Fashion

Kingold Jewelry Reports Financial Results for the Fourth Quarter and Year Ended December 31, 2014

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Company to Hold Conference Call with Accompanying Slide Presentation on March 31, 2015, at 6 p.m. ET

WUHAN CITY, China, April 1, 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 financial results for the fourth quarter and year ended December 31, 2014.

2014 Financial and Operating Highlights (all results are compared to prior year period)

  • Net sales was $1.1 billion compared to $1.2 billion, the decline was primarily due to lower gold pricing
  • Processed a total of 60.1 metric tons [one metric ton = 35,274 ounces] of 24-karat gold products, an increase of 17.6% compared to 51.1 metric tons and within the Company’s previously announced guidance range
  • Gross profit increased to $76.3 million compared to $47.0 million, and gross margin was 6.9% compared to 3.9%, largely due to the previously announced purchase of large quantities of gold at low market prices at year end of 2013 and at the beginning of 2014
  • Net income was $47.3million, or $ 0.72 per diluted share, compared to $28.3 million, or $0.44 per diluted share
  • Book value per diluted share was $3.91 at December 31, 2014 compared to $3.31 at December 31, 2013
  • Kingold meets its previously announced 2014 guidance of between 60 metric tons and 70 metric tons with 60.1 million

2014 Fourth Quarter Financial Highlights (all results are compared to prior year period)

  • Net sales was $209.3 million, a decrease of 34.1% compared to $317.6 million, largely due to the later Chinese New Year
  • Processed a total of 13.2 metric tons of 24-karat gold products, a decrease of 7.7% compared to 14.3 metric tons
  • Net income was $7.7 million, or $0.12 per diluted share, a decrease of 3.2% from $7.9 million, or $0.12 per diluted share

Outlook for 2015

  • Company expects to process between 70 metric tons and 80 metric tons of 24-karat gold products in 2015.

Mr. Zhihong Jia, Chairman and CEO of the Company, commented, "We are pleased with our 2014 financial and operating results as we continued to improve our 24-karat gold manufacturing and designing capability and distribution network throughout China. In 2014, China’s gold industry was impacted by a weaker economy and overall decline in gold prices. Despite these challenges, Kingold processed 60.1 metric tons of gold products during the year and sold them to its 300 major customers from 25 provinces."

UPDATE ON Kingold Jewelry cultural industry Park

  • January 8, 2015: The Company announced that it has completed the framework on the property and move to the next phase of construction, which will be focused on both exterior and interior decoration and design. The Company expects to complete the entire project on time and will have a grand opening by the end of December 2015.
  • January 21, 2015: The Company announced that it has formally received two separate "Certificates of Presale of Commercial Properties" from Wuhan Housing Security and Management Bureau, which cover five commercial buildings, totaling approximately 123,600 square meters (approx. 1,330,000 square feet). The Company is seeking potential buyers for these commercial properties, and is expected to utilize any proceeds from the presale of these units to complete construction.

Chairman Jia stated, "We continue to receive regular inquiries and positive feedback on our development of the Jewelry Park, and remain on track for a grand opening in December 2015."

2014 OPERATIONAL REVIEW

  • In the fourth quarter of 2014, Kingold processed approximately 13.2 metric tons of 24-karat gold products, a decrease of 7.7% over the 14.3 metric tons processed in the fourth quarter of 2013. For the year ended December 31, 2014, the Company processed 60.1 metric tons of 24-karat gold products, an increase of 17.6% over the 51.1 metric tons processed in 2013.

Metric Tons of Gold Processed

Three Months Ended:

December 31, 2014

December 31, 2013

Volume

% of Total

Volume

% of Total

Branded*

5.7

43.2%

8.3

58.0%

Customized**

7.5

56.8%

6.0

42.0%

Total

13.2

100%

14.3

100%

Year Ended:

December 31, 2014

December 31, 2013

Volume

% of Total

Volume

% of Total

Branded*

28.8

47.9%

28.6

56.0%

Customized**

31.3

52.1%

22.5

44.0%

Total

60.1

100%

51.1

100%

* 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.

