Yet (midday), the shares are down 9%. Quite odd, that…
We would say these results are a blast and picking some up at the sell-off seems like a good idea, but read for yourself (bold letters are ours):
FUQI International, Inc. Reports Third Quarter 2009 Financial Results
— 3Q09 Revenues Increase 35.8% to $127.2 Million —
— 3Q09 Gross Margin Increases 11.8% to 23.5% —
— 3Q09 Net Income Increases 187.9% to $18.8 Million, or $0.73 per Diluted Share —
— Raises Full Year Revenue and Net Income Guidance —
“I am pleased to report that, our team has once again delivered strong third quarter results, especially as the third quarter has historically been a seasonally slower quarter for FUQI. During the third quarter, we were able to report stronger than expected wholesale results primarily due to increased sales volume and through our original design manufacturing (ODM) work. As our brand grows throughout China, we plan to continue to capitalize on such opportunities to enhance our wholesale and retail businesses. Furthermore, we will continue with our collaborative relationship with several well-known universities specialized in gemological training in China to further enhance our product and designs as well as to develop innovative technological products. We remain confident with our fully-integrated wholesale and retail platforms, and we believe that we are well on our way to becoming one of the dominant jewelry enterprises in China,” commented Mr. Yu Kwai Chong, CEO and Chairman of Fuqi International.
In the third quarter of 2009, the company opened a total of eleven new retail counters. Three FUQI counters were opened in Beijing, Shanghai and Shenyang and eight Temix brand counters were opened in Beijing and Shanghai. Three counters closed in the same period. As of September 30, 2009, the Company had a total of 72 retail counters, including 58 under the Temix brand and 14 under the FUQI brand, and a total of 7 retail stores, which are all under the Temix brand. The Company continues to grow its counter space and plans to have a total of 95-100 retail locations by the end of 2009 and additional 80-100 retail locations in 2010.
Revenues for the third quarter of 2009 increased 35.8% to $127.2 million from $93.7 million in the third quarter of 2008. The increase was attributable to an increase of sales volume in the wholesale business, including original design manufacturing (ODM) work, as well as from increased revenues derived from the Company’s retail business. Wholesale revenue contributed approximately $117.5 million to overall revenues for the quarter, representing year-over-year growth of approximately 29.7%, and retail revenue contributed approximately $9.7 million to overall revenue for the quarter, which is a 208.7% increase compared to $3.2 million the same period of the prior year.
Gross profit in the third quarter of 2009 increased 172.0% to $29.9 million from $11.0 million for the same period in the prior year. Gross profit margin for the third quarter of 2009 increased to 23.5% compared to 11.7% in the same period in the prior year. The improvement in gross margin was primarily due to higher wholesale margins resulting from several sizeable ODM orders fulfilled during the third quarter. Third quarter wholesale gross margin increased 12.8% to 23.6% compared to 10.8% in the prior year period while retail gross margin was 22.6% in the third quarter of 2009 compared to 38.0% in the third quarter of the prior year.
Operating expenses in the third quarter increased 110.8% to $5.7 million compared to $2.7 million in the prior year period. The increase was primarily a result of higher professional fees as a result of the expansion of the retail business and increased payroll cost for the additional employees hired in the accounting and finance department, salary expenses incurred in relation to the expansion of the wholesale and retail business and an increase in variable rents and fees to department stores and malls for retail business. Income from operations for the third quarter increased 192.3% to $24.2 million from $8.3 million in the third quarter of 2008.
Net income for the third quarter of 2009 increased 187.9% to $18.8 million, or $0.73 per diluted share, compared to $6.5 million, or $0.31 per diluted share in the same period of the prior year.
On September 30, 2009, the Company had cash and cash equivalents of $173.2 million, compared with $49.3 million at the end of the second quarter. Inventory at the end of the third quarter was $85.8 million, down slightly from $86.8 million in the second quarter, but reflecting anticipated demand for jewelry products in the upcoming Christmas holiday season.
2009 Financial Outlook
Mr. Chong continued, “The third quarter came in stronger than we expected, considering the long National Holiday week and the dearth of gift-giving holidays during the quarter. Nevertheless, our ability to generate strong revenue and earnings growth during a seasonally slow period is extremely encouraging for our management team, as we look towards our goals for the future. As a result of the stronger-than-expected third quarter performance, we will be raising our revenue and net income guidance for the fourth quarter and full year. We believe that FUQI has laid the plans for strong continued growth in the wholesale and retail markets, and our branding, marketing and distribution plans will enable us to leverage the foundation we have built for more market penetration. We are excited about the coming quarters and the plans we have in place, and look forward to providing our shareholders with optimal value.”
