Gulf Resources, Inc. (Nasdaq:GURE) ("Gulf Resources" or the
"Company"), a leading manufacturer of bromine, crude salt and
specialty chemical products in China, today announced its financial
results for the fourth quarter and fiscal year ended December 31,
2014.
Fiscal Year 2014 Highlights
- Revenue was $113.7 million, a year-over-year decrease of
4%
- Gross profit was $31.9 million, a decrease of 7%
- Gross margin was 28%, compared to 29% in 2013
- Net income was $17.9 million, or $0.46 per basic and diluted
share from $21.0 million, or $0.55 per basic and $0.54 per diluted
share compared with the same period in 2013, a year-over-year
decrease of 15%.
- Excluding the one-time gain from the relocation of Factory #3
in 2013, earnings per share would have only declined 6.4%.
- Cash totaled $146.6 million as of December 31, 2014 ($3.77 per
share)*
- Net net cash (cash-liabilities) totaled $135,676,863
($3.49 per share).*
- Cash flow per share totaled $46,573,777 ($1.20 per
share).*
- Free cash flow totaled $39,392,574 ($1.01 per share).*
- Cash flow for the years 2013 and 2014 combined totaled
$86,725,049 ($2.28 per share)*
- Free cash flow for the years 2013 and 2014 combined totaled
$79,581,715 ($2.05 per share).*
- Shareholders' equity reached $312.1 million ($8.02 per
share)*
Fourth Quarter 2014 Highlights
- Revenue was $25.2 million, a year-over-year decrease of
16%
- Gross profit was $6.7 million, a year-over-year decrease of
27%
- Gross margin increased to 26.5% from 30.4% for the fourth
quarter of 2013
- Income from operations was $4.0 million as compared to $7.6
million in the fourth quarter of 2013, a year-over-year decrease of
47%. The fourth quarter of 2013 had a one-time gain of $623,577 for
the relocation of Factory No. 3.
- Operating margin was 15.8% compared to 25.1% for the fourth
quarter of 2013
- Net income was $2.9 million, or $0.07 per basic and diluted
share, versus $5.6 million, or $0.15 per basic and $0.14 per
diluted share a year ago, a year-over-year decrease of 49%
Fiscal Year 2014 Financial
Results
Net revenue for the fiscal year 2014, was $113,660,331, a
decrease of $4,731,452, or 4%, over the same period in 2013. This
decrease was attributable to our bromine and crude salt segments.
(i) revenue from our bromine segment decreased from $60,488,886 for
the fiscal year 2013 to $57,949,824 for the same period in 2014, a
decrease of approximately 4%, due to lower prices (ii) revenue from
our crude salt segment decreased from $13,790,128 for the fiscal
year 2013 to $10,752,226 for the same period in 2014, a decrease of
approximately 22%, due to lower prices (iii) revenue from our
chemical products segment increased from $44,112,769 for the fiscal
year 2013 to $44,958,281 for the same period in 2014, an increase
of approximately 2%.
Gross profit was $31,922,721, or 28%, of net revenue for fiscal
year 2014 as compared to $34,182,647, or 29%, of net revenue for
fiscal year 2013. Income from operations was $23,818,221 for the
fiscal year 2014 (or 21% of net revenue), a decrease of $4,625,271
(or approximately 16%) over income from operations for the fiscal
year 2013. The decrease resulted primarily from the decrease in
pricing for our bromine and crude salt segments products as well as
from the recognized gain on the relocation of original Factory No.3
in the amount of $2,501,336 for the fiscal year 2013. Net income
was $17,871,795 for the fiscal year 2014, a decrease of $3,095,562
(or approximately 15%) as compared to the same period in 2013. This
decrease was primarily attributable to the decrease in the selling
price of bromine and crude salt.
Fourth Quarter 2014 Results
Gulf Resources' revenue was $25.2 million for the
fourth quarter of 2014, a decrease of 16%, from $30.1 million for
the fourth quarter of 2013. Revenue from the bromine segment was
$14.0 million, a decrease of 1.3%. Revenue from the crude salt
segment was $2.7 million, a decrease 28.0%. Revenue from the
chemical products segment was $8.5 million, a decrease of 30.0%
from the corresponding period in 2013.
