China Marine Reports Fourth Quarter and Full Year 2012 Financial Results

SHISHI, China, March 26, 2013 /PRNewswire/ -- China Marine Food Group Limited (NYSE MKT: CMFO) ("China Marine" or the "Company"), a manufacturer of Mingxiang® seafood-based snack foods, Hi-Power® marine algae-based beverages and a distributor of frozen marine catch, today announced its financial results for the fourth quarter and full year ended December 31, 2012.

Financial Summary

Fourth Quarter 2012 Results



Q4 2012

Q4 2011

CHANGE

Net Sales

$50.2 million

$64.3 million

-22.0%

Gross Profit

$12.3 million

$7.3 million

+69.4%

Net Income

$1.7 million

$1.1 million

+50.8%

Diluted EPS*

$0.06

$0.04

+50.0%

Adjusted Net Income**

$4.6 million

$2.3 million

+96.0%

Adjusted Diluted EPS**

$0.15

$0.08

+87.5%


* Diluted EPS calculated for the period is based on 29.7 million shares on December 31, 2012 and December 31, 2011.

** Adjusted Net Income and Diluted EPS are non-GAAP calculations and do not include $0.6 million of non-cash, amortization of intangible assets related to the Company's acquisition in Q4 2012 and Q4 2011, $0.6 million of after-tax non-cash stock-based compensation expenses in Q4 2011 and $2.2 million of non-cash intangible assets impairment in Q4 2012. For more information about the non-GAAP financial measures contained in this press release, please see "About Non-GAAP Financial Measures" below.

"We closed 2012 with very strong results from our two primary businesses - Mingxiang® seafood snacks and Hi-Power® beverages," started Mr. Pengfei Liu, Chairman and CEO of China Marine. "For the second consecutive quarter, sales of our seafood snacks increased year-over-year, reflecting strength in our brands and a rebound in the marketplace. We see continued growth opportunities ahead, driven by further improvements in the market for our products and expanded distribution in existing and select new markets."

Fourth Quarter 2012 Results

For the quarter ended December 31, 2012, total net revenues, including Mingxiang®-branded seafood snack foods, Hi-Power® beverages and marine catch was $50.2 million, down approximately 22.0% from $64.3 million in the prior year's period. However, sales grew significantly year-over-year in both the seafood snacks and Hi-Power® beverages businesses.

Seafood Snack Food Segment

China Marine's sale of processed and packaged seafood snack foods generated $15.9 million in revenue, a 41.6% increase from the fourth quarter of 2011, representing the second consecutive quarter of year-over-year growth in seafood snacks revenue. Overall seafood snack food sales have been gradually recovering to pre-earthquake levels. Sales were particularly higher in Fujian province as a result of continuous market penetration efforts and marketing support. Seafood snack foods accounted for 31.7% of total revenues in the fourth quarter of 2012.

China Marine has maintained its product line of 27 Mingxiang®-branded seafood jerky snacks sold to consumers at retail locations. Retail points for seafood snack foods include major supermarket chains, convenience store chains, general food stores, campus canteens and local corner shops in Fujian, Zhejiang, Guangdong, Shandong and major prefectures like Shenzhen.

Hi-Power® Beverage Segment

Revenues from the Hi-Power® algae-based beverage line were $15.0 million in the fourth quarter of 2012, a 154.7% increase compared to $5.9 million in the fourth quarter of 2011. Hi-Power® sales were negatively affected in the year-ago period due to consumer concerns regarding plasticizer contamination in the beverage industry. Sales increased year-over-year both in Fujian and Zhejiang provinces.

The total numbers of retail end-points for Hi-Power® were about 14,000 on December 31, 2012. Since 2011, the Company has focused on increasing sales growth in existing distributors. Hi-Power® beverages are sold and promoted in major international retailers such as Walmart®, China-based supermarkets like Trust-Mart®, convenience stores, bars, restaurants, school canteens and local corner stores which carry Hi-Power® beverages, and certain locations where Mingxiang®-branded seafood products are also sold.

Gross margin was 38.7% in the fourth quarter of 2012, down 0.5% from 39.2% in the same period last year due primarily to the increased costs of raw materials, packaging materials and manufacturing overhead.

