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| 8-K - 8-K CURRENT REPORT - KINGOLD JEWELRY, INC. | v312260_8k.htm |
KINGOLD JEWELRY REPORTS RECORD UNAUDITED
FISCAL 2012 FIRST QUARTER FINANCIAL RESULTS
Company to Hold Conference Call with Accompanying Slide Presentation
On May 10, 2012, at 8:30 a.m. ET
WUHAN CITY, China, May 9, 2012 -- 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 first quarter ended March 31, 2012, highlighted by double-digit percentage growth in revenue and net income year-over-year.
Mr. Zhihong Jia, Chairman and CEO of Kingold, stated, “We continued to see strong growth in our sales volume during the first quarter of 2012, particularly from our investment gold business. We continue to gradually shift resources to support demand from our bank partners, and were pleased that this has helped serve as a new driver for sales. We are now distributing products from the investment gold business to several provinces and municipal locations throughout China, including Beijing, Hubei, Jiangsu, Jiangxi, Liaoning, Zhejiang, Henan and Sichuan. In our jewelry business, we have continued to build upon and expand our customer base over the past year, with new clients including Harbin Hengyuan Gold Corp, Hangzhou Xingya Jewelry, Wuxi Yinglou and Datong Jintai Jewelry. We were also pleased to receive a AAA credit rating from the Gems & Jewelry Trade Association of China, which we feel is a testament to our reputation in China’s jewelry industry and strong financial position. We feel that the long-term demand drivers in the jewelry business, such as a rising middle class, growing disposable income and culture (weddings and child births) will continue to provide stable growth for the Company.”
2012 First Quarter Operational and Financial Review
| · | In the first quarter of 2012, Kingold processed approximately 8.84 metric tons [one metric ton = 35,274 ounces] of 24-karat gold products, an increase of 17.6% over the 7.52 metric tons processed in the first quarter of 2011. In the first quarter Kingold processed approximately 970,000 pieces of jewelry, gold bars and coins, with the majority being necklaces and rings (roughly 250,000 pieces for each category). |
| · | The Company reported revenues for the 2012 first quarter of $225.0 million, an increase of 42.6% from $157.7 million in the first quarter of 2011. The increase in net sales was primarily driven by increased branded production as well as by the increase in the price of gold. Of the $67.3 million increase in net sales, approximately $35.3 million was attributable to increased branded production and approximately $25.2 million to the increase in the price of gold 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 incremental $9.9 million of revenue in the first 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. |
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| · | Gross profit for the 2012 first quarter was $11.6 million, an increase of 29.0% from $9.0 million in the prior-year period. The Company’s gross margin for the period was 5.1% compared to 5.7% from the prior year period. Gross margin was lower for the period primarily because gold prices increased nearly 9% while the Company could not raise its processing fee proportionally. However, Kingold’s gross margin improved over the gross margin of 4.1% reported in the fourth quarter of 2011. The fourth quarter gross margin was affected by a shift in product mix (more branded production) and initial costs involved with ramping up the Company’s investment gold business. |
| · | The Company reported net income attributable to Kingold shareholders for the first quarter of 2012 of $7.3 million, or $0.13 per diluted share based on 54.4 million weighted average diluted shares outstanding, compared to net income of $5.3 million, or $0.11 per diluted share based on 49.7 million weighted average diluted shares outstanding, in the prior-year period. |
Balance Sheet and Cash Flow Highlights
| (in millions except for percentages) | 3/31/2012 | 12/31/2011 | % Change | |||||||||
| Cash and Cash Equivalents | $ | 3.0 | $ | 8.8 | (66 | %) | ||||||
| Inventories (gold) | 122.9 | 108.1 | 13.7 | % | ||||||||
| Working Capital | 121.7 | 113.4 | 7.4 | % | ||||||||
| Short Term Loan | 6.3 | 6.3 | 0 | % | ||||||||
| Total Long-term Debt | 0 | 0 | N/A | |||||||||
| Stockholders’ Equity | 135.0 | 127.0 | 6.3 | % | ||||||||
Kingold’s net cash from operating activities can fluctuate significantly due to changes in inventories (principally gold). Other factors that may vary significantly include our accounts payable, purchases of gold and income taxes. The Company expects the net cash that it generates from operating activities to continue to fluctuate as its inventories, receivables, accounts payables and the other factors described above change with increased production and the purchase of larger quantities of raw materials (gold).
Market and Business Outlook
Despite the fluctuation in gold prices, China’s gold consumption remained very strong in the first quarter of 2012. According to statistics from the Hong Kong Census and Statistics Department from May 2012, in the first quarter Hong Kong alone exported 135.5 metric tons of gold into mainland China, five times more than in the same period from last year. China is widely expected to overtake India as the world’s largest gold market in 2012.
