Kingold Jewelry Reports Financial Results For The First Quarter Ended March 31, 2014

Company to Hold Conference Call on Thursday, May 15, 2014, at 5:30 PM ET

Company Reiterates 2014 Guidance of Between 60 metric tons and 70 metric tons of Gold Processed During 2014

May 15, 2014, 16:01 ET from Kingold Jewelry, Inc.

WUHAN, China, May 15, 2014 /PRNewswire/ -- Kingold Jewelry, Inc. ("Kingold" or "the Company") (NASDAQ: KGJI), one of China's leading manufacturers and designers of high quality 24-karat gold jewelry, ornaments and investment-oriented products, today announced its financial results for the first quarter ended March 31, 2014.

2014 First Quarter Financial Highlights (all results are compared to prior year period)

  • Net sales increased 38.9% to $307.5 million
  • Processed a total of 14.5 metric tons of 24-karat gold products, an increase of 67.8% compared to 8.64 metric tons
  • Net income attributable to common stockholders increased to $16.1 million, or $0.24 per share, from $3.0 million, or $0.05 per share
  • Book value per diluted share of $3.47

Mr. ZhiHong Jia, Chairman and CEO of the Company, commented, "We are pleased to have achieved solid operating results during the first quarter of 2014, which was a result of our expanded production.  We also reported considerable growth in gross profit as a result of purchasing larger quantities of gold at lower market prices into inventory at year end 2013 and at the beginning of 2014.  We are proud that one of Kingold's original designs, "Buddha Gold Coin," was a popular and a hit during the 2014 Chinese New Year sales season. We expect to create and design additional new gold products to meet Chinese market demand and its consumer culture.  We anticipate that these efforts will continue to increase our sales volume as well as expand Kingold's brand name.  We are very pleased with our operating performance during the period and remain optimistic for the remainder of 2014."

Chairman Jia continued, "We are also moving forward in our other growth projects, including the development of the Kingold Jewelry International Industry Park in Wuhan.   We believe this site in Wuhan provides a significant opportunity for upside potential as we move forward toward anticipated completion in mid-2015.  We have continued to carefully monitor our expenses in this development and expect to provide additional information throughout the year for investors."

2014 First Quarter Operational Review


  • In the first quarter of 2014, Kingold processed approximately 14.5 metric tons of 24-karat gold products, an increase of 67.8% over the 8.6 metric tons processed in the first quarter of 2013.
  • During the first quarter of 2014, the Company increased the volume of higher margin customized production, and was successful in selling customized gold coins by piece instead of by weight.
  • In March, Kingold signed a joint venture agreement with Kuwait Support Services Company W.L.L. ("KSS"), which served as the start of the Company's international expansion plan aimed at marketing the Company's gold products to distributors in the Middle East.   The two companies participated in the 11th International Gold & Jewelry Exhibition held in Kuwait in April 2014, where Kingold's products were well received by distributors in attendance.  The Company is working on new designs targeting these customers.

Metric Tons of Gold Processed


Three Months Ended:


March 31, 2014

March 31, 2013

Branded*

7.9

54.5%

4.6

53.6%

Customized**

6.6

45.5%

4.0

46.4%

Total

14.5

100%

8.6

100%

* Branded Production: The Company purchases gold from the Shanghai Gold Exchange to produce branded products.

** Customized Production: Clients who purchase customized products supply gold to the Company for processing.

2014 First Quarter Financial Review

Revenues

Net sales for the three months ended March 31, 2014, increased by 38.9% to $307.5 million from $221.4 million for the same period in 2013. The increase was primarily due to expanded production to 14.5 metric tons for the three months ended March 31, 2014 from 8.6 metric tons for the same period in 2013.

Gross Profit

Gross profit for the three months ended March 31, 2014, increased to $27.9 million, an increase of 392.8%, from $5.7 million for the same period in 2013.

Gross Margin

The Company's gross margin was 9.1% for the three months ended March 31, 2014, compared to 2.6% in the prior year period.  The increase was primarily due to the Company' purchase of large quantities of gold inventory at year end 2013 and beginning of 2014 at low market prices, resulting in much lower cost of production during the first quarter.  Gold prices increased from $1,202 per ounce on December 31, 2013 to as high as $1,379 per ounce on March 14, 2014. The gross margin in the future quarters is not likely to be this high and may well return to the level of past quarters.  The Company also increased volume of higher margin customized production. Plus, the Company had $2.8 million write-down of inventory during the first quarter of 2013.