For the three months ended December 31, 2014, the Company processed a total of 13.2 metric tons of gold, of which branded production was 5.7 metric tons, representing 43.2% of total gold processed, and customized production was 7.5 metric tons, representing 56.8% of total gold processed in the fourth quarter of 2014. In the fourth quarter of 2013, the Company processed a total of 14.3 metric tons, of which branded production was 8.3 metric tons, or 58.0% of the total gold processed, and customized production was 6.0 metric tons, or 42.0% of total gold processed.

For the year ended December 31, 2014, Kingold processed a total of 60.1 metric tons of gold, of which branded production was 28.8 metric tons, or 47.9% of total gold processed, and customized production was 31.3 metric tons, or 52.1% of total gold processed. In 2013, the Company processed a total of 51.1 metric tons of gold, of which branded production was 28.6 metric tons, or 56.0% of the total, and customized production was 22.5 metric tons, or 44.0% of the total.

2014 FINANCIAL REVIEW

Net Sales

Net sales for the three months ended December 31, 2014 was $209.3 million, compared to $317.6 million for the same period in 2013. The decrease in sales is largely due to the later Chinese New Year. The mid-February Chinese New Year postponed the winter sales peak to January of 2015.

Net sales for the year ended December 31, 2014 was 1.1 billion, decrease of 6.9% from the $1.2 billion reported in the year of 2013. The decrease in net sales was primarily driven by the decrease in the price of gold and to increased sales of customized products.

The Company’s total sales from its investment gold business were $19.2 million for the year of 2014, a decrease of 84.5% from $106.1 million in 2013. Demand for investment gold was down overall in light of the slow down in China’s economy.

Gross Profit

Gross profit for the three months ended December 31, 2014 was $13.9 million, a decrease of 1.8%, from $14.2 million for the same period in 2013.

Gross profit for the year of 2014 increased to $76.3 million, an increase of 62.4%, from $47.0 million for year of 2013.

Gross Margin

The Company’s gross margin was 6.7% for the three months ended December 31, 2014, compared to 4.5% in the prior year period.

The Company’s gross margin for the 2014 fiscal year was 6.9%, up from 3.9% in the prior year period. The substantial increase was due to the fact that the Company purchased large quantities of gold inventory at year end 2013 and beginning of 2014 at low market prices, making the first half production at a cost much lower than normal.

Net Income

Net income for the three months ended December 31, 2014 was $7.7 million, or $0.12 per diluted share based on 66.0 million weighted average diluted shares outstanding, compared to net income of $7.9 million in the prior year period, or $0.12 per diluted share based on 64.5 million weighted average diluted shares outstanding in the prior-year period.

Net income for the year of 2014 was $47.3 million, or $0.72 per diluted share based on 66.0 million weighted average diluted shares outstanding, compared to net income of $28.3 million in the prior year, or $0.44 per diluted share based on 63.9 million weighted average diluted shares outstanding, in the prior-year.

Balance Sheet and Cash Flow

(in millions except for percentages)

12/31/2014

12/31/2013

% Changed

(Audited)

(Audited)

Cash

$

1.3

2.3

(41.7%)

Inventories (gold)

212.4

174.4

21.8%

Working Capital

212.6

199.8

6.4%

Stockholders’ Equity

258.2

214.9

20.2%

Net cash provided by operating activities was $20.3 million for the year of 2014, compared with net cash provided by operating activities of $7.7 million for the year of 2013. The change was mainly because of the increase in net income raised from $28.3 million in the year of 2013 to $47.3 million in the year of 2014.

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 2015

Based on its existing resources and capacity, strong demand for 24-karat gold products in China, the Company believes that its gold processed is expected to be between 70 metric tons and 80 metric tons during 2015. This guidance is based solely on current projected, organic growth. The Company anticipates narrowing this guidance throughout the year, along with providing additional metrics for investors in the coming months.