For the fourth quarter of 2009, the Company anticipates total revenue between approximately $182.0-$191.0 million, which includes wholesale and retail revenues. Net income in the fourth quarter is expected to be in the range of $15.2-$16.6 million, or $0.55-$0.60 per diluted share, based on a weighted average share count of approximately 27.6 million shares.
For the full year 2009, the Company now expects full-year revenue of approximately $519.4-$528.4 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 $53.5-$54.9 million, or diluted EPS of $2.21-$2.27, based on a weighted average share count of approximately 24.2 million shares, reflecting the partial-year impact of the shares issued in our recent offering.
The Company will conduct a conference call to discuss its third quarter 2009 results today, Monday, November 9th at 8:30 am ET. Listeners may access the call by dialing #1-480-629-9858. To listen to the live webcast of the event, please go to http://www.viavid.net . Listeners may access the call replay, which will be available through November 23rd, by dialing #1-303-590- 3030; pin number: 4182147.
About FUQI International
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
This press release may include certain statements that are not descriptions of historical facts, but are forward-looking statements. Forward- looking statements can be identified by the use of forward-looking terminology such as “will” “believes”, “expects” or similar expressions. These forward- looking statements may also include statements about the Company’s proposed discussions related to its business or growth strategy, which is subject to change. Such information is based upon expectations of the Company’s management that were reasonable when made but may prove to be incorrect. All of such assumptions are inherently subject to uncertainties and contingencies beyond our control and upon assumptions. 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; the Company’s ability to obtain all necessary government certifications and/or licenses to conduct its business; the Company’s recent entry into the retail jewelry market; the Company’s reliance on one source for gold; 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 Company does not undertake to update the forward-looking statements contained in this press release. For a description of the risks and uncertainties that may cause actual results to differ from the forward-looking statements contained in this press release, see the Company’s most recent Annual Report filed with the Securities and Exchange Commission (SEC) on Form 10-K, and its subsequent SEC filings. Copies of filings made with the SEC are available through the SEC’s electronic data gathering analysis retrieval system (EDGAR) at http://www.sec.gov .
For more information, please contact: Mr. Frederick Wong Chief Financial Officer Tel: +852-6199-0741 (Hong-Kong) Ms. Charlene Hua EVP of Finance, Capital Market & Corporate Development Tel: +852-9468-2497 (Hong Kong) Email: <a href="mailto:IR@Fuqiintl.com;_ylt=Ai1I4hMC3lxDL6Rp5SS5xeOxcq9_;_ylu=X3oDMTE2NmkxbWl2BHBvcwMzBHNlYwNuZXdzQXJ0Qm9keQRzbGsDaXJmdXFpaW50bGNv" class="yltasis">IR@Fuqiintl.com</a> Bill Zima ICR Inc. (US) Tel: +1-203-682-8200 FUQI INTERNATIONAL, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (UNAUDITED) Three Months Ended Nine Months Ended September 30, September 30, 2009 2008 2009 2008 Net sales: Wholesale and distribution $117,450,677 $90,523,143 $306,780,848 $233,011,441 Retail 9,737,783 3,154,558 30,609,867 5,108,874 127,188,460 93,677,701 337,390,715 238,120,315 Cost of sales: Wholesale and distribution 89,712,957 80,723,212 250,306,439 207,616,922 Retail 7,538,332 1,956,227 21,740,102 3,596,854 97,251,289 82,679,439 272,046,541 211,213,776 Gross Profit 29,937,171 10,998,262 65,344,174 26,906,539 Operating expenses: Selling and marketing 3,893,122 1,559,892 9,731,593 2,486,020 General and administrative 1,828,675 1,153,666 5,690,294 3,222,725 Total operating expenses 5,721,797 2,713,558 15,421,887 5,708,745 Income from operations 24,215,374 8,284,704 49,922,287 21,197,794 Other income (expenses): Interest expense (667,537) (400,799) (1,463,510) (1,086,954) Interest income 54,303 6,715 114,928 20,050 (Loss)/gain from derivative instrument (18,652) 22,954 77,019 1,584,220 Miscellaneous 150,648 16,111 190,905 272,271 Total other income (expenses) (481,238) (355,019) (1,080,658) 789,587 Income before provision for income taxes 23,734,136 7,929,685 48,841,629 21,987,381 Provision for income taxes 4,962,627 1,409,127 10,542,380 3,820,983 Net income 18,771,509 6,520,558 38,299,249 18,166,398 Other