Kingold Jewelry, Inc. Reports Record Fourth Quarter and Full Year 2010 Results

-- Company provides 2011 guidance for revenue of between $720 million and $780 million and net income of between $30 million and $32 million --

Mar 31, 2011, 07:00 ET from Kingold Jewelry, Inc.

WUHAN, China, March 31, 2011 /PRNewswire-Asia-FirstCall/ -- Kingold Jewelry, Inc. ("Kingold" or the "Company") (Nasdaq: KGJI), one of China's leading manufacturers and designers of 24-karat gold jewelry and ornaments, today announced financial results for the fourth quarter and full year ended December 31, 2010.

Fourth Quarter 2010 Highlights

  • Revenue increased 216.6% to $184.9 million from $58.4 million in fourth quarter 2009    
  • Gross profit rose 55.8% to $9.5 million from $6.1 million in fourth quarter 2009
  • Net income attributable to common stockholders grew 83.6% to $5.3 million, or $0.12 per diluted share, from $2.9 million, or $0.09 per diluted share, in fourth quarter 2009

Full Year 2010 Highlights

  • Revenue increased 108.8% to $523.0 million from $250.5 million in 2009  
  • Gross profit rose 98.4% to $31.2 million from $15.7 million in 2009
  • Net income attributable to common stockholders grew 109.7% to $18.2 million, or $0.41 per diluted share, from $8.7 million, or $0.26 per diluted share, in 2009
  • In March 2010, the Company launched MGold, a proprietary line of branded, premium quality 24-karat gold jewelry.  
  • In August 2010, Kingold's common stock began trading on the NASDAQ Capital Market.

"We are very pleased to report record fourth quarter revenue and earnings, capping off an excellent year for Kingold Jewelry. In 2010, our first full year as a publicly traded company, we launched a successful line of proprietary branded jewelry, MGold, up-listed our shares to NASDAQ, accomplished robust earnings growth, and positioned the company for continued success in 2011," said Mr. Zhihong Jia, Kingold's Chairman and CEO.

Subsequent Events

  • In January 2011, the Company completed a $23 million follow-on public offering.
  • In February 2011, Kingold entered into an agreement with China Merchants Bank Limited to manufacture 24-karat gold investment oriented products, such as gold coins and bars, for resale by China Merchants Bank to customers throughout its expansive retail banking network across China.

Fourth Quarter 2010 Results

Fourth quarter 2010 revenue increased 216.6% to $184.9 million from $58.4 million for the same period of 2009. Of the $126.5 million year-over-year revenue increase, approximately $72 million was due to higher volume and approximately $54.5 million was attributable to higher gold prices. In the fourth quarter of 2010, the Company produced 6.46 metric tons of 24-karat gold products compared to 4.48 metric tons in the same period of 2009. The year-over-year increase in fourth quarter 2010 revenue reflects higher sales to existing customers as well as incremental sales to new regional jewelry wholesalers and expanded geographic coverage in China.

Fourth quarter 2010 gross profit grew to $9.5 million, up 55.8% from $6.1 million for the same period of 2009. Gross margin declined to 5.2% in fourth quarter 2010 from 10.5% in fourth quarter 2009, primarily reflecting a shift in volume mix to Branded Production (which utilizes Company purchased gold) from Customized Production (which utilizes customer supplied gold). Customized Production revenue is presented in the Company's financial statements net of cost of goods sold and therefore exhibits significantly higher gross margin than Branded Production revenue. Branded Production represented approximately 4.76 tons, or 73.7% of total volume during fourth quarter 2010, compared to roughly 1.75 tons, or 39.3% of total volume during fourth quarter 2009.  

Fourth quarter 2010 operating expenses increased by 40.5% to $1.8 million, compared to $1.3 million in the same period last year, primarily reflecting $0.8 million of incremental selling general and administrative expenses, mainly for incremental professional fees as result of preparing public offering.

Operating income increased 59.8% to $7.7 million, or 4.2% of revenue, from $4.8 million, or 8.3% of revenue, in the fourth quarter of 2009.

Net income attributable to common shareholders increased 83.6% to $5.3 million, or $0.12 per diluted share, as compared to $2.9 million, or $0.09 per diluted share, in the fourth quarter of 2009.  

