L & L Energy Announces First Quarter Fiscal 2012 Financial Results and Earnings Call

News provided by

L & L Energy, Inc.

Sep 09, 2011, 04:49 ET

SEATTLE, Sept. 9, 2011 /PRNewswire/ -- L & L Energy, Inc., (NASDAQ: LLEN) ("L&L" or the "Company"), a U.S.-based company operating coal businesses in China, today announced its financial results for the first fiscal quarter ended July 31, 2011. The Company generated $36.7 million in sales for the first quarter, and net income totaled $3.08 million.

Fiscal 2012 First Quarter Summary and Recent Highlights

  • Accelerated Guizhou Provincial Consolidation policy creates tremendous growth opportunity for L&L
  • CEO, Dickson Lee, meets and receives endorsement from the Vice Governor of Guizhou for L&L to take a leadership role in the provincial coal consolidation process
  • L&L signs letters of intent with 14 operating Guizhou mines that collectively produce approximately 3 million tons per year
  • L&L enters into a Memorandum of Understanding with Tianjin Fuhao, a fully-owned subsidiary of Tianjin Materials and Equipment Co., and a leader in coal logistics and infrastructure in China
  • Revenues and earnings were negatively affected during the last quarter and this quarter due to temporary idling of all company-owned mines. In accordance with the provincial-wide mandate, approximately 1600 mines in Guizhou were temporarily idled. Three of four L&L mines are now back in operation
  • Revenues for the first quarter were approximately $36.7 million
  • Net income was $3.08 million
  • Earnings per share was $0.08 per diluted share
  • Operating profit was $4.24 million
  • Gross profit was $8.19 million

"Our earnings and revenues were affected across all segments of our business by the idling of our mines during mandatory, but temporary closures and slowdowns issued by the local government," said Ian Robinson, Chief Financial Officer of L&L. "The negative effect on our numbers are temporary and we support the government's stance on increasing accountability and safety in our industry. We continue to work with the local provincial governments to take the lead in increasing the standards of not only safety, but also operational efficiency. We expect that the government will play a major role in supporting consolidation efforts and we look forward to working with them to ensure safe and efficient operations within the region."

Dickson Lee, Chairman and CEO stated, "Continued negative perception on companies who operate in China has slowed our growth plans. However we continue to improve our foothold in the coal industry and have been able to make tremendous strides in positioning ourselves at the forefront of a number of opportunities in South China. We are focused and confident in our position to take a leadership role in the Guizhou coal consolidation process and with the support of the local government, we have been able to sign letters of intent with 14 potential mines that collectively could yield US$500 million in revenues. The next step will be to have Dr. Syd Peng, an L&L Board Member and world-renowned coal expert, lead our acquisition team on a trip through Guizhou to evaluate each potential acquisition.  Dr. Peng is a recognized expert in underground mining in both the U.S. and China and will be able to assist our very strong mining and acquisition team in China to evaluate each mines' management team and mining operations, including mechanization potential, safety, and production expansion capabilities."

Lee continued, "The potential in Guizhou is huge, and going forward I expect we will expend a tremendous percentage of our resources on this potentially game-changing opportunity."

Results of Operations

In this quarter our net revenues decreased to $36.7 million during the three months ended July 31, 2011, down from $55 million during the same period the year before. The decrease was primarily due to the government's temporary slowdown and idling of all mines in our region, coupled with the cyclical low summer season.

The idling of mines and regional shut downs had negative effects across all segments of our business. Revenues from mining operations for the first quarter were $7.3 million.  Our washing and wholesale segments were affected by the lack of coal. Revenues from coal washing decreased over the first quarter to $18.98 million and revenues from wholesale operations decreased to $4.46 million. The volume of sales dropped due to decreased supplies of raw coal and fine coal in Yunnan and Guizhou. Coking was also negatively affected, with revenues for the first quarter being $6.64 million.

Our gross profit was margin was reduced to 22%. Mining, which typically has had the highest margin, was impacted most by the idling. Secondly the vast majority of our work force stayed on payroll and spent significant time implementing upgrades to meet increasing safety and regulatory standards.

The government took action and issued the provincial-wide temporary closure due to several fatal mine accidents (our mines had no accidents) in South China during the spring. Our Yunnan mines have resumed production, although are undergoing improvements in accordance with the recent regulatory changes. Our Da Ping mine has been approved to resume production and is currently expanding its production capacity. However, our Ping Yi mine remains idle as of July 31, 2011.