Marine Catch Trade Segment

China Marine's frozen marine catch business segment generated $19.3 million in the fourth quarter of 2012 compared to $47.2 million in the same period a year ago. The Company purchases and sells marine catch to distributors on an opportunistic basis. Gross profits were $1.6 million in the marine catch business during the three months ended December 31, 2012 compared to $1.8 million in the same period a year ago.

Consolidated costs of goods sold totaled $37.9 million for the quarter, or 75.5% of net revenues for the period ended December 31, 2012, which consists of the cost of raw materials, packaging materials, direct labor and manufacturing overhead.

Gross profit in the fourth quarter of 2012 was $12.3 million compared to $7.3 million in the fourth quarter of 2011. Consolidated gross margins increased to 24.5% for the fourth quarter of 2012, up from 11.3% for the three months ended December 31, 2011. Gross margin improvements were a direct result of higher sales of seafood snacks and Hi-Power® beverages, and lower sales of marine catch at relatively lower margins.

GAAP net income attributable to China Marine shareholders was $1.7 million in the three months ended December 31, 2012 compared to $1.1 million net income in the same period a year ago. Excluding the non-GAAP financial measure as mentioned above, adjusted net income for the fourth quarter of 2012 were $4.6 million, with adjusted earnings per share of $0.15.

Full Year 2012 Results

FY 2012 Results



FY 2012

FY 2011

CHANGE

Net Sales

$157.3 million

$143.9 million

+9.3%

Gross Profit

$35.8 million

$31.7 million

+12.9%

Net Income

-$4.5 million

$8.6 million

-152.4%

Diluted EPS*

-$0.15

$0.29

-151.7%

Adjusted Net Income**

$3.4 million

$12.8 million

-73.2%

Adjusted Diluted EPS**

$0.12

$0.43

-72.1%


* Diluted EPS calculated for the period is based on 29.7 million shares on December 31, 2012 versus 29.5 million shares on December 31, 2011.

** Adjusted Net Income and Diluted EPS are non-GAAP calculations and do not include $2.5 million of non-cash, amortization of intangible assets related to the Company's acquisition in FY 2012 and FY 2011, $0.6 million and $1.7 million of after-tax non-cash stock-based compensation expenses in FY 2012 and FY 2011, respectively, $2.6 million of non-cash goodwill impairment and $2.2 million of non-cash intangible assets impairment in FY 2012. For more information about the non-GAAP financial measures contained in this press release, please see "About Non-GAAP Financial Measures" below.

Net revenues for the twelve months ended December 31, 2012 were $157.3 million compared to $143.9 million in the corresponding period a year ago, representing a 9.3% increase. The primary reason for the year-over-year growth in net revenues was a 55.7% increase in sales of Hi-Power® beverages. Mingxiang®-branded seafood products, Hi-Power® beverages and marine catch accounted for approximately 32.7%, 29.4% and 37.9% of total sales in fiscal 2012, respectively.

Gross profits were $35.8 million during the full year of 2012, representing a gross margin of 22.8%, compared to $31.7 million and 22.0%, respectively, during 2011. The Company was able to partially offset higher raw materials and packaging costs through manufacturing efficiencies and an improvement in product mix.

Operating expenses were $39.1 million for the twelve months ended December 31, 2012, up 82.9% compared to $21.4 million in the full year 2011. Sales and marketing expenses increased from $14.0 million in 2011 to $27.0 million in 2012, reflecting ongoing investments in advertising, marketing and promotions. The Company had an operating loss of $3.2 million in 2012 compared to an operating income of $10.4 million in 2011. Excluding $0.6 million of after-tax non-cash stock-based compensation expenses, $2.5 million non-cash amortization expense, $2.6 million of non-cash goodwill impairment and $2.2 million of non-cash intangible assets impairment related to prior acquisition, adjusted operating income for the twelve months ended December 31, 2012 was $4.7 million.

