Yongye International Announces Record Second Quarter Results
BEIJING, Aug. 12 /PRNewswire-Asia-FirstCall/ -- Yongye International, Inc. (Nasdaq: YONG) ("Yongye" or the "Company"), a leading manufacturer, developer and distributor of "Shengmingsu" brand plant and animal nutrient products in China, today announced record financial results for the quarter ended June 30, 2010.
Second Quarter 2010 Highlights
-- Revenue increased 93.2% to $89.4 million from the second quarter of
2009
-- Gross profit increased 105.6% to $50.0 million
-- Gross margin increased 340 basis points to 56.0%
-- Operating income increased 86.8% to $29.8 million
-- Net income attributable to Yongye increased 301.1% to $24.2 million, or
$0.54 per diluted share, compared to $6.0 million, or $0.20 per diluted
share, in the second quarter of 2009
-- Adjusted net income attributable to Yongye, which excludes the impact
of the non-cash change in fair value of derivative liabilities of
$156,936, increased 112.8% to $24.1 million, or $0.54 per diluted share,
compared to adjusted net income attributable to Yongye of $11.3 million,
or $0.37 per diluted share, in the same period last year*
-- The number of independently-owned, Yongye-branded stores increased 105%
to 18,700 from 9,110 stores at the end of 2009
-- Days sales outstanding decreased to 32 days from 42 days
"We achieved strong sales, earnings, and EPS growth in the second quarter," stated Mr. Zishen Wu, Chief Executive Officer of Yongye International. "The majority of our revenue came from continued growth in sales in our existing markets as our loyal consumers, the rural Chinese farmers, continued to return to our branded stores to purchase our Shengmingsu products as they continued to receive value from increased crop yields and shortened harvest times. A significant part of our sales in the second quarter came from new geographic markets which are outside our core provinces in northern China where we are traditionally strong and where our business originated. We believe our record results were also driven by our more aggressive advertising and promotion efforts during the quarter as reflected in our increased selling expenses. In addition, we were successful in adding a large number of new stores to our network."
Second Quarter 2010 Results
Revenue for the three months ended June 30, 2010, was $89.4 million compared to $46.3 million for the same period in 2009, an increase of 93.2%. The increase in revenue was due to higher sales penetration in existing markets and the rapid expansion of the Company's distribution network. As of June 30, 2010, Yongye had 18,700 independently-owned branded stores in its network, compared to 13,880 stores at the end of the first quarter and 9,110 stores at the end of 2009.
Gross profit was $50.0 million compared to $24.3 million for the same period last year, an increase of 105.6%. Gross margin was 56.0% compared to 52.6% in the same period last year. The 340 basis point increase in gross margin was primarily the result of the Company transitioning its manufacturing process in-house during the second quarter of last year and continued, increasing economies of scale.
Selling, general and administrative ("SG&A") expenses including R&D were $20.2 million, or 22.6% of sales, compared to $8.4 million, or 18.1% of sales, in the same period last year. This increase in percentage was primarily due to additional expenses related to advertising and promotional activities as the Company conducted business in more provinces and carried out a nationwide marketing campaign through premium media outlets. While selling expense as percentage of sales for first half of 2010 was 19.8%, the Company expects to be able to achieve its full year 2010 target of selling expense as percentage of sales of approximately 15-17%. Operating income was $29.8 million compared to $16.0 million in the same period last year, an increase of 86.8%.
Net income attributable to Yongye was $24.2 million, or $0.54 per diluted share, compared to net income attributable to Yongye of $6.0 million, or $0.20 per diluted share, in the second quarter of 2009. The Company recorded a non- cash change in fair value of derivative liabilities of $156,936 in the second quarter of 2010. Excluding the impact of this non-cash item, adjusted net income attributable to Yongye was $24.1 million, or $0.54 per diluted share, compared to adjusted net income attributable to Yongye of $11.3 million, or $0.37 per diluted share in the same period last year.(*)
(*) See the table following this press release for a reconciliation of net income and diluted EPS to exclude the non-cash change in fair value of derivative liabilities.
