China Marine Food Group Limited Reports Financial Results for its First Quarter 2010
SHISHI, China, May 12 /PRNewswire-Asia-FirstCall/ -- China Marine Food Group Limited (NYSE Amex: CMFO) ("China Marine" or the "Company"), a manufacturer of Mingxiang(R) seafood-based snack foods, "Hi-Power" marine algae-based beverages and a distributor of frozen marine catch, today announced its financial results for its first quarter ended March 31, 2010.
First Quarter 2010 Highlights
-- Revenue was $19.7 million, up 18.7% from Q1 2009
-- The Company's processed seafood segment accounted for 84.0% of total
revenue, growing 47.3% year over year
-- The Company expanded its retail footprint of retail sales locations for
processed seafood products to 2,500
-- Gross profit was $6.6 million, up 61.0%, and operating income was up
42.0% to $5.0 million from Q1 2009
-- GAAP net income was $3.9 million, up 20.9% from Q1 2009; Non-GAAP net
income was $4.5 million(*)
-- Earnings per diluted share were $0.16 based on 25.0 million shares;
Non-GAAP EPS was $0.18(*)
SUMMARY FINANCIALS
First Quarter 2010 Results
1Q 2010 1Q 2009 CHANGE
Net Sales $19.7 million $16.5 million +18.7%
Gross Profit $ 6.6 million $ 4.1 million +61.0%
Net Income $ 3.9 million $ 3.2 million +20.9%
EPS (Diluted) $ 0.16 $ 0.14 +14.3%
Adjusted Net Income(*) $ 4.5 million $ 3.2 million +40.6%
Adjusted EPS (Diluted)(*) $ 0.18 $ 0.14 +28.6%
(*) Adjusted Net Income and EPS in Q1 2010 are non-GAAP calculations and
do not include $0.6 million of non-cash, amortization of intangible
assets related to the Company's recent acquisition. For more
information about the non-GAA financial measures contained in this
press release, please see "About Non-GAAP Financial Measures" below.
"Sales of our Mingxiang(R) seafood snack products grew briskly and were the most significant contributor to revenues in the first quarter of 2010," began Mr. Pengfei Liu, Chairman and CEO of China Marine. "Our two major sales regions, Fujian and Zhejiang, showed substantial growth and were supported by a 25% increase in the number of regional sales managers which now total 30. We also expanded our retail footprint by over 10% to 2,500 locations where consumers can currently purchase Mingxiang(R) products. In addition, our acquisition of 'Hi-Power' marine algae-based beverages had an immediate impact on our revenue in the first quarter of 2010. We anticipate continued growth of Mingxiang(R) seafood snack foods and 'Hi-Power' beverages throughout 2010 enabling us to reach our revenue goal of $100.0 million by the end of the year," Liu concluded.
First Quarter Fiscal Year 2010 Results
Total revenue in the quarter ended March 31, 2010 was $19.7 million, up 18.7% from $16.5 million in the prior year's period. China Marine's continued focus on the sale of processed and packaged seafood snack foods produced $16.5 million in revenue, a 47.3% increase from $11.2 million in the first quarter of 2009 and accounted for 84.0% of total revenue in the first quarter of 2010. China Marine also added approximately 300 new locations which carry Mingxiang(R) branded snack foods. As of March 31, 2010, the total number of retail locations in China Marine's network is approximately 2,500.
China Marine launched an advertising and marketing program for its newly packaged marine algae-based beverages, "Hi-Power", in Fujian. The marking campaign began with a sponsorship of the Xiamen Marathon in January 2010 where "Hi-Power" beverages were supplied to the athletes and prominently featured on the marathon's media and print advertising. China Marine also placed a number of print advertisements for "Hi-Power" and aired a 15-second television advertisement on the premier broadcast channel in the Fujian province. First time revenue in the first quarter of 2010 from algae-based beverages was $2.8 million and accounted for 14.0% of total revenue. Though "Hi-Power" was previously sold in a total of four provinces while as a private company, China Marine decided that the repackaging and branding of "Hi-Power" would be best monitored in Fujian first, and then introduce the new program to other provinces through a planned roll-out. The Company anticipates significant quarterly growth of "Hi-Power" as China Marine expands the sales effort of their beverage line to other geographic areas in the coming quarters. China Marine anticipates that "Hi-Power" will contribute at least 20% of total revenues or $20.0 million to 2010 results.
