- 1Q09 Revenues Increase 41% to $109.4 Million -
- 1Q09 Gross Margin Increases 510 Basis Points to 16.5% -
- 1Q09 Net Income Increases to $9.7 Million, or $0.45 per Diluted Share -
- Company Raises FY09 Financial Estimates -
SHENZHEN, China, May 15 /PRNewswire-Asia-FirstCall/ -- FUQI International, Inc. (Nasdaq: FUQI) today announced financial results for the first quarter ended March 31, 2009.
“We are excited to continue posting strong financial results in the first quarter of 2009, and are pleased to be one of the leaders in the growing luxury jewelry market in China, which has been somewhat resistant to the effects of the economic downturn. Despite the health of the global economy, we have put in place a structure that has allowed us to continue growing at respectable rates. We are now beginning to see signs of stability in the Chinese economy, which we believe will bode even better for our future results. We are focusing our efforts to drive the continued growth of our retail business and we believe the traditionally larger margins will have an increasingly significant impact on our profitability as our retail business continues to grow. We will continue to serve our wholesale customers optimally, by maintaining the right amount of inventory and varieties of design on hand at all time to fulfill our customer demand,” commented Mr. Yu Kwai Chong, CEO and Chairman of Fuqi International.
Revenues for the first quarter of 2009 increased 41.0% to $109.4 million from $77.6 million in the first quarter of 2008. The increase was attributable to an increase of sales volume in the wholesale business as well as from increased revenues derived from the Company’s retail business. Wholesale revenue contributed approximately $96.8 million to overall revenues, representing year-over-year growth of approximately 26.7% and retail revenue contributed approximately $12.5 million to overall revenue for the quarter, which is a 9.4 times increase compared to the same period in the prior year.
Gross profit in the first quarter of 2009 increased 105% to $18.1 million from $8.8 million for the same period in the prior year. Gross profit margin for the first quarter of 2009 increased 510 basis points to 16.5% compared to 11.4% in the same period in the prior year. The improvement in gross margin was primarily due to an increase of product segments, benefit from gradually rising precious metal prices and a stable increase in sales of Fuqi’s and Temix’s retail outlets. The Company continues to prudently grow its retail business to capitalize on higher retail margins, which has occurred in the first quarter of 2009.
Operating expenses in the first quarter increased 189% to $5.5 million compared to $1.9 million in the prior year period. The increase was primarily a result of an increase in legal and professional fees and salary expenses incurred in relation to the expansion of our wholesale and retail business and an increase in fees to the malls for retail business. Income from operations for the first quarter increased 83% to $12.6 million from $6.9 million in the first quarter of 2008.
Net Income for the first quarter of 2009 increased 52% to $9.7 million, or $0.45 per diluted share, compared to $6.4 million, or $0.31 per diluted share in the same period of the prior year.
On March 31, 2009, the Company had cash and cash equivalents of $54.0 million, compared with $56.6 million at the end of 2008. Inventory at the end of the first quarter was $70.1 million, up from $44.4 million at the end of 2008 in the Company’s anticipation of increasing demand for its jewelry products for the Labor Day holidays and Mother’s Day. This increase also reflects the Company’s desire to have available product quantities and varieties on hand to meet demand in the wholesale business as well as its strategic expansion into the retail business.
2009 Financial Outlook
Mr. Chong continued, “Our keen financial management has allowed us to post this impressive growth, and enabled us to begin to distinguish ourselves from the competition. We plan to continue to conservatively manage our balance sheet so that we are always ready to capitalize upon profitable opportunities in the marketplace.”
For the second quarter, the Company anticipates total revenue between approximately $89.5 - $93.5 million which includes wholesale and retail revenues. Net income in the second quarter is expected to be in the range of $5.9 - $6.9 million, or $0.27 - $0.32 per diluted share, based on a weighted average share count of 21.5 million shares.
