Yongye Announces Fourth Quarter and Full Year 2009 Financial Results
Mar 15, 2010, 10:05 ET
BEIJING, March 15 /PRNewswire-Asia-FirstCall/ -- Yongye International, Inc. (Nasdaq: YONG), ("Yongye" or the "Company") a leading developer, manufacturer, and distributor of Shengmingsu brand plant and animal nutrient products in China, today announced its financial results for the fourth quarter and fiscal year ended December 31, 2009.
Fourth Quarter 2009 Highlights
-- Revenue increased 248.2% to $10.1 million from $2.9 million in the
fourth quarter of 2008
-- Gross profit increased 275.7% to $5.4 million from $1.4 million
-- Gross margin increased 390 basis points to 53.3% from 49.4%
-- Operating income was $0.4 million, compared to an operating loss of
$1.1 million in the fourth quarter of 2008
-- Net loss was $0.1 million, compared to a net loss of $0.4 million in
the same period last year
-- Adjusted net income, which excludes the impact of non-cash charges
related to the change in fair value of derivative liabilities of $3.1
million, was $3.0 million, or $0.08 per diluted share, compared to an
adjusted net loss of $1.0 million in the prior year period*
-- Expanded the network of Yongye branded stores to 9,110 at the end of
2009, compared to 7,000 at the end of the third quarter of 2009, and
1,125 at the end of 2008
-- Raised $69 million in gross proceeds via a public equity offering
Full Year 2009 Highlights
-- Revenue increased 104.0% to $98.1 million from $48.1 million in 2008
-- Gross profit increased 109.0% to $52.1 million from $24.9 million
-- Gross margin increased 129 basis points to 53.1% from 51.8%
-- Operating income increased 129.4% to $31.4 million from $13.7 million
-- Operating margin increased 355 basis points to 32.0% from 28.5%
-- Net income was $2.2 million, or $0.07 per diluted share, compared to
$13.3 million, or $0.56 per diluted share, last year.
-- Adjusted net income, which excludes the impact of non-cash charges
related to the change in fair value of derivative liabilities of $24.0
million, was $26.2 million, or $0.83 per diluted share, compared to
$11.2 million, or $0.56 per diluted share, last year*
"Due to the seasonality of our business, the fourth quarter of the year is normally our slowest," said Mr. Zishen Wu, Chairman and Chief Executive Officer. "However, based on the rapid expansion of our sales network in 2009, especially in central and southern China, and continued success in increasing our market penetration rates, we achieved very significant year-over-year revenue growth in the quarter. Our growth in the fourth quarter and for the full year reflects the increasing market recognition of the benefits of our Shengmingsu brand plant and animal products and the success of our extensive and growing distribution network in generating sales across the large and growing domestic agricultural market in China."
Fourth Quarter 2009 Results
Revenue for the three months ended December 31, 2009 was $10.1 million compared to $2.9 million for the same period in 2008, an increase of 248.2%. 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 December 31, 2009, Yongye had 9,110 branded stores in its network, compared to 7,000 stores at the end of the third quarter of 2009, and 1,125 stores at the end of 2008.
Gross profit was $5.4 million compared to $1.4 million for the three months ended December 31, 2008, an increase of 275.7%. Gross margin was 53.3% compared to 49.4% in the same period last year. The increase in gross margin was primarily the result of the Company transitioning its manufacturing process in house during the fourth quarter and increasing economies of scale.
Selling, general and administrative expenses were $4.8 million, or 47.5% of sales, in the fourth quarter of 2009, compared to $2.5 million, or 87.3% of sales, in the same period last year. The decrease in margin was primarily due to more efficient marketing spending and increasing economies of scale. Operating income was $0.4 million compared to an operating loss of $1.1 million in the same period last year.
In January 2010, Yongye's sole operating entity in China, Yongye Nongfeng, received government approval for a preferential corporate income tax rate of 15% for the full years of 2009 and 2010. Since Yongye Nongfeng accrued its income tax expenses for the first three quarters of 2009 based on the statutory income tax rate of 25%, such approval resulted in a $2.8 million decrease in provision for income taxes in the fourth quarter of 2009.
Net loss was $0.1 million in the fourth quarter of 2009, compared to a net loss of $0.4 million in the fourth quarter of 2008. The Company incurred non- cash charges related to the change in fair value of derivative liabilities of $3.1 million in the fourth quarter of 2009. Excluding the impact of these non-cash charges, adjusted net income was $3.0 million, or $0.08 per diluted share compared to an adjusted net loss of $1.0 million in the same period last year.*
*See the table following this press release for a reconciliation of net income and EPS to exclude non-cash charges related to the change in fair value of derivative liabilities.
Full Year 2009 Results
Revenue for twelve months ended December 31, 2009 was $98.1 million compared to $48.1 million in 2008, an increase of 104.0%. Gross profit was $52.1 million with a gross margin of 53.1%, compared to gross profit of $24.9 million with a gross margin of 51.8% for the twelve months ended December 31, 2008. Operating income was $31.4 million with an operating margin of 32.0%, compared to $13.7 million with an operating margin of 28.5% last year. Net income was $2.2 million, or $0.07 per diluted share, compared to $13.3 million, or $0.56 per diluted share, last year.
The Company incurred non-cash charges related to the change in fair value of derivative liabilities of $24.0 million in 2009. Excluding the impact of these non-cash charges, adjusted net income was $26.2 million, or $0.83 per diluted share, compared to $11.2 million, or $0.56 per diluted share, last year.*
The diluted weighted average number of shares outstanding increased from 20,106,433 in 2008 to 31,324,830 in 2009 because additional shares were issued in private placements in May 2009 and as part of the public offering in December 2009.