The Company reaffirms its 2012 guidance that sales volume will be approximately 35 tons. This guidance is based solely on our current organic growth projections. Kingold expects its second quarter sales volume to continue the momentum and growth seen in the first quarter.
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Chairman Jia concluded, "We have been very pleased with the development over the past six months, as we have begun to shift our resources towards growing the investment gold business. We expect this segment to continue to grow as a percentage of our revenues in coming periods. We continue to closely monitor gold price fluctuations globally, but were pleased to see stable pricing throughout the first quarter. We continue to feel that population growth, a rising middle class, and a trend towards risk-averse investment in gold will continue to drive China’s gold demand for the immediate and long-term future to the benefit of Kingold. We remain confident about the long-term growth prospects for the investment gold market and 24-karat gold jewelry in China and look forward to continuing to develop our new products and distribution abilities throughout the country. We have maintained a healthy balance sheet, are debt-free, and remain wholly focused on expanding our operations.”
Conference Call
Kingold will discuss these results in a conference call tomorrow morning (May 10, 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=168420.
The Company will also post an accompanying slide presentation available in PDF format on its homepage 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. 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.
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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
|
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| May 9, 2012 |
| KINGOLD JEWELRY, INC. | ||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME | ||||||||
| (IN US DOLLARS) | ||||||||
| (UNAUDITED) | ||||||||
| For the three months ended March 31, | ||||||||
| 2012 | 2011 | |||||||
| NET SALES | $ | 224,967,394 | $ | 157,712,467 | ||||
| COST OF SALES | ||||||||
| Cost of sales | (213,102,255 | ) | (148,461,128 | ) | ||||
| Depreciation | (297,788 | ) | (285,207 | ) | ||||
| Total cost of sales | (213,400,043 | ) | (148,746,335 | ) | ||||
| GROSS PROFIT | 11,567,351 | 8,966,132 | ||||||
| OPERATING EXPENSES | ||||||||
| Selling, general and administrative expenses | 1,058,342 | 1,154,032 | ||||||
| Stock compensation expense | 356,439 | 122,500 | ||||||
| Depreciation | 33,420 | 31,914 | ||||||
| Amortization | 2,996 | 2,873 | ||||||
| Total Operating Expenses | 1,451,197 | 1,311,319 | ||||||
| INCOME FROM OPERATIONS | 10,116,154 | 7,654,813 | ||||||
| OTHER INCOME (EXPENSES) | ||||||||
| Interest expense | (111,136 | ) | (83,648 | ) | ||||
| Total Other Expenses, net | (111,136 | ) | (83,648 | ) | ||||
| NET INCOME BEFORE PROVISION FOR INCOME TAXES | 10,005,018 | 7,571,165 | ||||||
| PROVISION FOR INCOME TAXES | (2,691,006 | ) | (2,025,604 | ) | ||||
| NET INCOME | $ | 7,314,012 | $ | 5,545,560 | ||||
| Less: net income attribute to the noncontrolling interest | - | (253,403 | ) | |||||
| NET INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS | $ | 7,314,012 | $ | 5,292,157 | ||||
| OTHER COMPREHENSIVE INCOME | ||||||||
| Total foreign currency translation gains | 352,704 | 656,149 | ||||||
| Less: foreign currency translation gains | ||||||||
| attributable to noncontrolling interest | - | (15,509 | ) | |||||
| Foreign currency translation gains | ||||||||
| attributable to common stockholders | 352,704 | 640,640 | ||||||
| COMPREHENSIVE INCOME | $ | 7,666,716 | $ | 5,932,797 | ||||
| Earnings per share | ||||||||
| Basic | $ | 0.14 | $ | 0.11 | ||||
| Diluted | $ | 0.13 | $ | 0.11 | ||||
| Weighted average number of shares | ||||||||
| Basic | 53,107,343 | 48,249,588 | ||||||
| Diluted | 54,358,067 | 49,724,008 | ||||||
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| KINGOLD JEWELRY, INC. | |||||||||
| CONDENSED CONSOLIDATED BALANCE SHEETS | |||||||||
| (IN US DOLLARS) | |||||||||
| (UNAUDITED) | |||||||||
