Kingold Jewelry Reports Unaudited 2012 Third Quarter and Nine Month
Financial Results
- 9.5 metric tons of 24-karat gold products processed, an
increase of 44%
- Net sales increased 4.8% to $220.8
million
- Gross profit margin was 5.7% compared to 6.6% for 2011
- Net income attributable to common shareholders of
$8.4 million, or $0.15 per diluted share
- Company reiterates guidance of approximately 35 tons processed
during 2012
WUHAN CITY, China, Nov. 13,
2012 /PRNewswire/ -- Kingold Jewelry, Inc. (NASDAQ:
KGJI), one of China's leading
manufacturers and designers of high quality 24-karat gold jewelry,
ornaments and investment-oriented products, today announced
financial results for the third quarter and nine-months ended
September 30, 2012.
Mr. Zhihong Jia, Chairman and CEO
of Kingold Jewelry, Inc. ("Kingold" or the "Company") stated, "In
the third quarter of 2012 we delivered top line growth of 4.8%,
with a 44% increase in tons of gold processed while maintaining
competitive operating margins. We remain focused on developing and
expanding our investment gold business while utilizing and
expanding our existing sales network in jewelry markets to continue
delivering on our strategic objective of profitably growing our
business."
Investment Gold Business
"We continue to move forward and have made considerable progress
in our investment gold business. We are now partnered with some of
the largest banks in China and
distributing gold bars and coins to eight different provinces and
municipal locations throughout China. The investment gold business is
becoming a significant part of our business, and in the third
quarter of 2012 generated approximately $17.9 million of revenue and $46.4 million in the first nine months of 2012,
which represented 8.1% and 6.5% of our total revenue in those
periods. We remain confident in our decision to enter into the
investment gold business, and recognize we have much more work
ahead of us to reach our objectives for improved productivity and
profitability."
Jewelry Business
"We remain dedicated to growing our market share in China's gold jewelry designing and
manufacturing through expanding our customer base and production
capabilities. During the third quarter of 2012, we signed a major
gold-processing agreement with a leading Shanghai Stock Exchange
listed gold jewelry retailer in China, Shanghai Laofengxiang. Under this
agreement, we expect to process at least 5 tons, or approximately
176,370 ounces, of jewelry products through December 31, 2013. We believe this new
arrangement will increase our brand recognition within the industry
as well as with end-customers as Shanghai Laofengxiang covers
approximately 98% of the market and distributes its products
through 700 plus chain-stores and a 2000 member sales network
across China. Kingold had
previously partnered with Shanghai Laofengxiang and processed 2
tons of jewelry products in 2011, and we believe that Shanghai
Laofengxiang's decision to return reflects our high quality and
advanced processing techniques."
2012 Third Quarter Operational and Financial Review
- In the third quarter of 2012, Kingold processed a total of 9.5
metric tons [one metric ton = 35,274 ounces] of 24-karat gold
products, an increase of 44.0% compared to the 6.6 metric tons
processed in the third quarter of 2011.
- The Company reported revenues for the 2012 third quarter of
$220.8 million, an increase of
$10.1 million, or 4.8%, from
$210.7 million in the third quarter
of 2011. Of the $10.1 million
increase in net sales, approximately $17.1
million was attributable to increased production, which was
partially offset by approximately $9.0
million due to the decrease in the price of gold during the
period as compared to the prior period, and the remaining is due to
the gain from exchange rate fluctuations.
- The Company expects a higher percent of its revenue in future
quarters to be derived from its investment gold business, which
generated $17.9 million of revenue in
the third quarter of 2012. The Company's investment gold consists
of products such as gold coins, bars and certain gold gift
products, which are sold to individual branch locations under that
bank's specific brand. The Company typically expects a higher
margin from its investment gold products than its branded jewelry
and ornament production.
- Gross profit for the 2012 third quarter was $12.7 million, a decrease of 9.4% from
$14.0 million in the prior-year
period. The Company's gross margin for the period was 5.7%
compared to 6.6% from the prior year period. Gross margin decreased
primarily because we processed more high-margin, high-end products
in July and September 2011, which
lead to margins being higher than normal in the third quarter of
2011 compared to the remainder of 2011 and the first nine months of
2012.
- The Company reported net income attributable to Kingold
shareholders for the third quarter of 2012 of $8.4 million, or $0.15 per diluted share based on 54.2 million
weighted average diluted shares outstanding, compared to net income
of $9.3 million, or $0.18 per diluted share based on 50.7 million
weighted average diluted shares outstanding, in the prior-year
period.
