Kingold Jewelry Reports Financial Results For the Third Quarter Ended September 30, 2015

Company to Hold Conference Call with Accompanying Slide Presentation on Monday, November 16, 2015, at 5:00 PM ET.

16 Nov, 2015, 16:05 ET from Kingold Jewelry, Inc.

WUHAN CITY, China, Nov. 16, 2015 /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 unaudited financial results for the third quarter ended September 30, 2015.  

2015 THIRD QUARTER FINANCIAL HIGHLIGHTS (ALL RESULTS ARE COMPARED TO PRIOR YEAR PERIOD)

  • Net sales were $263.8 million, an increase of $12.8 million, or 5.1%, compared to $251.0 million. The increase in net sales was primarily due to increased sales volume in the Company's branded gold product production.
  • Processed a total of 13.5 metric tons of gold, compared to 14.5 metric tons, a decrease of 6.9%.
  • Gross profit increased to $15.6 million, an increase of $5.6 million, or 56.3%, compared to $10.0 million, and gross margin was 5.9% compared to 4.0% for the same period in 2014.
  • Net income increased 67.5% to $8.8 million, or $0.13 per diluted share, compared to $5.2 million, or $0.08 per diluted share.

Mr. Zhihong Jia, Chairman and CEO of the Company, commented, "We were pleased with our operating results for the third quarter of 2015, as both our gross profit and net income achieved double digit growth. Kingold faced a wide range of challenges during the first half of 2015, but we remained focused on continuing to create innovative designs in order to provide our customers with a wide variety of products from which to choose. In the third quarter, we have been able to increase our net sales by taking full advantage of our existing sales network and our online retail platform. We believe that our continuous efforts in expanding both online and offline sales channels should positively affect Kingold's business prospects in the future."

UPDATE ON Kingold Jewelry cultural industry Park ("Jewelry park")

Mr. Jia stated, "The Kingold team and the construction company are making progress in the construction of our Jewelry Park, and we still anticipate construction to be completed in January 2016. We have postponed the grand opening of the Jewelry Park until the first quarter of 2016 to provide additional time for refinements to the building interior, landscaping, and finishing work. This was a large endeavor for our Company and we have been pleased with its progress. We look forward to announcing a successful grand opening in the coming months."

Mr. Jia continued, "In August 2015, we started the pre-sale of certain real estate property in the Jewelry Park. Approximately 433,000 square feet of office space has already been pre-sold to various buyers and received approximately RMB 144 million (approximately $22.7 million) from the buyers. Kingold expects to deliver these properties to the customers in January 2016 when the Jewelry Park construction is completed. We will keep our investors apprised with our developments."

2015 THIRD QUARTER OPERATIONAL REVIEW

  • In the third quarter of 2015, the Company processed a total of 13.5 metric tons of gold, of which branded production was 7.8 metric tons, representing 58.0% of total gold processed, and customized production was 5.7 metric tons, representing 42.0% of total gold processed. In the third quarter of 2014, the Company processed a total of 14.5 metric tons, of which branded production was 6.5 metric tons, or 44.6% of the total gold processed, and customized production was 8.0 metric tons, or 55.4 % of total gold processed.

Metric Tons of Gold Processed

Three Months Ended:

September 30, 2015

September 30, 2014

Volume

% of Total

Volume

% of Total

Branded*

7.8

58.0%

6.5

44.6%

Customized**

5.7

42.0%

8.0

55.4%

Total

13.5

100.0%

14.5

100.0%

Nine Months Ended:

September 30, 2015

September 30, 2014

Volume

% of Total

Volume

% of Total

Branded*

20.3

50.4%

23.1

49.3%

Customized**

20.0

49.6%

23.8

50.7%

Total

40.3

100.0%

46.9

100.0%

 * Branded Production: The Company acquires gold from the Shanghai Gold Exchange to produce branded products. ** Customized Production: Clients who purchase customized products supply gold to the Company for processing.  

2015 THIRD QUARTER FINANCIAL REVIEW

Net Sales

Net sales for the three months ended September 30, 2015 were $263.8 million, an increase of $12.8 million, or 5.1%, from net sales of $251.0 million for the three months ended September 30, 2014. The increase in net sales was primarily due to increased sales volume in our branded production products of 1.35 metric tons.

Net sales for the nine months ended September 30, 2015 were $719.4 million, a decrease of $178.8 million, or 19.9%, from net sales of $898.2 million compared to the nine months ended September 30, 2014. The decrease was due to decreased sales volume by 6.6 metric tons.

Gross Profit

Gross profit for the three months ended September 30, 2015 was $15.6 million, an increase of $5.6 million, or 56.3%, from $10.0 million for the same period in 2014.

Gross profit for the nine months ended September 30, 2015 was $28.8 million, a decrease of $33.6 million, or 53.9%, from $62.3 million for the same period in 2014.

Gross Margin

Gross margin for the three months ended September 30, 2015 was 5.9%, compared to 4.0% for the same period in 2014.

Gross margin for the nine months ended September 30, 2015 was 4.0%, compared to 6.9% for the same period in 2014.

