SOURCE: LJ International
March 29, 2011 08:57 ET
LJ International Reports Rising Revenues and EPS in Q4 and FY 2010
Earnings Are Driven by Sharp Growth in Retail Division
HONG KONG--(Marketwire - March 29, 2011) - LJ International Inc. (LJI) (NASDAQ: JADE)
HIGHLIGHTS:
-- RETAIL DIVISION EXPERIENCES 48% Q4 SALES GAIN AND 155% RISE IN
OPERATING INCOME
-- OVERALL REVENUES RISE 15% FOR Q4 AND 27% FOR 2010, SURPASSING
QUARTERLY AND ANNUAL GUIDANCE
-- Q4 EPS RISES 56% YEAR-OVER-YEAR
-- EQUITY RAISE AND CREDIT LINES ENHANCE BALANCE SHEET - WORKING CAPITAL
EXCEEDS $100M
LJ International Inc. (LJI) (NASDAQ: JADE) today reported financial results
for the fourth quarter and fiscal year ended December 31, 2010. Revenues,
operating profit, net income, and earnings per share all rose during both
periods at double-digit percentage rates, spurred by sharply rising sales
from the Company's ENZO retail chain in China.
Key financial results are summarized as follows:
Overall revenues in the fourth quarter of 2010 were $45.0 million, up 15%
from $39.1 million a year earlier. Total revenues for 2010 totaled $140.5
million, up 27% from $110.5 million in 2009. Fourth quarter 2010 revenues
exceeded earlier guidance of approximately $42.5 million.
Retail revenues totaled $24.7 million in the fourth quarter of 2010, up 48%
from $16.7 million a year earlier. Retail revenues for all of 2010 totaled
$78.9 million, up 55% from $50.8 million in 2009.
Wholesale revenues totaled $20.3 million in the fourth quarter of 2010,
down 9% from $22.4 million in the fourth quarter of 2009. Wholesale
revenues for all of 2010 were $61.7 million, a 3% increase from $59.7
million in 2009.
Overall operating income was $5.6 million in the fourth quarter of 2010, up
109% from $2.7 million a year earlier. For all of 2010, overall operating
income was $14.3 million, a 209% increase from $4.6 million in 2009.
Retail operating income was $4.2 million in the fourth quarter of 2010, up
155% from $1.7 million a year earlier. For the full year 2010, operating
income increased 155%, to $11.6 million from $4.5 million in 2009.
Wholesale operating income was $2.1 million in the fourth quarter of 2010,
up 7% year-over-year. For 2010, wholesale operating income continued to be
profitable, increasing 145% to $4.5 million from $1.8 million in 2009.
Please note that overall operating income includes retail and wholesale
totals with an adjustment for corporate expenses.
Net income for LJI in the fourth quarter of 2010 was $4.0 million, or $0.14
per fully diluted share, up 56% on a per-share basis from $2.2 million, or
$0.09 per share, in 2009. Full-year net income for 2010 was $13 million,
or $0.49 per fully diluted share, up from $3.7 million, or $0.15 per share,
in 2009. Please note that net income for 2010 excludes a non-recurring
gain of $1.6 million on the sale of investment property in the third
quarter of 2010. EPS for 2010 was $0.43 per share.
2010 Retail Expansion is Paying
Off - Management Comments on Accelerated Retail Expansion, Increased Brand
Marketing, and Capital Resources
"LIJ's latest financials reflect the major acceleration of ENZO store
openings," said LJI Chairman and CEO, Yu Chuan Yih. "In 2008, ENZO
underwent an evaluation phase to better streamline operations and increase
efficiencies. Starting in Spring 2010, LJI's ENZO retail division resumed
its rapid expansion plan. By year end 2010, a net total of 38 new
locations were opened, bringing ENZO's total count to 133 stores. Retail
revenues have increased accordingly. A gratifying outcome is reflected in
greater retail operating margins and profits as well as companywide net
income. New retail stores are quickly reaching profitability and
contributing to the sharp improvement in LJI's overall operating results."