China Marine's third revenue segment, frozen marine catch, contributed $0.4 million in the first quarter of 2010 compared to $5.3 million in Q1 2009. The Company sells frozen marine catch opportunistically and based on favorable market pricing it can secure from bulk orders of marine catch from suppliers.
Gross profit in the first quarter of fiscal year 2010 was $6.6 million, an increase of 61.0% from $4.1 million in the prior year's corresponding period. Gross margin for the processed seafood line was 33.5%, compared to 32.6% in the first quarter of 2009. Gross margins of "Hi-Power" marine algae-based beverages was 35.2% and consistent with Company expectations. Due to the relatively low sales revenue from China Marine's marine catch segment, gross margin for the marine catch segment was 27.4% compared to 8.5% in the first quarter of 2009. The difference in gross margins were attributed to smaller orders of frozen marine catch which did not receive volume discounts reserved for the Company's key marine catch distributors.
Selling, general and administrative expenses in the quarter ended March 31, 2010 were $1.0 million compared to $0.6 million in the prior year's period, as a result of increased advertising costs associated with the new beverage business. Operating income in the first quarter of 2010 was $5.0 million, with operating margin of 25.3%, a 42.0% increase from $3.5 million in the prior year's period.
The increase in depreciation and amortization was mainly attributable to the amortization of intangible assets associated with the acquisition of the beverage business at the beginning of this year. The algae-based beverage process expertise is amortized over its estimated useful life of 10 years, on a straight-line basis, at a yearly amortization charge of approximately $2.3 million.
GAAP net income for the quarter ended March 31, 2010 was $3.9 million, compared to $3.2 million in the prior year's corresponding period, a 20.9% increase year over year. Whereas adjusted non-GAAP net income for the first quarter of 2010 was $4.5 million, a 40.6% increase year over year. Earnings per weighted average diluted share were $0.16 based on 25.0 million diluted shares, while adjusted earnings were $0.18 per share.
Financial Condition
As of March 31, 2010, the Company had $47.4 million in cash compared to $7.1 million as of December 31, 2009. The increase in cash was mostly attributed to the Company's $30.0 million financing secured in January 2010 which replaced the Company's working capital used to close the acquisition of Xianghe, the manufacturer of "Hi-Power" beverages. Working capital was $56.5 million, up from $48.4 million as of December 31, 2009. Accounts receivable were $9.7 million, compared to $18.8 million as of December 31, 2009. China Marine's days sales outstanding were 66 days.
As of March 31, 2010, the Company no longer had a $26.4 million note receivable which it reported on December 31, 2009. The note receivable was used to purchase Xianghe, the manufacturer of "Hi-Power" algae-based beverages acquired in January 2010. Land use rights as of March 31, 2010 were $2.9 million, of which $2.3 million was listed as a prepayment as of December 31, 2009. The land use rights which were acquired are being used for development of a new cold storage facility for which China Marine announced its groundbreaking ceremony on April 26, 2010.
Current liabilities were $4.2 million as of March 31, 2010 compared to $8.0 million as of December 31, 2009 as a result of repayment of short-term bank borrowings in the first quarter of this year.
Business Outlook and Guidance
"We had important events transpire since the beginning of the year which have triggered our key growth strategies," stated Mr. Liu, CEO of China Marine. "Throughout 2010, our plans remain focused on simultaneously developing greater distribution for Mingxiang(R) foods and 'Hi-Power' marine algae-based drinks, and we expect to implement cross selling techniques while securing additional distribution and retail store chains for both of these product lines. We are confident that we will meet our 2010 revenue guidance of $100.0 million, and net income guidance of $21.5 million for the year, excluding amortization charges for intangibles."