Gross profit for the fourth quarter of 2014 was
$6.7 million, a decrease of 27%, from $9.1 million of the fourth
quarter of 2013, and gross profit margin for the three months ended
December 31, 2014 was 26.5%, as compared to 30.4% for the
corresponding period last year. Sales, marketing and other
operating expenses for the fourth quarter of 2013 were $25,576, as
compared to $26,795 for the corresponding quarter last year.
General and administrative expenses for the fourth
quarter of 2014 were $2.24 million, as compared to $2.21 million
for the fourth quarter of 2013.
Income from operations for the fourth quarter of
2014 was $4.0 million, as compared to $7.6 million for the
corresponding quarter of 2013. The operating margin was 15.8% for
the fourth quarter of 2013, as compared to 25.1% for the fourth
quarter of 2013.
For the fourth quarter of 2014, the Company
incurred other income of $82,408, as compared to $50,212 for the
corresponding quarter last year.
Income taxes were $1.2 million for the fourth
quarter of 2014, a decrease of 40% from $2.0 million for the fourth
quarter of 2013. The Company's effective tax rate was 26% during
the quarter, which is same as the fourth quarter of 2013.
Net income was $2.9 million for the fourth quarter
of 2014, a decrease of 49%, from $5.6 million for the fourth
quarter of 2014. Basic and diluted earnings per share in the fourth
quarter of 2014 were $0.07 per basic and diluted share as compared
to $0.15 per basic and $0.14 per diluted share in the fourth
quarter of 2013. Weighted average number of basic shares for the
three months ended December 31, 2014 was 38,725,282, as compared
with 38,395,921 for the three months ended December 31, 2013.
Financial Condition
As of December 31, 2014, Gulf Resources had cash of
$146.6 million, ($3.77 per share),* current liabilities of $8.1
million, and shareholders' equity of $312.1 million ($8.02 per
share)*. Net net cash (cash-all liabilities) totaled $135,676,863
($3.49 per share)*. At the end of fiscal year 2014, the Company had
working capital of $186.0 million ($4.78 per share)*.
During 2014, we generated positive cash flow from
operating activities of $46.6 million ($1.20 per share)*. We used
approximately $0.66 million for the payment of land leases. In the
same period, we also used approximately $6.46 million in the third
phase enhancement project related to the protective shells to
transmission channels and ducts in Factory No. 10 and 11.
Free cash flow per share totaled $39,392,574 ($1.01
per share)*.
In the past two years combined, the Company
generated cash flow from operating activities of $86,725,049 ($2.28
per share)* and free cash flow of $79,581,715 ($2.05 per
share)*.
SUBSEQUENT EVENTS
In order to increase the Company's profit margins, produce more
consistent and reliable earnings and lessen dependence on the
economically sensitive bromine industry, on January 12, 2015, the
Company entered into an Equity Interest Transfer Agreement (the
"Agreement") with Shouguang City Rongyuan Chemical Co, Ltd.
("SCRC") and its shareholders, pursuant to which SCHC acquired SCRC
and all rights, title and interest in and to all assets owned by
SCRC, a leading manufacturer of materials for human and animal
antibiotics in China and other parts of Asia.
On February 4, 2015 the Company closed the transactions
contemplated by the Agreement between the Company, SCHC and SCRC.
In consideration for SCRC, SCHC paid $66.2 million in cash and
issued approximately 7.27 million shares of common stock at a price
of $2.00 per share, which represents a 73% premium over the
previous 10 day closing price. The shares were issued to the four
former equity owners of SCRC. The issuance of the shares was exempt
from registration pursuant to Regulation S of the Securities Act of
1933, as amended. On the closing date, the Company entered into a
lock-up agreement with the four former equity owners of SCRC. In
accordance with the terms of the lock-up agreement, the
shareholders have agreed not to sell or transfer the shares for
five years from the date the stock certificates evidencing the
Shares were issued. Total consideration for the purchase of SCRC
was approximately $80.8 million.
As the initial accounting for the acquisition of SCRC is
incomplete at the time the financial statements are issued.
Supplemental pro forma information as required by FASB ASC
805-10-50-2(h) is not available for disclosure.
On January 30, 2015, the Company announced that it found natural
gas resources under its bromine well in the Sichuan area. The
company will hire a third party to conduct a survey of the
geological structure and complexity analysis and the economics of
the natural gas under this well. The Company is in the final stage
of discussion with the expert company to finalize the service
agreement.