Fiscal 2012 Nine Month Operational and Financial
Review
- In the nine months ended September 30,
2012, Kingold processed a total of 30.2 metric tons [one
metric ton = 35,274 ounces] of 24-karat gold products, an increase
of 24.8% compared to the 24.3 metric tons processed in the first
nine months of 2011.
- Revenues for the nine months ended September 30, 2012 were $714.3 million, an increase of $93.8 million, or 15.1%, from $620.5 million in the same period of the prior
year. The increase in net sales was primarily driven by
increased production as well as by the increase in the price of
gold. Of the $93.8 million increase
in net sales, approximately $39.0
million was attributable to increased production,
approximately $38.7 million to the
increase in the price of gold and the remaining is due to the gain
from exchange rate fluctuations.
- For the nine months ended September 30,
2012, the Company generated approximately $46.4 million of revenue from its investment gold
business.
- Gross profit for the nine months ended September 30, 2012 was $39.2 million, an increase of 10.7% from
$35.4 million in the prior-year
period. The Company's gross margin for the nine months ended
September 30, 2012 was 5.5% compared
to 5.7% for the prior year period. The reason for the decrease in
our gross margin is because the price of gold increased
significantly in the first nine months of 2012 and we were not able
to raise the processing fees we charge our customers
proportionally.
- The Company reported net income attributable to Kingold
shareholders for the nine months ended September 30, 2012 of $25.3 million, or $0.47 per diluted share based on 54.2 million
weighted average diluted shares outstanding, compared to net income
of $23.0 million, or $0.46 per diluted share based on 50.5 million
weighted average diluted shares outstanding, in the prior-year
period.
Balance Sheet and Cash Flow Highlights
(in millions except
for percentages)
|
|
9/30/2012
|
|
12/31/2011
|
%
Change
|
Cash and Cash
Equivalents
|
$
|
1.6
|
$
|
8.8
|
(81.8%)
|
Inventories
(gold)
|
|
142.3
|
|
108.1
|
31%
|
Working
Capital
|
|
141.3
|
|
113.4
|
24.6%
|
Short Term
Loans
|
|
6.4
|
|
6.3
|
2%
|
Total Long-term
Debt
|
|
0
|
|
0
|
N/A
|
Stockholders'
Equity
|
|
154.1
|
|
127.0
|
21.3%
|
Kingold's net cash from operating activities can fluctuate
significantly due to changes in inventories (principally gold).
Market and Business Outlook
Despite the fluctuation in gold prices and concerns over the
global economic climate (particularly in Europe), China's gold consumption has remained strong
during 2012. A recent report in July
2012 by the World Gold Council noted that while sales were
expected to slow in the second quarter after a record first
quarter, it estimates China's gold
demand "should expand 13% to 870 metric tons in 2012." The
report projected jewelry demand growing 7.7% to 550 tons in 2012,
and bars and coins up 24% to 320 tons in 2012.
Kingold reaffirms its 2012 guidance that the Company will
process approximately 35 tons of gold product. This guidance
is based solely on its current organic growth projections.
Chairman Jia concluded, "We were pleased with our results and
development during the first nine months of 2012, we continue to
see strong demand for 24 karat gold products in China. We executed our growth strategy in the
third quarter by expanding our customer base by seeking major large
jewelry retailer and wholesalers in our jewelry products business,
and partnering with major banks in our investment gold products
business."
Conference Call
Kingold will discuss these results in a conference call tomorrow
morning (November 14, 2012) at
8:30 a.m. ET.
The dial-in numbers are:
Live Participant Dial In
(Toll Free):
|
877-407-0778
|
Live Participant Dial In
(International):
|
201-689-8565
|
The conference call will also be webcast live. To listen to the
call, please go to the Investor Relations section of Kingold's
website at www.kingoldjewelry.com, or click on the following
link:
http://www.investorcalendar.com/IC/CEPage.asp?ID=170179
The Company will also post an accompanying slide presentation
available in PDF format on its Website prior to the conference
call.
About Kingold Jewelry, Inc.
Kingold Jewelry, Inc. (NASDAQ: KGJI), centrally located in
Wuhan City, China's fourth largest city, was founded in
2002 and today is one of China's
leading designers and manufacturers of 24-karat gold jewelry,
ornaments and investment-oriented products. The Company sells both
directly to retailers as well as through major distributors across
China. Kingold has received
numerous industry awards and has been a member of the Shanghai Gold
Exchange since 2003. For more information, please visit
www.kingoldjewelry.com.
