Yuhe International, Inc. Announces First Quarter 2010 Results
WEIFANG, China, May 14 /PRNewswire-Asia-FirstCall/ -- Yuhe International, Inc. (Nasdaq: YUII) ("Yuhe" or "the Company"), a leading supplier of day-old chickens raised for meat production, or broilers, in the People's Republic of China ("PRC"), today announced financial results for the quarter ended March 31, 2010.
First Quarter 2010 Highlights and Recent Events
-- Net revenue increased 7.7% to $11.8 million year over year
-- Sales volume grew 11% to 25.6 million birds year over year
-- Gross profit was $3.9 million with gross margin of 33.2%
-- Operating income was $3.0 million, down 7.9% year over year
-- Net income increased 0.4% to $2.9 million, or $0.18 per fully diluted
share
"While the first quarter is traditionally one of our slowest in terms of sales due to the cold weather and the Chinese Spring Festival, we saw an uptick in sales volume of our day old broilers," commented Mr. Zhentao Gao, Chairman and Chief Executive Officer of Yuhe International. "At the same time, gross margin was impacted by slightly lower selling prices and higher feed costs. We expect our financial performance to accelerate in the second half of the year when the approximate 176,000 parent breeders we recently purchased mature and begin contributing to production capacity."
First Quarter 2010 Results
Net revenue for the first quarter of 2010 increased 7.7% to $11.8 million, compared to $10.9 million for the same period last year. The increase was mainly driven by the 10.8% gain in sales volume of day-old broilers to 25.6 million from 23.1 million in the comparable period last year. The sales volume increase was slightly offset by the 2.7% decrease in the average selling price per day-old broiler to RMB 2.91 from RMB 2.99 in the same quarter of 2009. Of net revenue, $10.9 million, or 92.6%, was generated from sales of day-old broilers.
Gross profit decreased 4.0% year over year to $3.9 million, compared to $4.1 million in the same period last year. Gross profit margin was 33.2%, compared to 37.2% in the same quarter last year. The decrease in gross profit margin is attributable to the 27.0% increase in the price of corn, a major ingredient in chicken feed.
Operating income decreased 7.9% to $3.0 million, compared to $3.2 million in the same period of 2009. Operating margin was 25.3%, compared to 29.55% in the same quarter of 2009.
Net income increased 0.4% to $2.93 million, compared to $2.91 million in the same period last year. Fully diluted earnings per share were $0.18, compared to $0.19 in comparable period of 2009. For the first quarter of 2010, there were 16.1 million fully diluted weighted shares outstanding versus 15.7 million fully diluted weighted shares outstanding in the same period of the prior year.
Financial Condition
As of March 31, 2010, the Company held $15.7 million in cash and cash equivalents, as compared to $14.0 million at year-end 2009. Working capital was $11.1 million with a 1.8 to 1 current ratio. The Company had $58.4 million in shareholders' equity compared to $55.3 million at the year-end 2009. Yuhe generated $2.0 million in operating cash flow in the first quarter of 2010.
2010 Outlook
The Company's management expects sales volume and net income to rise throughout the remainder of 2010. Yuhe's strongest results will occur in the second half of the year, given the seasonality of the business and the fact that the new parent breeders that were purchased in early 2010 will begin to generate revenue in the fourth quarter of 2010. Therefore, management re-affirms its previously issued guidance for 2010 of production totaling 150 million day-old broilers and net income of approximately $17 million.
Recent Events
In April 2010, Yuhe renegotiated approximately $8.2 million of its long-term bank loans at a more favorable fixed interest rate of 7.56%. The terms of these loans were extended to the first quarter of 2013.
In May 2010, Ernst & Young (China) Advisory Limited completed its review of the Company's payment procedures at the request of Yuhe's Audit Committee. The review concluded the following: (1) Yuhe International has cleared all the inter-company balances with related parties; (2) There were no payments between Yuhe International and its related parties in the period of March 1, 2010 to March 31, 2010; and (3) No material exceptions were noted during the review of the payment procedures. The Board of Directors and Audit Committee have initiated more stringent internal controls over payment procedures. Additional information is available in the Company's Form 10-Q filed with the SEC on May 14, 2010.
