-- 4Q08 Revenues Increase 135% to $129.5 Million --
-- 4Q08 Gross Margin Increases 340 Basis Points to 14.0% --
-- 4Q08 Net Income Increases to $9.7 Million, or $0.45 per Diluted Share --
-- FY08 Revenues Increase 152% to $367.6 Million --
-- FY08 Net Income Increases 107% to $27.9 Million, or $1.32 per Diluted
Share --
-- Company Issues 2009 Financial Estimates --
SHENZHEN, China, March 31 /PRNewswire-Asia/ -- FUQI International, Inc. (Nasdaq GM: FUQI) today announced financial results for the quarter and full year ended December 31, 2008.
"We are extremely pleased with our operating results for the fourth quarter and full year 2008, especially in light of current economic conditions. Our fourth quarter tends to be our strongest quarter of the season, due to Chinese New Year and certain western influenced celebrated holidays such as Christmas in China. We have maintained a strong balance sheet, with $129.4 million in working capital and no long term debt. Even in difficult market conditions, we believe that our strategy of building scale and scope through organic growth and through the acquisition of Temix has enabled us to continue to grow our business in both the wholesale and retail business and we are delighted with our initial results," commented Mr. Yu Kwai Chong, CEO and Chairman of Fuqi International.
Fourth-Quarter Financial Results
Revenues for the fourth quarter of 2008 increased 135% to $129.5 million from $55.1 million in the fourth quarter of 2007. The increase is primarily due to increases in sales volumes and selling prices in the Company's wholesale business as well as from slightly higher than expected revenues from the Company's retail operations. Wholesale revenue contributed approximately $123 million to overall revenues, representing year-over-year growth of approximately 127% and retail revenue contributed approximately $6.0 million to overall revenue for the quarter, which is a 9.0 times increase compared to the same period in the prior year.
Gross profit in the fourth quarter of 2008 increased 212% to $18.1 million from $5.8 million for the same period in the prior year. Gross profit margin for the fourth quarter of 2008 increased 340 basis points to 14.0% compared to 10.6% in the same period in the prior year. The improvement in gross margin was primarily derived from a slight increase in processing fees of the Company's products, which resulted primarily from an increase in sales price of precious metal jewelry, an expansion in retail presence by the Company's opening of more jewelry counters in new locations and acquisition of Temix's 50 retail outlets and an increase in original design manufacturing (ODM) processing income.
Operating expenses in the fourth quarter increased 247% to 5.9 million compared to $1.7 million in the prior year period. The increase was due to additional costs required to support expanded wholesale and retail operations, a growing revenue base, increased payroll expense, depreciation, business taxes, professional fees and expenses incurred as a publicly traded company. Income from operations for the fourth quarter increased to 195% to $12.1 million from $4.1 million in the fourth quarter of 2007.
Net Income for the fourth quarter of 2008 was $9.7 million, or $0.45 per diluted share, compared to $7.4 million, or $0.39 per diluted share in the same period of the prior year. Please note that in the fourth quarter of 2007, the Company benefited from a one-time gain of $4.2 million from a reversal of tax liabilities due to an exemption received from the tax authority in China. There was no such benefit in 2008.
On December 31, 2008, the Company had cash and cash equivalents of $56.6 million, compared with $63.3 million on December 31, 2007. Inventory of $44.4 million was down from the end of the third quarter of 2008, but up from the $29.6 million reported at the end of 2007. This reflects the Company's strategic expansion into the retail business, its acquisition of Temix, and its desire to have available product on hand to meet demand.
Financial Results for the Twelve Months ended December 31, 2008
For the twelve months ended December 31, 2008, net sales, which consist of gross sales net of returns, increased 152% to $367.6 million compared to $145.6 million for the previous year. Net sales from the wholesale business increased 147% to $356.4 million from $144.3 million in the prior year. Net sales from the retail business increased 8.2 times to $11.1 million from $1.2 million in the prior year.
Gross profit for 2008 increased 172% to $45.0 million compared to $16.5 million in the prior year. Gross margin increased to 12.2% from 11.3% in the prior year.
Total operating expenses for 2008 were $11.6 million, or 3.2% of net sales, compared to $4.0 million, or 2.8% of net sales, in the prior year.
Operating profit for 2008 increased 167% to $33.4 million compared to $12.5 million in the prior year. Operating margin for 2008 increased 50 basis points to 9.1% compared to 8.6% in the prior year.
Net income for 2008 was $27.9 million, or $1.32 per diluted share, compared to $13.5 million, or $0.86 per diluted share in the prior year.