compre- hensive income (loss) - foreign currency translation adjustments 47,969 707,332 39,190 7,213,788 Comprehensive income $18,819,478 $7,227,890 $38,338,439 $25,380,186 Earnings per share - basic $0.75 $0.31 $1.69 $0.86 Earnings per share - diluted $0.73 $0.31 $1.66 $0.86 Weighted average number of common shares - basic 24,964,966 21,247,868 22,654,228 21,033,701 Weighted average number of common shares- diluted 25,722,344 21,247,868 23,045,424 21,033,701 FUQI INTERNATIONAL, INC. CONDENSED CONSOLIDATED BALANCE SHEETS September 30, December 31, 2009 2008 (Unaudited) ASSETS Current assets: Cash $173,169,185 $56,569,733 Accounts receivable, including amount due from related party of $9,376,955 for 2009 and $2,837,907 for 2008, net of allowance for doubtful accounts of $1,171,000 for 2009 and $1,620,000 for 2008 73,825,242 73,949,200 Value added taxes receivable 5,824,290 2,170,669 Inventories 85,774,101 44,409,645 Prepaid expenses and other current assets 561,747 286,405 Advances to suppliers 26,120,827 8,468,971 Gold future contracts -- 1,426,236 Deferred taxes 26,820 142,608 Total current assets 365,302,212 187,423,467 Property, equipment, and improvements, net 4,046,172 3,400,642 Deposits 114,909 104,414 Goodwill 585,693 583,269 Acquired intangibles, net 3,103,914 3,197,344 Other assets 93,658 140,278 $373,246,558 $194,849,414 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Notes payable $48,323,327 $21,944,904 Accounts payable and accrued liabilities 8,261,630 12,511,519 Other payable, related parties 3,076,720 6,287,102 Customer deposits 18,271,322 14,474,178 Income tax payable 6,682,964 2,802,110 Total current liabilities 84,615,963 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, shares issued and outstanding - 27,628,656 for 2009 and 22,005,509 for 2008 27,629 22,006 Additional paid in capital 195,960,570 82,503,638 Accumulated foreign currency translation adjustments 9,659,714 9,620,524 Retained earnings 82,982,682 44,683,433 Total stockholders' equity 288,630,595 136,829,601 $373,246,558 $194,849,414 FUQI INTERNATIONAL, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) INCREASE (DECREASE) IN CASH Nine Months Ended September 30, 2009 2008 Cash flows provided by operating activities: Net income $38,299,249 $18,166,398 Adjustments to reconcile net income to net cash provided by (used for) operating activities: Depreciation and amortization 905,330 363,644 Provision for inventory reserve -- 1,958,552 Bad debt provision (449,290) 100,633 Stock-based compensation 467,729 445,653 Loss on disposal on property, equipment and improvements 55,355 18,189 Changes in operating assets and liabilities: Accounts receivable (3,749,103) (24,737,675) Value added taxes receivable (3,649,481) (2,951,671) Inventories (41,299,295) (10,614,653) Prepaid expenses and other current assets (215,109) (148,260) Gold future contracts 1,426,716 609,615 Advances to suppliers (17,633,714) (576,491) Deferred taxes 115,851 (2,239,121) Other assets 46,722 (111,561) Accounts payable, accrued expenses, accrued business tax, and other payable (4,218,947) 4,957,894 Customer deposits 3,781,576 2,311,975 Income tax payable 3,876,000 1,658,344 Net cash (used for) provided by operating activities (22,240,411) (10,788,535) Cash flows (used for) investing activities: Purchase of property, equipment and improvements (1,624,738) (959,435) Proceeds from disposal of property, equipment and improvements 79,028 -- Business acquisition -- (3,911,646) Decrease in restricted cash -- 431,282 Net cash used for investing activities (1,545,710) (4,439,799) Cash flows provided by (used for) financing activities: Proceeds from short-term borrowing 26,342,748 3,594,019 Repayments to a related party (965,901) -- Advances from a related party 2,071,706 -- Issuance of common stock related to public offering, net of financing cost 112,994,826 -- Net cash provided by (used for) financing activities 140,443,379 3,594,019 Effect of exchange rate changes on cash (57,806) 4,522,759 Net increase (decrease) in cash 116,599,452 (7,111,556) Cash, beginning of the period 56,569,733 63,293,653 Cash, end of the period $173,169,185 $56,182,097 Supplemental disclosure of cash flow information: Interest paid $1,533,925 $604,505 Income taxes paid $6,550,534 $4,449,155 Non-cash disclosure: Issuance of common stock for the Temix acquisition $-- $4,021,160 Offset of accounts receivables from related party and other payable to a related party $4,392,387 $-- Non monetary exchanges related to certain retail sales $1,553,949 $607,186 Transfer of acquisition deposit as a payment of the purchase price for business acquisition $-- $718,804