First Half 2010 Results
Revenue for the six months ended June 30, 2010, was $114.3 million compared to $58.7 million for the same period in 2009, an increase of 94.8%. Gross profit was $63.9 million compared to $30.9 million for the same period last year, an increase of 107.0%. Gross margin was 55.9% compared to 52.6% in the same period last year.
Selling, general and administrative expenses including R&D were $28.4 million, or 24.9% of sales, compared to $11.6 million, or 19.8% of sales, in the same period last year. Operating income was $35.5 million compared to $19.3 million in the same period last year, an increase of 84.2%.
Net income attributable to Yongye was $28.6 million, or $0.64 per diluted share, compared to net income of $9.4 million, or $0.33 per diluted share, in the same period last year. The Company recorded a non-cash change in fair value of derivative liabilities of $169,470 in the first half of 2010. Excluding the impact of this non-cash item, adjusted net income attributable to Yongye was $28.4 million, or $0.64 per diluted share, compared to adjusted net income attributable to Yongye of $14.4 million, or $0.51 per diluted share in the same period last year.(*)
(*) See the table following this press release for a reconciliation of net income and diluted EPS to exclude the non-cash change in fair value of derivative liabilities.
Financial Condition
As of June 30, 2010, the Company had $38.2 million in cash, compared to $65.5 million as of December 31, 2009. Working capital was $119.9 million, compared to $107.8 million at the end of 2009. As of June 30, 2010, the Company had only $0.5 million in long-term debt. Stockholders' equity totaled $172.5 million as of June 30, 2010, compared to $132.6 million at the end of 2009.
Recent Developments
-- In August, the Company announced it will host an analyst/investor event
as well as a grand opening ceremony for its new production facility in
Inner Mongolia, China on August 27-28, 2010.
-- In July, the Company announced it increased the annual production
capacity of its existing plant nutrient production line from 10,000
tons to 15,000 tons.
-- In July, the Company acquired the Shengmingsu distribution network from
its provincial level distributor in Hebei Province which is solely
comprised of a customer list. To fund the transaction, the Company
issued 3.6 million shares of common stock in July 2010 to the seller
and will pay an additional $3.0 million in cash. The shares issued are
subject to a six-month lock-up period.
-- In June 2010, Yongye's Shengmingsu plant nutrient product and the
Company's unique branded store business model were featured as an
innovative and effective agricultural model by the flagship news
program for China Central Television's Economic Channel, which is
considered the most influential business and financial television
channel in China.
Business Outlook
As previously announced, from 2010 to 2012, Yongye expects to achieve at least a 50% annual growth rate in revenue and, for full year 2010, expects annual revenues of between $180 million and $185 million, representing an increase of between 83% and 89% over last year's revenue of $98.1 million.
Yongye updated guidance on adjusted net income attributable to Yongye. For full year 2010, the Company expects adjusted net income attributable to Yongye, which excludes the impact of certain non-cash expenses such as the change in fair value of warrants and share-based compensation, of between $48 million and $50 million, representing an increase of between 83.2% and 90.8% over 2009 adjusted net income attributable to Yongye of $26.2 million.
The Company increased its year-end target for the number of independently-owned, branded stores selling Yongye's Shengmingsu products to at least 23,000 by the end of 2010, which represents a 152% increase over the 2009 year-end figure of 9,110.
Yongye expects to close its recently announced acquisition of the development rights of a lignite coal resource project by the end of 2010 and expects the construction of its new production facility, which is located nearby, to be completed this month. Acquiring this resource is of great strategic importance. Humic acid, which is extracted from lignite coal, accounts for the largest percentage of Yongye's cost of goods sold and the Company believes it is important to secure this crucial resource at a cost effective price. This acquisition helps the Company mitigate market issues such as fluctuations in market prices, quality and delivery in its supply chain and ensures that its fast growing Shengmingsu business continues to have access to this key raw material.