2009 Financial Outlook
Mr. Chong continued, "We believe the long-term outlook for our wholesale and retail jewelry market in China remains positive. However, we plan to maintain a conservative guidance for 2009, factoring in our expectations for continued growth in our business. The jewelry market continues to be driven by demand that is embedded in our culture. Our customers celebrate important milestones with gifts of jewelry, and we expect that cultural tradition continues to enable Fuqi to grow organically. Furthermore, we will continue to look for reasonable opportunities to expand our reach through a prudent acquisition strategy."
For the first quarter, the Company anticipates total revenue of approximately $106-$108 million which includes wholesale and retail revenues. Net income in the first quarter is expected to be in the range of $6.8 - $7.7 million, or $0.31 - $0.35 per diluted share, based on a weighted average share count of 22.0 million shares.
For the full year 2009, the Company currently expects full-year revenue growth to be in the range of 18% to 22% over 2008. These estimates include both wholesale and retail revenues and exclude the impact from any potential acquisitions. The Company also anticipates consolidated net income growth to be in the range of 10% to 14%, and diluted EPS of $1.35-$1.41, based on a weighted average share count of 22.0 million shares.
Conference Call
The Company will conduct a conference call to discuss its fourth quarter and full year 2008 results today, Tuesday, March 31, 2009 before the market open at 8:00 am ET. Listeners may access the call by dialing #1-913-905-3226. 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 April 7, 2009. Listeners may access the replay by dialing # 719-457-0820; Passcode: 4844847.
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 the large and rapidly 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.
For more information, please contact:
FUQI International, Inc.
Mr. Frederick Wong
Chief Financial Officer
Tel: +852-6199-0741 (Hong Kong)
Ms. Charlene Hua
EVP of Financial, Capital Market & Corporate Development
Tel: +852-9468-2497 (Hong Kong)
IR Email: IR@FuqiIntl.com
ICR Inc.
Bill Zima
Phone: 1-203-682-8200 (Investor Relations)
Fuqi International, Inc.
Condensed Consolidated Statements of Income and Comprehensive Income
Three-Months Ended, Year Ended,
December 31, December 31,
2008 2007 2008 2007
Net sales
Wholesale and
distribution $ 123,459,921 $ 54,495,493 $ 356,471,362 $144,313,478
Retail 6,025,369 574,398 11,134,243 1,245,189
129,485,290 55,069,891 367,605,605 145,558,667
Cost of sales
Wholesale and
distribution 106,028,635 48,826,036 313,645,557 128,110,346
Retail 5,378,938 424,044 8,975,792 934,531
111,407,573 49,250,080 322,621,349 129,044,877
Gross profit 18,077,717 5,819,811 44,984,256 16,513,790
Operating expenses:
Selling and
marketing 2,423,561 456,261 4,909,581 1,105,168
General and
administrative 3,492,957 1,218,389 6,715,682 2,919,140
Total operating
expenses 5,916,518 1,674,650 11,625,263 4,024,308
Income from
operations 12,161,199 4,145,161 33,358,993 12,489,482
Other income (expenses):
Interest expense (349,707) (324,323) (1,436,661) (1,238,505)
Interest income 102,742 160,371 122,792 166,230
Change of fair value
of inventory loan
payable -- (391) -- (46,083)
Exemption of tax
liabilities and
estimated penalty
payable -- 4,161,533 -- 4,161,533
Gain from derivative
instrument 778,201 -- 2,362,421 --
Miscellaneous 60,630 74,604 332,901 80,307
Total other
income (expenses) 591,866 4,071,794 1,381,453 3,123,482
Income before
provision for
income taxes 12,753,065 8,216,955 34,740,446 15,612,964
Provision for
income taxes 3,040,370 803,529 6,861,353 2,097,050
Net income 9,712,695 7,413,426 27,879,093 13,515914
Other comprehensive
income - foreign
currency translation
adjustments 129,033 1,999,641 6,635,489 2,552,910
Comprehensive
income $ 9,841,728 $ 9,413,067 $ 34,514,582 $16,068,824
Earnings per share
- basic $ 0.45 $ 0.39 $ 1.32 $ 0.96
Earnings per share
- diluted $ 0.45 $ 0.39 $ 1.32 $ 0.86
Weighted average
number of common
shares - Basic 21,465,176 18,879,685 21,142,457 14,105,791
Weighted average
number of common
shares - Diluted 21,465,176 18,879,685 21,142,457 15,627,494
Fuqi International, Inc.