Net loss and net loss per share attributable to China Marine shareholders for the twelve months ended December 31, 2012 were $4.5 million and $0.15, respectively. Non-GAAP adjusted net income was $3.4 million and non-GAAP adjusted earnings per share was $0.12. The weighted average shares outstanding were 29.7 million shares for 2012.

Financial Condition

As of December 31, 2012, the Company had $0.9 million in cash compared to $0.6 million as of December 31, 2011. China Marine had $8.8 million of debt outstanding at December 31, 2012 as a result of short-term loans used for optimal pricing of marine catch purchases and to maintain the effectiveness of the facility lines with the banks. Cash used for operations were $4.2 million during the twelve months of 2012 compared to $8.4 million in the comparable period a year ago. The primary cause of the year-over-year improvement is better accounts receivable collection, partially offset by higher inventories.

Working capital was $72.2 million as of December 31, 2012, up from $70.2 million as of December 31, 2011. The current ratio was 4.7 to 1 on December 31, 2012 compared to 9.0 to 1 on December 31, 2011. Accounts receivable were $54.0 million as of December 31, 2012 compared to $68.6 million as of December 31, 2011. The accounts receivable takes less than three months to collect on average. Shareholders' equity was $126.7 million at December 31, 2012.

Fourth Quarter and Full Year 2012 Conference Call

Mr. Pengfei Liu, CEO, and Mr. Marco Ku, CFO, will host the conference call. To attend the call, please use the dial in information below. When prompted, ask for the "China Marine Food Q4 2012 conference call".

Date:

Wednesday, March 27, 2013

Time:

8:00 am Eastern Time (DST)

Conference Line Dial-In (U.S.):

+1-877-317-6776

International Dial-In:

+1-412-317-6776

Conference ID:

"China Marine" or 10026364

Webcast:

http://webcast.mzvaluemonitor.com/Cover.aspx?PlatformId=1011

Please dial in at least 10-minutes before the call to ensure timely participation.

A playback of the call will be available until 8:00 am ET on April 3, 2013. To listen, call +1-877-344-7529 within the United States or +1-412-317-0088 when calling internationally. Please use the replay pin number 10026364. The Webcast will be available until March 26, 2014.

About China Marine

China Marine Food Group Limited is a food and beverage manufacturer of Mingxiang® seafood-based snack foods and Hi-Power® marine algae-based health drinks, and a wholesaler of frozen marine catch in five provinces in the PRC. Founded in 1994, China Marine has grown steadily and positioned its brands as a category leader in 3,500 retail food sales points and 14,000 beverage sales points in China. The Company has received "The Famous Brand" and "Green Food" awards. Located in Fujian province, it is one of the largest coastal provinces in the PRC and a vital navigation hub between the East China Sea and the South China Sea. The Company is committed to the highest standard of quality control with the ISO9001, ISO14001, HACCP certification and EU export registration.

Forward Looking Statements

This release contains certain "forward-looking statements" relating to the business of China Marine Food Group Limited and its subsidiary companies, which can be identified by the use of forward-looking terminology such as "believes, expects" or similar expressions. Such forward looking statements involve known and unknown risks and uncertainties, including all business uncertainties relating to product development, marketing, concentration in a single customer, raw material costs, market acceptance, future capital requirements, competition in general and other factors that may cause actual results to be materially different from those described herein as anticipated, believed, estimated or expected. Certain of these risks and uncertainties are or will be described in greater detail in our filings with the Securities and Exchange Commission. China Marine Food Group Limited is under no obligation to (and expressly disclaims any such obligation to) update or alter its forward-looking statements whether as a result of new information, future events or otherwise. This press release shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of such state or jurisdiction.