Business Outlook
Overall, we expect that the Chinese economy and bromine demand
will remain relatively soft. However, with the acquisition and the
expansion of our chemical business, we expect 2015 total revenue
will increase to $190 million, and net income will increase to the
range of $33 million to $34 million (approximately $0.74 per share)
based on current bromine price levels.
This guidance does not include either the costs or the potential
revenues of the Sichuan gas project.
The Company will not consider further development of the Sichuan
gas project until the assessment report from third party has been
completed, which is expected by the end of May 2015. If the project
is commercially viable, the company intends to invest approximately
$10 million for further development in 2015.
The Rongyuan acquisition is going smoothly. Audited financials
are required be filed by end of April 2015 with the SEC in
accordance to Form 8-K rules.
Gulf will continue to pursue horizontal and vertical acquisition
targets in order to increase the Company's profitability.
"In 2015, we will also consider methods of increasing
shareholder value," said Mr. Xiaobin Liu, the CEO of the company.
"We have generated substantial free cash flow and made accretive
acquisitions. We have also bought back some stock. However, we
recognize our stock is highly undervalued. We ended 2014 with net
cash per share of $3.77*, more than twice the current stock price.
Our shareholders equity was $312.1 million ($8.02 per share)*.
During 2015, we will consider a number of possible ways of
increasing shareholder value including stock buybacks, roadshows,
the possibility of dual listing on other exchanges, and etc. We
value our shareholders and want to take steps that will benefit
them."
* All per share calculations have not been
audited and have been calculated using the end of the year share
count of 38,911,014 as shown on the balance sheet in the
10-K.
Conference Call
Gulf Resources' management will host a conference
call on Monday, March 16, 2015 at 7:30 AM Eastern Time to discuss
its financial results for the fourth quarter and fiscal year ended
December 31, 2014.
Hosting the call will be Mr. Xiaobin Liu, CEO of
Gulf Resources. The Company's management team will be available for
investor questions following the prepared remarks.
To participate in this live conference call, please
dial +1 (877) 275-8968 five to ten minutes prior to the scheduled
conference call time. International callers should call +1 (706)
643-1666. The conference participant ID is 5572541.
A replay of the conference call will be available
two hours after the call's completion during 03/16/2014510:30 EDT -
04/16/2015 23:59 EDT. To access the replay, call +1 (855) 859-2056.
International callers should call +1 (404) 537-3406. The conference
ID is 5572541.
This conference call will be broadcast live over
the Internet and can be accessed by all interested parties by
clicking on http://www.gulfresourcesinc.com/events.html. Please
access the link at least fifteen minutes prior to the start of the
call to register, download, and install any necessary audio
software. For those unable to participate during the live
broadcast, a 90-day replay will be available shortly after the call
by accessing the same link.
About Gulf Resources, Inc.
Gulf Resources, Inc. operates through two
wholly-owned subsidiaries, Shouguang City Haoyuan Chemical Company
Limited ("SCHC") and Shouguang Yuxin Chemical Industry Co., Limited
("SYCI"). The Company believes that it is one of the largest
producers of bromine in China. Elemental Bromine is used to
manufacture a wide variety of compounds utilized in industry and
agriculture. Through SYCI, the Company manufactures chemical
products utilized in a variety of applications, including oil and
gas field explorations and as papermaking chemical agents. For more
information, visit www.gulfresourcesinc.com.
Forward-Looking Statements
Certain statements in this news release contain
forward-looking information about Gulf Resources and its
subsidiaries' business and products within the meaning of Rule 175
under the Securities Act of 1933 and Rule 3b-6 under the Securities
Exchange Act of 1934, and are subject to the safe harbor created by
those rules. The actual results may differ materially depending on
a number of risk factors including, but not limited to, the general
economic and business conditions in the PRC, future product
development and production capabilities, shipments to end
customers, market acceptance of new and existing products,
additional competition from existing and new competitors for
bromine and other oilfield and power production chemicals, changes
in technology, the ability to make future bromine asset purchases,
and various other factors beyond its control. All forward-looking
statements are expressly qualified in their entirety by this
Cautionary Statement and the risks factors detailed in the
Company's reports filed with the Securities and Exchange
Commission. Gulf Resources undertakes no duty to revise or update
any forward-looking statements to reflect events or circumstances
after the date of this release.