| March 31, | December 31, | |||||||
| 2012 | 2011 | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS | ||||||||
| Cash and cash equivalents | $ | 2,954,410 | $ | 8,810,173 | ||||
| Accounts receivable | 363,510 | 896,949 | ||||||
| Inventories | 122,865,734 | 108,088,420 | ||||||
| Other current assets and prepaid expenses | 340,486 | 72,333 | ||||||
| Value added tax recoverable | 5,093,005 | 4,750,847 | ||||||
| Total Current Assets | 131,617,145 | 122,618,722 | ||||||
| PROPERTY AND EQUIPMENT, NET | 12,632,290 | 12,942,902 | ||||||
| OTHER ASSETS | ||||||||
| Other assets | 153,336 | 153,102 | ||||||
| Intangible assets, net | 513,328 | 515,543 | ||||||
| Total other assets | 666,664 | 668,645 | ||||||
| TOTAL ASSETS | $ | 144,916,099 | $ | 136,230,269 | ||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| CURRENT LIABILITIES | ||||||||
| Short term loan | $ | 6,353,270 | $ | 6,343,578 | ||||
| Other payables and accrued expenses | 678,874 | 870,454 | ||||||
| Income tax payable | 2,696,367 | 1,451,929 | ||||||
| Other taxes payable | 162,154 | 562,027 | ||||||
| Total Current Liabilities | 9,890,665 | 9,227,988 | ||||||
| COMMITMENTS AND CONTINGENCIES | - | - | ||||||
| EQUITY | ||||||||
| Preferred stock, $0.001 par value, 500,000 shares | ||||||||
| authorized, none issued or outstanding | ||||||||
| as of March 31, 2012 and December 31, 2011 | - | - | ||||||
| Common stock $0.001 par value, 100,000,000 shares | ||||||||
| authorized, 53,107,343 shares issued and outstanding | ||||||||
| as of March 31, 2012 and December 31, 2011 | 53,108 | 53,108 | ||||||
| Additional paid-in capital | 56,084,448 | 55,728,009 | ||||||
| Retained earnings | ||||||||
| Unappropriated | 67,250,131 | 59,936,120 | ||||||
| Appropriated | 967,543 | 967,543 | ||||||
| Accumulated other comprehensive income | 10,670,204 | 10,317,501 | ||||||
| Total Equity | 135,025,434 | 127,002,281 | ||||||
| TOTAL LIABILITIES AND EQUITY | $ | 144,916,099 | $ | 136,230,269 | ||||
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| KINGOLD JEWELRY, INC. | ||||||||||
| CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS | ||||||||||
| (IN US DOLLARS) | ||||||||||
| (UNAUDITED) | ||||||||||
| For the three months ended March 31, | ||||||||
| 2012 | 2011 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net income | $ | 7,314,012 | $ | 5,545,560 | ||||
| Adjusted to reconcile net income to cash used in | ||||||||
| Operating activities: | ||||||||
| Depreciation | 331,208 | 317,121 | ||||||
| Amortization of intangible assets | 2,996 | 2,873 | ||||||
| Share based compensation | 356,439 | 122,500 | ||||||
| Changes in operating assets and liabilities | ||||||||
| (Increase) decrease in: | ||||||||
| Accounts receivable | 533,746 | 959,184 | ||||||
| Inventories | (14,583,108 | ) | (25,666,030 | ) | ||||
| Other current assets and prepaid expenses | (255,292 | ) | 61,844 | |||||
| Deferred offering costs | - | 666,364 | ||||||
| Value added tax recoverable | (334,233 | ) | (2,695,585 | ) | ||||
| Increase (decrease) in: | ||||||||
| Other payables and accrued expenses | (203,998 | ) | (713,329 | ) | ||||
| Income tax payable | 1,239,750 | (167,321 | ) | |||||
| Other taxes payable | (399,935 | ) | (473,637 | ) | ||||
| Net cash used in operating activities | (5,998,415 | ) | (22,040,456 | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Purchase of property and equipment | (1,476 | ) | (39,500 | ) | ||||
| Net cash used in investing activities | (1,476 | ) | (39,500 | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| 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 | - | 20,194,055 | ||||||
| EFFECT OF EXCHANGE RATES ON CASH & CASH EQUIVALENTS | 144,129 | (6,264 | ) | |||||
| NET DECREASE IN CASH AND CASH EQUIVALENTS | (5,855,763 | ) | (1,892,166 | ) | ||||
| CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD | 8,810,173 | 9,151,536 | ||||||
| CASH AND CASH EQUIVALENTS, END OF PERIOD | $ | 2,954,410 | $ | 7,259,370 | ||||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION | ||||||||
| Cash paid for interest expense | $ | 117,302 | $ | 84,750 | ||||
| Cash paid for income tax | $ | 1,450,421 | $ | 2,192,925 | ||||