About Adjusted Non-GAAP Financial Measures

To supplement the Company's consolidated financial statements, which statements are prepared and presented in accordance with GAAP, we use the following non-GAAP financial measures: non-GAAP adjusted net income, and non-GAAP adjusted diluted EPS. The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. The Company uses these non-GAAP financial measures for financial and operational decision making and as a means to evaluate period-to-period comparisons. Management believes that these non-GAAP financial measures provide meaningful supplemental information regarding the Company's performance and liquidity by excluding certain expenses and expenditures that may not be indicative of "recurring core business operating results", meaning operating performance excluding non-cash amortization charges for intangibles, after-tax non-cash stock-based compensation expenses, and non-cash goodwill and intangible assets impairment. China Marine believes that both management and investors benefit from referring to these non-GAAP financial measures in assessing performance and when planning, forecasting and analyzing future periods. These non-GAAP financial measures also facilitate management's internal comparisons to historical performance and liquidity as well as comparisons to competitors' operating results. The Company believes these non-GAAP financial measures are useful to investors both because (1) they allow for greater transparency with respect to key metrics used by management in its financial and operational decision making and (2) they are used by our institutional investors and the analyst community to help them analyze the health of the business.

- Financial Statements Follow -

CHINA MARINE FOOD GROUP LIMITED

CONSOLIDATED BALANCE SHEETS

(Currency expressed in United States Dollars ("US$"))



December 31,


2012


2011

ASSETS






Current assets:






Cash and cash equivalents

$

880,259


$

586,914

Accounts receivable, net


54,045,852



68,643,678

Inventories


36,415,013



8,886,234

Prepaid expenses and other current assets


400,664



849,419







Total current assets


91,741,788



78,966,245







Property, plant and equipment, net


35,737,296



11,199,244

Land use rights, net


2,966,805



3,023,569

Construction in progress


158,702



22,923,143

Intangible assets, net


15,616,259



20,225,220

Goodwill


-



2,553,757







TOTAL ASSETS

$

146,220,850


$

138,891,178







LIABILITIES AND SHAREHOLDERS' EQUITY






Current liabilities:






Short-term borrowings

$

8,760,375


$

2,550,257

Accounts payable, trade


4,227,177



2,583,549

Amount due to a shareholder


-



50,361

Income tax payable


321,306



174,525

Accrued liabilities and other payables


6,217,260



3,424,288







Total current liabilities


19,526,118



8,782,980







Commitments and contingencies












Shareholders' equity:






Preferred stock, $0.001 par value; 1,000,000 shares authorized;
     0 shares issued and outstanding as of December 31, 2012 and
     2011


-



-

Common stock, $0.001 par value; 100,000,000 shares authorized;
     29,722,976 and 29,697,976 shares issued and outstanding as of
     December 31, 2012 and 2011


29,723



29,698

Additional paid-in capital


50,097,677



50,074,952

Statutory reserve


9,696,177



9,696,177

Accumulated other comprehensive income


12,946,218



11,897,382

Retained earnings


53,568,622



58,053,435

Total China Marine Food Group Limited shareholders' equity


126,338,417



129,751,644

Non-controlling interests


356,315



356,554

Total shareholders' equity


126,694,732



130,108,198







TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$

146,220,850


$

138,891,178

 

CHINA MARINE FOOD GROUP LIMITED

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(Currency expressed in United States Dollars ("US$"))



Year Ended December 31,


2012


2011

REVENUE, NET






Processed seafood products

$

51,441,395


$

58,967,200

Marine catch


59,657,283



55,304,114

Algae-based beverage products


46,218,669



29,676,358



157,317,347



143,947,672

COST OF REVENUE (INCLUSIVE OF DEPRECIATION AND AMORTIZATION)






Processed seafood products


(36,376,898)



(41,411,881)

Marine catch


(56,673,983)



(53,057,915)

Algae-based beverage products


(28,436,881)



(17,753,909)



(121,487,762)



(112,223,705)







GROSS PROFIT


35,829,585



31,723,967







OPERATING EXPENSES:






Depreciation and amortization


(2,782,333)



(2,714,603)

Sales and marketing


(26,968,313)



(14,045,894)

General and administrative


(3,864,245)



(2,576,019)

Stock-based compensation


(667,246)



(2,034,197)

Goodwill impairment


(2,571,488)



-

   Intangible assets impairment


(2,223,879)



-

TOTAL OPERATING EXPENSES


(39,077,504)



(21,370,713)







(LOSS) INCOME FROM OPERATIONS


(3,247,919)



10,353,254







OTHER INCOME (EXPENSES):






Subsidy income


15,866



14,719

Rental income


198,940



101,326

Interest income


86,517



154,515

Interest expense


(439,848)