For the full year 2009, the Company currently expects full-year revenue of approximately $442.0 - $465.0 million. These estimates include both wholesale and retail revenues and exclude the impact from any potential acquisitions. The Company also anticipates net income of approximately $32.0 - $35.0 million, or diluted EPS of $1.49 - $1.63, based on a weighted average share count of 21.7 million shares.
Conference Call
The Company will conduct a conference call to discuss its first quarter 2009 results today, Friday, May 15, 2009 before the market opens at 8:00 am ET. Listeners may access the call by dialing #1-913-312-1414. To listen to the live webcast of the event, please go to http://www.viavid.net . A replay of the call will be available through May 21, 2009. Listeners may access the replay by dialing # 719-457-0820; Passcode: 4041000.
About FUQI International, Inc.
Based in Shenzhen, China, FUQI International, Inc. is a leading designer of high quality precious metal jewelry in China, developing, promoting, and selling a broad range of products in China’s large and expanding Chinese luxury goods market.
Safe Harbor Statement
The statements set forth above include forward-looking statements that may involve risk and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Such risks and uncertainties include, but are not limited to, risks related to our acquisition of Temix in August 2008, adverse capital and credit market conditions, the vulnerability of the Company’s business to a general economic downturn in China; fluctuation and unpredictability of costs related the gold, platinum and precious metals and other commodities used to make the Company’s products; changes in the laws of the PRC that affect the Company’s operations; the Company’s recent entry into the retail jewelry market; competition from competitors; the Company’s ability to obtain all necessary government certifications and/or licenses to conduct its business; development of a public trading market for the Company’s securities; the cost of complying with current and future governmental regulations and the impact of any changes in the regulations on the Company’s operations; and other factors detailed from time to time in the Company’s filings with the United States Securities and Exchange Commission and other regulatory authorities. The forward-looking statements are also identified through use of the words “believe,” “enable,” “may,” “will,” “could,” “intends,” “estimate,” “anticipate,” “plan,” “predict,” “probable,” “potential,” “possible,” “should,” “continue,” and other words of similar meaning. Actual results could differ materially from the expectations contained in forward-looking statements as a result of several factors, including regulatory approval requirements and competitive conditions. These and other factors that may result in differences are discussed in greater detail in the Company’s reports and other filings with the Securities and Exchange Commission.
(Financial Tables to Follow)
Condensed Consolidated Statements of Income and Comprehensive Income
(Unaudited)
Three Months Ended,
March 31,
2009 2008
Net sales
Wholesale and distribution 96,825,853 76,358,511
Retail 12,534,157 1,207,848
109,360,010 77,566,359
Cost of sales
Wholesale and distribution 82,632,955 67,805,466
Retail 8,675,689 949,518
91,308,644 68,754,984
Gross profit 18,051,366 8,811,375
Operating expenses:
Selling and marketing 2,982,587 397,396
General and administrative 2,533,605 1,509,177
Total operating expenses 5,516,192 1,906,573
Income from operations 12,535,174 6,904,802
Other income (expenses):
Interest expense (418,438) (363,220)
Interest income 28,350 8,959
Gain from derivative instrument 78,459 840,522
Miscellaneous 4,458 126,782
Total other (expenses)
income (307,171) 613,043
Income before provision for income
taxes 12,228,003 7,517,845
Provision for income taxes 2,567,504 1,122,772
Net income 9,660,499 6,395,073
Other comprehensive (loss) income -
foreign currency translation
