EX-99.1 6 tv500022_ex99-1.htm EXHIBIT 99.1

 

Exhibit 99.1

 

 

Kingold Jewelry Reports Financial Results for the Second Quarter and Six Months Ended June 30, 2018

 

Company to Hold Conference Call with Accompanying Slide Presentation at 4:30 p.m. E.T. on August 9, 2018

 

WUHAN CITY, China, August 9, 2018 - 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 unaudited financial results for the second quarter and six months ended June 30, 2018.

 

2018 Second Quarter Financial Highlights (all results compared to prior year period)

·Net sales were $678.8 million, an increase of 42.6% from $475.9 million
·Processed a total of 27.6 metric tons of 24-karat gold products, increased by 6.0% from 26 metric tons
·Net income was $13.6 million, or $0.20 per diluted share, compared to net income of $8.0 million, or $0.12 per diluted share

  

Outlook for 2018

·Company reiterates guidance of between 100 metric tons and 110 metric tons of 24-karat gold products in 2018

 

Management Commentary

Mr. Zhihong Jia, Chairman and CEO of the Company, commented, “We were pleased to deliver strong operating results in the second quarter of 2018 and continue to benefit from our gold investment which enabled us to further expand our production capacity and design capabilities. During the quarter, we have witnessed a strong growing demand for 24-karat gold jewelry and investment products in China, and our management quickly adjusted the product mix in response to market demand with additional trendy design jewelry products and value preserving investment gold products. We are dedicated to building the Kingold brand as an increasingly important participant in the gold industry in China, while quickly responding to market changes and adjusting operational strategies.”

 

2018 SECOND QUARTER AND SIX MONTHS OPERATIONAL REVIEW

 

Metric Tons of Gold Processed
 
Three Months Ended:
   June 30, 2018   June 30, 2017 
   Volume   % of Total   Volume   % of Total 
Branded*   16.9    61.1%   12    46.2%
Customized**   10.7    38.9%   14    53.8%
Total   27.6    100.0%   26    100%

 

Six Months Ended:
    June 30, 2018    June 30, 2017 
   Volume   % of Total   Volume   % of Total 
Branded*   29.8    58.6%   20.1    47.7%
Customized**   21.1    41.4%   22.0    52.3%
Total   50.9    100.0%   42.1    100.0%

  

* 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 June 30, 2018, the Company processed a total of 27.6 metric tons of gold, of which branded production was 16.9 metric tons, representing 61.1% of total gold processed, and customized production was 10.7 metric tons, representing 38.9% of total gold processed in the second quarter of 2018. In the second quarter of 2017, the Company processed a total of 26 metric tons, of which branded production was 12 metric tons, or 46.2% of the total gold processed, and customized production was 14 metric tons, or 53.8% of total gold processed.

 

 

Kingold Jewelry, Inc.

August 9, 2018

 

For the six months ended June 30, 2018, the Company processed a total of 50.9 metric tons of gold, of which branded production was 29.8 metric tons, representing 58.6% of total gold processed, and customized production was 21.1 metric tons, representing 41.4% of total gold processed in the first half of 2018. In the first half of 2017, the Company processed a total of 42.1 metric tons, of which branded production was 20.1 metric tons, or 47.7% of the total gold processed, and customized production was 22 metric tons, or 52.3% of total gold processed.

 

 

CONSOLIDATED FINANCIAL AND OPERATING REVIEW

 

Net Sales

Net sales for the three months ended June 30, 2018 was $678.8 million, increased by 42.6% from $475.9 million for the same period in 2017. The increase in net sales was mainly the result of the higher sales volume for branded production sales.

 

For the six months ended June 30, 2018, the Company's net sales were $1,218.3 million, increased by 58.6% from $768.1 million in the first half of 2017. The increase in net sales was mainly the result of the higher sales volume for branded production sales.

 

Gross Profit

Gross profit for the three months ended June 30, 2018 was $63.8 million, increased by 33.4% from $47.8 million for the same period in 2017.

 

For the six months ended June 30, 2018, the Company's gross profit were $128 million increased by 97.3% from $64.9 million in the same period of 2017.

