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FUQI earnings - Fuqi International
FUQI International, Inc. Reports Fourth Quarter and 2007 Financial Results
Friday March 28, 8:00 am ET
-- 4Q07 Revenues Increased 122% to $55.1 Million in 4Q07
-- 4Q07 Net Income Increased 253% to $7.4 Million, or $0.39 per Diluted Share
-- FY07 Revenues Increased 58% to $145.6 Million
-- FY07 Net Income Increased 133% to $13.5 Million, or $0.86 per Diluted Share
Company Provides Financial Outlook for Fiscal 2008
SHENZHEN, China, March 28 /Xinhua-PRNewswire-FirstCall/ -- FUQI International, Inc. (Nasdaq: FUQI - News) today announced financial results for the fourth quarter and fiscal year ended December 31, 2007.
Revenues for the fourth quarter of 2007 increased 122% to $55.1 million from $24.8 million in the fourth quarter of 2006, due to increases in sales volumes and selling prices.
Gross profit in the fourth quarter increased 98% to $5.8 million compared to $2.9 million in the prior year. This increase in gross profit was primarily attributable to higher selling prices for new jewelry designs as well as a generally more favorable pricing environment in the precious metal market, which resulted in increased processing fees on jewelry items delivered during the fourth quarter.
Gross profit margin for the fourth quarter decreased 120 basis points to 10.6% compared to 11.8% in the prior year. The decline in gross margin occurred for two reasons. First, during the quarter, the Company initiated (and has since ended) a limited-time, promotional discount on design fees that increased brand awareness, attracted new buyers, and generated larger orders. Additionally, gross margin was impacted by some very short-term fluctuations in gold prices during late November and early December. As a result of increased demand, the Company replenished its lower-cost inventory in November in preparation for a large sales event hosted by the Company in December. Raw materials prices in both November and December were higher than the inventory that had already been used in the quarter, and as a result of the short-term fluctuation, gross margin was also impacted.
Operating expenses in the fourth quarter increased to $1.7 million compared to $311,000 in the prior year period. This increase was a result of higher administrative expenses required to support a growing revenue base, as well as higher advertising costs, business taxes and expenses incurred as a result of being a publicly traded company. Operating income for the fourth quarter increased to $4.1 million from $2.6 million in the fourth quarter of 2006.
Net Income for the fourth quarter of 2007 increased 253% to $7.4 million, or $0.39 per diluted share, compared to $2.1 million, or $0.15 per diluted share in the prior year period. Net margin was 13.4% compared to 8.5% in the prior year period. Total non-cash compensation in the fourth quarter was approximately $702,000, and the reversal of the previous years' tax provision due to a tax exemption granted by the tax authority was approximately $4.2 million. Excluding the effect from these two items, net income margin was 6.9% and adjusted diluted earnings per share were $0.21. Management is providing a non-GAAP measure in order to enhance investors' and other readers' understanding and assessment of the Company's financial performance.
At the end of December 2007, the Company had retained earnings of $16.8 million and cash and cash equivalents of $63 million. The majority of the Company's cash was derived from its October 2007 stock offering that generated approximately $67 million in net proceeds.
Mr. Yu Kwai Chong, Chairman of Fuqi International commented, "We are pleased that our results for the fourth quarter were slightly better than previously forecasted, and the momentum that we have sustained through the first quarter is encouraging. We are committed to our goal of building brand awareness and becoming the leading provider of luxury jewelry products in China."
2008 Financial Outlook
For the 2008 fiscal year, the Company anticipates total wholesale revenue of approximately US$235-$250 million, compared to $145.6 million in 2007. The Company expects to sustain long term wholesale gross margins in the 10.5% range, in line with its historical average, with additional gross margin upside as its branded retail business becomes more meaningful to overall sales. Net income for 2008 is expected to be in the range of $15.3-$17.5 million, or $0.70-$0.80 per diluted earnings per share, based on a weighted average diluted share count of 22 million shares.
For the 2008 first quarter, the Company anticipates total wholesale revenue of approximately US$62 million, which represents a year-over-year increase of approximately 121%. Net income in the first quarter is expected to be in the range of $4.0-$4.4 million, or $0.19-$0.21 per diluted share, based on a weighted average share count of 21 million shares. Gross margin for the first quarter is expected to be approximately 11%, and net margin is expected to be approximately 6.5%. Please note that seasonally, the Company's sales and net income are generally strongest in the fourth quarter followed by Q3, Q1 and Q2.
Mr. Chong continued, "We look forward to another year of solid growth in our wholesale business. We continue to see strong traction in the luxury goods market in China, and believe that our strong and growing wholesale sales force, combined with the perception in China of high-end jewelry as both investment and ornament, will continue to strengthen our wholesale revenues."
Mr. Chong concluded, "We are also looking forward to our pending acquisition of Temix, which is expected to be finalized in the next several weeks, and to begin contributing to Fuqi revenues in the third quarter, once we have all necessary government approvals. Temix will allow us to quickly ramp up our retail strategy, by bringing 45 counters and 5 stores on board. Our strong capital position has given us the opportunity to broaden our retail presence through the Temix acquisition, and we will continue to manage our balance sheet to optimize opportunities and value for the business. We believe both our wholesale and retail strategies are sound, and allow us to put in place the foundation required to make Fuqi the leading wholesale and retail company in our market."
Financial Results for the Twelve Months ending December 31, 2007
For the twelve-month period ending December 31, 2007, net sales, which consist of gross sales net of returns, increased 57.5% to $145.6 million compared to $92.4 million in the twelve months of last year.
Gross profit increased to $16.5 million compared to $8.8 million in the prior year period. Gross margin increased 180 basis points to 11.3% from 9.5% in the same period of prior year.
Selling, general and administrative expenses in for 2007 were $4.0 million, or 2.8% of sales, compared to $1.3 million, or 1.4% of sales, in the same period of prior year.
Operating profit for 2007 increased 66% to $12.5 million compared to $7.5 million in the same period of prior year. Operating margin for 2007 increased 50 basis points to 8.6% compared to 8.1% in the same period of prior year.
Net income for 2007 was $13.5 million, or $0.86 per diluted share, compared to $5.8 million, or $0.50 per diluted share in the same period of prior year. Net income as a percent of net sales increased 300 basis points to 9.3% compared to 6.3% in the prior year.
Conference Call
The Company will conduct a conference call to discuss the fourth quarter 2007 results today, Friday, March 28, 2008 before the market open at 8:30 am ET.
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