Kingold Jewelry Reports 2013 Second Quarter Financial Results Company to Hold Conference Call with Accompanying Slide Presentation on August 14, 2013, at 8:30 a.m. ET PR Newswire WUHAN, China, Aug. 13, 2013 WUHAN, China, Aug. 13, 2013 /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 financial results for its second quarter and six months ended June 30, 2013. 2013 Second Quarter Financial and Operating Highlights (Comparisons are to 2012 Second Quarter): oNet sales increased 36.7% to $367.0 million compared to $268.5 million, largely as a result of increased production due to higher demand. oProcessed 15.2 metric tons [one metric ton = 35,274 ounces] of 24-karat gold products compared to 11.8 metric tons. oAs a result of lower gold prices, the Company incurred a $2.4 million write-down on the value of its inventory. oGross profit decreased to $11.1 million compared to $15.0 million, and gross margin was 3.0% compared to 5.6%, largely as a result of this write-down in inventory. oNet income attributable to common shareholders was $6.3 million, or $0.10 per diluted share, compared to $9.6 million, or $0.18 per diluted share. oBook value per diluted share of $2.99 at June 30, 2013 compared to $2.97 at December 31, 2012. Company Reiterates Guidance for 2013 Due to Strong Demand in Second Quarter oDuring the quarter, the Company experienced an increase in demand for its jewelry and investment gold products as a result of the May 1^st Chinese Labor Day Holiday and correction in the price of gold in April. oKingold reiterates its expectation of processing between 50-60 metric tons of 24-karat gold products in 2013. The Company processed 23.8 million metric tons through the first six months of 2013. Management Comments Mr. Zhihong Jia, Chairman and CEO of Kingold, stated, "We were pleased to report top-line growth and profitability despite changes in global gold pricing. As reported previously, we were affected by the rapid changes in gold prices. Our customers altered their buying patterns and delayed orders as a result of the extreme volatility in pricing. We mitigated the impact on our operations by slowing down sales of products where we are not able to fix the price at the time of sale (such as our investment gold business and sales to certain jewelry customers) to avoid market risk and to preserve value. We also wrote-down our inventory to reflect the change in market value. We understand that Kingold is subject to commodity risk, however we remain focused on properly running our business through all market cycles. We are pleased that from mid-to-late April and throughout the remainder of the second quarter we witnessed a surge in demand as prices stabilized, and as expected, saw increased demand for our products due to the May 1^st Chinese Labor Day holiday. We focused on providing quick turnaround to meet this demand, and have received a favorable response from our customer base. Over the long-term, we think this will add tremendous value to our brand and customer loyalty, and ultimately continue to drive sales and profits in the future. Further, we are benefiting from an improving balance sheet position, as noted by our increased cash, lower receivables, lower inventory, and increasing book value. We feel that our business is a sustainable and flexible model that can shift with changing market cycles that may create great difficulty for our smaller competitors." Operational Review In the second quarter of 2013, Kingold processed a total of 15.2 metric tons of 24-karat gold products compared to 11.8 metric tons processed in the prior-year period. The Company's net sales consisted primarily of sales of branded products to wholesale and retail customers, as well as fees generated from customized production (as detailed in the table below). Of the 15.2 metric tons processed during the period, Kingold's branded production accounted for 8.5 metric tons (56.2%) and customized production accounted for 6.7 metric tons (43.8%). In the first half of 2013, the Company processed a total of 23.8 metric tons of gold, of which branded production accounted for 13.2 metric tons (55.3%) and the customized production accounted for 10.6 metric tons (44.7%).In the first half of 2012, Kingold processed a total of 20.6 metric tons of gold, of which branded production accounted for 10.1 metric tons (49.1%) and customized production accounted for 10.5 metric tons (50.9%). Metric Tons of Gold Processed Three Months Ended: June 30, 2013 June 30, 2012 Branded* 8.5 56.2% 5.6 47.2% Customized** 6.7 43.8% 6.2 52.8% Total 15.2 100% 11.8 100% Six Months Ended: June 30, 2013 June 30, 2012 Branded* 13.2 55.3% 10.1 49.0% Customized** 10.6 44.7% 10.5 51.0% Total 23.8 100% 20.6 100% * 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. 