of United States dollars, except per share data)
For the three months For the years ended
ended December 31,
December 31,
2006 2005 2006 2005
(unaudited)(unaudited) (audited) (audited)
Net revenue 43,407 20,654 137,771 51,710
Cost of revenue (34,482) (15,924) (109,381) (40,047)
Gross profit 8,925 4,730 28,390 11,663
Operating expenses
Selling expenses 1,039 236 3,231 791
General and administrative
expenses 760 484 2,387 789
Other operating expenses -- -- -- 902
Total operating expenses 1,799 720 5,618 2,482
Income from operations 7,126 4,010 22,772 9,181
Gain on short-term investments -- -- -- 6
Interest income 21 9 59 12
Interest expense (2,085) (531) (4,441) (531)
Debt financing costs (1,156) (4,964) (10,669) (4,964)
Derivative unrealized fair
value gain 4,564 700 1,237 700
Income before income taxes 8,470 (776) 8,958 4,404
Income taxes (2,474) (1,396) (7,604) (3,439)
Net income 5,996 (2,172) 1,354 965
Other comprehensive income
Foreign currency translation
adjustment 437 18 985 154
Comprehensive income 6,433 (2,154) 2,339 1,119
Earnings per share
-Basic $0.07 ($0.03) $0.02 $0.01
-Diluted $0.07 ($0.03) $0.02 $0.01
Weighted average shares
outstanding
-Basic 86,821,002 74,544,565 80,167,110 73,950,274
-Diluted 86,830,685 78,170,327 80,176,793 77,576,036
Net income 5,996 (2,172) 1,354 965
Less: Option holder
preference dividend (2,717)
Undistributed Earnings 5,996 (2,172) 1,354 (1,752)
PUDA COAL, INC.
RECONCILIATION OF NON-GAAP FINANCIAL DATA
Adjusted Net income Q4 2006 Q4 2005
($ in thousands except per share
data)
Net Diluted Net Diluted
Net Income (Loss) Diluted EPS Income EPS Income EPS
Adjusted Amount 3,957 0.05 2,509 0.03
Adjustments
Non cash debt financing
costs (1) 773 0.01 4,964 0.06
Unrealized derivative fair
value gain/Loss (2) (4,565) (0.05) (700) (0.01)
Discount on converted shares
and exercised warrants(3) 1,753 0.02 417 0.01
Amount per consolidated
statement of operations 5,996 0.07 (2,172) (0.03)
(1) 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, Non cash debt financing costs for Q4
2005 includes amortization of debt issue costs of $739,000,
amortization of discount on convertible notes and warrants of
$4,225,000
(2) Derivative unrealized fair value gain for Q4 2006 was 4,564,000,
Derivative unrealized fair value gain for Q4 2005 was 700,000
(3) Discount on converted shares and exercised warrants for Q4 2006 was
1,753,000, Discount on converted shares and exercised warrants for Q4
2005 was 417,000
Adjusted Net income FY 2006 FY 2005
($ in thousands except per share
data)
Net Diluted Net Diluted
Net Income (Loss) Diluted EPS Income EPS Income EPS
Adjusted Amount 12,480 0.16 5,646 0.07
Adjustments
Non cash debt financing
costs (1) 9,465 0.12 4,964 0.06
Unrealized derivative fair
value gain/Loss (2) (1,237) (0.02) (700) (0.01)
Discount on converted shares
and exercised warrants(3) 2,898 0.04 417 0.01
Amount per consolidated
statement of operations 1,354 0.02 965 0.01
(1) Non cash debt financing costs for FY 2006 includes amortization of
debt issue costs of $838,000, amortization of discount on convertible
notes and warrants of $8,627,000, Non cash debt financing costs for FY
2005 includes amortization of debt issue costs of $739,000,
amortization of discount on convertible notes and warrants of
$4,225,000
(2) Derivative unrealized fair value gain for FY 2006 was 1,237,000,
Derivative unrealized fair value gain for FY 2005 was 700,000
(3) Discount on converted shares and exercised warrants for FY 2006 was
2,898,000, Discount on converted shares and exercised warrants for
FY 2005 was 417,000
PUDA COAL, INC.
