Gulf Resources Reports Fourth Quarter and Fiscal Year 2012 Financial Results SHOUGUANG, China, March 18, 2013 (GLOBE NEWSWIRE) -- Gulf Resources, Inc. (Nasdaq:GURE) ("Gulf Resources" or the "Company"), a leading manufacturer of bromine, crude salt and specialty chemical products in China, today announced its financial results for the fourth quarter and fiscal year ended December 31, 2012. Fourth Quarter 2012 Highlights oRevenue was $22.0 million, a year-over-year decrease of 27.8% oGross profit was $4.2 million, a year-over-year decrease of 59.5% oGross margin decreased to 19.1% from 34.1% for the fourth quarter of 2011 oIncome from operations was $2.6 million as compared to $1.9 million in the fourth quarter of 2011 oOperating margin was 12.0% compared to 6.2% for the fourth quarter of 2011 oNet income was $1.9 million or $0.05 per basic and diluted share, versus $1.0 million, or $0.03 per basic and diluted share a year ago, a year-over-year increase of 90% Fiscal Year 2012 Highlights oRevenue was $101.7 million, a year-over-year decrease of 38.4% oGross profit was $28.3 million, a decrease of 62.5% oGross margin was 27.8%, compared to 45.7% in 2011 oNet income was $15.0 million, or $0.43 per basic and diluted share, a year-over-year decrease of 51.5% from $31.0 million, or $0.89 per basic and diluted share oCash totaled $65.2 million as of December 31, 2012 "For the year 2012, our top-line revenue had significantly decreased due to negative impact from the challenging market environment. The revenue of bromine, one of our major business segments, had also experienced the largest decline inrecent years and inevitably affected our overall operating performance in year 2012. During the year, we engaged in product facilities acquisitions in order to benefit from the lowered assets pricing and implemented various cost control and saving measures to overcome the difficulties of the operating environment. Although the macroeconomic tightening policies in China continued to result in the weakened market demand for a number of our products in the fourth quarter of the year, our operating expenses in the fourth quarter had significantly decreased as a result of the cost control implementation, and therefore we were able to record a higher operating profit in the fourth quarter 2012, as compared to the same period last year," said Xiaobin Liu, Chief Executive Officer of Gulf Resources. Fourth Quarter 2012 Results Gulf Resources' revenue was $22.0 million for the fourth quarter of 2012, a decrease of 27.8% from $30.5 million for the fourth quarter of 2011. The decrease in net revenue was primarily attributable to the decline in selling price and sales volume in the bromine segment. Revenue from the bromine and crude salt segments was $11.4 million and $2.7 million, respectively, representing a decrease of 42.1% and increase of 12.3% for bromine and crude salt segments, respectively. The total revenue of both bromine and crude salt business segments represented 64% of sales revenue for the fourth quarter of 2012. Revenue from the chemical products segment was $7.9 million, or 36% of total revenue, for the fourth quarter of 2012, a decrease of 7% from $8.5 million in the corresponding period in 2011. The decrease in revenue from this product segment was mainly due to a drop in sales volume for pesticide manufacturing additives, which offset the incremental benefit arising from the increase in chemical product prices for oil field and exploration additives and a higher sales volume for paper manufacturing additives, as compared to the same quarter last year. Gross profit for the fourth quarter of 2012 was $4.2 million, a decrease of 59.5% from $10.4 million from the fourth quarter of 2011, and gross profit margin for the three months ended December 31, 2012 was 19.1%, as compared to 34.1% for the corresponding period last year. The decrease in gross margin was mainly due to the decrease in selling prices in bromine segments, as compared to the same period last year. Sales, marketing and other operating expenses for the fourth quarter of 2012 were $21,204, as compared with $19,075 for the corresponding