 

Gross Margin

The Company’s gross margin was 9.4% for the three months ended June 30, 2018, compared to 10% in the prior year period. The slight decrease in gross margin was primarily due to the decreased average selling price of branded production, compensated by decreased unit cost of branded production during the three months ended June 30, 2018. The average selling price of branded production was RMB 252.34 per gram for the three months ended June 30, 2018, decreased by RMB 11.66 or 4.4%, from RMB 264 per gram for the same period in 2017. Meanwhile, the unit cost of branded production sales was RMB 232.43 per gram for the three months ended June 30, 2018, decreased by RMB 11.63, or 4.8%, from RMB 244.06 per gram for the same period in 2017. The decreases of both the average selling price and unit cost of branded production were mainly due to the weak gold price in the three months ended June 30, 2018.

 

For the six months ended June 30, 2018, the Company's gross margin was 10.5%, compared to 8.4% in the first half of 2017. The increase in gross margin was because the decrease in unit cost of branded production sales exceeded the decrease in the average selling price of branded production during the six months ended June 30, 2018. The unit cost of branded production sales was RMB 232.30 per gram for the six months ended June 30, 2018, decreased by RMB 8.1 or 3.4% from RMB 240.39 per gram for the same period in 2017. However, the average selling price of branded production was RMB 254.95 per gram for the six months ended June 30, 2018, decreased by RMB 1.72 or 0.7% from RMB 256.66 per gram for the same period in 2017.

 

Net Income

Net income for the three months ended June 30, 2018 was $13.6 million, or $0.20 per diluted share based on 66.2 million weighted average diluted shares outstanding, compared to net income of $8.0 million in the prior year period, or $0.12 per diluted share based on 66.4 million weighted average diluted shares outstanding in the prior year period.

 

For the six months ended June 30, 2018, the Company's net income was $26.8 million, or $0.40 per basic and diluted share, compared to net loss of $13.3 million, or $(0.20) per basic and diluted share, in the same period of 2017.

 

 

Kingold Jewelry, Inc.

August 9, 2018

   

Balance Sheet Highlights (USD in Millions)
    6/30/2018    12/31/2017    Percentage Change 
Cash and Cash Equivalents  $0.24   $5.0    (95.2)%
Inventories  $150   $135    11.1%
Working Capital (Current Assets -- Current Liabilities)  $603   $768    (21.5)%
Stockholders’ Equity  $373   $390    (4.4)%

  

Net cash provided by operating activities was $446.3 million for the six months ended June 30, 2018, compared with net cash used in operating activities of $257 million for the same period in 2017. The increase of net cash provided by operating activities was mainly due to the decrease in inventory purchases of $311 million because $349.4 million of gold for investment was released to inventory during the six months ended June 30, 2018, a decrease in value added tax receivable of $76.6 million, an increase in income taxable of $2.9 million and an increase in other payables and accrued liabilities of $1.3 million.

 

The Company’s net cash from operating activities can fluctuate significantly due to change in inventories. Other factors that may vary significantly include accounts payable, purchase of gold and income taxes. The Company expects the net cash it generates from operating activities to continue to fluctuate as inventories, receivables, accounts payables and the other factors described above change with increased production and the purchase of larger or smaller quantities of raw materials (principally gold). These fluctuations could cause net cash from operating activities to decrease, even if net income grows as the Company continues to expand. Although the Company expects that net cash from operating activities will increase over the long term, it cannot predict how these fluctuations will affect Kingold’s cash flow in any particular quarter.

 

OUTLOOK FOR 2018

Based on its existing resources and capacity along with strong demand for 24-karat gold products in China, the Company reiterates its expectation that gold processed will be between 100 metric tons and 110 metric tons during 2018.

 

 

Conference Call Details

Kingold also announced that it will discuss these financial results in a conference call on August 9, 2018 at 4:30 p.m. E.T.

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/q2-2018. 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 2018 outlook for gold processing. 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.

 

 

Kingold Jewelry, Inc.

August 9, 2018

 

COMPANY CONTACT

Kingold Jewelry, Inc.

Bin Liu, CFO

Phone: +1-847-660-3498 (US) / +86-27-6569-4977 (China)

bl@kingoldjewelry.com

 

 

INVESTOR RELATIONS COUNSEL:

The Equity Group Inc.

Katherine Yao, Senior Associate

Phone: +86-10-5661 7012

kyao@equityny.com

 

 

Kingold Jewelry, Inc.