Conference Call
To attend the China Marine Q1 2010 conference call, please use the dial information below. When prompted, ask for the "China Marine Call" and/or be prepared to provide the conference ID.
Date: Thursday, May 13, 2010
Time: 9:00 am Eastern
Conference Line Dial-In (U.S.): 1-877-941-1431
International Dial-In: 1-480-629-9668
Conference ID: 4297530 "China Marine Conference Call"
Webcast: http://viavid.net/dce.aspx?sid=00007517
Please dial in at least 10 minutes before the call to ensure timely participation.
A playback of the call will be available from 12:00 Noon Eastern Time on May 13 until 11:59 pm Eastern Time on May 20, 2010. To listen, call 1-800-406-7325 within the United States or 1-303-590-3030 when calling internationally. Please use the replay pin number 4297530.
About China Marine
China Marine Food Group Ltd. is a food and beverage manufacturer of Mingxiang(R) seafood-based snack foods, "Hi-Power" marine algae-based health drinks, and a wholesaler of frozen marine catch in seven provinces in the PRC. Founded in 1994, China Marine has grown steadily and positioned its Mingxiang(R) branded products as a category leader in 2,500 retail sales points in the PRC. The Company has received "The Famous Brand" and "Green Food" awards. Located in the 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 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 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. 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.
For more information, please contact:
COMPANY
Marco Hon Wai Ku, CFO
Add: Suite 815, 8th Floor
Ocean Centre, Harbour City
Kowloon, HONG KONG
Tel: +852-2111-8768
Email: [email protected]
Web: http://www.china-marine.cn
INVESTOR RELATIONS
John Mattio, SVP
HC International, New York
Tel: +1-203-616-5144 (U.S.)
Email: [email protected]
Web: http://www.hcinternational.net
CHINA MARINE FOOD GROUP LIMITED
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 2010 AND DECEMBER 31, 2009
(Currency expressed in United States Dollars (US$), except for number of
shares))
March 31, 2010 December 31, 2009
(Unaudited) (Audited)
ASSETS
Current assets:
Cash and cash equivalents $47,375,573 $7,143,232
Accounts receivable, net 9,652,488 18,834,062
Inventories 3,260,603 3,876,950
Note receivable -- 26,399,696
Prepaid expenses and other current
assets 366,771 151,653
Total current assets 60,655,435 56,405,593
Property, plant and equipment, net 8,595,441 8,599,977
Land use rights, net 2,940,779 615,355
Prepayment for land use right -- 2,274,323
Intangible assets 22,904,874 --
Goodwill 2,373,024 --
TOTAL ASSETS $97,469,553 $67,895,248
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings $-- $4,139,121
Accounts payable, trade 2,167,338 885,286
Amount due to a stockholder 69,598 69,587
Income tax payable 736,644 618,664
Accrued liabilities and other payable 1,231,182 2,334,384
Total current liabilities 4,204,762 8,047,042
Commitments and contingencies
Stockholders' equity:
Preferred stock, $0.001 par value;
1,000,000 shares authorized; 0
shares issued and outstanding as of
March 31, 2010 and December 31, 2009 -- --
Common stock, $0.001 par value;
100,000,000 shares authorized;
28,493,650 and 23,413,639 shares
issued and outstanding as of March
31, 2010 and December 31, 2009 28,494 23,414
Additional paid-in capital 45,912,198 16,888,532
Statutory reserve 5,614,517 5,614,517
Accumulated other comprehensive
income 3,553,582 3,576,135
Retained earnings 37,671,446 33,745,608
Total China Marine Food Group Limited
stockholders' equity 92,780,237 59,848,206
Non-controlling interests 484,554 --
Total stockholders' equity 93,264,791 59,848,206
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $97,469,553 $67,895,248
CHINA MARINE FOOD GROUP LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009
(Currency expressed in United States Dollars (US$), except for number of
shares)
(Unaudited)
Three months ended March 31,
2010 2009
