|March 31, 2011|
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 --
WUHAN CITY, CHINA, March 31, 2011 - 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
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.
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.
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.
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.
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