August 9, 2018

  

KINGOLD JEWELRY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(IN US DOLLARS)

(UNAUDITED)

 

   For the three months ended June 30,   For the six months ended June 30, 
   2018   2017   2018   2017 
                 
NET SALES  $678,796,263   $475,891,200   $1,218,320,318   $768,155,277 
                     
COST OF SALES                    
Cost of sales   (614,775,972)   (427,858,604)   (1,089,741,556)   (702,767,612)
Depreciation   (228,173)   (210,888)   (545,838)   (505,331)
Total cost of sales   (615,004,145)   (428,069,492)   (1,090,287,394)   (703,272,943)
                     
GROSS PROFIT   63,792,118    47,821,708    128,032,924    64,882,334 
                     
OPERATING EXPENSES                    
Selling, general and administrative expenses   2,564,845    3,069,142    5,110,199    6,766,525 
Stock compensation expenses   5,364    11,143    10,728    22,286 
Depreciation   151,658    125,831    260,487    231,670 
Amortization   2,963    2,755    5,936    5,498 
Total operating expenses   2,724,830    3,208,871    5,387,350    7,025,979 
                     
INCOME FROM OPERATIONS   61,067,288    44,612,837    122,645,574    57,856,355 
                     
OTHER INCOME (EXPENSES)                    
Other Income   -    132    -    65,497 
Interest Income   446,143    504,462    822,144    1,191,307 
Interest expense, including  amortization of debt issuance costs of $2,305,354 and $3,116,277 for the three months, and $4,560,420 and $6,403,986 for the six months ended June 30, 2018 and 2017, respectively   (43,301,467)   (38,980,626)   (87,418,347)   (76,570,122)
Total other expenses, net   (42,855,324)   (38,476,032)   (86,596,203)   (75,313,318)
                     
INCOME (LOSS) FROM OPERATIONS BEFORE TAXES   18,211,964    6,136,805    36,049,371    (17,456,963)
                     
INCOME TAX PROVISION (BENEFIT)                    
Current   4,169,121    5,218,082    7,426,595    5,218,082 
Deferred   479,046    (7,114,895)   1,824,055    (9,402,844)
                     
Total income tax provision (benefit)   4,648,167    (1,896,813)   9,250,650    (4,184,762)
                     
NET INCOME (LOSS)   13,563,797    8,033,618    26,798,721    (13,272,201)
                     
OTHER COMPREHENSIVE INCOME (LOSS)                    
Unrealized gain (loss) related to investments in gold, net of tax  $(19,350,626)  $(54,046,052)  $(37,973,323)  $48,861,337 
Foreign currency translation gains (loss)   (19,822,304)   11,789,755    (6,002,603)   8,362,338 
Total Other comprehensive income (loss)  $(39,172,930)  $(42,256,297)  $(43,975,926)  $57,223,675 
                     
COMPREHENSIVE INCOME (LOSS)  $(25,609,133)  $(34,222,679)  $(17,177,205)  $43,951,474 
Earnings (Loss) per share                    
Basic  $0.21   $0.12   $0.41   $(0.20)
Diluted  $0.20   $0.12   $0.40   $(0.20)
Weighted average number of shares                    
Basic   66,113,502    66,018,867    66,113,502    66,018,867 
Diluted   66,229,658    66,415,601    66,395,251    66,018,867 

  

 

 

 

KINGOLD JEWELRY, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(IN US DOLLARS)

(UNAUDITED)

 

   June 30,   December 31, 
   2018   2017 
         
ASSETS        
         
Cash  $240,453   $4,997,125 
Restricted cash   6,965,467    5,534,551 
Accounts receivable   -    768,167 
Inventories   150,437,622    135,042,713 
Investments in gold   1,185,042,807    1,562,943,153 
Other current assets and prepaid expenses   250,183    100,592 
Value added tax recoverable   274,033,622    353,732,758 
Total current assets   1,616,970,154    2,063,119,059 
           
Property and equipment, net   6,517,129    7,299,643 
Restricted cash   7,600,532    7,392,721 
Investments in gold   908,899,905    957,124,267 
Other assets   296,897    302,072 
Deferred income tax assets   18,545,561    6,677,675 
Land use right   416,840    429,915 
Total long-term assets   942,276,864    979,226,293 
TOTAL ASSETS  $2,559,247,018   $3,042,345,352 
           