Net Income

Net income for the three months ended March 31, 2014 was $16.1 million, or $0.24 based on 66.6 million weighted average diluted shares outstanding, compared to net income of $3.0 million, or $0.05 per diluted share based on 61.2 million diluted shares outstanding, in the prior-year period.

Balance Sheet and Cash Flow

(in millions except for percentages)


3/31/2014

12/31/2013

% Change

Cash

$

7.5

2.3

226.0%

Restricted Cash


25.4

12.7

100.0%

Inventories (gold)


217.9

174.4

24.9%

Working Capital


211.9

199.8

6.1%

Stockholders' Equity


231.0

214.9

7.5%

Kingold's net cash from operating activities can fluctuate significantly due to changes in inventories (principally gold). Other factors that may vary significantly include 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).

Outlook for 2014

Based on its existing resources and capacity (which includes the Company's recent proceeds from its previously announced financing and gold lease agreements), the Company reiterates its gold processed will be between 60 metric tons and 70 metric tons during 2014.

Management Change

Kingold also announced that it recently appointed Mr. Jun Wang as General Manager of the Company, effective as of May 1, 2014.  Mr. Wang possesses 11 years of working experience within the gold jewelry industry.  He has worked at Wuhan Kingold since 2003 as a gold investment analyst, and has successively served as the manager of the purchase department, the manager of the investment department, the assistant general manager and as the vice general manager of Wuhan Kingold.  Mr. Wang will succeed Mr. Bin Zhao as General Manager.  Mr. Zhao, who has served as the General Manager since 2008, has agreed to stay on in an advisory role in connection with the transition.

Conference Call Details

Kingold also announced that it will discuss financial results in a conference call on Thursday, May 15, 2014, at 5:30 PM ET.

The dial-in numbers are:

Live Participant Dial In (Toll Free):


877-407-9038

Live Participant Dial In (International):


201-493-6742

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://kingoldjewelry.equisolvewebcast.com/q1-2014.   The Company will also have 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, one of China's largest cities, 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, as amended, and the Securities Exchange Act of 1934, as amended. These include statements regarding Kingold's ability to continue to meet Chinese market demand and consumer culture, and the effects on sales volume, as well as statements regarding the development of the Kingold Jewelry International Industry Park, about the joint venture in the Middle East and Kingold's outlook for 2014. Readers are cautioned that actual results could differ materially from those expressed in any forward-looking statements. Forward-looking statements are subject to a number of risks, including those 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) bl@kingoldjewelry.com

INVESTOR RELATIONS The Equity Group Inc. Katherine Yao, Associate +86 10-6587-6435 kyao@equityny.com  

Adam Prior, Senior Vice President (212) 836-9606 aprior@equityny.com

 

KINGOLD JEWELRY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(IN US DOLLARS)

(UNAUDITED)

For the three months ended March 31,

2014

2013

NET SALES

$

307,453,098

$

221,408,122

COST OF SALES

Cost of sales

(279,293,247)

(215,457,306)

Depreciation

(308,279)

(299,082)

Total cost of sales

(279,601,526)

(215,756,388)

GROSS PROFIT

27,851,572

5,651,734

OPERATING EXPENSES

Selling, general and administrative expenses

2,565,176

1,123,870

Stock compensation expenses

612,995

247,958

Depreciation

31,108

36,835

Amortization

3,089

3,009

Total Operating Expenses

3,212,368

1,411,672

INCOME FROM OPERATIONS

24,639,204

4,240,062

OTHER EXPENSE

Interest expense

(1,761,883)

(94,509)

Total Other Expense

(1,761,883)

(94,509)

INCOME FROM OPERATIONS BEFORE TAXES

22,877,321

4,145,553

INCOME TAX PROVISION (BENEFIT)

Current

6,489,043

1,818,903

Deferred

275,634

(706,980)

TOTAL INCOME TAX PROVISION

6,764,677

1,111,923

NET INCOME

$

16,112,644

$

3,033,630

OTHER COMPREHENSIVE INCOME (LOSS)

Total foreign currency translation gains (loss)

$

(1,989,671)

$

962,540

COMPREHENSIVE INCOME

$

14,122,973

$

3,996,170

Earnings per share

Basic

$

0.24

$

0.05

Diluted

$

0.24

$

0.05

Weighted average number of shares

Basic

65,807,394

60,818,892

Diluted

66,617,212

61,165,502

 