Twelve Months 2010 Results

Full year 2010 revenue increased 108.8% to $523.0 million from $250.5 million in 2009. Of the $272.6 million year-over-year revenue increase, approximately $160 million was due to higher volume and $113 million was attributable to higher gold prices. In 2010, the Company produced 25.9 metric tons of 24-karat gold products compared to 15.3 metric tons in 2009. Higher revenue in 2010 reflects increased sales to existing customers as well as incremental sales to new regional jewelry wholesalers and expanded geographic coverage in China. The Company's new MGold line of jewelry, which was launched at the end of March 2010, accounted for roughly 10% of full year 2010 revenue.  

Full year 2010 gross profit grew 98.4% to $31.2 million from $15.7 million in 2009. Gross margin declined to 6.0% in 2010 from 6.3% in 2009, primarily reflecting a shift in volume mix toward Branded Production from Customized Production. Branded Production represented 14.34 tons, or 55.5% of total volume during 2010, as compared to 8.43 tons, or 55.0% of total volume during 2009. Incremental sales of the Company's higher margin MGold line in part offset the negative impact of shift in production mix on the Company's reported gross margin in 2010.

Full year 2010 operating expenses increased by 88.9% to $4.7 million, compared to $2.5 million in 2009, primarily reflecting $1.8 million of incremental selling general and administrative expenses, mainly as a result of the expenses related to operating a public company and paying professional service fees as well as $0.4 million of additional stock compensation expense.  

Operating income increased 100.2% to $26.5 million, or 5.1% of revenue, from $13.2 million, or 5.3% of revenue, in 2009.

Net income attributable to common stockholders increased 109.7% to $18.2 million, or $0.41 per diluted share, as compared to $8.7 million, or $0.26 per diluted share, in 2009.  

Financial Condition

As of December 31, 2010, Kingold had $9.2 million in cash and cash equivalents, $59.8 million in working capital and a current ratio of 6.7. Total stockholders' equity was $72.1 million on December 31, 2010, up 41.8% from $50.8 million at the end of 2009. Accounts receivable totaled $1.2 million at December 31, 2010, compared to $0.5 million at December 31, 2009. The Company generated $2.4 million in cash flow from operating activities for the twelve months ended December 31, 2010, compared to cash flow used in operating activities of $2.0 million in the twelve months ended December 31, 2009.

Business Outlook

In 2011, the Company anticipates revenue of between $720 million and $780 million and net income of between $30 million and $32 million. The Company's guidance assumes, among other things, relatively stable gold prices for the remainder of the year, no additional capital raises in 2011, and meaningful contribution from its new line of financially-oriented gold products starting in the second half of 2011.    

"We commenced 2011 with fresh capital, which will better enable us to meet continuing strong demand for our products," commented Mr. Jia. "We see above average growth prospects for our popular MGold jewelry portfolio and for our new line of financially-oriented gold products, both of which are higher margin revenue streams. This year we seek to solidify Kingold's market leadership and enhance shareholder value by aiming to manufacture the highest quality 24-karat gold jewelry, ornaments and financially-oriented products available in China."

Restatement of Third Quarter 2010 Financial Results  

The company amended and restated its third quarter 2010 financials to reflect a non-cash stock compensation expense resulting from the issuance of 100,000 shares of restricted common stock in December 2010 pursuant to the terms of a pre-existing consulting contract. This non-cash adjustment reduced the Company's previously stated net income by $670,440, or $0.02 per share for the three months ended September 30, 2010 and less than $0.01 per share for the nine months ended September 30, 2010. This adjustment to the third quarter 2010 financials has been reflected in footnotes 18 and 19 of the Company's Form 10-K for the fiscal year ended December 31, 2010.

Conference Call

Kingold Jewelry will conduct a conference call at 9:00 a.m. Eastern Time (ET) on Thursday, March 31, 2011, to discuss fourth quarter and full year 2010 financial results. Hosting the call will be Mr. Zhihong Jia, Chairman and Chief Executive Officer, and Mr. Bin Liu, Chief Financial Officer. The Company plans to distribute this earnings press release prior to the conference call.

The conference call can be accessed by dialing 866-759-2078 (U.S. and Canada callers) or 706-643-0585 (international callers) and entering the conference ID 53928409 approximately five to ten minutes prior to the call. A replay will be available for two weeks starting on Thursday, March 31, 2011 at 11:00 a.m. ET by dialing 800-642-1687 (U.S. and Canada callers) or 706-645-9291 (international callers) and entering the conference replay ID 53928409.