Upcoming Event
Yuhe will present at the Second Annual China Rising Investment Conference presented by CCG Investor Relations in New York on May 17, 2010. For more information, please visit http://www.chinarisingconference.com .
Conference Call
The Company will host a conference call at 9:00 a.m. Eastern Time (ET) on Friday, May 14, 2010, to discuss financial results for the first quarter of 2010. To participate in the live conference call, please dial the following number five to ten minutes prior to the scheduled conference call time: (877) 509-7549. International callers should dial (706) 902-4287. When promoted, enter the conference passcode: 748 854 98.
A replay will be available for two weeks beginning on Friday, May 14, 2010 at 10:00 a.m. ET. To access the replay, dial (800) 642-1687. International callers should dial (706) 645-9291. When prompted, enter the conference passode: 748 854 98.
About Yuhe International, Inc.
Founded in 1996, Yuhe is the fourth largest day-old broiler breeder in China. The Company's main operations involve breeding, as all broilers are sold within a day of hatching. With headquarters in Weifang, Shandong province, the Company has modern facilities and is led by an experienced team which includes experts in chicken breeding, disease prevention and animal husbandry science. Yuhe has two operational subsidiaries, Weifang Yuhe Poultry Co. Ltd. and Weifang Taihong Feed Co. Ltd. which largely supplies the Company's internal demand for chicken feed. Currently, 90% of the Company's sales of day-old broilers are in Shandong province through 28 local agents there. There are 10 other sales agents in adjacent provinces. The Company has imported state-of-the-art equipment from the United States, Germany and Japan and has passed ISO9001 certification, allowing it to adhere to international standards of operation. For more information on the Company and its products, please visit http://www.yuhepoultry.com .
Cautionary Statement
This press release contains forward-looking statements concerning the Company's business, products and financial results. The Company's actual results may differ materially from those anticipated in the forward-looking statements depending on a number of risk factors including, but not limited to, the following: general economic and business conditions, development, shipment, market acceptance, additional competition from existing and new competitors, changes in technology, and various other factors beyond the Company's control. All forward-looking statements are expressly qualified in their entirety by this Cautionary Statement and the risk factors detailed in the Company's reports filed with the Securities and Exchange Commission. The Company undertakes no duty to revise or update any forward-looking statements to reflect events or circumstances after the date of this release.
- FINANCIAL TABLES FOLLOW -
YUHE INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Stated in US Dollars)
March 31, December 31,
2010 2009
ASSETS (unaudited)
Current assets:
Cash and cash equivalents $ 15,710,565 $ 14,047,147
Accounts receivable, net of
allowances of $18,871 and $18,868 838 838
Inventories 8,268,393 6,560,783
Advances to suppliers 359,927 359,179
Deferred tax assets 15,167 17,766
Total current assets 24,354,890 20,985,713
Plant and equipment, net 29,433,188 29,556,712
Deposits paid for acquisition of
long term assets 16,213,668 16,082,613
Notes receivable, net and other
receivable, net 46,818 33,635
Unlisted investments held for sale 300,220 300,172
Intangible assets, net 2,835,473 2,851,411
Net investment in direct financing lease 390,907 382,742
Long term prepaid rent 6,544,822 6,570,038
Total assets $ 80,119,986 $ 76,763,036
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 5,687,433 $ 5,740,912
Current portion of long term loans 2,311,259 9,433,686
Other payable 1,459,548 1,343,901
Accrued expenses and payroll related
liabilities 2,564,740 2,366,134
Advances from customers 655,302 678,366
Other taxes payable 152,626 150,764
Loan from director 292,564 292,517
Other liabilities 143,972 143,949
Due to related companies 1,208 1,208
Total current liabilities 13,268,652 20,151,437