quarter last year. General and administrative expenses for the fourth quarter of 2012 were $1.0 million, as compared to $6.4 million for the fourth quarter of 2011. The lower general and administrative expenses for the fourth quarter in 2012 were mainly due to the lower expenses incurred related to management expenses and exploration costs. Income from operations for the fourth quarter of 2012 was $2.6 million, as compared to $1.9 million for the corresponding quarter of 2011. The operating margin was 12.0% for the fourth quarter of 2012, as compared to 6.2% for the fourth quarter of 2011. For the fourth quarter of 2012, the Company incurred other income of $13,302, as compared to $18,707 for the corresponding quarter last year. Income taxes were $0.8 million for the fourth quarter of 2012, a decrease of 11.1% from $0.9 million for the fourth quarter of 2011. The Company's effective tax rate was 27% during the quarter, as compared to 30% in the same quarter last year. Net income was $1.9 million for the fourth quarter of 2012, an increase of 90% from $1 million for the fourth quarter of 2011. Basic and diluted earnings per share in the fourth quarter of 2012 were $0.05 per basic and diluted share as compared to $0.03 per basic and diluted share in the fourth quarter of 2011. Weighted average number of basic shares for the three months ended December 31, 2012 was 34,706,356, as compared with 34,560,743 for the three months ended December 31, 2011. Fiscal Year 2012 Financial Results Revenue for fiscal year 2012 was $101.7 million, a decrease of 38.4% from $165.0 million for fiscal year 2011. The decrease in revenue was primarily attributable to the decreased demand in both the bromine and crude salt segments which led to lower average selling prices in 2012 on an annual basis. Gross profit was $28.3 million, a decrease of 62.5% from $75.4 million for fiscal year 2011. Gross margin for fiscal 2012 was 27.8%, as compared to 45.7% for fiscal year 2011. Operating income was $20.5 million, a decrease of 53.7% from $44.3 million for fiscal year 2011. Net income was $15.0 million, or $0.43 per basic and diluted share, a decrease of 51.5% from 31.0 million, or $0.89 per basic and diluted share, for fiscal year 2011. Financial Condition As of December 31, 2012, Gulf Resources had cash of $65.2 million, current liabilities of $11.0 million, and shareholders' equity of $264.2 million. At fiscal year end, the Company had working capital of $96.3 million and a current ratio of 9.8. For the twelve months ended December 31, 2012, the Company generated $20.5 million in cash flow from operations, primarily attributable to net income, and used $37.9 million in investing activities, mainly due to purchases of property, plant and equipment. Business Outlook According to the economic statistic and market observations for the first quarter in 2013, we believe that the economic condition is recovering at a low pace as we previously predicted. As the increase in industrial activities leads to more market demand for our segment products, the market price of bromine also reached 20,000RMB in the beginning of March 2013. Although the uncertainties of economic policies and the rising cost of labor and materials will continue to bring challenges to our operation, we are confident that we can achieve the earning targets set forth in the financial guidance announced in January this year. Subsequent Events oIn January 2013, the Company provided its 2013 financial forecast; please refer to the link http://finance.yahoo.com/news/gulf-resources-provides-2013-fiscal-133000384.html for further details. oThe Company completed the renovation of the commercial building which was acquired on September 25, 2012 and announced the commencement of the new office building in January, 2013. Conference Call Gulf Resources' management will host a conference call on Tuesday, March 19, 2013 at 8:00 AM Eastern Time to discuss its financial results for the fourth quarter and fiscal year ended December 31, 2012. Hosting the call will be Mr. Xiaobin Liu, CEO of Gulf Resources. The Company's management team will be available for investor