Business Risks and Forward-Looking Statements
This press release contains forward-looking statements that are
subject to the safe harbors created under the Securities Act of
1933 and the Securities Exchange Act of 1934. These include
statements regarding the development and expansion of the
investment gold business, expanding the sales network of the
jewelry business, growth in the investment gold business,
processing of gold for Shanghai Laofengxiang, China's gold demand and guidance regarding
Kingold's gold processing in 2012. Readers are cautioned that
actual results could differ materially from those expressed in any
forward-looking statements. In addition, please refer to the risk
factors contained in Kingold's SEC filings available at
www.sec.gov, including Kingold's most recent Annual Report on Form
10-K and Quarterly Reports on Form 10-Q. Readers are cautioned not
to place undue reliance on any forward-looking statements, which
speak only as of the date on which they are made. Kingold
undertakes no obligation to update or revise any forward-looking
statements for any reason.
Company Contact
Kingold Jewelry, Inc.
Bin Liu, CFO
Phone: +1-847-660-3498 (US) / +86-27-6569-4977 (China)
Email: bl@kingoldjewelry.com
INVESTOR RELATIONS
The Equity Group Inc.
Adam Prior, Vice President
(212) 836-9606
aprior@equityny.com
Katherine Yao, Account
Executive
+86 10-6587-6435
kyao@equityny.com
KINGOLD JEWELRY,
INC.
|
CONDENSED
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE
INCOME
|
(IN US
DOLLARS)
|
(UNAUDITED)
|
|
|
|
|
|
|
For the three months
ended September 30,
|
|
For the nine months
ended September 30,
|
|
|
|
|
|
2012
|
|
2011
|
|
2012
|
|
2011
|
NET
SALES
|
|
$
|
220,836,949
|
$
|
210,710,516
|
$
|
714,290,183
|
$
|
620,533,358
|
COST OF
SALES
|
|
|
|
|
|
|
|
|
|
|
Cost of sales
|
|
|
(207,868,634)
|
|
(196,453,806)
|
|
(674,193,265)
|
|
(584,246,090)
|
|
Depreciation
|
|
|
(296,524)
|
|
(265,488)
|
|
(890,419)
|
|
(872,125)
|
|
|
Total cost of
sales
|
|
|
(208,165,158)
|
|
(196,719,294)
|
|
(675,083,684)
|
|
(585,118,215)
|
GROSS
PROFIT
|
|
|
12,671,791
|
|
13,991,222
|
|
39,206,499
|
|
35,415,143
|
OPERATING
EXPENSES
|
|
|
|
|
|
|
|
|
|
|
Selling, general and
administrative expenses
|
|
756,674
|
|
789,820
|
|
3,165,658
|
|
2,550,526
|
|
Stock compensation
expenses
|
|
379,450
|
|
62,500
|
|
1,047,355
|
|
257,500
|
|
Depreciation
|
|
|
36,710
|
|
66,214
|
|
104,584
|
|
98,325
|
|
Amortization
|
|
|
2,983
|
|
3,000
|
|
8,958
|
|
8,781
|
|
|
Total Operating
Expenses
|
|
1,175,817
|
|
921,534
|
|
4,326,555
|
|
2,915,133
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME FROM
OPERATIONS
|
|
11,495,974
|
|
13,069,689
|
|
34,879,944
|
|
32,500,010
|
OTHER INCOME
(EXPENSES)
|
|
|
|
-
|
|
|
|
|
|
Other Income
|
|
|
-
|
|
227
|
|
-
|
|
18,234
|
|
Other Expense
|
|
|
-
|
|
5,758
|
|
(1,559)
|
|
5,758
|
|
Interest
expense
|
|
|
(113,298)
|
|
-
|
|
(336,212)
|
|
(120,811)
|
|
|
Total Other Expenses,
net
|
|
(113,298)
|
|
5,985
|
|
(337,771)
|
|
(96,819)
|
INCOME FROM
OPERATIONS BEFORE TAXES
|
|
11,382,676
|
|
13,075,674
|
|
34,542,173
|
|
32,403,192
|
|
|
|
|
|
|
|
|
|
|
|
|
PROVISION FOR INCOME
TAXES
|
|
(3,016,059)
|
|
(3,353,879)
|
|
(9,280,633)
|
|
(8,347,773)
|
NET
INCOME
|
|
$
|
8,366,617
|
$
|
9,721,795
|
$
|
25,261,540
|
$
|
24,055,419
|
|
Less: net income
attribute to the noncontrolling interest
|
|
-
|
|
(406,584)
|
|
-
|
|
(1,039,754)
|
NET INCOME