Conference Call Details

Kingold also announced that it will discuss these financial results in a conference call on March 31, 2015, at 6 p.m. 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/q4-2014. 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 statements regarding Kingold’s outlook with respect to its 2015 outlook for gold processing, its 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. 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, Associate
+86 10-6587-6435
kyao@equityny.com

KINGOLD JEWELRY, INC.

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(IN U.S. DOLLARS)

For the three months ended December 31,

For the years ended December 31,

2014

2013

2014

2013

NET SALES

$

209,333,026

$

317,575,713

$

1,107,558,544

$

1,189,915,923

COST OF SALES

Cost of sales

(195,023,389)

(302,998,188)

(1,030,010,474)

(1,141,671,197)

Depreciation

(365,074)

(370,785)

(1,296,583)

(1,277,374)

Total cost of sales

(195,388,463)

(303,368,973)

(1,031,307,057)

(1,142,948,571)

GROSS PROFIT

13,944,562

14,206,740

76,251,487

46,967,352

OPERATING EXPENSES

Selling, general and administrative expenses

2,025,666

1,609,850

7,343,951

4,749,488

Stock compensation expenses

1,310,995

398,773

3,149,980

1,532,563

Depreciation

61,655

44,930

130,074

155,216

Amortization

3,080

6,125

12,300

12,205

Total operating expenses

3,401,396

2,059,678

10,636,305

6,449,472

INCOME FROM OPERATIONS

10,543,166

12,147,062

65,615,182

40,517,880

OTHER INCOME (EXPENSES)

Other Income

–

–

94,624

–

Interest Income

–

–

305,465

56,253

Other Expense

–

–

–

(81)

Interest expense

(307,991)

(760,649)

(1,847,240)

(1,051,564)

Total other expenses, net

(307,991)

(760,649)

(1,447,151)

(995,392)

INCOME FROM OPERATIONS BEFORE TAXES

10,235,174

11,386,413

64,168,031

39,522,488

INCOME TAX PROVISION (BENEFIT)

Current

1,258,968

3,257,007

16,836,054

11,454,787

Deferred

1,301,027

199,243

–

(272,225)

Total income tax provision

2,559,994

3,456,250

16,836,054

11,182,562

NET INCOME

$

7,675,180

$

7,930,163

$

47,331,977

$

28,339,926

OTHER COMPREHENSIVE INCOME (LOSS)

Total foreign currency translation gains (loss)

$

278,221

$

1,039,417

$

(1,331,032)

$

5,820,020

COMPREHENSIVE INCOME

$

7,953,400

$

8,969,580

$

46,000,945

$

34,159,946

Earnings per share

Basic

$

0.12

$

0.12

$

0.72

$

0.45

Diluted

$

0.12

$

0.12

$

0.72

$

0.44

Weighted average number of shares

Basic

65,957,499

64,334,400

65,918,768

63,495,520

Diluted

65,957,499

64,486,938

66,007,075

63,902,912

KINGOLD JEWELRY, INC.

CONSOLIDATED BALANCE SHEETS

(IN U.S. DOLLARS)