LIABILITIES AND STOCKHOLDERS’ EQUITY          
           
CURRENT LIABILITIES          
           
Short term loans  $908,635,791   $962,101,746 
Other payables and accrued expenses   19,906,196    18,913,863 
Related party loan   75,530,983    307,389,647 
Due to related party   3,420,269    2,630,301 
Income tax payable   4,015,473    1,208,742 
Other taxes payable   2,496,472    2,615,463 
Total current liabilities   1,014,005,184    1,294,859,762 
Related party loans   414,034,451    567,843,066 
Long term loans   758,141,473    789,410,137 
TOTAL LIABILITIES   2,186,181,108    2,652,112,965 
COMMITMENTS AND CONTINGENCIES          
EQUITY          
Preferred stock, $0.001 par value, 500,000 shares authorized, none issued or outstanding as of June 30, 2018 and December 31, 2017     -    - 
Common stock $0.001 par value, 100,000,000 shares authorized, 66,113,502 shares issued and outstanding as of June 30, 2018 and December 31, 2017   66,113    66,113 
Additional paid-in capital   80,388,177    80,377,449 
Retained earnings          
Unappropriated   330,465,332    303,666,611 
Appropriated   967,543    967,543 
Accumulated other comprehensive income (loss), net of tax   (38,821,255)   5,154,671 
Total Equity   373,065,910    390,232,387 
           
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY  $2,559,247,018   $3,042,345,352 

   

 

 

 

KINGOLD JEWELRY, INC.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(IN US DOLLARS)

(UNAUDITED)

 

   For the six months ended June 30, 
   2018   2017 
         
CASH FLOWS FROM OPERATING ACTIVITIES          
Net income (loss)  $26,798,721   $(13,272,201)
Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities:          
Depreciation and amortization   806,325    737,001 
Amortization of intangible assets   5,936    5,498 
Amortization of debt issuance costs included in interest expense   4,560,420    6,403,986 
Share based compensation for services and warrants expense   10,728    22,286 
Inventory valuation allowance   -    17,597,804 
Deferred tax provision (benefit)   1,824,055    (9,402,844)
Changes in operating assets and liabilities          
Accounts receivable   784,850    572,975 
Inventories   331,036,274    (204,138,326)
Other current assets and prepaid expenses   (157,286)   587,453 
Value added tax recoverable   76,550,155    (66,550,772)
Other payables and accrued expenses   1,251,498    5,063,398 
Customer deposits   (82,602)   - 
Income tax payable   2,939,193    5,218,082 
Other taxes payable   (77,119)   123,225 
Net cash provided by (used in) operating activities   446,251,148    (257,032,435)
           
CASH FLOWS FROM INVESTING ACTIVITIES          
Purchases of property and equipment   (453,522)   (1,141,219)
Investments in gold   -    (270,889,242)
Net cash used in investing activities   (453,522)   (272,030,461)
           
CASH FLOWS FROM FINANCING ACTIVITIES          
Proceeds from other loans – short term   -    29,090,063 
Repayments of other loans – short term   (301,624,503)   (72,870,607)
Proceeds from other loans – long term   240,479,892    95,997,207 
Repayments of other loans – long term   -    (101,815,220)
Proceeds from related party loans – short term   -    290,900,628 
Repayments of related party loans – short term   (235,549,065)   - 
Proceeds from related party loans – long term   334,479,672    690,888,992 
Repayments of related party loans – long term   (484,255,723)   (415,987,899)
Payments of loan origination fees   (309,511)   (1,998,723)
Repayment of third party loans   -    (29,090,063)
(Repayment of) borrowings from related party   800,793    (3,988,513)
Net cash provided by (used in) financing activities   (445,978,445)   481,125,865 
           
EFFECT OF EXCHANGE RATES ON CASH AND RESTRICTED CASH   (2,937,126)   1,732,785 
NET DECREASEIN CASH AND RESTRICTED CASH   (3,117,945)   (46,204,246)
CASH AND RESTRICTED CASH, BEGINNING OF PERIOD   17,924,397    81,677,623 
CASH AND RESTRICTED CASH, END OF PERIOD  $14,806,452   $35,473,377 
           
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION          
Cash paid for interest expense  $81,761,918   $56,674,744 
Cash paid for income tax  $4,487,402   $- 
           
NON-CASH INVESTING AND FINANCING ACTIVITIES          
Investments in gold obtained in a lease from a related party and fully repaid  $-   $131,117,303 
Investments in gold transferred to inventories  $389,112,590   $180,786,694 
Unrealized gain (loss) on investments in gold, net of tax  $(37,973,323)  $48,861,337