Non-current liabilities
Long-term loans 8,484,371 1,360,206
Total liabilities 21,753,023 21,511,643
Stockholders' Equity:
Preferred stock, $.001 par value,
1,000,000 shares authorized, no
shares issued and outstanding -- --
Common stock at $.001 par value;
authorized 500,000,000 shares
authorized, 15,809,563 and
15,722,180 equivalent shares issued
and outstanding, respectively 15,809 15,722
Additional paid-in capital 30,852,457 30,672,849
Retained earnings 26,243,794 23,316,794
Accumulated other comprehensive
income 1,254,903 1,246,028
Total stockholders' equity 58,366,963 55,251,393
Total liabilities and stockholders'
equity $ 80,119,986 $ 76,763,036
YUHE INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(UNAUDITED)
(Stated in US Dollars)
Three Months Ended March 31,
2010 2009
Net revenue $ 11,756,917 $ 10,914,390
Cost of revenue (7,856,562) (6,852,353)
Gross profit 3,900,355 4,062,037
Operating Expenses
Selling (110,947) (92,940)
General and administrative expenses (820,516) (743,990)
Total operating expenses (931,463) (836,930)
Income from operations 2,968,892 3,225,107
Non-operating income (expenses)
Interest income 58 96
Other income (expenses) 10,989 (465)
Investment income 15,612 15,509
Interest expenses (65,950) (325,427)
Total other income (expenses) (39,291) (310,287)
Net income before income taxes 2,929,601 2,914,820
Income tax expense (2,601) --
Net income $ 2,927,000 $ 2,914,820
Other comprehensive income
Foreign currency translation 8,875 48,272
Comprehensive income $ 2,935,875 $ 2,963,092
Earnings per share
Basic $ 0.19 $ 0.19
Diluted $ 0.18 $ 0.19
Weighted average shares outstanding
Basic 15,735,773 15,722,180
Diluted 16,056,599 15,722,180
YUHE INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(Stated in US Dollars)
Three Months Ended March 31,
2010 2009
Cash flows from operating activities
Net income $ 2,927,000 $ 2,914,820
Adjustments to reconcile net income to
net cash provided by operating activities:
Stock based compensation 179,608 179,712
Depreciation 553,496 500,545
Amortization 16,397 16,372
Capitalized interest in construction in
progress (206,063) --
Income from unlisted investment (15,612) --
Gain on disposal of property, plant and
equipment 176 --
Changes in operating assets and liabilities:
Inventories (1,706,572) (423,234)
Advances to suppliers 2,489 (71,013)
Deferred tax assets 2,601 9,443
Long term prepaid rent 26,273 --
Accounts payable (54,403) 1,049,384
Other payable 115,430 286,867
Accrued expenses and payroll related
liabilities 198,272 127,994
Advances from customers (23,172) 51,425
Other taxes payable 1,839 616
Change in net investment in direct
financing lease (8,104) --
Net cash provided by operating activities 2,009,655 4,386,943
Cash flows from investing activities
Deposit paid and acquisition of
property, plant and equipment (332,155) (41,133)
Advance to notes receivable -- (335)
Repayment of notes receivable (16,357) --
Proceeds received from related parties
receivables -- 41,442
Net cash used in investing activities (348,512) (26)
Cash flows from financing activities
Proceeds from related party payable -- 275,336
Net cash flows provided by financing
activities: -- 275,336
Effect of foreign currency translation
on cash and cash equivalents 2,275 17,521
Net increase in cash 1,663,418 4,679,774
Cash- beginning of period 14,047,147 13,412,205
Cash- end of period $ 15,710,565 $ 18,091,979
Cash paid during the period for:
Interest paid $ 231,576 $ 357,632
Supplemental disclosure
Transfer of construction in progress to
fixed assets $ -- $ 1,831,131
Cashless exercise of 142,816 warrants $ 87 $ --
For more information, please contact:
Yuhe International, Inc.
Mr. Vincent Hu, CFO
Phone: +86-536-7300-667
Email: [email protected]
Mr. Jason Wang, Director of IR
Phone: +1-765-409-1844
Email: [email protected]
Web: http://www.yuhepoultry.com
CCG Investor Relations Inc.
Mr. Athan Dounis, Account Manager
Phone: +1-646-213-1916
Email: [email protected]
Shaun Smolarz, Financial Writer
Phone: +1-646-101-7444
Email: [email protected]
Web: http://www.ccgirasia.com
SOURCE Yuhe International, Inc.
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