"In keeping with our efforts to support retail expansion, particular effort
was placed on ENZO's
marketing and branding strategy. Special promotional events, store opening
celebrations, and
integrating ENZO jewelry into fashion and makeup trends were activities
sponsored by LJI to bring ENZO to the forefront of consumers. In October
2010, a CBNweekly consumer survey rated ENZO one of the most desired luxury
brands for jewelry. In the categories 'brand
recognition' and 'demonstrated buyer preference,' ENZO placed fourth,
preceded only by
Cartier, Tiffany and Bulgari. We are proud to showcase ENZO and pleased
that both the industry and consumers continue to respond enthusiastically,"
stated Mr. Yih.
Mr. Yih summarized, "The year 2010 also included a significant
strengthening to LJI's capital resources and balance sheet. During 2010,
LJI raised approximately $38 million of new capital through equity and bank
lines of credit. With a solid financial foundation and continued
profitability for both retail and wholesale divisions, LJI remains on track
to reach the previously announced goal of having 200 ENZO stores open by
year end 2011."
Margins Rise Across the Board
LJI's gross profit in the fourth quarter of 2010 was $17.5 million, or 39%
of revenues, compared to $12.1 million, or 31% of revenues, in 2009. The
margin increase was due largely to the greater share of revenues from the
ENZO retail division, which has higher margins than the wholesale division.
It should be noted, however, that revenue margins rose within each
division. For the ENZO retail division, gross margins for the fourth
quarter 2010 rose to 54% from 47% a year earlier. Wholesale gross margin
rose to 21% from 19% a year earlier.
For all of 2010, gross profit companywide was $54.8 million, or 39% of
revenues, compared to $38.4 million, or 35% of revenues, in 2009. Retail
gross margins rose in 2010 to 53% from 52% in 2009. Wholesale gross
margins rose to 21% from 20% in 2009.
Operating margins rose year-over-year, spurred by both the increase in
gross margins and reductions (relative to revenues) of selling, general and
administrative (SG&A) expenses. For the fourth quarter of 2010, the
operating margin was 12% of revenues, up from an operating margin of 7% a
year earlier. SG&A expenses fell to 14% of revenues from 15% a year
earlier. This drop was offset partially by an increase in rental expenses
year-over-year to 10% of revenues, from 8% a year earlier. For all of 2010,
SG&A expenses were 16% of revenues, down from 18% in 2009. Rental expenses
held steady at 10% in both 2009 and 2010.
Balance Sheet Strengthens with New Capital Infusion
Aided by approximately $38 million from two new bank lines of credit and a
private placement share issue -- all finalized and announced in the fourth
quarter of 2010 -- LJI ended 2010 with additional strength to an already
solid balance sheet. Cash and equivalents totaled $13 million on December
31, 2010, or $0.45 per outstanding share, up from $11.3 million at the end
of 2009. Working capital (current assets minus current liabilities) rose to
$100.6 million at the end of 2010, up from $77.6 million at the end of 2009.
Long-term debt fell to $1.7 million from $2.3 million a year earlier.
Company Projects Over 50% Rise in Revenues and Net Income in Q1 2011
In guidance for the first quarter ending March 31, 2011, LJI said it
expects revenues to total approximately $40 million, an increase of 48%
from the first quarter of 2010. Retail revenues are projected to rise 52%
year-over-year to approximately $25 million. Wholesale revenues are
expected to rise 44% to approximately $15 million. Net income is expected
to be approximately $3 million or $0.10 per fully diluted share in the
first quarter of 2011. This figure is an increase of 60% year-over-year.
About LJ International Inc.
LJ International Inc. (LJI) (NASDAQ: JADE) is engaged in the designing,
branding, marketing and distribution of a full range of jewelry. It has
built its global business on a vertical integration strategy and an
unwavering commitment to quality and service. Through its ENZO stores, LJI
is now a major presence in China's fast-growing retail jewelry market. As a
wholesaler, it distributes to fine jewelers, department stores, national
jewelry chains and electronic and specialty retailers throughout North
America and Western Europe. Its product lines incorporate all major
categories, including earrings, necklaces, pendants, rings and bracelets.
Cautionary Note Regarding Forward-Looking Statements: This press release
may contain "forward-looking statements" within the meaning of the U.S.