2013 Second Quarter Financial Review oNet sales for the three months ended June 30, 2013 was $367.0 million, an increase of $98.5 million, or 36.7%, compared to net sales of $268.5 million for the three months ended June 30, 2012. The increase in net sales was primarily driven by increased production of $124.4 million, offset by approximately $31.3 million due to the decrease in the price of gold. oGross profit for the three months ended June 30, 2013 was $11.1 million, a decrease of $3.8 million, compared to $15.0 million for the same period in 2012. Gross margin for the three months ended June 30, 2013 was 3.0% compared to 5.6% for the same period in 2012. The decrease in gross profit and gross margin was primarily the result of a $2.4 million write-down of Kingold's gold inventory to current market prices, as well and the shift in product mix to increased branded production as compared to higher-margin customized production during the period. oNet income attributable to Kingold shareholders for the second quarter of 2013 was $6.3 million, or $0.10 per diluted share based on 64.3 million weighted average diluted shares outstanding, compared to net income of $9.6 million, or $0.18 per diluted share based on 54.6 million diluted shares outstanding, in the prior-year period. Fiscal 2013 Six Month Financial Review oNet sales for the six months ended June 30, 2013 were $588.5 million, an increase of 19.3% from $493.5 million in the same period of the prior year. The increase in net sales was primarily driven by increased production of $132.5 million, offset by approximately $43.5 million due to the decrease in the in the price of gold, with the remaining increase due to gains from exchange rate fluctuations. oGross profit for the six months ended June 30, 2013 was $17.4 million, a decrease of $9.1 million, compared to $26.5 million in the prior-year period. The Company's gross margin for the six months ended June 30, 2013 was 3.0% compared to 5.4% for the prior year period. The decrease in gross margin was primarily due to a $5.2 million write-down of inventory, as well as the shift in product mix to increased branded production as compared to higher-margin customized production during the period. oNet income attributable to Kingold shareholders for the six months ended June 30, 2013 was $9.4 million, or $0.15 per diluted share based on 62.7 million weighted average diluted shares outstanding, compared to net income of $16.9 million, or $0.31 per diluted share based on 54.4 million weighted average diluted shares outstanding, in the prior-year period. Balance Sheet and Cash Flow (in millions except for percentages) 6/30/2013 12/31/2012 % Change Cash $ 5.7 $ 2.5 128% Inventories (gold) 163.2 150.0 8.2% Working Capital 180.2 149.2 20.8% Short-term debt 6.5 6.3 2.1% Stockholders' Equity 192.2 161.5 19.0% 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 the other factors described above change with increased production and the purchase of larger quantities of raw materials (principally gold). Outlook for 2013 Kingold believes gold processed will be between 50 metric tons and 60 metric tons during 2013. This guidance is based solely on current projected, organic growth, and would represent a 32.3% to 58.7% increase from the 37.8 metric tons processed in 2012. Mr. Jia concluded, "Kingold is on track to produce its expected volume through 2013, largely as a result of a substantial increase in demand in the early weeks of the second quarter surrounding the May 1^st Labor Day holiday in the PRC. We are also looking into new methods of expanding our brand presence, including opening new showrooms for Kingold's own products. In addition, we are steadily increasing the marketing of our investment gold products, while controlling this growth in light of changing gold prices. Our goal throughout the first half of 2013 has been to continue developing our relationships with our customers, who we believe recognize the strength of a well-capitalized and organized company that can quickly handle their production needs throughout any cycle." Conference Call Details Kingold also announced that it will discuss financial results in a conference call on Wednesday, August 14, 2013, at 8:30 AM 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/q2-2013. 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, 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 and the Securities Exchange Act of 1934. These include statements regarding the amount of gold to be processed in 2013, Kingold's ability to benefit from the recent stability in gold prices which will help fortify client relationships, Kingold's ability to withstand global pricing effects and gain market share from competitors that do not have such an advantage, consumer demand in China for gold, and fluctuations in net cash from operating activities. 