adjustments (13,758) 3,966,733
Comprehensive income $ 9,646,741 $ 10,361,806
Earnings per share - basic $ 0.45 $ 0.31
Earnings per share - diluted $ 0.45 $ 0.31
Weighted average number of common
shares - Basic 21,465,176 20,924,843
Weighted average number of common
Shares - Diluted 21,465,176 20,924,843
Condensed Consolidated Balance Sheets
March 31 December 31,
2009 2008
ASSETS (Unaudited)
Current assets:
Cash $ 53,972,530 $ 56,569,733
Accounts receivable, including
amount due from related party of
$9,510,149 for 2009 and $2,837,907
for 2008, net of allowance for
doubtful accounts of $2,222,000 for
2009 and $1,620,000 for 2008 64,993,257 73,949,200
Value added taxes receivable 5,258,902 2,170,669
Inventories 70,050,289 44,409,645
Prepaid expenses and other current
assets 2,275,894 286,405
Advances to supplier 3,146,638 8,468,971
Gold future contracts 409,631 1,426,236
Deferred taxes 257,939 142,608
Total current assets 200,365,080 187,423,467
Property, equipment, and
improvements, net 3,270,764 3,400,642
Deposits 104,405 104,414
Acquired intangibles, net 3,164,969 3,197,344
Goodwill 585,102 583,269
Other assets 207,113 140,278
$ 207,697,433 $ 194,849,414
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current liabilities:
Notes payable $ 29,257,303 $ 21,944,904
Accounts payable and accrued
liabilities 7,314,839 12,511,519
Other payable, related parties 7,084,564 6,287,102
Customer deposits 15,099,824 14,474,178
Income tax payable 2,453,083 2,802,110
Total current liabilities 61,209,613 58,019,813
STOCKHOLDERS’ EQUITY
Preferred stock, $0.001 par
value, 5,000,000 shares authorized,
none issued and outstanding -- --
Common stock, $0.001 par value,
100,000,000 shares authorized,
22,005,509 shares issued and
outstanding 22,006 22,006
Additional Paid in capital 82,515,116 82,503,638
Accumulated foreign currency
translation adjustments 9,606,766 9,620,524
Retained earnings 54,343,932 44,683,433
Total stockholders’ equity 146,487,820 136,829,601
$ 207,697,433 $ 194,849,414
Condensed Consolidated Statements of Cash Flows (Unaudited)
Increase (Decrease) in Cash
Three Months Ended March 31,
2009 2008
Cash flows provided by operating
activities:
Net income $ 9,660,499 $ 6,395,073
Adjustments to reconcile net income
to net cash provided by (used for)
operating activities:
Depreciation and amortization 280,113 104,232
Bad debt 602,750 237,928
Stock based compensation expense 11,478 148,551
Loss on disposal of fixed assets 8,206 --
Changes in operating assets and
liabilities:
Accounts receivable 8,345,262 (4,817,841)
Refundable value added taxes (3,087,926) (5,448,855)
Inventories (25,640,415) (32,911,543)
Prepaid expenses and other
current assets (1,436,911) 297,614
Advance to supplier 5,320,733 (674,373)
Gold future contracts 1,016,317 571,682
Deferred taxes (115,325) (1,789,723)
Other assets (66,836) 1,126
Accounts payable, accrued expenses,
accrued business tax and accrued
estimated penalties (5,708,500) (285,464)
Customer deposits 626,816 2,158,525
Income tax payable (348,724) 1,043,382
Net cash used for operating
activities (10,532,463) (34,969,686)
Cash flows provided by (used for)
investing activities:
Purchase of property, equipment and
improvements (165,917) (81,722)
Decrease (Increase) in restricted cash -- 422,357
Net cash (used for) provided by
investing activities (165,917) 340,635
Cash flows provided by (used for)
financing activities:
Proceeds from (repayments to)
short-term borrowing $ 7,313,149 $ (2,111,784)
Advance from a related party 797,892 --
Net cash provided by (used for)
financing activities 8,111,041 (2,111,784)
Effect of exchange rate changes on cash (9,864) 2,303,898
Net decrease in cash (2,597,203) (34,436,937)
Cash, beginning of period 56,569,733 63,293,653
Cash, end of period $ 53,972,530 $ 28,856,716
Supplemental disclosure of cash
flow information:
Interest paid $ 452,652 $ 296,120
Income taxes paid $ 3,031,560 $ 1,869,312
Non-cash activities:
Non monetary exchanges related to
certain retail sales $ 503,442 $ 231,472