Revenue, net
Processed seafood products $16,497,907 $11,202,982
Marine catch 398,519 5,345,070
Algae-based beverage products 2,753,983 --
19,650,409 16,548,052
Cost of revenue (inclusive of
depreciation and amortization)
Processed seafood products (10,969,020) (7,550,296)
Marine catch (289,245) (4,891,981)
Algae-based beverage products (1,783,730) --
(13,041,995) (12,442,277)
Gross profit 6,608,414 4,105,775
Operating expenses:
Depreciation and amortization (622,736) (19,372)
Sales and marketing (385,218) (114,062)
General and administrative (619,998) (465,754)
Total operating expenses (1,627,952) (599,188)
Income from operations 4,980,462 3,506,587
Other income (expenses):
Subsidy income -- 143,137
Rental income 22,601 20,375
Interest income 18,859 90,470
Interest expense (39,697) (62,708)
Income before income taxes 4,982,225 3,697,861
Income tax expense (1,056,092) (449,260)
NET INCOME 3,926,133 3,248,601
Less: net income attributable to non-
controlling interests (295) --
Net income attributable to China
Marine Food Group Limited $3,925,838 $3,248,601
Other comprehensive (loss) income:
- Foreign currency translation (loss)
gain (22,553) 56,955
COMPREHENSIVE INCOME $3,903,285 $3,305,556
Net income per share attributable to
China Marine Food Group Limited -
basic $0.16 $0.14
Net income per share attributable to
China Marine Food Group Limited -
diluted $0.16 $0.14
Weighted average shares outstanding -
basic 24,125,064 23,026,301
Weighted average shares outstanding -
diluted 25,016,494 23,026,301
CHINA MARINE FOOD GROUP LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009
(Currency expressed in United States Dollars (US$))
(Unaudited)
Three months ended March 31,
2010 2009
Cash flows from operating activities:
Net income $3,926,133 $3,248,601
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 690,060 73,066
(Reversal of) allowance for doubtful
accounts (46,092) 11,288
Changes in operating assets and
liabilities:
Accounts receivable 9,227,666 (2,257,516)
Inventories 616,347 5,432,655
Prepaid expenses and other current
assets (215,118) 134,108
Accounts payable, trade 1,282,052 313,998
Income tax payable 117,980 64,502
Accrued liabilities and other payable (1,103,202) (51,096)
Net cash provided by operating
activities 14,495,826 6,969,606
Cash flows from investing activities:
Purchase of property, plant and
equipment (77,705) (35,847)
Cash paid to construction in progress -- (863,616)
Purchase of land use right (69,778) --
Net cash received from acquisition of
a subsidiary 1,022,153 --
Net cash provided by (used in)
investing activities 874,670 (899,463)
Cash flows from financing activities:
Repayment of amount due to a
stockholder 11 (146,311)
Proceeds from the registered direct
offering, net of expenses 28,328,466 --
Proceeds from exercise of warrants 700,280 --
Proceeds from short-term borrowings -- 4,134,042
Payment on short-term borrowings (4,139,121) (4,289,341)
Net cash provided by (used in)
financing activities 24,889,636 (301,610)
Effect of exchange rate changes in
cash and cash equivalents (27,791) 48,433
NET CHANGE IN CASH AND CASH
EQUIVALENTS 40,232,341 5,816,966
CASH AND CASH EQUIVALENTS, BEGINNING
OF PERIOD 7,143,232 31,640,307
CASH AND CASH EQUIVALENTS, END OF
PERIOD $47,375,573 $37,457,273
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Cash paid for income taxes $938,112 $384,758
Cash paid for interest $39,697 $62,708
SUPPLEMENTAL DISCLOSURE OF NONCASH
INVESTING AND FINANCING TRANSACTIONS
Transfer from prepayment for land use
right to land use rights $2,274,323 $--
Transfer from construction in
progress to property, plant and
equipment $-- $1,840,330
NON-CASH TRANSACTIONS IN CONNECTION
WITH THE ACQUISITION OF XIANGHE
Transfer from note receivable to
purchase price payable $26,399,696 $--
Consideration payable by Xianghe on
behalf of Mingxiang $1,400,304 $--
SOURCE China Marine Food Group Limited
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