TAIYUAN, China, Aug. 15 /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 quarter ended June 30, 2007.
Second Quarter 2007 Highlights
-- Second quarter revenue reached a record $38.1 million, up 23.1% from
the second quarter of 2006
-- Operating income totaled $5.3 million, up 12.4% from the second quarter
of 2006
-- Net loss was $670,000, or $(0.01) per fully diluted share
-- Adjusted net income totaled $2.6 million, or $0.03 per diluted share,
up 5% from adjusted net income of $2.5 million in the second quarter of
2006
-- Sales of cleaned coal totaled 469,000 metric tons (MT), up 18% from the
second quarter of 2006
-- Average selling price of cleaned coal was $81 per ton, unchanged from
the second quarter of 2006
-- Completed acquisition of new Lingshi plant, increasing annual coal
washing capacity to 3.5 million MT
"Puda Coal achieved solid growth in revenues and operating income from the second quarter of 2007. Our revenues were relatively flat compared to the first quarter of 2007 as we had to take one of our coal washing facilities offline in order to complete the acquisition of our new Lingshi coal washing plant, which will increase our annual capacity by 800,000 MT," commented Mr. Zhao Ming, Chairman and Chief Executive Officer of Puda Coal. "Rising raw coal prices put pressure on our margins, but we were able to offset some of the price increase due to our strategy of building up our inventory of raw coal earlier this year."
Results for the Second Quarter 2007
For the quarter ended June 30, 2007, total revenue was $38.1 million, up 23.1% from $30.9 million in the second quarter of 2006. This revenue growth was driven by larger customer order volume from existing and new clients for high-grade coking coal. Sales of cleaned coal were 469,000 MT in the second quarter of 2007, up from 397,000 MT in the same period last year. The increase in the tonnage sales of cleaned coal was the primary reason for the increase in revenue. The average selling price was approximately $81 (after adjusting for exchange rate differences), unchanged from the same quarter of 2006.
Tonnage sales in the second quarter of 2007 were impacted by the acquisition of the Lingshi coal washing plant in Lingshi County, Shanxi province. The transaction was structured as an asset exchange, in which Puda Coal transferred ownership of its Dongqiang coal washing plant with 400,000 MT in annual capacity along with $6.0 million in cash in exchange for the Lingshi plant with 1.2 million MT in annual capacity. In order to effect the transaction, the Company shut down production at the Dongqiang plant in the weeks leading up to the asset transfer on June 6, 2007. The Lingshi plant became operational in July, and is expected to reach full capacity by year end.
Gross profit for the quarter was $6.6 million, up 10.0% from gross profit of $6.0 million in the second quarter of 2006. Gross margin was 17.4% in the quarter, down from 19.5% 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 three months ended June 30, 2006 to approximately $50 per ton in the three months ended June 30, 2007.
Operating expenses for the second quarter of 2007 were $1.3 million, up slightly from the same period last year. This was the result of higher general and administrative expenses from higher legal and professional fees and insurance expenses, which were offset by lower selling expenses from lower shipping charges due to decreased tonnage of sales to customers outside Shanxi Province in the second quarter of 2007. As a percentage of revenue, operating expenses were 3.5% in the second quarter of 2007, compared to 4.3% in the same quarter last year, reflecting operational efficiencies as the Company has grown in scale.
Operating income was $5.3 million, or 13.9% of revenue, up 12.4% from $4.7 million, or 15.2% of revenue, in the second quarter of 2006.
Net loss was $670,000, or $(0.01) per fully diluted share, compared to a net loss of $363,000, or $(0.00) per fully diluted share, in the second 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 $2.6 million, or $0.03 per fully diluted share, in the second quarter of 2007, up 4.8% from adjusted net income of $2.5 million, or $0.03 per diluted share, in the same period of 2006.
Results for the Six Months ended June 30, 2007
Net revenue was $75.5 million in the six months ended June 30, 2007, up 46.0% from $51.7 million in the six months ended June 30, 2006. Gross profit was $14.1 million, or 18.7% of revenue, up 34.1% from $10.5 million, or 20.4% of revenue, in the first half of 2006. Operating income was $11.6 million, or 15.4% of revenue, up 36.4% from $8.5 million, or 16.4% of revenue, in the first half of 2006. Net income was $3.2 million, or $0.04 per fully diluted share, compared with a net loss $6.8 million, or $(0.09) per fully diluted share, in the first half 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 $6.2 million, or $0.06 per fully diluted share, in the first six months of 2007, up 35.8% from $4.6 million, or $0.06 per fully diluted share, in the first half of 2006.