Condensed Consolidated Balance Sheets
December 31, December 31,
2008 2007
ASSETS
Current assets:
Cash $ 56,569,733 $ 63,293,653
Restricted cash -- 410,700
Accounts receivable, including
amount due from related party of
$2,837,907 for 2008 and $0 for
2007, net of allowance for
doubtful accounts of $1,620,000
for 2008 and $470,000 for 2007 73,949,200 23,864,141
Value added taxes receivable 2,170,669 2,094,946
Inventories 44,409,645 29,639,236
Prepaid expenses and other current
assets 286,405 956,419
Advances to supplier 8,468,971 744,013
Gold future contracts 1,426,236 --
Deferred taxes 142,608 79,402
Total current assets 187,423,467 121,082,510
Property, equipment, and improvements,
net 3,400,642 1,495,861
Deposits 104,414 97,706
Acquired intangibles, net 3,197,344 --
Goodwill 583,269 --
Other assets 140,278 38,513
$ 194,849,414 $ 122,714,590
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 21,944,904 $ 15,743,504
Line of Credit -- 1,369,000
Accounts payable and accrued
liabilities 11,969,849 662,662
Other payable, related parties 6,287,102 --
Accrued business tax 541,670 498,792
Customer deposits 14,474,178 5,278,534
Income tax payable 2,802,110 1,902,443
Total current liabilities 58,019,813 25,454,935
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,
shares issued and outstanding -
22,005,509 for 2008 and
20,924,843 for 2007 22,006 20,925
Additional Paid in capital 82,503,638 77,449,355
Accumulated foreign currency
translation adjustments 9,620,254 2,985,035
Retained earnings 44,683,433 16,804,340
Total stockholders' equity 136,829,601 97,259,655
$ 194,849,414 $ 122,714,590
Fuqi International, Inc.
Condensed Consolidated Statement of Cash Flows
Increase (Decrease) in Cash
Years Ended December 31,
2008 2007
Cash flows provided by operating
activities:
Net income $ 27,879,093 $ 13,515,914
Adjustments to reconcile net income
to net cash provided by (used for)
operating activities:
Depreciation and amortization 622,267 326,784
Provision for (reversal of
provision for) bad debt 1,103,249 251,746
Stock based compensation expense 1,034,204 701,856
Exemption of tax liabilities and
estimated penalty payable -- (4,161,534)
Loss on disposal of fixed assets 18,270 --
Changes in operating assets and
liabilities, net of effects of
acquisition in 2008:
Accounts receivable (48,922,304) (13,590,622)
Value added taxes receivable 1,632,680 (2,153,866)
Inventories (3,361,938) (22,292,543)
Prepaid expenses and other current
assets 47,678 (809,178)
Advance to supplier (7,632,120) (744,013)
Gold future contracts (1,407,762) --
Deposits - short term -- 757,875
Deferred taxes (57,006) (46,395)
Other assets (78,950) 4,215
Accounts payable and accrued
liabilities 10,766,389 906,006
Other payable, related parties 919,555 --
Customer deposits 8,718,812 3,811,563
Income tax payable 759,131 1,785,619
Net cash used for operating
activities (7,958,752) (21,736,573)
Cash flows provided by (used for) investing
activities:
Purchase of property, equipment and
improvements (1,023,758) (373,080)
Business acquisition (6,498,195) --
Decrease (Increase) in restricted cash 433,213 (395,413)
Net cash used for investing
activities (7,088,740) (768,493)
Cash flows provided by (used for) financing
activities:
Proceeds from short-term borrowing $ 3,610,109 $ 1,977,066
Advance from a related party 953,069 --
Proceeds from exercise of warrants,
net of financing cost -- 2,755,509
Issuance of common stock related
initial public offering, net of
financing cost -- 66,788,527
Proceeds from loans borrowed from
stockholder -- 203,506
Repayments to loans payable to
stockholder -- (642,295)
Net cash provided by financing
activities 4,563,178 71,082,313
Effect of exchange rate changes on cash 3,760,394 1,361,425
Net increase (decrease) in cash (6,723,920) 49,938,672
Cash, beginning of period 63,293,653 13,354,981
Cash, end of period $ 56,569,733 $ 63,293,653
Supplemental disclosure of cash flow information:
Interest paid $ 1,388,040 $ 1,210,667
Income taxes paid $ 6,157,628 $ 357,826
Non-cash activities:
Issuance of common stock for the
Temix acquisition $ 4,021,160 $ --
Non monetary exchanges related to
certain retail sales $ 1,107,680 $ --
Transfer of acquisition deposit as
a payment of the purchase price for
business acquisition $ 722,022 $ --
