HONG KONG, Nov. 13 /Xinhua-PRNewswire-FirstCall/ -- LJ International Inc. (LJI) (Nasdaq: JADE), a leading jewelry manufacturer and retailer, today reported financial results for the third quarter ended September 30, 2008.
Revenues for the third quarter ended September 30, 2008 totaled $32.9 million, down 12.7% from $37.7 million in the third quarter of 2007. The Company noted that the year-over-year revenue decline was primarily due to worsening economic conditions at the wholesale level, stemming from a global slowdown in consumer spending, and the temporary suspension of its "Signature" retail line for affluent consumers. Net income for the third quarter of 2008 was $0.4 million, or $0.02 per diluted share, compared to $0.5 million, or $0.02 per diluted share, a year earlier.
On a segmented basis, revenues from LJI's ENZO chain of jewelry stores increased by nearly 48% to $9.3 million from $6.3 million in year-ago quarter. The growth was primarily due to the maturation of a number of stores that were opened last winter. Wholesale revenues in the third quarter of 2008 decreased by nearly 25% to $23.6 million from $31.4 million in the third quarter of 2007. A total of 97 ENZO stores were in operation on September 30, 2008.
CEO Comments on Market Conditions
LJI Chairman and CEO Yu Chuan Yih commented, "Today's results show how LJI has held its own in an increasingly harsh environment for consumer sales of luxury goods. It is widely expected that the U.S. will report little or no growth in GDP during the third quarter, and possibly even a contraction. Results from our wholesale division, which depends on North America for most of its sales, reflect that worsening situation.
However, despite today's adverse economic conditions, which has now reached China, our ENZO chain of retail stores is continuing to report positive and improving financial results. We believe ENZO's increasing share of our overall revenue mix will ensure we are well-diversified away from the U.S. economy should it continue its weakening trend."
Nine-Month Results
For the nine months ended September 30, 2008, LJI reported revenues of $94.4 million, compared to $104.9 million in the first nine months of 2007. As with third quarter 2008 results, the year-over-year drop in revenues was due largely to lower sales in LJI's wholesale operations, reflecting the impact of a slowing world economy on consumer demand, particularly in the U.S. Net income for the first nine months of 2008 was $1.2 million, or $0.05 per diluted share, compared to $2.3 million, or $0.10 per diluted share, in the first nine months of 2007.
Fourth Quarter Guidance
In its guidance for the fourth quarter and full year 2008, LJI said it expects revenues in the fourth quarter to range from $32 million to $33 million, compared to $47.1 million a year earlier. Net income for the fourth quarter is projected to range between $0.4 million and $0.5 million, or approximately $0.02 per diluted share, compared to a net loss of ($0.8 million), or ($0.04) per diluted share, a year earlier. For all of 2008, the Company said it expects to achieve revenues between $126 million and $127 million, compared to $152 million in Fiscal 2007. Net income for 2008 is expected to range between $1.5 million to $1.6 million, or $0.07 per diluted share, compared to $1.5 million, or $0.07 per share, in 2007.
Mr. Yih continued, "The fourth quarter is shaping up to be one of the weakest holiday shopping seasons in memory. Looking ahead, however, we see LJI emerging from the global downturn in a strong position to grow with recovering consumer demand."
To be added to LJI's investor lists, please contact Haris Tajyar at htajyar@irintl.com or at 818-382-9702.
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. LJI distributes to fine jewelers, department stores, national jewelry chains and electronic and specialty retailers throughout North America and Western Europe, with a growing retail presence in China through its ENZO stores. Its product lines incorporate all major categories sought by major retailers, including earrings, necklaces, pendants, rings and bracelets.
Forward-looking statement: Except for the historical information, the matters discussed in this news release may contain forward-looking statements. These forward-looking statements do not constitute promises or guarantees of future performance, but involve a number of risks and uncertainties that could cause actual results to differ materially from such statements. Factors that could cause actual results to differ materially from such statements include, but are not limited to, factors relating to future revenues and earnings, expectations that the Company will not be negatively impacted by further one- time events relating to, but not limited to, write-offs related to its U.S. customers, significant or unforeseen litigation expenses, fluctuations in the Company's gross margins, productivity improvements at its ENZO Division, successful turnaround of its unprofitable ENZO retail stores, continued weakness in the global economic climate, particularly in the U.S. and China as well as additional risk factors detailed in the Company's most recent filings with the Securities and Exchange Commission. The Company assumes no obligation to update any forward-looking information contained in this press release or with respect to the announcements described herein.
(FINANCIAL TABLES FOLLOW)
LJ INTERNATIONAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
Three months ended Nine months ended
September 30 September 30
2008 2007 2008 2007
US$ US$ US$ US$
Operating revenue $32,960 $37,767 $94,406 $104,923
Costs of goods sold (23,874) (27,965) (66,449) (75,803)
Gross profit 9,086 9,802 27,957 29,120
Selling, general and
administrative expenses (8,372) (8,273) (27,739) (23,330)
Operating income 714 1,529 218 5,790
Other revenue and expense
Other revenues 85 53 217 219
Gain on disposal of investment
property -- -- 2,210 --
Interest expenses (416) (693) (1,402) (2,289)
Income before income taxes and
minority interest 383 889 1,243 3,720
Income taxes (5) (420) (67) (1,420)
Income before minority interest 378 469 1,176 2,300
Minority interest (4) (4) (5) (9)
Net income 374 465 1,171 2,291
Earnings per share:
Basic $0.02 $0.02 $0.05 $0.11
Diluted $0.02 $0.02 $0.05 $0.10
Weighted average number of
shares used in calculating
diluted earnings per share 22,759,949 22,641,071 22,336,579 22,340,464
LJ INTERNATIONAL INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
As of As of
September 30, December 31,
2008 2007
(Unaudited)
US$ US$
ASSETS
Current asset
Cash and cash equivalents 4,428 4,951
Restricted cash 6,420 4,161
Trade receivables, net of allowance for doubtful
accounts 21,203 23,194
Derivatives -- 2,947
Available-for-sale securities 2,333 2,973
Inventories 85,908 82,012
Prepayments and other current assets 2,415 2,522
Total current assets 122,707 122,760
Properties held for lease, net 758 1,292
Property, plant and equipment, net 7,381 8,460
Deferred tax assets 111 111
Goodwill, net 1,521 1,521
Total assets 132,478 134,144
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Bank overdrafts 3,084 2,977
Notes payable 8,933 4,047
Capitalized lease obligation, current portion 81 92
Letters of credit, gold loan and others 16,857 21,536
Derivatives -- 4,444
Trade payables 18,076 18,700
Accrued expenses and other payables 4,452 6,120
Income taxes payable 1,022 1,719
Deferred taxation 339 339
Total current liabilities 52,844 59,974
Notes payable, non-current portion 2,596 1,154
Capitalized lease obligation, non-current portion 122 181
Total liabilities 55,562 61,309
Minority interest 172 167
Shareholders' equity
Common stocks, par value US$0.01 each,
Authorized 100 million shares,
Issued 22,761,172 shares as of September
30, 2008 and 21,437,172 shares as of
December 31, 2007 228 214
Additional paid-in capital 55,138 51,495
Accumulated other comprehensive (loss) income (431) 321
Retained earnings 21,809 20,638
Total shareholders' equity 76,744 72,668
Total liabilities and shareholders' equity 132,478 134,144
FOR MORE INFORMATION:
Haris Tajyar
Managing Partner
Investor Relations International
Tel: +1-818-382-9702
Email: htajyar@irintl.com