Financial Condition
As of June 30, 2007, Puda Coal had $8.3 million in cash and cash equivalents, $38.0 million in working capital and a current ratio 3.9:1. Puda Coal used $11.1 million in cash flow from operations in the first six months of 2007, primarily due to the Company's strategy to increase its inventory of raw coal in an effort to mitigate rising raw materials prices. Long-term debt, excluding current portion, stood at $9.8 million and shareholders' equity stood at $31.9 million at June 30, 2007.
Business Outlook
Puda Coal has increased its coal washing capacity over the last several years in response to strong demand for high grade metallurgic cleaned coal as a result of large infrastructure projects, a prosperous national real estate market as well as China's ongoing western development plan. The Company continued this strategy in 2007, with a plan to reach 4.0 million MT of annual capacity by the end of fiscal 2007. Management continues to believe that China's strong economic growth will continue to drive demand for steel and high-grade metallurgical coking coal. However, due to current market factors, including the rising cost of raw coal, the Company is currently evaluating a number of new growth opportunities outside its traditional coal washing operations. As a result, the Company has no plans to increase its coal washing capacity beyond the current level of 3.5 million MT per year.
Based on its current operations and potential growth opportunities, the Company is maintaining its guidance. The Company expects to achieve revenues of between $210 and $220 million and operating income between $34 and $36 million for the full year 2007.
"This was a solid quarter for Puda Coal. We successfully completed an acquisition that expanded our coal washing operations. Our new Lingshi coal washing plant is ramping up production and operating at about 40% to 50% of its full capacity, and we expect it to reach full capacity by year end. We continue to believe that the coal industry in China provides attractive growth opportunities, and we are currently evaluating the best approach to increase value to our shareholders," said Mr. Zhao. "In addition to examining our strategic options, we are focused on improving our corporate governance and streamlining our corporate structure."
Subsequent Events
In July 2007, Puda Coal entered into a new contract with Zhongmei Jiujin Coke and Coal ("Zhongmei"), a large-scale modern coke manufacturer located in Lingshi County, Shanxi Province to supply up to 200,000 MT of cleaned coking coal before the end of 2007, or 33,000 metric tons per month. Zhongmei is a large-scale modern coke manufacturer located in Lingshi County, Shanxi Province. It is one of the major coke producers in Shanxi Province with an annual coke capacity of 2.0 million.
In July 2007, Puda Coal announced Mr. Ni Jianfei as a new independent member of its board of directors. Mr. Jianfei has extensive experience in coal industry research, coal mine design and management, operations and risk control, most recently at a coal mine design and consulting company.
In August 2007, Mr. Lawrence S. Wizel joined Puda Coal's board as an independent director. He has a strong background serving a diverse client base of publicly held and private companies in a variety of capacities including SEC filings, initial public offerings, mergers and acquisition transactions and periodic reporting. Mr. Wizel is a Certified Public Accountant and is expected to chair the Company's audit committee, which will be established in the near future.
Conference Call
The Company will host a conference call at 9:00 a.m. ET on Wednesday, August 15, 2007 to discuss results for the second quarter of 2007. To participate in the live conference call, please dial the following number five to ten minutes prior to the scheduled conference call time: (800) 688-0796. International callers should dial (617) 614-4070. When prompted by the operator, mention Conference Pass code 67353668. If you are unable to participate in the call at this time, a replay will be available on Wednesday, August 15 at 11:00 a.m. ET, through August 22 at 11:00 a.m. ET. To access the replay, dial (888) 286-8010. International callers should dial (617) 801-6888. The conference pass code is 87461099.
Use of Non-GAAP Financial Information
GAAP results for the three and six month periods ended June 30, 2007 and June 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.