questions following the prepared remarks. To participate in this live conference call, please dial +1 (877) 275-8968 five to ten minutes prior to the scheduled conference call time. International callers should call +1 (706) 643-1666. The conference participant pass code is 25549431. A replay of the conference call will be available for 14 days starting from 11:00 AM ET on Friday, March 22, 2012. To access the replay, call +1 (855) 859-2056. International callers should call +1 (404) 537-3406. The pass code is 25549431. This conference call will be broadcast live over the Internet and can be accessed by all interested parties by clicking on http://www.gulfresourcesinc.com/events.html. Please access the link at least fifteen minutes prior to the start of the call to register, download, and install any necessary audio software. For those unable to participate during the live broadcast, a 90-day replay will be available shortly after the call by accessing the same link. About Gulf Resources, Inc. Gulf Resources, Inc. operates through two wholly-owned subsidiaries, Shouguang City Haoyuan Chemical Company Limited ("SCHC") and Shouguang Yuxin Chemical Industry Co., Limited ("SYCI"). The Company believes that it is one of the largest producers of bromine in China. Elemental Bromine is used to manufacture a wide variety of compounds utilized in industry and agriculture. Through SYCI, the Company manufactures chemical products utilized in a variety of applications, including oil & gas field explorations and as papermaking chemical agents. For more information, visit www.gulfresourcesinc.cn. The Gulf Resources, Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=15631 Forward-Looking Statements Certain statements in this news release contain forward-looking information about Gulf Resources and its subsidiaries' business and products within the meaning of Rule 175 under the Securities Act of 1933 and Rule 3b-6 under the Securities Exchange Act of 1934, and are subject to the safe harbor created by those rules. The actual results may differ materially depending on a number of risk factors including, but not limited to, the general economic and business conditions in the PRC, future product development and production capabilities, shipments to end customers, market acceptance of new and existing products, additional competition from existing and new competitors for bromine and other oilfield and power production chemicals, changes in technology, the ability to make future bromine asset purchases, and various other factors beyond its control. All forward-looking statements are expressly qualified in their entirety by this Cautionary Statement and the risks factors detailed in the Company's reports filed with the Securities and Exchange Commission. Gulf Resources undertakes no duty to revise or update any forward-looking statements to reflect events or circumstances after the date of this release. GULF RESOURCES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Expressed in U.S. dollars) As of December 31, 2012 2011 Current Assets Cash $65,241,035 $78,576,060 Accounts receivable 35,969,900 21,919,828 Inventories 5,993,598 4,437,972 Prepayments and deposits -- 307,600 Prepaid land leases 47,307 46,582 Deferred tax assets 6,973 228,702 Total Current Assets 107,258,813 105,516,744 Non-Current Assets Property, plant and equipment, net 165,942,542 147,200,740 Property, plant and equipment under capital 1,996,478 2,336,920 leases, net Prepaid land leases, net of current portion 748,502 763,814 Deferred tax assets 2,246,699 2,509,481 Total non-current assets 170,934,221 152,810,955 Total Assets $278,193,034 $258,327,699 Liabilities and Stockholders' Equity Current Liabilities Accounts payable and accrued expenses $6,533,236 $7,373,643 Retention payable 1,432,690 556,450 Capital lease obligation, current portion 193,164 189,742 Taxes payable 2,856,658 4,058,550 Total Current Liabilities 11,015,748 12,178,385 Non-Current Liabilities Capital lease obligation, net of current portion 2,952,902 3,036,558 Total Liabilities $13,968,650 $15,214,943 Stockholders' Equity PREFERRED STOCK; $0.001 par value; 1,000,000 $ -- $ -- shares authorized; none outstanding COMMON STOCK; $0.0005 par value; 100,000,000 shares authorized; 38,552,070 and 34,745,342 shares issued; and 38,367,471 and 34,560,743 19,276 17,373 shares outstanding as of December 31, 2012 and 2011, respectively Treasury stock; 184,599 shares as of December 31, (500,000) (500,000) 2012 at cost Additional paid-in capital 79,489,188 74,107,979 Retained earnings unappropriated 146,745,754 133,314,581 Retained earnings appropriated 15,973,887 14,409,557 Cumulative translation adjustment 22,496,279 21,763,266 Total Stockholders' Equity 264,224,384 243,112,756 Total Liabilities and Stockholders' Equity $278,193,034 $258,327,699 GULF RESOURCES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (Expressed in U.S. dollars) Years Ended December 31, 2012 2011 NET REVENUE Net revenue $101,700,882 $164,980,453 OPERATING EXPENSES / INCOME Cost of net revenue (73,439,341) (89,538,212) Sales, marketing and other operating expenses (82,004) (86,936) Research and development cost (164,586) (398,842) Exploration costs -- (7,034,153) Write-off / Impairment on property, plant and (1,042,138) (7,570,566) equipment General and administrative expenses (6,792,110) (17,874,296) Other operating income 304,152 1,821,010 (81,216,027) (120,681,995) INCOME FROM OPERATIONS 20,484,855 44,298,458 OTHER INCOME (EXPENSES) Interest expense (210,705) (212,441) Interest income 312,806 269,614 102,101 57,173 INCOME BEFORE TAXES 20,586,956 44,355,631 INCOME TAXES (5,591,453) (13,402,871) NET INCOME $14,995,503 $30,952,760 COMPREHENSIVE INCOME: NET INCOME 14,995,503 30,952,760 OTHER COMPREHENSIVE INCOME - Foreign currency translation adjustments 733,013 12,493,402 COMPREHENSIVE INCOME $15,728,516 $43,446,162 EARNINGS PER SHARE BASIC $0.43 $0.89 DILUTED $0.43 $0.89 WEIGHTED AVERAGE NUMBER OF SHARES BASIC 34,706,356 34,660,866 DILUTED 35,067,950 34,673,615 GULF RESOURCES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Expressed in U.S. dollars) Years Ended December 31, 2012 2011 CASH FLOWS FROM OPERATING ACTIVITIES Net income $14,995,503 $30,952,760 Adjustments to reconcile net income to net cash provided by operating activities: Interest on capital lease obligation 209,584 210,347 Amortization of prepaid land leases 493,849 424,467 Depreciation and amortization 23,317,594 17,697,439 Allowance for obsolete and slow-moving inventories 13,023 8,178 Write-off / Impairment loss on property, plant and 1,042,138 7,570,566 equipment Compensation income from local government for -- (1,340,026) demolition of factory Exchange loss on inter-company balances 61,090 1,398,574 Deferred tax asset 489,334 (2,569,647) Stock-based compensation expense 510,500 7,481,400 Changes in assets and liabilities: Accounts receivable (13,936,332) 995,713 Inventories (1,550,213) (1,621,118) Prepayment and deposits 307,600 648,734 Accounts payable and accrued expenses (850,229) 551,636 Retention payable 866,148 98,174 Due to related parties -- -- Taxes payable (1,204,287) (3,459,768) Net cash provided by operating activities 24,765,302 59,047,429 CASH FLOWS USED IN INVESTING ACTIVITIES Additions of prepaid land leases (477,678) (406,380) Compensation received for demolition of factory -- 1,340,026 Purchase of property, plant and equipment (37,399,421) (52,907,374) Net cash used in investing activities (37,877,099) (51,973,728) CASH FLOWS FROM FINANCING ACTIVITIES Repurchase of common stock -- (500,000) Repayment of capital lease obligation (297,598) (288,739) Net cash used in financing activities (297,598) (788,739) EFFECTS OF EXCHANGE RATE CHANGESON CASH AND CASH 74,370 3,796,618 EQUIVALENTS NET (DECREASE) INCREASE IN CASH AND CASH (13,335,025) 10,081,580 EQUIVALENTS CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR 78,576,060 68,494,480 CASH AND CASH EQUIVALENTS - END OF YEAR $65,241,035 $78,576,060 CONTACT: Gulf Resources, Inc. Web: http://www.gulfresourcesinc.com Max Ma, IR Manager Email: Max_vx@163.com Helen Xu, CEO Assistant Email: email@example.com Gulf Resources, Inc. logo
Gulf Resources Reports Fourth Quarter and Fiscal Year 2012 Financial Results
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