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 and ornaments sold by weight. 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. Sales have grown from $29 million in FY 2006 to $523 million in FY 2010 with net income attributable to common stockholders growing from $1.3 million to $18.2 million over the same period. 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 forward-looking statements, including our 2011 business outlook, are based on currently available information, operating plans and projections about future events and trends. They inherently involve risks and uncertainties, and 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, whether as a result of new information, future events or otherwise.

Company Contact: Kingold Jewelry, Inc Bin Liu, CFO Phone: +1-212-509-1700 (US) / 86-27-6569-4977 (China) Email: bl@kingoldjewelry.com www.kingoldjewelry.com

Investor Relations Contact: CCG Investor Relations Kalle Ahl, CFA Phone: +1-646-833-3417 (New York) E-mail: kalle.ahl@ccgir.com www.ccgir.com

-Financial Tables Follow-

KINGOLD JEWELRY INC.

CONSOLIDATED STATEMENTS OF INCOME & COMPREHENSIVE INCOME

(IN US DOLLARS)

For the three months

For the twelve months

ended December 31,

ended December 31,

2010

2009

2010

2009

NET SALES

$

184,944,446

58,413,699

$

523,007,255

$

250,450,650

COST OF SALES

 Cost of sales

(175,063,921)

(52,012,731)

(490,638,666)

(233,613,179)

 Depreciation

(340,264)

(278,208)

(1,172,552)

(1,111,989)

   Total cost of sales

(175,404,185)

(52,290,939)

(491,811,218)

(234,725,168)

GROSS PROFIT

9,540,262

6,122,760

31,196,037

15,725,482

OPERATING EXPENSES

 Selling, general and administrative expenses

1,600,082

826,406

3,733,557

1,934,089

 Stock compensation expenses

155,040

415,001

825,480

415,001

 Depreciation

37,709

33,621

124,651

124,774

 Amortization

2,840

2,765

11,170

11,051

   Total Operating Expenses

1,795,670

1,277,793

4,694,858

2,484,915

INCOME FROM OPERATIONS

7,744,591

4,844,967

26,501,179

13,240,567

OTHER INCOME (EXPENSES)

 Other income

148,035

8,546

166,970

12,838

 Interest income

2,566

559

5,798

3,030

 Interest expense

(73,959)

(114,244)

(479,133)

(703,500)

 Fees to guarantor of short term loans

(67,719)

(180,827)

 Other expenses

(9)

156,601

(1,479)

(27,166)

   Total Other Expenses, net

8,914

(129,365)

(375,563)

(895,625)

INCOME FROM OPERATIONS BEFORE TAXES

7,753,505

4,715,602

26,125,616

12,344,942

PROVISION FOR INCOME TAXES

(2,159,545)

(1,347,017)

(7,084,930)

(3,220,439)

NET INCOME

$

5,593,960

3,368,585

$

19,040,686

$

9,124,503

 Less: net income attribute to the noncontrolling interest

(260,383)

(462,920)

(877,067)

(462,920)

NET INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS

$

5,333,578

2,905,665

$

18,163,619

$

8,661,583

OTHER COMPREHENSIVE INCOME

 Total foreign currency translation gains

956,521

3,165

2,304,787

75,531

 Less: foreign currency translation gains    attributable to noncontrolling interest

(22,671)

(1,135)

(51,215)

(1,135)

 Foreign currency translation gains    attributable to common stockholders

933,848

2,030

2,253,572

74,396

COMPREHENSIVE INCOME

$

6,267,426

2,907,695

$

20,417,191

$

8,735,979

Earnings per share

 Basic

$

0.13

0.09

$

0.43

$

0.26

 Diluted

$

0.12

0.09

$

0.41

$

0.26

Weighted average number of shares

 Basic

42,393,023

33,865,743

41,948,406

33,294,089

 Diluted

44,608,789

33,900,840

44,054,736

33,302,839

KINGOLD JEWELRY INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN US DOLLARS)

For the years ended December 31,

2010

2009

CASH FLOWS FROM OPERATING ACTIVITIES

 Net income

$

19,040,686

$

9,124,503

 Adjusted to reconcile net income to cash provided by (used in)    operating activities:

   Depreciation

1,297,203

1,241,310

   Amortization of intangible assets

11,170

11,051

   Loss from disposal of fixed assets

-

4,251

   Share based compensation

825,480

415,001

 Changes in operating assets and liabilities

 (Increase) decrease in:

   Accounts receivable

(646,843)

619,212

   Inventories

(21,988,671)

(6,828,159)

   Other current assets and prepaid expenses

30,307

192,202

   Deferred offering costs

(666,364)

-

   Value added tax recoverable

2,091,880

(5,788,898)

 Increase (decrease) in:

   Accounts payable

-

-

   Other payables and accrued expenses

1,328,329

38,225

   Income tax payable

770,528

(141,014)

   Other taxes payable

337,482

(16,925)

   Value added tax payable

-

(911,152)

   Net cash provided by (used in) operating activities

2,431,187

(2,040,394)

CASH FLOWS FROM INVESTING ACTIVITIES

 Proceeds from disposal of fixed assets

-

2,924

 Purchase of property and equipment

(31,861)

(29,352)

   Net cash provided by (used in) investing activities

(31,861)

(26,428)

CASH FLOWS FROM FINANCING ACTIVITIES

 Restricted cash

1,477,506

1,236,488

 Proceeds from bank loans

5,910,022

8,770,801

 Repayments of bank loans

(8,865,033)

(14,179,462)

 Net proceeds from stock issuance in private placement

-

4,531,482

 Capital Contribution by stockholders

-

9,385,816

   Net cash provided by (used in) financing activities

(1,477,505)

9,745,125

EFFECT OF EXCHANGE RATES ON CASH & CASH EQUIVALENTS

265,595

3,823

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

1,187,416

7,682,126

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR

7,964,120

281,994

CASH AND CASH EQUIVALENTS, END OF YEAR

$

9,151,536

$

7,964,120

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

 Cash paid for interest expense

$

479,106

$

703,500

 Cash paid for income tax

$

6,314,402

$

3,361,453

NON-CASH INVESTING AND FINANCING ACTIVITIES:

 Common stock issued for consulting service

$

-

$

415,001

KINGOLD JEWELRY INC.

CONSOLIDATED BALANCE SHEETS

(IN US DOLLARS)

December 31,

December 31,

2010

2009

ASSETS

CURRENT ASSETS

 Cash and cash equivalents

$

9,151,536

$

7,964,120

 Restricted cash

-

1,462,587

 Accounts receivable

1,165,760

485,399

 Inventories

55,426,830

31,756,009

 Other current assets and prepaid expenses

72,215

101,189

 Deferred offering costs

666,364

-

 Value added tax recoverable

3,853,647

5,792,014

   Total Current Assets

70,336,352

47,561,318

PROPERTY AND EQUIPMENT, NET

13,332,416

14,126,950

OTHER ASSETS

 Other assets

146,222

141,198

 Intangible assets, net

503,824

497,572

   Total other assets

650,046

638,770

TOTAL ASSETS

$

84,318,814

$

62,327,038

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES

 Short term loans

$

6,058,486

$

8,775,522

 Other payables and accrued expenses

1,715,431

368,196

 Income tax payable

2,185,112

1,347,295

 Other taxes payable

545,221

192,415

   Total Current Liabilities

$

10,504,250

$

10,683,428

COMMITMENTS AND CONTINGENCIES

-

-

STOCKHOLDERS' EQUITY

 Preferred stock, $0.001 par value, 500,000 shares    authorized, none issued or outstanding    as of December 31, 2010 and 2009

-

-

 Common stock $0.001 par value, 100,000,000 shares    authorized, 42,531,994 and 41,766,404 shares issued and outstanding    as of December 31, 2010 and 2009

42,532

41,766

 Additional paid-in capital

31,901,832

31,077,118

 Retained earnings

   Unappropriated

33,744,244

15,669,257

   Appropriated

967,543

878,911

 Accumulated other comprehensive income

5,409,876

3,156,305

   Total Stockholders' Equity

72,066,027

50,823,356

 Noncontrolling interest

1,748,536

820,254

   Total Equity

73,814,563

51,643,610

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$

84,318,813

$

62,327,038

SOURCE Kingold Jewelry, Inc.



RELATED LINKS

http://www.kingoldjewelry.com