Exhibit 99.1
China Direct Reports Record Financial Results for the Fourth Quarter and Full Year of Fiscal 2007
- Full year revenue reaches $174.24 million
- Full year net income increases to $11.83 million
- Full year basic EPS rises to $0.75 per share
- Full year fully-diluted EPS rises to $0.67 per share
- Company to provide updated earnings guidance for 2008 during today’s 4:30 p.m. EDT Conference Call.
Deerfield Beach, Florida – March 31, 2008 - (PR Newswire)–China Direct, Inc. (AMEX: CDS), a U.S. company that owns controlling stakes in a diversified portfolio of Chinese entities and assists Chinese businesses in accessing the U.S. capital markets, announced today the Company's audited financial results for the fourth quarter of 2007 and the full year ended December 31, 2007.
Financial Highlights
The Full Year Financial Performance
Revenues for 2007 increased to $174.24 million, as compared to revenues of $13.98 million for 2006.
Gross profit for 2007 was $18.79 million, as compared to $1.47 million for 2006. Total operating expenses for 2007 increased to $4.48 million, as compared to $1.93 million for 2006. Operating expenses as a percentage of gross profit declined in 2007 to 23.8% down from $131.3% in 2006. Operating income was $14.31 million for 2007 versus a loss of $459,207 for 2006, yielding an operating profit margin of 8.2% in 2007.
Net income for 2007 increased to $11.83 million as compared to net income of $169,322 in 2006. The basic earnings were $0.75 per share as compared to $0.02 per share for 2006 on a weighted average basis. On a fully diluted basis, the earnings per share for 2007 were $0.67 per share as compared to $0.01 per share for 2006 on a weighted average basis. The net profit margin in 2007 improved to 6.8% from 1.2% in 2006.
Marc Siegel, President of China Direct, stated “We continue to be very pleased with the financial performance of our four segments in 2007, and we are particularly encouraged by the synergies we are starting to realize from the recent acquisitions to our magnesium segment. We believe the expansion of our magnesium segment has brought us significantly closer to achieving our goal of becoming the global leader in the production and distribution of magnesium. We continue to seek acquisitions in this segment that allow us to drive growth through manufacturing cost savings and distribution reach."
The Fourth Quarter Financial Performance
Revenues for the fourth quarter ended December 31, 2007 increased to $58.27 million as compared to revenues of $13.50 million in the fourth quarter ended December 31, 2006. The increase in revenues was mainly attributable to increased sales from our Magnesium and Clean Technology segments acquired during 2007, as well as a strong performance from both Lang Chemical and our Consulting segment. Additionally, revenue in the fourth quarter of 2007 increased 31% sequentially from revenues of $44.58 million in the third quarter of 2007, driven by our magnesium business.
Gross profit for the fourth quarter of 2007 was $6.82 million as compared to $1.33 million in the fourth quarter ended December 31, 2006. Total operating expenses for the fourth quarter of 2007 increased to $1.68 million compared to $819,336 in the fourth quarter of 2006. The increase in operating expenses in the fourth quarter of 2007 reflects the continued increases to our operations in China associated with our new subsidiaries and staff additions both in the U.S. and China associated with the financial management and integration of our expanding operations. The Company also experienced increases in travel expenses, professional consulting fees, professional insurance premiums, as well as non-cash option charges for employees, management, and professional advisors. Operating income was $5.14 million and $514,266 for the fourth quarter of 2007 and 2006, yielding operating margins of 8.8% and 3.7%, respectively.
Net income for the fourth quarter of 2007 increased to $4.71 million, or $0.23 per basic share, as compared to net income of $557,153 or $0.05 per basic share for the fourth quarter of 2006. On a fully diluted basis, earnings per share for the fourth quarter of 2007 were $0.20 per share as compared to $0.04 per share for the fourth quarter of 2006. Additionally, net income was up 59% sequentially from net income of $2.98 million in the third quarter of 2007. The net profit margin improved to 8.1% in the fourth quarter of 2007 from 4.1% in the fourth quarter of 2006.
Balance Sheet
At December 31, 2007, total assets were $88.29 million, an increase of 324% from $20.84 million at December 31, 2006. At December 31, 2007, shareholder equity reached $42.82 million, an increase of 630% from $5.86 million at December 31, 2006. At December 31, 2007, cash and cash equivalents were $20.39 million and working capital was approximately $40.88 million, an increase of 570% and 502% from cash and cash equivalents of $3.03 million and working capital of approximately $6.79 million at December 31, 2006, respectively.
2008 Financial Guidance
The Company sees continued robust growth in both revenue and earnings for 2008 and will provide updated earnings guidance for 2008 during its conference call today, March 31, 2008 at 4:30 PM EDT.