GULF RESOURCES, INC. |
AND SUBSIDIARIES |
CONSOLIDATED BALANCE
SHEETS |
(Expressed in U.S.
dollars) |
|
|
|
|
As of
December 31, |
|
2014 |
2013 |
Current Assets |
|
|
Cash |
$ 146,585,601 |
$ 107,828,800 |
Accounts receivable |
41,997,862 |
44,885,354 |
Inventories |
5,367,868 |
5,301,995 |
Prepayments and deposits |
86,301 |
4,583 |
Prepaid land leases |
51,024 |
50,548 |
Other receivables |
38,272 |
-- |
Deferred tax assets |
864 |
1,657 |
Total Current Assets |
194,127,792 |
158,072,937 |
Non-Current Assets |
|
|
Property, plant and equipment, net |
124,350,781 |
146,400,436 |
Property, plant and equipment under capital
leases, net |
1,339,602 |
1,701,328 |
Prepaid land leases, net of current
portion |
733,560 |
753,928 |
Deferred tax assets |
2,430,417 |
2,316,176 |
Total non-current assets |
128,854,360 |
151,171,868 |
Total Assets |
$ 322,982,152 |
$ 309,244,805 |
|
|
|
Liabilities and Stockholders' Equity |
|
|
Current Liabilities |
|
|
Accounts payable and accrued expenses |
$ 4,004,728 |
$ 5,645,831 |
Retention payable |
326,959 |
209,126 |
Capital lease obligation, current
portion |
205,128 |
202,392 |
Taxes payable |
3,545,429 |
5,248,486 |
Total Current Liabilities |
8,082,244 |
11,305,835 |
Non-Current Liabilities |
|
|
Capital lease obligation, net of current
portion |
2,826,495 |
2,943,878 |
Total Liabilities |
$ 10,908,739 |
$ 14,249,713 |
|
|
|
Stockholders' Equity |
|
|
PREFERRED STOCK; $0.001 par value; 1,000,000
shares authorized; none outstanding |
$ |
$ |
COMMON STOCK; $0.0005 par value; 80,000,000
shares authorized; 38,911,014 and 38,765,201 shares issued; and
38,672,865 and 38,580,602 shares outstanding as of December 31,
2014 and 2013, respectively |
19,456 |
19,383 |
Treasury stock; 238,149 and 184,599 shares as
of December 31, 2014 and 2013 |
(561,728) |
(500,000) |
Additional paid-in capital |
80,380,008 |
80,033,981 |
Retained earnings unappropriated |
183,480,402 |
166,421,427 |
Retained earnings appropriated |
18,078,392 |
17,265,572 |
Cumulative translation adjustment |
30,676,883 |
31,754,729 |
Total Stockholders' Equity |
312,073,413 |
294,995,092 |
Total Liabilities and Stockholders'
Equity |
$ 322,982,152 |
$ 309,244,805 |
|
|
|
|
|
|
GULF RESOURCES, INC. |
AND SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF
INCOME AND COMPREHENSIVE INCOME |
(Expressed in U.S.
dollars) |
|
|
|
|
Years Ended
December 31, |
|
2014 |
2013 |
NET REVENUE |
|
|
Net revenue |
$ 113,660,331 |
$ 118,391,783 |
|
|
|
OPERATING EXPENSES / INCOME |
|
|
Cost of net revenue |
(81,737,610) |
(84,209,136) |
Sales, marketing and other
operating expenses |
(105,588) |
(96,372) |
Research and development
cost |
(134,292) |
(140,445) |
Exploration cost |
(488,880) |
-- |
Write-off / Impairment on
property, plant and equipment |
(673,705) |
(27,964) |
Loss from disposal of property,
plant and equipment |
(9,866) |
-- |
General and administrative
expenses |
(7,161,047) |
(8,563,282) |
Gain on relocation of
factory |
-- |
2,501,336 |
Other operating income |
468,878 |
587,573 |
|
(89,842,110) |
(89,948,290) |
|
|
|
INCOME FROM OPERATIONS |
23,818,221 |
28,443,493 |
|
|
|
OTHER INCOME (EXPENSES) |
|
|
Interest expense |
(203,296) |
(208,250) |
Interest income |
482,885 |
339,798 |
|
279,589 |
131,548 |
INCOME BEFORE TAXES |
24,097,810 |
28,575,041 |
|
|
|
INCOME TAXES |
(6,226,015) |
(7,607,683) |
|
|
|
NET INCOME |
$ 17,871,795 |
$ 20,967,358 |
|
|
|
COMPREHENSIVE INCOME: |
|
|
NET INCOME |
17,871,795 |
20,967,358 |
OTHER COMPREHENSIVE INCOME |
|
|
- Foreign currency translation
adjustments |
(1,077,846) |
9,258,450 |
|
|
|
COMPREHENSIVE INCOME |
$ 16,793,949 |
$ 30,225,808 |
|
|
|
EARNINGS PER SHARE |
|
|
BASIC |
$ 0.46 |
$ 0.55 |
DILUTED |
$ 0.46 |
$ 0.54 |
|
|
|
WEIGHTED AVERAGE NUMBER OF SHARES |
|
|
BASIC |
38,694,567 |
38,395,921 |
DILUTED |
39,260,627 |
38,827,330 |
|
|
|
|
|
|
GULF RESOURCES, INC. |
AND SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF CASH
FLOWS |
(Expressed in U.S.