ATTRIBUTABLE TO COMMON STOCKHOLDERS
|
$
|
8,366,617
|
$
|
9,315,211
|
$
|
25,261,540
|
$
|
23,015,665
|
OTHER COMPREHENSIVE
INCOME
|
|
|
|
|
|
|
|
|
|
Total foreign currency
translation gains
|
|
1,700,761
|
|
1,288,912
|
|
752,777
|
|
3,333,579
|
|
Less: foreign currency
translation gains
|
|
|
|
|
|
|
|
|
|
|
attributable to
noncontrolling interest
|
|
-
|
|
(4,708)
|
|
-
|
|
(49,612)
|
|
Foreign currency
translation gains
|
|
|
|
|
|
|
|
|
|
|
attributable to common
stockholders
|
|
1,700,761
|
|
1,284,204
|
|
752,777
|
|
3,283,967
|
COMPREHENSIVE
INCOME
|
$
|
10,067,377
|
$
|
10,599,415
|
$
|
26,014,317
|
$
|
26,299,632
|
Earnings per
share
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.16
|
|
0.19
|
$
|
0.47
|
$
|
0.47
|
|
Diluted
|
|
$
|
0.15
|
|
0.18
|
$
|
0.47
|
$
|
0.46
|
Weighted average number
of shares
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
53,578,218
|
|
49,998,706
|
|
53,286,072
|
|
49,391,647
|
|
Diluted
|
|
|
54,246,563
|
|
50,744,359
|
|
54,200,552
|
|
50,480,880
|
KINGOLD JEWELRY,
INC.
|
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
|
(IN US
DOLLARS)
|
|
(UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
2012
|
|
December 31,
2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
CURRENT
ASSETS
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
|
$
|
1,625,205
|
$
|
8,810,173
|
|
Accounts
receivable
|
|
|
|
379,164
|
|
896,949
|
|
Inventories
|
|
|
|
|
142,255,205
|
|
108,088,420
|
|
Other current assets and
prepaid expenses
|
|
|
|
69,694
|
|
72,333
|
|
Value added tax
recoverable
|
|
|
|
7,788,203
|
|
4,750,847
|
|
|
Total Current
Assets
|
|
|
|
152,117,471
|
|
122,618,722
|
|
|
|
|
|
|
|
|
|
|
PROPERTY AND
EQUIPMENT, NET
|
|
|
|
12,132,635
|
|
12,942,902
|
|
|
|
|
|
|
|
|
|
|
OTHER
ASSETS
|
|
|
|
|
|
|
|
|
Other assets
|
|
|
|
|
153,587
|
|
153,102
|
|
Intangible assets,
net
|
|
|
|
508,153
|
|
515,543
|
|
|
Total other
assets
|
|
|
|
661,740
|
|
668,645
|
TOTAL
ASSETS
|
|
|
|
$
|
164,911,846
|
$
|
136,230,269
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES
|
|
|
|
|
|
|
|
Short term
loans
|
|
|
|
$
|
6,363,651
|
$
|
6,343,578
|
|
Other payables and
accrued expenses
|
|
|
|
966,177
|
|
870,454
|
|
Income tax
payable
|
|
|
|
3,040,105
|
|
1,451,929
|
|
Other taxes
payable
|
|
|
|
477,960
|
|
562,027
|
|
|
Total Current
Liabilities
|
|
|
|
10,847,893
|
|
9,227,988
|
|
|
|
|
|
|
|
|
|
|
COMMITMENTS AND
CONTINGENCIES
|
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
|
EQUITY
|
|
|
|
|
|
|
|
|
Preferred stock, $0.001
par value, 500,000 shares
|
|
|
|
|
|
|
|
authorized, none issued
or outstanding
|
|
|
|
|
|
|
|
|
as of September 30, 2012
and December 31, 2011
|
|
-
|
|
-
|
|
Common stock $0.001 par
value, 100,000,000 shares
|
|
|
|
|
|
|
authorized, 53,671,140
and 53,107,343 shares issued and outstanding
|
|
|
|
|
|
|
as of September 30, 2012
and December 31, 2011
|
|
53,671
|
|
53,108
|
|
Additional paid-in
capital
|
|
|
|
56,774,801
|
|
55,728,009
|
|
Retained
earnings
|
|
|
|
|
|
|
|
|
Unappropriated
|
|
|
|
|
85,197,660
|
|
59,936,120
|
|
Appropriated
|
|
|
|
|
967,543
|
|
967,543
|
|
Accumulated other
comprehensive income
|
|
|
|
11,070,278
|
|
10,317,501
|
|
|
Total Equity
|
|
|
|
|
154,063,953
|
|
127,002,281
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND
EQUITY
|
|
|
$
|
164,911,846
|
$
|
136,230,269
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
KINGOLD JEWELRY,
INC.