(11,483)

(LOSS) INCOME BEFORE INCOME TAXES


(3,386,444)



10,612,331







INCOME TAX EXPENSE


(1,098,608)



(2,048,956)







NET (LOSS) INCOME


(4,485,052)



8,563,375







Less: net loss attributable to non-controlling interests


239



240







NET (LOSS) INCOME ATTRIBUTABLE TO CHINA MARINE FOOD GROUP LIMITED

$

(4,484,813)


$

8,563,615







Other comprehensive income:






-   Foreign currency translation gain


1,048,836



4,494,800







COMPREHENSIVE (LOSS) INCOME

$

(3,435,977)


$

13,058,415







Net (loss) income per share attributable to China Marine Food Group Limited






-   Basic

$

(0.15)


$

0.29

-   Diluted

$

(0.15)


$

0.29







Weighted average shares outstanding






-   Basic


29,708,768



29,514,744

-   Diluted


29,708,768



29,514,744

 

CHINA MARINE FOOD GROUP LIMITED

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Currency expressed in United States Dollars ("US$"))



Year Ended December 31,


2012


2011

CASH FLOWS FROM OPERATING ACTIVITIES:






Net (loss) income

$

(4,485,052)


$

8,563,375

Adjustments to reconcile net income to net cash used in operating activities:






Depreciation and amortization


3,327,840



3,014,783

Stock issued for service


22,750



51,800

(Reversal of) Allowance for doubtful accounts


(73,356)



101,071

Loss on disposal of property, plant and equipment


-



22,045

Compensatory stock awards


-



2,646,000

Goodwill impairment


2,571,488



-

   Intangible assets impairment


2,223,879



-

Changes in operating assets and liabilities:






Account receivable


14,671,182



(20,214,210)

Inventories


(27,528,779)



1,106,636

Prepaid expenses and other current assets


448,755



(743,779)

Accounts payable, trade


1,643,628



(1,181,173)

Income tax payable


146,781



(363,226)

Accrued liabilities and other payables


2,792,972



(1,434,406)







Net cash used in operating activities


(4,237,912)



(8,431,094)







CASH FLOWS FROM INVESTING ACTIVITIES:






Purchase of property, plant and equipment


(172,991)



(36,717)

Cash paid to construction in progress


(2,133,528)



(10,968,232)







Net cash used in investing activities


(2,306,519)



(11,004,949)







CASH FLOW FROM FINANCING ACTIVITIES:






Repayment of amount due to a shareholder


(50,361)



(211,428)

Proceeds from short-term borrowings


8,750,099



2,550,257

Repayment on short-term borrowings


(2,570,327)



-







Net cash provided by financing activities


6,129,411



2,338,829







NET CHANGE IN CASH AND CASH EQUIVALENTS


(415,020)



(17,097,204)







Effect of exchange rate changes in cash and cash equivalents


708,365



2,127,346







CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR


586,914



15,556,772







CASH AND CASH EQUIVALENTS, END OF YEAR

$

880,259


$

586,914







SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION






Cash paid for income taxes

$

951,827


$

2,412,182

Cash paid for interest

$

439,848


$

11,483







SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING TRANSACTIONS






Transfer from construction in progress to property, plant and equipment

$

24,897,969


$

1,812,921

Accrual of property, plant and equipment

$

737,798


$

-

For more information, please contact:

COMPANY

Mr. Marco Hon Wai Ku, CFO

China Marine Food Group Limited
Suite 815, 8th Floor, Ocean Centre, Harbour City, Tsimshatsui, Kowloon, HONG KONG
Tel:              +852-2111-8768
Email:          marco.ku@china-marine.cn
Web:            www.china-marine.cn

INVESTOR RELATIONS

John Mattio, SVP
MZ North America
Tel:              +1-212-301-7130
Email:          john.mattio@mzgroup.us
Web:           www.mzgroup.us

SOURCE China Marine Food Group Limited



RELATED LINKS
http://www.china-marine.cn
http://webcast.mzvaluemonitor.com/Cover.aspx?PlatformId=1011
http://www.mzgroup.us

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