Mr. Siegel concluded, “We remain focused on generating internal growth of at least 30% in 2008, as we integrate our recently acquired business operations. We see continued improvement in our average contract price for magnesium in 2008 as pre sold contracts from 2007 expire and new sales contracts are made at current price levels. We are confident we can continue to make strategic and opportunistic acquisitions in China and believe we have gained substantial experience in 2007. Throughout the past year we have steadily built a cohesive team which has positioned China Direct to continue its expansion in 2008 and beyond. We remain excited by the opportunities in China and continue to work responsibly and aggressively on behalf of our shareholders. We believe 2008 will be another record breaking year for China Direct.”
China Direct Conference Call to discuss the Company's financial results for the fourth quarter of 2007 and the full year of 2007 ended December 31, 2007 as well as provide updated financial guidance for 2008.
The conference call will take place at 4:30 p.m. EDT on Monday, March 31, 2008. Anyone interested in participating should call 1-800-762-8779 if calling within the United States or 1-480-248-5081 if calling internationally approximately 5 to 10 minutes prior to 4:30 p.m. EDT. Participants should ask for the China Direct 2007 Fourth Quarter Financial Results conference call/ Conference ID 3856868. There will be a playback available until April 15, 2008. To listen to the playback, please call 1-800-406-7325 if calling within the United States or 1-303-590-3030 if calling internationally. Please use the pass code 3856868 for replay.
This call is being webcast by ViaVid Broadcasting and can be accessed at China Direct's website athttp://www.chinadirectinc.com . The webcast may also be accessed at ViaVid's website athttp://www.viavid.net . The webcast can be accessed through April 15, 2008 on either site. To access the webcast, you will need to have the Windows Media Player on your desktop. For the free download of the Media Player, please visit:http://www.microsoft.com/windows/windowsmedia/en/download/default.asp
| | | | | | | |
| | December 31, | |
| | 2007 | | 2006 | |
ASSETS | | | | | | | |
Current Assets: | | | | | | | |
Cash and cash equivalents | | $ | 20,394,931 | | $ | 3,030,345 | |
Notes receivable | | | 1,010,781 | | | 942,117 | |
Investment in trading securities | | | — | | | 2,166,603 | |
Investment in trading securities -related party | | | — | | | 311,611 | |
Investment in marketable securities held for sale | | | 7,820,500 | | | — | |
Investment in marketable securities held for sale-related party | | | 1,315,488 | | | 1,325,400 | |
Accounts receivable, net of allowance for doubtful accounts
of $290,456 and $110,611 for 2007 and 2006, respectively | | | 9,644,880 | | | 2,770,062 | |
Accounts receivable-related parties | | | 2,283,600 | | | — | |
Inventories | | | 5,293,986 | | | 5,494,292 | |
Prepaid expenses and other current assets | | | 12,396,269 | | | 1,272,246 | |
Prepaid expenses-related parties | | | 4,150,943 | | | — | |
Other receivables | | | 3,043,193 | | | — | |
Due from related parties | | | 1,287,877 | | | — | |
Total current assets | | | 68,642,448 | | | 17,312,676 | |
Restricted cash | | | 646,970 | | | 447,713 | |
Property, plant and equipment, net of accumulated depreciation of $577,801
and $97,428 for 2007 and 2006, respectively | | | 18,010,524 | | | 2,753,468 | |
Prepaid expenses | | | 294,986 | | | 321,548 | |
Other assets | | | 138,089 | | | — | |
Mining rights, net | | | 457,226 | | | — | |
Property use rights, net | | | 96,078 | | | — | |
Total assets | | $ | 88,286,321 | | $ | 20,835,405 | |
LIABILITIES AND STOCKHOLDERS' EQUITY | | | | | | | |
Current Liabilities: | | | | | | | |
Loans payable-short term | | $ | 2,570,149 | | $ | 1,536,064 | |
Loan payable-related party | | | 410,167 | | | — | |
Accounts payable and accrued expenses | | | 9,057,790 | | | 4,517,354 | |
Accounts payable-related parties | | | 964,114 | | | 1,546,880 | |
Advances from customers | | | 6,277,767 | | | 916,764 | |
Deferred revenues-short term | | | 685,294 | | | 779,900 | |
Other payables | | | 4,097,716 | | | 45,623 | |
Income tax payable | | | 560,116 | | | 599,699 | |
Deferred Income tax | | | — | | | 440,861 | |
Due to related parties | | | 3,137,233 | | | 140,893 | |
Total current liabilities | | | 27,760,346 | | | 10,524,038 | |
Loan payable—long term | | | 166,573 | | | 22,793 | |
Deferred revenue—long term | | | — | | | 779,900 | |
Minority interest | | | 17,215,451 | | | 3,644,350 | |
Stockholders' Equity: | | | | | | | |
Preferred Stock: $.0001 par value, 10,000,000 authorized, no shares issued
and outstanding | | | — | | | — | |
Common Stock; $.0001 par value, 1,000,000,000 authorized, 20,982,010