Upon completion, the new production facility will help Yongye continue to meet the strong demand for its products in the domestic agricultural market in China. The new facility will expand annual production capacity for Yongye's Shengmingsu plant nutrient product from 15,000 tons per annum currently to 35,000 tons per annum, and that for its Shengmingsu animal nutrient product from 1,000 tons per annum currently to 11,000 tons per annum.
Mr. Wu added, "We expect continued strong sales growth in our business through the balance of the year and beyond as reflected in our recently updated guidance and branded store target. We have positioned our business to be able to satisfy the strong growth we expect. We recently announced a 50% capacity increase in our existing production facility and we are opening our new production facility later this month. We also expect strong growth in our bottom line and EPS. The recently closed acquisition of the Shengmingsu distribution network in Hebei, our most important province, as well as our announced deal to acquire the lignite coal resource project are both part of our vertical integration strategy, which we expect to have a positive impact on our gross margin performance. We believe we have sufficient cash resources to finance the remaining phases of the two vertical integration initiatives mentioned above. We are very pleased with the 44% year-over-year increase we achieved in our adjusted diluted EPS this quarter and are committed to continuing to maximize shareholder value not just through increased sales and net income, but also through further increases in our per share earnings performance."
Conference Call
The Company will host a conference call at 9:00 a.m. Eastern Time on Friday, August 13, 2010, to discuss its second quarter 2010 results. To participate in the live conference call, please dial the following number five to ten minutes prior to the scheduled conference call time: (877) 407-5374. International callers should dial +1 (702) 894-2288. The conference pass code is 93527897. For those who are unable to participate in the conference call at the time of the call, a replay will be available for 14 days after the call is held. To access the replay, please dial (800) 642-1687. International callers should dial +1 (706) 645-9291. The replay pass code is 93527897.
Use of Adjusted Financial Measures
GAAP results for the three months ended June 30, 2010 include a non-cash change in fair value of derivative liabilities. To supplement the Company's condensed consolidated financial statements presented on a GAAP basis, the Company has provided adjusted financial information excluding the impact of this item in this release. It is a departure of U.S. GAAP; however, the Company's management believes that this adjusted measure provides investors with a better understanding of how the results relate to the Company's historical performance. A reconciliation of the adjustments to GAAP results appears in the table accompanying this press release. This additional adjusted information is not meant to be considered in isolation or as a substitute for GAAP financials. The adjusted financial information that the Company provides also may differ from the adjusted information provided by other companies.
About Yongye International
Yongye International is a Chinese agricultural nutrient company headquartered in Beijing, with its production facilities located in Hohhot, Inner Mongolia, China. Yongye markets two lines of organic nutrient products: a liquid nutrient product which is sprayed on plants and a powder nutrient product which is added to animal feed. Both products are sold under the brand name "Shengmingsu," which means "life essential" in Chinese. The Company's patented and patent pending formulas and proprietary extraction processes allow it to create products that increase crop yields and improve the health of livestock. The Company sells its products primarily to provincial or regional level distributors, who then channel those products to a carefully selected network of independently-owned Yongye branded stores in China. For more information, please visit the Company's website at http://www.yongyeintl.com .
Safe Harbor Statement
This press release contains certain statements that may include "forward looking statements." All statements other than statements of historical fact included herein are "forward-looking statements." These forward-looking statements are often identified by the use of forward-looking terminology such as "believes," "expects" or similar expressions, involving known and unknown risks and uncertainties. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, they do involve assumptions, risks and uncertainties, and these expectations may prove to be incorrect. You should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including the risk factors discussed in the Company's periodic reports that are filed with the Securities and Exchange Commission and available on the SEC's website ( http://www.sec.gov ). All forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these risk factors. Other than as required under the securities laws, the Company does not assume a duty to update these forward-looking statements.