PUDA COAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousand of United States dollars, except per share data)
Three months Three months Six months Six months
ended ended ended ended
30-Jun-07 30-Jun-06 30-Jun-07 30-Jun-06
NET REVENUE $38,097 $30,943 $75,512 $51,714
COST OF REVENUE (31,469) (24,916) (61,379) (41,174)
GROSS PROFIT 6,628 6,027 14,133 10,540
OPERATING EXPENSES
Selling expenses 704 771 1,546 1,047
General and
administrative
expenses 640 557 992 991
TOTAL OPERATING
EXPENSES 1,344 1,328 2,538 2,038
INCOME FROM
OPERATIONS 5,284 4,699 11,595 8,502
INTEREST INCOME 15 3 40 12
INTEREST EXPENSE (512) (1,213) (1,001) (1,779)
DEBT FINANCING COSTS (639) (2,888) (1,406) (7,841)
DERIVATIVE
UNREALIZED FAIR
VALUE
(LOSS)/GAIN (2,716) 487 (1,848) (3,013)
INCOME/(LOSS) BEFORE
INCOME TAXES 1,432 1,088 7,380 (4,119)
INCOME TAXES (2,102) (1,451) (4,203) (2,689)
NET (LOSS)/INCOME (670) (363) 3,177 (6,808)
OTHER COMPREHENSIVE
INCOME
Foreign currency
translation
adjustment 750 79 1,150 227
COMPREHENSIVE
INCOME/(LOSS) $80 ($284) $4,237 ($6,581)
NET (LOSS)/INCOME (670) (363) 3,177 (6,808)
LESS: DIVIDENDS
Option holder
preference
dividend (2,717) (2,717) (2,717) (2,717)
Common dividend -- -- -- --
UNDISTRIBUTED
EARNINGS ($3,387) ($3,080) $460 ($9,525)
BASIC EARNINGS/(LOSS)
PER SHARE
-- Option holder
preference $0.04 $0.04 $0.04 $0.04
-- Other common
holders (0.05) (0.04) 0 (0.13)
($0.01) $0.00 $0.04 ($0.09)
DILUTED
EARNINGS/(LOSS) PER
SHARE
-- Option holder
preference $0.04 $0.04 $0.04 $0.04
-- Other common
holders (0.05) (0.04) 0 (0.13)
($0.01) $0.00 $0.04 ($0.09)
WEIGHTED AVERAGE
NUMBER OF SHARES
OUTSTANDING - BASIC 96,711,763 76,733,239 95,405,732 76,531,046
-DILUTED 96,711,763 76,733,239 95,410,647 76,531,046
PUDA COAL, INC.
RECONCILIATION OF NON-GAAP FINANCIAL DATA
Adjusted Net income Q2 2007 Q2 2006
($ in thousands except per share data)
Net Diluted Net Diluted
Net Income (Loss) Diluted EPS Income EPS Income EPS
Adjusted Amount 2,583 0.03 2,464 0.03
Adjustments
Non cash debt financing
costs (1) 260 0.00 2,509 0.03
Unrealized derivative
fair value gain/Loss (2) 2,716 0.03 (487) (0.01)
Discount on converted
shares and exercised
warrants(3) 276 0.01 805 0.01
Amount per consolidated statement
of operations (670) (0.01) (363) 0.00
(1) Non cash debt financing costs for Q2 2007 includes amortization of
debt issue costs of $0, amortization of discount on
convertible notes and warrants of $260,000; Non cash debt financing
costs for Q2 2006 includes amortization of debt issue costs of
$177,000, amortization of discount on convertible notes and warrants
of $2,332,000
(2) Derivative unrealized fair value loss for Q2 2007 was 2,716,000;
derivative unrealized fair value gain for Q2 2006 was $487,000
(3) Discount on converted shares and exercised warrants for Q2 2007 was
$276,000; Discount on converted shares and exercised
warrants for Q2 2006 was $805,000
Six months ended Six months ended
Adjusted Net income June 30, 2007 June 30, 2006
($ in thousands except per share data)
Net Diluted Net Diluted
Net Income (Loss) Diluted EPS Income EPS Income EPS
Adjusted Amount 6,186 0.06 4,556 0.06
Adjustments
Non cash debt
financing costs (1) 652 0.00 7,404 0.10
Unrealized derivative
fair value gain/Loss (2) 1,848 0.02 3,013 0.04
Discount on converted
shares and exercised
warrants(3) 508 0.00 947 0.01
Amount per consolidated statement
of operations 3,177 0.04 (6,808) (0.09)
(1) Non cash debt financing costs for the six months ended June 30, 2007
includes amortization of debt issue costs of $6,000,
amortization of discount on convertible notes and warrants of $646,000;
Non cash debt financing costs for the six months ended
June 30, 2006 includes amortization of debt issue costs of $768,000,
amortization of discount on convertible notes and warrants of
$6,636,000
(2) Derivative unrealized fair value loss for the six months ended June
30, 2007 was $1,848,000; Derivative unrealized fair value
gain for the six months ended June 30, 2006 was $3,013,000
(3) Discount on converted shares and exercised warrants for the six months
ended June 30, 2007 was $508,000; Discount on
converted shares and exercised warrants for the six months ended June
30, 2006 was $947,000
PUDA COAL, INC.