December 31,

December 31,

2014

2013

ASSETS

CURRENT ASSETS

Cash

$

1,331,658

$

2,284,930

Restricted cash

14,793,632

12,668,749

Accounts receivable

503,406

532,386

Inventories

212,396,363

174,433,501

Other current assets and prepaid expenses

57,971

8,252,387

Due from related party

–

52,354,308

Value added tax recoverable

4,501,426

6,220,866

Deferred income tax assets

–

275,882

Total current assets

233,584,456

257,023,009

PROPERTY AND EQUIPMENT, NET

9,390,258

10,686,947

OTHER ASSETS

Deposit on land use right-Jewelry Park

9,819,687

32,721,442

Construction in progress – Jewelry Park

58,310,818

–

Other assets

157,078

157,946

Land use right

492,027

507,117

Total other assets

68,779,610

33,386,505

TOTAL ASSETS

$

311,754,324

$

301,096,461

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES

Short term loans

$

16,270,745

$

49,572,985

Long term loans – current maturities

28,844,777

–

Other payables and accrued expenses

2,970,770

3,499,717

Income tax payable

978,713

3,269,908

Other taxes payable

777,537

848,739

Total current liabilities

49,842,542

57,191,349

Long term loans

3,672,308

29,004,287

TOTAL LIABILITIES

53,514,850

86,195,636

COMMITMENTS AND CONTINGENCIES

–

–

EQUITY

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

authorized, none issued or outstanding

as of December 31, 2014 and December 31, 2013

–

–

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

authorized, 65,963,502 and 64,953,462 shares issued and outstanding

as of December 31, 2014 and December 31, 2013

65,963

64,953

Additional paid-in capital

79,460,175

76,847,205

Retained earnings

Unappropriated

163,002,075

120,946,375

Appropriated

967,543

967,543

Accumulated other comprehensive income

14,743,718

16,074,749

Total stockholders’ equity

258,239,474

214,900,825

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

$

311,754,324

$

301,096,461

KINGOLD JEWELRY, INC.

CONSOLIDATED STATEMENT OF CASH FLOWS

(IN U.S. DOLLARS)

For the years ended December 31,

2014

2013

CASH FLOWS FROM OPERATING ACTIVITIES

Net income

$

47,331,977

$

28,339,926

Adjusted to reconcile net income to cash provided by

operating activities:

Depreciation

1,426,657

1,432,591

Amortization of intangible assets

12,300

12,205

Share based compensation for services

3,149,980

1,532,563

Inventory valuation allowance

–

1,088,901

Deferred tax provision (benefit)

–

(272,225)

Changes in operating assets and liabilities

(Increase) decrease in:

Accounts receivable

26,053

180,215

Inventories

(38,924,060)

(20,400,387)

Other current assets and prepaid expenses

8,193,528

(7,566,421)

Deferred offering costs

–

Value added tax recoverable

1,959,688

1,022,705

Increase (decrease) in:

Other payables and accrued expenses

(512,197)

1,611,132

Income tax payable

(2,273,323)

591,138

Other taxes payable

(66,538)

165,322

Net cash provided by operating activities

20,324,065

7,737,665

CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of property and equipment

(190,403)

(78,306)

Proceeds from sale of property and equipment

1,970

–

Cash deposit for land use right-Jewelry Park

–

(32,287,748)

Cash payment in construction in progress-Jewelry Park

(35,590,752)

–

Net cash used in investing activities

(35,779,185)

(32,366,054)

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from bank loans-short term

24,000,521

48,915,939

Repayments of bank loans-short term

(57,031,746)

(6,457,550)

Proceeds from long term loan

3,672,486

28,619,860

Restricted cash

(2,194,663)

(12,500,836)

Proceeds from related party loan

65,082,981

–

Repayments of related party loan

(13,016,596)

(52,354,308)

Cash dividend paid

(5,276,277)

–

Net proceeds from exercise of warrants

10,000

4,600,400

Net proceeds from stock issuance

–

12,522,000

Net cash provided by financing activities

15,246,706

23,345,505

EFFECT OF EXCHANGE RATES ON CASH AND CASH EQUIVALENTS

(744,858)

1,023,700

NET INCREASE IN CASH AND CASH EQUIVALENTS

(953,272)

(259,184)

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR

2,284,930

2,544,114

CASH AND CASH EQUIVALENTS, END OF YEAR

$

1,331,658

$

2,284,930

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Cash paid for interest expense

$

14,140,388

$

4,444,627

Cash paid for income tax

$

18,834,998

$

10,863,648

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/kingold-jewelry-reports-financial-results-for-the-fourth-quarter-and-year-ended-december-31-2014-300058761.html