For more information, please contact:
Yongye International
Mr. Larry Gilmore
Vice President of Corporate Strategy
Phone: +86-10-8232-8866 x8880
Email: [email protected]
CCG Investor Relations
Athan Dounis
Account Manager
Phone: +1-646-213-1916
Email: [email protected]
- Financial Tables Follow -
YONGYE INTERNATIONAL, INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP FINANCIAL DATA
Three Months Ended Three Months Ended
June 30, 2010 June 30, 2009
Net Diluted Net Diluted
Income EPS Income EPS
Adjusted Amount $24,088,765 $0.54 $11,321,131 $0.37
Change in fair value of derivative
liabilities ($156,936) $5,276,958
GAAP amount per consolidated
statement of income $24,245,701 $0.54 $6,044,173 $0.20
Weighted average number of shares
- diluted 44,696,725 30,222,243
Six Months Ended Six Months Ended
June 30, 2010 June 30, 2009
Net Diluted Net Diluted
Income EPS Income EPS
Adjusted Amount $28,447,524 $0.64 $14,419,904 $0.51
Change in fair value of derivative
liabilities ($169,470) $5,068,947
GAAP amount per consolidated
statement of income $28,616,994 $0.64 $9,350,957 $0.33
Weighted average number of shares
- diluted 44,674,545 28,500,814
YONGYE INTERNATIONAL, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEETS
June 30, 2010 December 31, 2009
Current assets
Cash $38,165,514 $65,518,181
Accounts receivable, net of allowance
for doubtful accounts 54,318,725 6,161,796
Inventories 41,437,200 42,033,261
Prepayments 10,276,841 6,211,896
Prepaid expenses 456,979 112,879
Other receivables 268,040 383,841
Total Current Assets 144,923,299 120,421,854
Property, plant and equipment, net 11,194,461 9,156,915
Intangible asset, net 80,077 85,058
Land use right, net 4,140,288 4,166,987
Deposits for assets acquisition 20,137,071 --
Other assets 7,525,840 2,029,012
Goodwill 9,987,640 9,945,862
Total Assets $197,988,676 $145,805,688
Current liabilities
Short-term bank loan $-- $2,925,174
Long-term loans and payables -
current portion 462,224 331,693
Accounts payable - related party -- 880,026
Accounts payable - third parties 2,172,711 344,774
Income tax payable 8,732,681 4,082,424
Advance from customers 980,575 29,157
Accrued expenses 10,876,590 479,609
Due to a related party -- 1,663,191
Other payables 944,270 553,286
Derivative liabilities - fair value
of warrants 825,586 1,380,205
Total Current Liabilities 24,994,637 12,669,539
Long-term loans and payables 541,713 545,327
Total Liabilities 25,536,350 13,214,866
Equity
Common stock: par value $.001;
75,000,000 shares authorized;
44,587,044 shares issued and
outstanding at June 30, 2010 and
44,532,241 shares issued and
outstanding at December 31, 2009 44,587 44,532
Additional paid-in capital 119,052,799 118,583,308
Subscription receivable -- (8,550,000)
Retained earnings 44,123,439 15,506,445
Accumulated other comprehensive
income 971,148 329,139
Total equity attributable to Yongye
International, Inc. 164,191,973 125,913,424
Noncontrolling interest 8,260,353 6,677,398
Total Equity 172,452,326 132,590,822
Total Liabilities and Equity $197,988,676 $145,805,688
YONGYE INTERNATIONAL, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
For the Three Months Ended For the Six Months Ended
June 30, June 30, June 30, June 30,
2010 2009 2010 2009
Sales $89,414,388 $46,271,544 $114,349,104 $58,707,319
Cost of sales 39,378,346 21,936,877 50,456,303 27,839,484
Gross profit 50,036,042 24,334,667 63,892,801 30,867,835
Selling expenses 16,343,330 6,450,694 22,631,333 9,070,992