CONSOLIDATED BALANCE SHEETS
June 30, 2007 and December 31, 2006
(In thousands of United States dollars)
30-Jun-07 31-Dec-06
ASSETS (unaudited)
CURRENT ASSETS
Cash and cash equivalents $8,345 $24,943
Restricted cash 233 233
Accounts receivable, net 8,909 7,186
Other receivables
-- Related parties 7 9
-- Third parties 6 40
Advances to suppliers
-- Related parties 525 602
-- Third parties 1,397 538
VAT recoverable 635 --
Deferred charges 5 171
Inventories 31,149 15,663
Total current assets 51,211 49,385
PROPERTY, PLANT AND EQUIPMENT, NET 15,643 9,870
INTANGIBLE ASSETS, NET 3,521 3,729
TOTAL ASSETS $70,375 $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 3,061 2,531
Other payables
-- Related parties 919 901
-- Third parties 2,869 2,113
Accrued expenses 904 951
Income taxes payable 2,115 2,485
VAT payable -- 1,204
Distribution payable 1,052 1,026
Penalty payable 958 204
Total current liabilities 13,178 12,936
LONG-TERM LIABILITIES
Long-term debt
-- Related party 9,750 10,400
Convertible notes 2,152 3,108
Derivative conversion feature 1,448 2,406
Derivative warrants 9,274 8,380
Total long-term liabilities 22,624 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 98,073,756 98 93
Paid-in capital 20,993 16,506
Statutory surplus reserve fund 1,366 1,366
Retained earnings 7,110 3,933
Accumulated other comprehensive income 2,289 1,139
Total stockholders' equity 31,856 23,037
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $70,375 $62,984
PUDA COAL, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the six months ended June 30, 2007 and 2006
(In thousands of United States dollars)
Six months ended June 30,
2007 2006
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income/(loss) $3,177 ($6,808)
Adjustments to reconcile net
income/(loss) to net cash
provided by operating activities
Amortization of land-use rights 41 39
Depreciation 493 473
Provision for doubtful debts 5 2
Amortization of debt issue costs 6 768
Amortization of discount on
convertible notes and warrants 646 6,636
Derivative unrealized fair value loss 1,848 3,013
Discount on converted shares and
exercised warrants 508 947
Issue of common stock for services -- 21
Changes in operating assets and
liabilities:
Increase in accounts receivable (1,528) (413)
Decrease/(increase) in other
receivables 38 (1)
(Increase)/decrease in advances to
suppliers (744) 2,175
Increase in VAT receivable (627) --
(Increase)/decrease in inventories (14,916) 941
Increase in accounts payable 237 973
(Decrease)/increase in accrued
expenses (67) 137
Increase in other payables 707 385
(Decrease)/increase in income tax
payable (428) 57
(Decrease)/increase in VAT payable (1,220) 712
Increase in penalty payable 754 437
Decrease in restricted cash -- 382
Net cash (used in)/provided by
operating activities (11,070) 10,876
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 630 390
Repayment of long-term debt (650) (650)
Net cash used in financing activities (20) (260)
Effect of exchange rate changes on
cash 469 237
Net (decrease)/increase in cash and
cash equivalents (16,598) 10,853
Cash and cash equivalents at beginning
of period 24,943 12,067
Cash and cash equivalents at end of
period $8,345 $22,920
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