Net Income

For the three months ended September 30, 2015, net income increased $3.5 million, or 67.5% to $8.8 million, or $0.13 per diluted share, based on 66.0 million weighted average diluted shares outstanding, compared to $5.2 million, or $0.08 per diluted share, based on 66.1 million weighted average diluted shares outstanding in the prior-year period.

Net income for the nine months ended September 30, 2014 was $15.9 million, or $0.24 per basic and diluted share, compared to $39.2 million, or $0.59 per basic and diluted share, in the same period of 2014.  

Balance Sheet Highlights

(in millions except for percentages)

9/30/2015

12/31/2014

(Unaudited)

(Audited)

Cash

$29.6

$1.3

Inventories (gold)

272.6

212.4

Working Capital (Current Assets – Current Liabilities)

167.0

183.0

Stockholders' Equity

265.7

258.2

Book Value Per Share (in $)

$4.03

$3.92

Net cash used in operating activities was $34.0 million for the nine months ended September 30, 2015, compared with net cash provided by operating activities of $6.5 million for the same period in 2014. The change was mainly because of the decrease in net income, and the increased inventory purchase when the market price of gold was low.  

Kingold's net cash from operating activities can fluctuate significantly due to changes in inventories (principally gold). Other factors that may vary significantly include the Company's purchases of gold and income taxes. The Company expects that the net cash it generates from operating activities will continue to fluctuate as the Company's inventories, receivables, accounts payables, and other factors described above change with increased production and purchase of larger quantities of raw materials (principally gold).

OUTLOOK FOR 2015

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 that it expects its gold processed will be between 45 metric tons and 55 metric tons during 2015.  

Conference Call Details

Kingold also announced that it will discuss its financial results in a conference call on Monday, November 16, 2015, at 5:00 PM ET.

The dial-in numbers are:

Live Participant Dial In (North America):

877-407-9038

Live Participant Dial In (China):

4001-202-840

Live Participant Dial In (Other Countries):

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/q3-2015. 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. You can identify these forward-looking statements by words such as "expects," "believe," "project," "anticipate," or similar expressions. The forward-looking statements in this release include, but are not limited to, statements regarding Kingold's outlook with respect to its 2015 gold processing, expectations with respect to expansion into a higher margin, direct retail business through the online retail store, expectations with respect to completion of construction of the Jewelry Park and planned grand opening, as well as its ability to engage in presales and finance the remaining construction, and its expectations with respect to a long-term partnership with Fosun. 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, Senior Associate Phone:+86 10-6587-6435 kyao@equityny.com

 

KINGOLD JEWELRY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (LOSS)

(IN U.S. DOLLARS)

(UNAUDITED)

For the three months ended September 30,

For the nine months ended September 30,

2015

2014

2015

2014

NET SALES

$

263,762,713

$

251,006,254

$

719,378,985

$

898,225,518

COST OF SALES

Cost of sales

(247,894,654)

(240,742,984)

(689,700,092)

(834,987,086)

Depreciation

(304,849)

(307,790)

(924,958)

(922,756)

Total cost of sales

(248,199,503)

(241,050,774)

(690,625,050)

(835,909,842)

GROSS PROFIT

15,563,210

9,955,481

28,753,935

62,315,676

OPERATING EXPENSES

Selling, general and administrative expenses

3,247,362

1,699,795

7,130,925

5,318,285

Stock compensation expenses

102,344

612,995

417,471

1,838,985

Depreciation and amortization

27,810

33,296

84,407

101,490

Total operating expenses

3,377,516

2,346,086

7,632,803

7,258,760

INCOME FROM OPERATIONS

12,185,694

7,609,395

21,121,132

55,056,916

OTHER INCOME (EXPENSES)

Other Income

3,209

-

9,739

-

Interest Income

(575)

-

150,497

-

Interest expense

(273,953)

(577,858)

(656,106)

(1,539,249)

Total other expenses, net

(271,319)

(577,858)

(495,869)

(1,539,249)

INCOME FROM OPERATIONS BEFORE TAXES

11,914,375

7,031,537

20,625,263

53,517,667

INCOME TAX PROVISION (BENEFIT)

Current

71,176

3,373,114

3,357,451

15,577,085

Deferred

3,078,209

(1,575,575)

1,348,181

(1,301,027)

Total income tax provision (benefit)

3,149,385

1,797,539

4,705,632

14,276,058

NET INCOME

$

8,764,990

$

5,233,998

$

15,919,631

$

39,241,609

Add: net loss attribute to the noncontrolling interest

448

-

636

-

NET INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS

8,765,438

5,233,998

15,920,267

39,241,609

OTHER COMPREHENSIVE INCOME (LOSS)

Total foreign currency translation gains (loss)

(10,487,596)

72,284

(8,899,780)

(1,594,156)

Add: foreign currency translation loss

attributable to noncontrolling interest

2,821

-

2,739

-

Foreign currency translation gains (loss)

attributable to common stockholders

(10,484,775)

72,284

(8,897,041)

(1,594,156)

COMPREHENSIVE INCOME(LOSS)

$

(1,719,337)