CONSOLIDATED BALANCE SHEET
(In thousand of United States dollars)
December 31, December 31,
2006 2005
ASSETS
CURRENT ASSETS
Cash and cash equivalents 24,943 12,067
Restricted cash 233 615
Accounts receivable, net 7,186 4,224
Other receivables
- Related parties 9 17
- Third parties 40 36
Advances to suppliers
- Related parties 602 2,959
- Third parties 538
Deferred charges 171 4,594
Inventories 15,663 7,559
Total current assets 49,385 32,071
PROPERTY, PLANT AND EQUIPMENT, NET 9,870 10,823
INTANGIBLE ASSETS, NET 3,729 3,807
TOTAL ASSETS 62,984 46,701
LIABILITIES AND STOCKHOLDERS’
EQUITY
CURRENT LIABILITIES
Current portion of long-term debt
- Related party 1,300 1,300
Accounts payable
- Related party 221 154
- Third parties 2,531 1,172
Other payables
- Related party 901 874
- Third parties 2,113 708
Accrued expenses 951 363
Income taxes payable 2,485 1,397
VAT payable 1,204 317
Distribution payable 1,026 992
Penalty payable 204 --
Total current liabilities 12,936 7,277
LONG-TERM LIABILITIES
Long-term debt
- Related party 10,400 11,700
Convertible notes 3,108 1,917
Derivative conversion feature 2,406 5,720
Derivative warrants 8,380 11,288
Total long-term liabilities 24,294 30,625
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 Nil -- --
Common stock, authorized 150,000,000
shares, par value $0.001, issued and
outstanding 92,881,301 93 75
Paid-in capital 16,506 4,625
Statutory surplus reserve fund 1,366 1,366
Retained earnings 3,933 2,579
Accumulated other comprehensive income 1,139 154
Total stockholders’ equity 23,037 6,082
TOTAL LIABILITIES AND STOCKHOLDERS’
EQUITY $62,984 $46,701
PUDA COAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 2006 and 2005
(In thousand of United States dollars)
Years ended December 31,
2006 2005
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income 1,354 965
Adjustments to reconcile net income to net cash
provided by operating activities
operating activities
Amortization of land-use rights 78 9
Depreciation 953 183
Provision for doubtful debts 10 5
Amortization of debt issue costs 838 739
Amortization of discount on convertible notes and
warrants 8,627 4,225
Derivative unrealized fair value gain (1,237) (700)
Discount on converted shares and exercised
warrants 2,898 417
Issue of common stock for services 21 --
Issue of common stock for penalty 1,000 --
Changes in operating assets and liabilities:
Decrease in short-term investments -- 117
Increase in accounts receivable (2,972) (1,507)
Decrease in notes receivable -- 638
Decrease in other receivables 4 2,251
Decrease/(increase) in advances to suppliers 1,819 (2,430)
Increase in inventories (8,104) (3,994)
Increase in accounts payable 1,426 610
Increase in accrued expenses 588 115
Increase in other payables 1,432 1,094
Increase/(decrease) in income tax payable 1,088 (611)
Increase in VAT payable 887 66
Increase in penalty payable 204 --
Decrease/(increase) in restricted cash 382 (615)
Net cash provided by operating activities 11,296 1,577
CASH FLOWS FROM FINANCING ACTIVITIES:
Exercise of warrants 1,860 --
Repayment of long-term debt (1,300) --
Issue of convertible notes -- 12,500
Debt issue costs -- (1,583)
Shareholder contribution -- 50
Distribution paid to owners of a subsidiary -- (947)
Net cash provided by financing activities 560 10,020
Effect of exchange rate changes on cash 1,020 157
Net increase in cash and cash equivalents 12,876 11,754
Cash and cash equivalents at beginning of year 12,067 313
Cash and cash equivalents at end of year $24,943 $12,067
