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| 8-K - FORM 8-K - KINGOLD JEWELRY, INC. | v328509_8-k.htm |
KINGOLD JEWELRY REPORTS UNAUDITED
2012 THIRD QUARTER AND NINE MONTH FINANCIAL RESULTS
Company to Hold Conference Call with Accompanying Slide Presentation On November 14, 2012, at 8:30 a.m. ET
Operating and Financial Highlights for Q3 2012 (Percentage Increases are Period-over-Period)
| · | 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, November 13, 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 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.”
| Kingold Jewelry, Inc. | Page 2 |
| November 13, 2012 |
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. |
| Kingold Jewelry, Inc. | Page 3 |
| November 13, 2012 |
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.
| Kingold Jewelry, Inc. | Page 4 |
| November 13, 2012 |
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 | |
| Katherine Yao, Account Executive | Katherine Yao, Account Executive |
| +86 10-6587-6435 | +86 10-6587-6435 |
| kyao@equityny.com | kyao@equityny.com |
| Katherine Yao, Account Executive |
###
| Kingold Jewelry, Inc. | Page 5 |
| November 13, 2012 |
| 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. | Page 6 |
| November 13, 2012 |
| 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. | Page 7 |
| November 13, 2012 |
| KINGOLD JEWELRY, INC. |
| CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME |
| (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 | ||||