Research and
development expenses 2,238,331 1,124,445 2,338,896 1,413,017
General and
administrative
expenses 1,614,692 785,565 3,465,946 1,130,722
Income from
operations 29,839,689 15,973,963 35,456,626 19,253,104
Other
(income)/expenses
Interest expense, net 7,271 10,500 14,729 16,458
Other income, net (286,895) (13,178) (238,112) (12,737)
(Decrease)/increase
in fair value of
derivative
liabilities (156,936) 5,276,958 (169,470) 5,068,947
Total other (income)/
expenses, net (436,560) 5,274,280 (392,853) 5,072,668
Earnings before
income tax expense 30,276,249 10,699,683 35,849,479 14,180,436
Income tax expense 4,738,834 4,591,776 5,683,322 4,747,223
Net income 25,537,415 6,107,907 30,166,157 9,433,213
Less: Net income
attributable to the
noncontrolling
interest 1,291,714 63,734 1,549,163 82,256
Net income
attributable to
Yongye
International, Inc. $24,245,701 $6,044,173 $28,616,994 $9,350,957
Earnings per share:
Basic $0.54 $0.20 $0.64 $0.33
Diluted $0.54 $0.20 $0.64 $0.33
Weighted average
shares used in
computation:
Basic 44,578,011 30,222,243 44,555,252 28,500,814
Diluted 44,696,725 30,222,243 44,674,545 28,500,814
YONGYE INTERNATIONAL, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended
June 30, 2010 June 30, 2009
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $30,166,157 $9,433,213
Adjustments to reconcile net income
to net cash used in operating
activities:
Depreciation and amortization 937,752 244,805
Reversal of bad debt provision -- (305,338)
(Decrease)/increase in fair value of
derivative liabilities (169,470) 5,068,947
Changes in operating assets and
liabilities:
Accounts receivable-related party -- (29,212)
Accounts receivable-third parties (47,954,830) (33,525,463)
Inventories 771,354 (6,026,638)
Prepayments (4,111,996) --
Due from a related party -- 33
Prepaid expenses (342,900) 60,096
Other receivables 117,326 263,126
Other assets (5,627,195) --
Accounts payable-related party (880,505) 11,376,007
Accounts payable-third parties 1,818,461 41,187
Income tax payable 4,615,935 4,562,992
Advance from customers 947,831 (1,699,588)
Accrued expenses 10,356,848 4,742,049
Other payables 165,247 85,887
Net Cash Used in Operating Activities (9,189,985) (5,707,897)
CASH FLOWS FROM INVESTING ACTIVITIES
Deposits made for assets acquisition (19,309,188) --
Proceeds from sale of property, plant
and equipment 92,629 --
Purchase of property, plant and
equipment (2,791,242) (2,100,266)
Purchase of property, plant and
equipment-related party (1,663,769) --
Net Cash Used in Investing Activities (23,671,570) (2,100,266)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term loans and
payables -- 129,593
Repayment of long-term loans and
payables (334,675) (70,591)
Repayment of short-term loans (2,925,675) --
Proceeds from common stock issued 8,550,000 8,984,595
Proceeds from warrants exercised 84,397 --
Payment for common stock issuance
costs -- (836,456)
Net Cash Provided by Financing
Activities 5,374,047 8,207,141
EFFECT OF FOREIGN EXCHANGE RATE
CHANGES ON CASH 134,841 (15,641)
NET (DECREASE)/INCREASE IN CASH (27,352,667) 383,337
Cash and cash equivalent at beginning
of period 65,518,181 4,477,477
Cash and cash equivalent at end of
period $38,165,514 $4,860,814
Supplemental cash flow information:
Cash paid for income taxes 1,070,826 192,357
Cash paid for interest expense 51,796 21,384
SOURCE Yongye International, Inc.
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