and 12,868,433 issued and outstanding for 2007 and 2006,respectively | | | 2,098 | | | 1,287 | |
Additional paid—in capital | | | 30,257,644 | | | 4,927,343 | |
Deferred compensation | | | (55,000 | ) | | (226,840 | ) |
Accumulated comprehensive income | | | 162,045 | | | 532,379 | |
Retained earnings | | | 12,456,706 | | | 630,155 | |
Total stockholders’ equity | | | 42,823,493 | | | 5,864,324 | |
Total liabilities and stockholders’ equity | | $ | 88,286,321 | | $ | 20,835,405 | |
| | | | | | | |
| | For the Year Ended
December 31, | |
| | 2007 | | 2006 | |
Revenues | | $ | 169,696,524 | | $ | 13,467,337 | |
Revenues-related party | | | 4,539,059 | | | 517,000 | |
Total revenues | | | 174,235,583 | | | 13,984,337 | |
Cost of revenues | | | 155,448,012 | | | 12,515,035 | |
Gross profit | | | 18,787,571 | | | 1,469,302 | |
Operating expenses: | | | | | | | |
Selling, general, and administrative | | | 4,476,967 | | | 1,900,111 | |
Selling, general, and administrative-related party | | | — | | | 28,398 | |
Total operating expenses | | | 4,479,967 | | | 1,928,509 | |
Operating income (loss) | | | 14,542,154 | | | (459,207 | ) |
Other income (expense): | | | | | | | |
Other income | | | 1,090,709 | | | 44,336 | |
Interest income (expense) | | | 280,342 | | | (6,624 | ) |
Unrealized gain on trading securities | | | — | | | 600,339 | |
Realized gain on sale of marketable securities | | | 616,045 | | | 81,170 | |
Realized (loss) gain on sale of marketable securities-related party | | | (41,885 | ) | | 85,774 | |
Net income before income taxes | | | 16,252,815 | | | 345,788 | |
Income taxes expense | | | (727,479 | ) | | (176,466 | ) |
Income before minority interest | | | 15,525,336 | | | 169,322 | |
Minority interest in income of subsidiary | | | (3,698,785 | ) | | — | |
Net income | | | 11,826,551 | | | 169,322 | |
Foreign currency translation gain | | | 1,314,343 | | | 137,443 | |
Unrealized loss on marketable securities held for sale,
net of income taxes | | | (174,212 | ) | | — | |
Unrealized (loss) gain on marketable securities held | | | | | | | |
For sale-related party, net of income taxes | | | (1,510,465 | ) | | 349,636 | |
Comprehensive income | | $ | 11,357,230 | | $ | 656,401 | |
Basic earnings per common share | | $ | 0.74 | | $ | 0.02 | |
Diluted earnings per common share | | $ | 0.67 | | $ | 0.01 | |
Basic weighted average common shares outstanding | | | 15,841,560 | | | 10,572,745 | |
Diluted weighted average common shares outstanding | | | 17,605,664 | | | 13,849,556 | |
About China Direct, Inc.
China Direct, Inc. (Amex: CDS) is a diversified management and advisory services organization headquartered in the U.S. Our management services division acquires a controlling interest in entities operating in China. Our ownership control enables China Direct to provide management advice, as well as financing to Chinese entities. This infrastructure creates a platform to expand business opportunities globally while effectively and efficiently accessing the U.S. capital markets. Our advisory services division provides comprehensive advisory and consulting services critical to the success of Chinese entities seeking to access the U.S. capital markets. As a direct link to China, China Direct serves as a vehicle allowing investors to directly participate in the rapid growth of the Chinese economy in a diversified and balanced manner. For more information about China Direct, please visithttp://www.chinadirectinc.com .
Safe Harbor Statement
This news release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward- looking statements are based on current expectations or beliefs, including, but not limited to, statements concerning the Company's operations, financial performance and, condition. For this purpose, statements that are not statements of historical fact may be deemed to be forward-looking statements. The Company cautions that these statements by their nature involve risks and uncertainties, and actual results may differ materially depending on a variety of important factors, including, but not limited to, the impact of competitive products, pricing and new technology; changes in consumer preferences and tastes; and effectiveness of marketing; changes in laws and regulations; fluctuations in costs of production, and other factors as those discussed in the Company's reports filed with the Securities and Exchange Com mission from time to time. In addition, the company disclaims any obligation to update any forward-looking statements to reflect events or circumstances after the date hereof.
Contact:
Investor Relations,
HC International, Inc.
Alan Sheinwald, Partner
Tel: (914) 669-0222
Email: Alan.Sheinwald@HCinternational.net
Company,
China Direct, Inc.
Richard Galterio, Executive Vice President
Tel: 1-877-China-57
Email: Richard@cdii.net