|
CONDENSED
CONSOLIDATED STATEMENT OF CASH FLOWS
|
(IN US
DOLLARS)
|
(UNAUDITED)
|
|
|
|
|
|
|
|
|
For the Nine months
ended September 30,
|
|
|
|
|
|
|
|
|
2012
|
|
2011
|
CASH FLOWS FROM
OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
Net income
|
|
|
|
$
|
25,261,540
|
$
|
24,055,419
|
|
Adjusted to reconcile
net income to cash used in
|
|
|
|
|
|
|
|
|
operating
activities:
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
|
|
995,002
|
|
970,450
|
|
|
Amortization of
intangible assets
|
|
|
|
8,958
|
|
8,781
|
|
|
Share based
compensation
|
|
|
|
|
1,047,355
|
|
257,500
|
|
Changes in operating
assets and liabilities
|
|
|
|
|
|
|
|
(Increase) decrease
in:
|
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
|
|
517,022
|
|
1,010,099
|
|
|
Inventories
|
|
|
|
|
(33,590,814)
|
|
(46,100,293)
|
|
|
Other current assets and
prepaid expenses
|
|
|
|
15,269
|
|
51,215
|
|
|
Value added tax
recoverable
|
|
|
|
|
(3,001,419)
|
|
(1,525,536)
|
|
Increase (decrease)
in:
|
|
|
|
|
|
|
|
|
|
Other payables and
accrued expenses
|
|
|
|
81,959
|
|
(740,083)
|
|
|
Income tax
payable
|
|
|
|
|
1,572,629
|
|
1,056,705
|
|
|
Other taxes
payable
|
|
|
|
|
(85,251)
|
|
(494,451)
|
|
|
Net cash used in
operating activities
|
|
|
|
(7,177,750)
|
|
(21,450,194)
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM
INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
Purchase of property and
equipment
|
|
|
|
(149,666)
|
|
(64,723)
|
|
|
Net cash used in
investing activities
|
|
|
|
(149,666)
|
|
(64,723)
|
CASH FLOWS FROM
FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
Deferred offering
costs
|
|
|
|
|
-
|
|
666,364
|
|
Repayments of bank
loans
|
|
|
|
|
-
|
|
(6,194,845)
|
|
Proceeds from related
party loan
|
|
|
|
-
|
|
2,574,082
|
|
Repayments of related
party loan
|
|
|
|
-
|
|
(2,168,196)
|
|
Net proceeds from stock
issuance in public offering
|
|
|
-
|
|
20,144,255
|
|
Net proceeds from
exercise of warrants
|
|
|
|
-
|
|
49,800
|
|
|
Net cash provided by
financing activities
|
|
|
|
-
|
|
15,071,460
|
|
|
|
|
|
|
|
|
|
|
|
EFFECT OF EXCHANGE
RATES ON CASH & CASH EQUIVALENTS
|
|
142,448
|
|
526,517
|
|
|
|
|
|
|
|
|
|
|
|
NET DECREASE IN CASH
AND CASH EQUIVALENTS
|
|
|
|
(7,184,968)
|
|
(5,916,940)
|
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH
EQUIVALENTS, BEGINNING OF PERIOD
|
|
|
8,810,173
|
|
9,151,536
|
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH
EQUIVALENTS, END OF PERIOD
|
|
|
$
|
1,625,205
|
$
|
3,234,596
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL
DISCLOSURE OF CASH FLOW INFORMATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for interest
expense
|
|
|
|
$
|
354,686
|
$
|
121,933
|
|
Cash paid for income
tax
|
|
|
|
$
|
7,708,004
|
$
|
7,291,068
|
SOURCE Kingold Jewelry, Inc.