dollars) |
|
|
Years Ended
December 31, |
|
2014 |
2013 |
CASH FLOWS FROM OPERATING ACTIVITIES |
|
|
Net income |
$ 17,871,795 |
$ 20,967,358 |
Adjustments to reconcile net income to net
cash provided by operating activities: |
|
|
Interest on capital lease
obligation |
202,656 |
207,393 |
Amortization of prepaid land
leases |
680,551 |
660,002 |
Depreciation and
amortization |
27,642,222 |
27,460,693 |
Allowance for obsolete and
slow-moving inventories |
(3,174) |
(21,265) |
Write-off / Impairment loss on
property, plant and equipment |
673,705 |
27,964 |
Loss from disposal of property,
plant and equipment |
9,866 |
-- |
Gain on relocation of
factory |
-- |
(2,501,336) |
Demolition expenditure net off
against gain on relocation of factory |
-- |
(1,059,965) |
Currency translation adjustment
on inter-company balances |
(92,412) |
774,405 |
Deferred tax asset |
(121,436) |
5,502 |
Stock-based compensation
expense |
346,100 |
544,900 |
Changes in assets and liabilities: |
|
|
Accounts receivable |
2,751,676 |
(7,777,332) |
Inventories |
(84,777) |
879,952 |
Prepayment and deposits |
(80,673) |
(4,583) |
Accounts payable and accrued
expenses |
(1,616,195) |
(1,057,016) |
Retention payable |
117,905 |
(1,233,988) |
Other receivables |
(38,272) |
18,000 |
Taxes payable |
(1,685,760) |
2,260,588 |
Net cash provided by operating
activities |
46,573,777 |
40,151,272 |
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES |
|
|
Additions of prepaid land leases |
(664,106) |
(638,076) |
Proceeds from sales of property, plant and
equipment |
21,514 |
143 |
Purchase of property, plant and
equipment |
(6,538,611) |
(3,192,681) |
Compensation proceeds received |
-- |
3,868,483 |
Net cash provided by (used in)
investing activities |
(7,181,203) |
37,869 |
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES |
|
|
Repurchase of common stock |
(61,728) |
-- |
Repayment of capital lease obligation |
(304,806) |
(302,497) |
Net cash used in financing
activities |
(366,534) |
(302,497) |
|
|
|
EFFECTS OF EXCHANGE RATE CHANGES ON CASH AND
CASH EQUIVALENTS |
(269,239) |
2,701,121 |
NET INCREASE IN CASH AND CASH
EQUIVALENTS |
38,756,801 |
42,587,765 |
CASH AND CASH EQUIVALENTS - BEGINNING OF
YEAR |
107,828,800 |
65,241,035 |
CASH AND CASH EQUIVALENTS - END OF YEAR |
$ 146,585,601 |
$ 107,828,800 |
|
|
|
|
|
|
GULF RESOURCES, INC. |
AND SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF CASH
FLOWS (CONTINUED) |
(Expressed in U.S.
dollars) |
|
|
|
|
Years Ended
December 31, |
|
2014 |
2013 |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION |
|
|
Cash paid during the year for: |
|
|
Income taxes |
$ 7,604,071 |
$ 5,605,116 |
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING
AND FINANCING ACTIVITIES |
|
|
Issuance of common stock upon
cashless exercise of options |
$ 73 |
$ 107 |
|
|
|
CONTACT: Gulf Resources, Inc.
Web: http://www.gulfresourcesinc.com
Director of Investor Relations
Helen Xu (Hai Yan Xu)
Beishengrong@vip.163.com
IR Manager
Max Ma
Max_vx@163.com
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