$

5,306,282

$

7,023,226

$

37,647,453

Earnings per share

Basic

$

0.13

$

0.08

$

0.24

$

0.60

Diluted

$

0.13

$

0.08

$

0.24

$

0.59

Weighted average number of shares

Basic

65,963,502

65,953,462

65,963,502

65,905,667

Diluted

65,963,502

66,137,568

65,963,502

66,285,370

 

 

KINGOLD JEWELRY, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(IN U.S. DOLLARS)

(UNAUDITED)

September 30,

December 31,

2015

2014

ASSETS

CURRENT ASSETS

Cash

$

29,614,182

$

1,331,658

Restricted cash

28,126,941

14,793,632

Accounts receivable

188,971

503,406

Inventories, net

272,605,177

212,396,363

Other current assets and prepaid expenses

265,949

57,971

Value added tax recoverable

12,495,126

4,501,426

Total current assets

343,296,346

233,584,456

PROPERTY AND EQUIPMENT, NET

8,171,001

9,390,258

OTHER ASSETS

Deposit on land use right-Jewelry Park

9,498,536

9,819,687

Construction in progross-Jewelry Park

81,721,286

58,310,818

Other assets

151,941

157,078

Land use right

467,012

492,027

Total other assets

91,838,775

68,779,610

TOTAL ASSETS

$

443,306,122

$

311,754,324

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES

Short term loans

$

53,511,285

$

16,270,745

Long term loans - current maturities

31,453,618

28,844,777

Debts payable, net

62,797,066

-

Deposit payables-Jewelry Park

22,663,603

-

Other payables and accrued expenses

5,273,180

2,970,770

Income tax payable

87,218

978,713

Other taxes payable

465,345

777,537

Total current liabilities

176,251,315

49,842,542

Deferred income tax liability-Non-Current

1,307,187

-

Long term loans

-

3,672,308

TOTAL LIABILITIES

177,558,502

53,514,850

COMMITMENTS

-

-

EQUITY

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

authorized, none issued or outstanding

as of September 30, 2015 and December 31, 2014

-

-

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

authorized, 65,963,502 shares issued and outstanding

as of September 30, 2015 and December 31, 2014

65,963

65,963

Additional paid-in capital

79,877,646

79,460,175

Retained earnings

 Unappropriated

178,922,343

163,002,075

 Appropriated

967,543

967,543

Accumulated other comprehensive income

5,846,677

14,743,718

Total stockholders' equity

265,680,172

258,239,474

Noncontrolling interest

67,448

-

Total Equity

265,747,620

258,239,473

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$

443,306,122

$

311,754,324

 

KINGOLD JEWELRY, INC.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(IN U.S. DOLLARS)

(UNAUDITED)

For the nine months ended September 30,

2015

2014

CASH FLOWS FROM OPERATING ACTIVITIES

Net income

$

15,919,631

$

39,241,609

Adjustments to reconcile net income to cash (used in) provided by

operating activities:

Depreciation and amortization

1,009,365

1,024,246

Amortization of deferred financing costs

162,322

-

Share based compensation for services

417,471

1,838,985

Inventory valuation allowance

-

6,301,209

Deferred tax provision (benefit)

1,348,181

(1,301,027)

Changes in operating assets and liabilities

(Increase) decrease in:

Accounts receivable

307,315

515,603

Inventories

(69,261,230)

(48,770,478)

Other current assets and prepaid expenses

(134,535)

8,136,861

Value added tax recoverable

(9,744,403)

365,586

Increase (decrease) in:

Other payables and accrued expenses

2,438,517

(826,274)

Deposit payables

23,374,347

-

Income tax payable

(886,440)

134,356

Other taxes payable

1,052,294

(146,645)

Net cash (used in) provided by operating activities

(33,997,165)

6,514,031

CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of property and equipment

(59,406)

(173,164)

Cash deposit for land use right-Jewelry Park

-

(14,694,597)

Cash payment in construction in progress-Jewelry Park

(26,111,485)

-

Net cash used in investing activities

(26,170,891)

(14,867,761)

CASH FLOWS FROM FINANCING ACTIVITIES

Net proceeds from minority interest for capital registration

73,045

-

Proceeds from bank loans-short term

55,189,430

23,991,542

Repayments of bank loans-short term

(16,232,185)

(57,010,410)

Proceeds from long term loan

-

3,671,113

Restricted cash

(14,250,445)

(4,132,361)

Proceeds from related party loan

-

64,990,983

Repayments of related party loan

-

(12,998,197)

Cash dividend paid

-

(5,276,277)

Deferred financing costs

(649,287)

-

Net proceeds from debt financing instruments private placement

64,928,741

-

Net cash provided by financing activities

89,059,299

13,236,393

EFFECT OF EXCHANGE RATES ON CASH AND CASH EQUIVALENTS

(608,719)

(612,792)

NET INCREASE IN CASH AND CASH EQUIVALENTS

28,282,524

4,269,871

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD

1,331,658

2,284,930

CASH AND CASH EQUIVALENTS, END OF PERIOD

$

29,614,182

$

6,554,801

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Cash paid for interest expense

$

3,751,584

$

10,192,638

Cash paid for income tax

$

4,243,891

$

15,442,729

SOURCE Kingold Jewelry, Inc.