Earnings Call Information

The company will host a conference call to discuss its first quarter financial results at 4:30 p.m. Eastern Daylight Time (1:30 p.m. Pacific Daylight Time) on Monday, September 12. The audio call of the meeting will be available via telephone at:

North America Toll Free: (800) 893-5360
International Toll: (404) 665-9534

Please call five minutes prior to 4:30 p.m. Eastern Daylight Time. A live webcast of the call will also be available at www.llenergyinc.com. A replay of the conference call will be available from September 12, 2011 at 6:30 p.m. EDT to September 19, 2011 at 11:59 p.m. EDT.  The toll free number for the replay is (855)-859-2056, passcode: 98988413.

Forward-Looking Statements

The statements contained words that are not historical fact, including statements related to Company's future performance, are all "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, and involve a number of risks and uncertainties. Actual results of the future events described in this document could differ materially due to numerous factors and other made by the company filing with the Securities and Exchange Commission. Other than as required under the securities laws, the Company does not assume a duty to update these forward-looking statements.

{FINANCIAL TABLES FOLLOW}

L & L ENERGY,  INC.

CONSOLIDATED BALANCE SHEETS

AS OF July 31, 2011 and April 30, 2011

(Unaudited)



July 31, 2011

April 30, 2011

ASSETS




CURRENT ASSETS:




Cash and cash equivalents

$

6,097,089

$

4,914,425

Accounts receivable

28,078,835

24,017,391

Prepaid and other current assets

18,264,351

28,641,462

Other receivables

1,036,287

2,586,147

Inventories

7,862,711

6,633,019

    Total current assets

61,339,273

66,792,444







Property, plant, equipment, and mine development, net

97,016,961

96,479,552

Construction-in-progress

55,189,117

44,943,609

Intangible assets, net

868,987

902,555

Goodwill

3,013,817

2,988,175

Restricted Cash

563,718

544,588

Long term receivable

7,468,634

7,272,828

Related party notes receivable

5,758,149

7,428,574

    Total non-current assets  

169,879,383

160,559,881



　

　

TOTAL ASSETS

$

231,218,656

$

227,352,325






LIABILITIES AND EQUITY



CURRENT LIABILITIES:




Accounts payable

$

4,594,028

$

3,439,460

Accrued and other liabilities

824,814

717,298

Other payables

5,164,351

7,546,391

Payables-related party

15,588,508

17,264,815

Due to officer

1,070,000

1,070,000

Taxes payable

18,815,388

18,835,276

Customer deposits

3,676,682

4,338,424

Bank loans

5,431,240

5,385,030

    Total current liabilities

55,165,011

58,596,694






LONG-TERM LIABILITIES




Long-term payable

800,000

800,000

Asset retirement obligation

2,035,776

1,978,877

    Total long-term liabilities

2,835,776

2,778,877







          Total Liabilities


58,000,787

61,375,571







Commitments and contingencies









EQUITY:



L&L ENERGY STOCKHOLDERS' EQUITY:




Preferred stock, no par value, 2,500,000 shares authorized, none issued and outstanding

-

-

Common stock ($0.001 par value, 120,000,000 shares authorized; 32,365,467 shares issued and outstanding, and 32,277,579  shares issued and outstanding at July 31 and April 30, 2011,  respectively)

32,366

32,278

Shares to be issued (13,104 shares)

13

0

Additional paid-in capital

51,124,610

48,420,321

Deferred stock compensation

-

-

Accumulated other comprehensive income

7,715,122

6,502,542

Retained Earnings

84,274,227

81,888,339

Treasury stock (459,000 shares and 1,259,00 shares at July 31 and April 30, respectively)

(396,059)

(396,859)

    Total L & L Energy stockholders' equity

142,750,279

136,446,621

Non-controlling interest

30,467,590

29,530,133

    Total equity

173,217,869

165,976,754

TOTAL LIABILITIES AND  EQUITY

$

231,218,656

$

227,352,325

The accompanying notes are an integral part of these consolidated financial statements.

L & L ENERGY, INC.

CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME

FOR THE THREE MONTHS ENDED July 31, 2011 and 2010

(Unaudited)

For The Three Months Periods Ended July 31,


2011

2010

NET REVENUES

$

36,633,306

$

55,329,939

COST OF REVENUES

28,443,975

36,724,263

GROSS PROFIT

8,189,331

18,605,676





OPERATING COSTS AND EXPENSES:



Salaries & wages-selling, general and administrative


933,000

780,672

Selling, general and administrative expenses, excluding salaries and wages

3,018,049

3,225,609

    Total operating expenses

3,951,049

4,006,281





INCOME FROM OPERATIONS

4,238,282

14,599,395

OTHER EXPENSE:



  Interest income (expense)

198,348

(70,540)

  Other income (expense)

(767,561)

(12,843)

    Total other income (expense)

(569,213)

(83,383)





INCOME BEFORE PROVISION FOR INCOME TAXES

3,669,069

14,516,012

LESS PROVISION FOR INCOME TAXES

585,867

2,183,300

INCOME BEFORE

NON-CONTROLLING INTEREST

3,083,202

12,332,712





Income attributable to non-controlling interests


697,314

1,394,198

Income attributable to L & L

2,385,888

10,938,514





NET INCOME

$

3,083,202

$

12,332,712





OTHER COMPREHENSIVE INCOME:



Foreign currency translation gain

1,212,580

1,038,832

COMPREHENSIVE INCOME

$

4,295,782

$

13,371,544





Comprehensive income attributable to non-controlling interests

$

1,740,794

$

1,454,763

Comprehensive income attributable to L & L

2,554,988

11,916,781





INCOME PER COMMON SHARE – basic  

$

0.08

$

0.38

INCOME PER COMMON SHARE – diluted

$

0.08

$

0.36





WEIGHTED AVERAGE COMMON SHARES OUTSTANDING – basic

31,355,781

29,037,451





WEIGHTED AVERAGE COMMON SHARES OUTSTANDING - diluted

31,704,978

30,407,090

The accompanying notes are an integral part of these consolidated financial statements.

L & L ENERGY, INC.

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE THREE MONTHS ENDED July 31, 2011 and 2010

(Unaudited)


For The Three Months Periods Ended July 31,


2011

2010

CASH FLOWS FROM OPERATING ACTIVITIES:



Net income

$

3,083,202

$

12,332,712

Adjustments to reconcile net income to net cash provided by operating activities:




Depreciation and amortization

1,585,548

3,111,736

Stock compensation

262,190

430,546

Accretion of asset retirement obligation

56,899


Accounts receivable

(4,061,444)

1,191,692

Prepaid and other current assets

10,377,111

6,945,169

Inventories

(1,229,692)

(2,152,916)

Other receivable

49,533

63,050

Accounts payable and other payable

(1,280,853)

(5,139,518)

Customer deposit

(661,742)

832,662

Accrued and other liabilities

107,516

(469,964)

Taxes payable

(19,888)

1,435,432

Note receivable

(195,806)

-

Net cash provided by operating activities


8,072,574

18,580,601






CASH FLOWS FROM INVESTING ACTIVITIES:




Acquisition of property and equipment

(376,833)

(3,582,067)

Acquisition of intangible assets

-

(429,298)

Construction-in-progress

(10,696,954)

(13,990,438)

Increase in restricted cash

(19,130)

-

Cash received from sale of HSC

1,088,524

-

Net cash used in investing activities


(10,004,393)

(18,001,803)






CASH FLOWS FROM FINANCING ACTIVITIES:




Payment on bank loans

-

(739,870)

Proceeds from warrant extension

-

50,000

Proceeds from Treasury stock sold

2,443,000

-

Warrants converted to common stock

-

1,457,000

Payment to previous owner of acquired mine

(1,676,307)


Related party receivable

2,082,228

(80,239)

Net cash provided by financing activities

2,848,921

686,891






Effect of exchange rate changes on cash and cash equivalents

265,562

883,576






INCREASE IN CASH AND CASH EQUIVALENTS

1,182,664

2,149,265

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD

4,914,425

7,327,369

CASH AND CASH EQUIVALENTS, END OF PERIOD

$

6,097,089

$

9,476,634






SUPPLEMENTAL INFORMATION



INTEREST PAID

$

72,819

$

59,200

INCOME TAX PAID

$

400,668

$

747,848

Contacts:
L&L Energy, Inc.
(206) 264 – 8065
[email protected]

SOURCE L & L Energy, Inc.

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