KINGOLD JEWELRY, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(IN US DOLLARS)

(UNAUDITED)

March 31,

December 31,

2014

2013

ASSETS

CURRENT ASSETS

Cash

$

7,505,439

$

2,284,930

Restricted cash

25,357,305

12,668,749

Accounts receivable

58,372

532,386

Inventories

217,931,053

174,433,501

Other current assets and prepaid expenses

2,003,847

8,252,387

Due from related party

-

52,354,308

Value added tax recoverable

7,786,331

6,220,866

Deferred income tax assets

-

275,882

Total Current Assets

260,642,347

257,023,009

PROPERTY AND EQUIPMENT, NET

10,331,053

10,686,947

OTHER ASSETS

Deposit on land use right

40,563,344

32,721,442

Other assets

156,639

157,946

Land use right

499,854

507,117

Total Other Assets

41,219,837

33,386,505

TOTAL ASSETS

$

312,193,237

$

301,096,461

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES

Short term loans

$

39,021,937

$

49,572,985

Other payables and accrued expenses

3,309,033

3,499,717

Income tax payable

6,441,137

3,269,908

Other taxes payable

-

848,739

Total Current Liabilities

48,772,107

57,191,349

Long term loans

32,426,337

29,004,287

TOTAL LIABILITIES

81,198,444

86,195,636

COMMITMENTS AND CONTINGENCIES

EQUITY

Preferred stock, $0.001 par value, 500,000 shares

authorized, none issued or outstanding

as of March 31, 2014 and December 31, 2013

-

-

Common stock $0.001 par value, 100,000,000 shares

authorized, 65,953,462 and 64,953,462 shares issued and outstanding

as of March 31, 2014 and December 31, 2013

65,953

64,953

Additional paid-in capital

78,817,200

76,847,205

Retained earnings

  Unappropriated

137,059,019

120,946,375

  Appropriated

967,543

967,543

Accumulated other comprehensive income

14,085,078

16,074,749

Total Stockholders' Equity

230,994,793

214,900,825

TOTAL LIABILITIES AND EQUITY

$

312,193,237

$

301,096,461

 

KINGOLD JEWELRY, INC.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(IN US DOLLARS)

(UNAUDITED)

For the three months ended March 31,

2014

2013

CASH FLOWS FROM OPERATING ACTIVITIES

Net income

$

16,112,644

$

3,033,630

Adjusted to reconcile net income to cash used in

operating activities:

Depreciation

339,387

335,917

Amortization of intangible assets

3,089

3,009

Share based compensation

612,995

247,958

Inventory valuation allowance

-

2,827,921

Deferred tax provision (benefit)

275,634

(706,980)

Changes in operating assets and liabilities

(Increase) decrease in:

Accounts receivable

473,101

606,085

Inventories

(45,275,221)

3,643,980

Other current assets and prepaid expenses

8,147,809

(881,611)

Value added tax recoverable

(1,628,968)

323,264

Increase (decrease) in:

Other payables and accrued expenses

(263,291)

(593,874)

Income tax payable

3,222,075

(779,983)

Other taxes payable

(847,976)

(493,734)

Net cash provided by (used in) operating activities

(18,828,723)

7,565,582

CASH FLOWS FROM INVESTING ACTIVITIES

Cash deposit for land use right

(8,173,006)

-

Purchase of property and equipment

(69,937)

(20,409)

Net cash used in investing activities

(8,242,943)

(20,409)

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from bank loans-short term

7,764,356

-

Repayments of bank loans-short term

(17,980,614)

-

Proceeds from long term loan

3,689,295

-

Restricted cash

(12,888,539)

(2,514,965)

Proceeds from related party loan

64,901,350

90,048

Repayments of related party loan

(12,980,270)

-

Net proceeds from stock issuance in public offering

12,522,000

Net cash provided by financing activities

32,505,578

10,097,083

EFFECT OF EXCHANGE RATES ON CASH AND CASH EQUIVALENTS

(213,403)

85,756

NET INCREASE IN CASH AND CASH EQUIVALENTS

5,220,509

17,728,012

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD

2,284,930

2,544,114

CASH AND CASH EQUIVALENTS, END OF PERIOD

$

7,505,439

$

20,272,126

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Cash paid for interest expense

$

4,345,677

$

1,553,103

Cash paid for income tax

$

3,266,968

$

2,598,886

 

SOURCE Kingold Jewelry, Inc.



RELATED LINKS

http://www.kingoldjewelry.com