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: email@example.com INVESTOR RELATIONS The Equity Group Inc. Katherine Yao, Associate Adam Prior, Senior Vice President +86 10-6587-6435 (212) 836-9606 firstname.lastname@example.org email@example.com KINGOLD JEWELRY, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (IN US DOLLARS) (UNAUDITED) For the three months ended For the six months ended June June 30, 30, 2013 2012 2013 2012 $ 367,042,088 $ $ 588,450,210 $ NET SALES 268,485,840 493,453,234 COST OF SALES Cost of sales (355,619,825) (253,222,376) (570,410,614) (466,324,631) Depreciation (302,694) (296,107) (601,776) (593,895) Total cost of (355,922,519) (253,518,483) (571,012,390) (466,918,526) sales GROSS PROFIT 11,119,569 14,967,357 17,437,820 26,534,708 OPERATING EXPENSES Selling, general and 871,886 1,350,642 1,995,756 2,408,984 administrative expenses Stock compensation 510,830 311,466 758,788 667,905 expenses Depreciation 37,158 34,453 73,993 67,874 Amortization 3,045 2,979 6,054 5,975 Total Operating 1,422,919 1,699,540 2,834,591 3,150,738 Expenses INCOME FROM 9,696,650 13,267,817 14,603,229 23,383,970 OPERATIONS OTHER INCOME (EXPENSES) Other Expense - (1,560) - (1,560) Interest (989,896) (111,778) (1,750,922) (222,913) expense Total Other (989,896) (113,338) (1,750,922) (224,473) Expenses, net INCOME FROM OPERATIONS 8,706,754 13,154,479 12,852,307 23,159,497 BEFORE TAXES INCOME TAX PROVISION (BENEFIT) Current 2,976,395 3,573,568 4,795,298 6,264,574 Deferred (594,907) - (1,301,887) - TOTAL INCOME 2,381,488 3,573,568 3,493,411 6,264,574 TAX PROVISION NET INCOME $ 6,325,266 $ 9,580,911 $ 9,358,896 $ 16,894,923 OTHER COMPREHENSIVE INCOME (LOSS) Total foreign currency $ 2,539,475 $ (1,300,687) $ 3,502,015 $ (947,983) translation gains (loss) COMPREHENSIVE $ 8,864,741 $ 8,280,224 $ 12,860,911 $ 15,946,940 INCOME Earnings per share Basic $ 0.10 $ 0.18 $ 0.15 $ 0.32 Diluted $ 0.10 $ 0.18 $ 0.15 $ 0.31 Weighted average number of shares Basic 64,002,331 53,168,337 62,428,297 53,138,008 Diluted 64,253,053 54,579,029 62,727,247 54,383,690 KINGOLD JEWELRY, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (IN US DOLLARS) (UNAUDITED) June 30, December 31, 2013 2012 ASSETS CURRENT ASSETS Cash $ 5,692,140 $ 2,544,114 Restricted cash 2,559,514 - Accounts receivable - 692,762 Inventories 163,232,062 150,041,421 Other current assets and prepaid expenses 8,562,286 133,539 Value added tax recoverable 10,526,400 7,031,374 Deferred income tax assets 1,315,157 - Total Current Assets 191,887,559 160,443,210 PROPERTY AND EQUIPMENT, NET 11,288,112 11,683,987 OTHER ASSETS Other assets 156,196 153,029 Intangible assets, net 507,612 503,313 Total other assets 663,808 656,342 TOTAL ASSETS $ 203,839,479 $ 172,783,539 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Short term loans $ 6,471,758 $ 6,340,551 Other payables and accrued expenses 1,412,843 1,445,513 Related party loans 359,753 209,890 Income tax payable 2,995,638 2,587,680 Other taxes payable 417,872 659,989 Total Current Liabilities 11,657,864 11,243,623 COMMITMENTS AND CONTINGENCIES - - EQUITY Preferred stock, $0.001 par value, 500,000 shares authorized, none issued or outstanding as of June 30, 2013 and December 31, - - 2012 Common stock $0.001 par value, 100,000,000 shares authorized, 64,294,216 and 54,521,140 shares issued and outstanding as of June 30, 2013 and December 31, 64,294 54,521 2012 Additional paid-in capital 75,427,689 57,656,674 Retained earnings Unappropriated 101,965,345 92,606,449 Appropriated 967,543 967,543 Accumulated other comprehensive income 13,756,744 10,254,729 Total Equity 192,181,615 161,539,916 TOTAL LIABILITIES AND EQUITY $ 203,839,479 $ 172,783,539 KINGOLD JEWELRY, INC. CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (IN US DOLLARS) (UNAUDITED) For the Six months ended June 30, 2013 2012 CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 9,358,896 $ 16,894,923 Adjusted to reconcile net income to cash used in operating activities: Depreciation 675,769 661,769 Amortization of intangible assets 6,054 5,975 Share based compensation 758,788 667,905 Inventory valuation allowance 5,207,547 - Deferred tax provision (1,301,887) - (benefit) Changes in operating assets and liabilities (Increase) decrease in: Accounts receivable 699,963 438,129 Inventories (15,191,547) (22,277,149) Other current assets and prepaid (8,414,355) (73,432) expenses Value added tax recoverable (3,315,726) (3,399,771) Increase (decrease) in: Other payables and accrued 36,309 200,238 expenses Income tax payable 350,834 2,134,041 Other taxes payable (253,195) (243,627) Net cash provided (used in) (11,382,550) (4,991,000) operating activities CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property and equipment (44,545) (149,381) Net cash( used in) investing (44,545) (149,381) activities CASH FLOWS FROM FINANCING ACTIVITIES Restricted cash (2,533,688) - Proceeds from related party loans 59,948 - Net proceeds from stock issuance 12,522,000 - Net proceeds from exercise of warrants 4,500,000 - Net cash provided by financing 14,548,260 - activities EFFECT OF EXCHANGE RATES ON CASH & CASH 26,861 78,530 EQUIVALENTS NET INCREASE (DECREASE) IN CASH AND CASH 3,148,026 (5,061,851) EQUIVALENTS CASH AND CASH EQUIVALENTS, BEGINNING OF 2,544,114 8,810,173 PERIOD CASH AND CASH EQUIVALENTS, END OF PERIOD $ 5,692,140 $ 3,748,322 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash paid for interest expense $ 2,640,896 $ 229,054 Cash paid for income tax $ 4,444,464 $ 4,129,700 SOURCE Kingold Jewelry, Inc. Website: http://www.kingoldjewelry.com
Kingold Jewelry Reports 2013 Second Quarter Financial Results
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