Private Securities Litigation Reform Act of 1995. Forward-looking
statements can be identified by words such as "anticipates," "intends,"
"plans," "seeks," "believes," "estimates," "expects" and similar references
to future periods. Forward-looking statements are based on our current
expectations and assumptions regarding our business, the economy and other
future conditions. Because forward-looking statements relate to the future,
they are subject to inherent uncertainties, risks and changes in
circumstances that are difficult to predict. Our actual results may differ
materially from those contemplated by the forward-looking statements. They
are neither statements of historical fact nor guarantees or assurances of
future performance. We caution you therefore against relying on any of
these forward-looking statements. Factors that could cause actual results
to differ materially from such statements, as well as additional risk
factors, are detailed in the Company's most recent filings with the
Securities and Exchange Commission. Any forward-looking statement made by
us in this press release speaks only as of the date on which it is made.
We undertake no obligation to publicly update any forward-looking
information contained in this press release or with respect to the
announcements described herein, except as may be required by law.
LJ INTERNATIONAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
Three months ended Year ended
December 31 December 31
---------------------- ----------------------
2010 2009 2010 2009
---------- ---------- ---------- ----------
US$ US$ US$ US$
Operating revenue 45,046 39,166 140,548 110,523
Costs of goods sold (27,505) (27,017) (85,737) (72,173)
---------- ---------- ---------- ----------
Gross profit 17,541 12,149 54,811 38,350
Operating expenses
Selling, general and
administrative expenses (11,065) (9,013) (37,303) (31,039)
Net loss on derivatives (178) - (476) (503)
Depreciation (748) (484) (2,779) (2,197)
---------- ---------- ---------- ----------
Operating income 5,550 2,652 14,253 4,611
Other revenue and expense
Interest income 23 5 69 147
Gain on currency
translation 482 - 643 -
Gain on sales of securities - - 258 -
Gain on disposal of
property held for lease - - 1,635 -
Interest expenses (292) (202) (978) (842)
---------- ---------- ---------- ----------
Income before income taxes
and noncontrolling
interests 5,763 2,455 15,880 3,916
Income taxes expense (1,765) (205) (2,877) (231)
---------- ---------- ---------- ----------
Net Income 3,998 2,250 13,003 3,685
Net (income) loss
attributable to
noncontrolling interest (1) (9) (9) 4
---------- ---------- ---------- ----------
Net income attributable to
LJ International Inc.
common shareholders 3,997 2,241 12,994 3,689
========== ========== ========== ==========
Earnings per share:
Basic 0.14 0.09 0.51 0.16
Diluted 0.14 0.09 0.49 0.15
Weighted average number
of shares used in
calculating diluted
earnings per share 29,293,340 24,734,382 26,656,995 24,101,854
========== ========== ========== ==========
LJ INTERNATIONAL INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
As of As of
December 31, December 31,
2010 2009
------------- -------------
US$ US$
ASSETS
Current assets
Cash and cash equivalents 13,048 11,282
Restricted cash 11,009 6,425
Trade receivables, net of allowance for
doubtful accounts 25,889 21,679
Available-for-sale securities 2,344 2,360
Inventories 107,666 81,401
Prepayments and other current assets 3,635 1,861
------------- -------------
Total current assets 163,591 125,008
Properties held for lease, net 419 717
Property, plant and equipment, net 10,115 6,400
Deferred tax assets 111 111
Goodwill, net 1,521 1,521
------------- -------------
Total assets 175,757 133,757
============= =============
Liabilities and shareholders' equity
Current liabilities
Bank overdrafts 2,879 2,908
Notes payable 10,720 5,551
Capitalized lease obligation, current portion 48 98
Letters of credit, gold loan and others 21,539 13,481
Derivatives 571 -
Trade payables 19,172 18,545
Accrued expenses and other payables 5,555 5,354
Income taxes payable 2,255 1,147
Deferred taxation 268 310
------------- -------------
Total current liabilities 63,007 47,394
Notes payable, non-current portion 1,621 2,244
Capitalized lease obligation, non-current
portion 30 78
------------- -------------
Total liabilities 64,658 49,716
------------- -------------
Equity
Common stocks, par value US$0.01 each,
Authorized 100 million shares; Issued 29,153,672
shares as of December 31, 2010 and 23,768,672
shares as of December 31, 2009 292 238
Additional paid-in capital 69,941 56,675
Accumulated other comprehensive income 837 102
Retained earnings 39,851 26,857
------------- -------------
Total LJ International Inc. shareholders'
equity 110,921 83,872
Noncontrolling interest 178 169
------------- -------------
Total equity 111,099 84,041
------------- -------------
Total liabilities and equity 175,757 133,757
============= =============