Financial Condition
As of December 31, 2009, the Company had $65.5 million in cash, compared to $4.5 million as of December 31, 2008. The increase in the Company's cash balance was primarily due to the proceeds the Company received from in the December 2009 financing. Working capital was $107.8 million, compared to $23.3 million at the end of 2008. As of year-end 2009, the Company had only $0.5 million in long-term debt. Stockholders' equity totaled $132.6 million as of December 31, 2009, compared to $28.5 million at the end of 2008.
Based on past experience and its development plan for 2010, the Company expects strong demand for its "Shengmingsu" branded nutrient products in the first half of 2010. Therefore, the Company significantly increased inventory in the fourth quarter of 2009 in order to effectively meet the market demand in 2010. The $107.8 million increase of working capital was primarily due to an increase in inventory of $21.3 million and cash balance of $61.0 million in 2009.
Recent Developments
In March 2010, Yongye's operating entity in China, Yongye Nongfeng Biotechnology, signed an agreement with a local supplier of humic acid to purchase an undeveloped lignite coal resources project in Inner Mongolia, PRC. According to the agreement, Nongfeng will pay Shuntong RMB240 million ($35.1 million) to acquire the development rights for this project. Yongye will use a portion of the proceeds received in the December 2009 public equity offering for this acquisition.
In December 2009, Yongye raised $69 million in gross proceeds via a public equity offering. As further outlined in the "Business Outlook" section of this press release, the proceeds are expected to be used for acquiring a lignite coal mine, constructing a new manufacturing facility and acquisitions and working capital.
In December 2009, the Company's senior management team rang the opening bell at the NASDAQ MarketSite in New York City.
In October 2009, Yongye completed the acquisition of the land, buildings, equipment, and fertilizer license of its predecessor, Inner Mongolia Yongye; thereby becoming a fully integrated manufacturer of agricultural nutrient products.
Business Outlook
From 2010 to 2012, Yongye expects to achieve at least a 50% annual growth rate in revenue through geographic expansion into new markets, increased penetration in existing markets, additional marketing and brand-building efforts, and expanded production capacity. By the end of 2010, the Company plans to expand its total number of branded stores to more than 20,000.
The Company also intends to improve its cost structure and enhance its profitability by gaining greater control over its supply chain and distribution network through a vertical integration strategy. In March 2010, Yongye announced an acquisition of an undeveloped lignite coal resources project in Inner Mongolia for RMB 240 million (approximately $35.1 million). According to a third party valuation report, the Lignite Coal Project area is estimated to contain over 40 million cubic meters of surface level lignite coal.
During 2010, the Company also expects to build a new manufacturing facility nearby, which is expected to be capable of extracting humic acid from coal and producing 20,000 tons per year of the Company's liquid plant product and 10,000 tons per year of its powder animal product. The Company's current manufacturing facility operates at almost full capacity to meet peak season demand and inventory requirements. In addition, the Company plans to acquire certain Shengmingsu distributors that have especially strong channel networks.
Mr. Wu added, "By directly sourcing the raw materials that account for the largest percentage of our cost of goods sold and by more tightly integrating the production of humic acid with our fulvic acid extraction process, we expect to achieve significant cost savings and improved long-term visibility into our business. Additionally, we expect that the acquisition of certain of our strongest distributors will help us exert more direct control over our sales process and will ultimately lead to the increased margins and profitability.
"We continue to strengthen Yongye's leadership position in the market through geographic expansion, deeper market penetration, and increasing productivity in our operations. Based on our three-year strategic plan and with the capital we raised in December 2009, we expect to continue to see strong organic growth. In addition, we continue to explore upstream and downstream acquisitions so as to integrate our value chain and further improve the profitability of our business."
Conference Call
The Company will host a conference call at 09:00 a.m. Eastern Time Tuesday, March 16, 2010 to discuss its full year 2009 results.
To participate in the live conference call, please dial the following number five to ten minutes prior to the scheduled conference call time: +1-877-407-5374. International callers should dial +1-702-894-2288. The conference pass code is 631 572 80.
For those who are unable to participate in the conference call at the time of the call, a replay will be available for fourteen days after the call is held. To access the replay, please dial +1-800-642-1687. International callers should dial +1-706-645-9291. The replay pass code is 631 572 80.
Use of Adjusted Financial Measures
GAAP results for the three and twelve months ended December 31, 2009 include non-cash charges related to the 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 these items 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, Inc.
Yongye International, Inc., headquartered in Beijing, is engaged in the development, manufacturing, distribution and sales of Shengmingsu brand plant and animal nutrient products. 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. Its sole operating subsidiary, Inner Mongolia Yongye Nongfeng Biotechnology Co., Ltd., is headquartered in Beijing with major operations located in Inner Mongolia, People's Republic of 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.
- Financial Tables Follow -
YONGYE INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
For the Three Months Ended For the Years Ended
December December December December
31, 2009 31, 2008 31, 2009 31, 2008
Sales
External
customers $10,104,197 $2,902,692 $95,870,906 $48,092,271
Related party 1,853 -- 2,221,936 --
Total sales 10,106,050 2,902,692 98,092,842 48,092,271
Cost of sales 4,714,576 1,467,720 45,989,386 23,165,684
Gross profit 5,391,474 1,434,972 52,103,456 24,926,587
Selling expenses 3,004,950 1,228,242 14,720,657 8,665,755
Research &
development
expenses 207,360 -- 1,690,248 --
General and
administrative
expenses 1,793,691 1,307,209 4,289,488 2,573,017
Income from
operations 385,473 (1,100,479) 31,403,063 13,687,815
Other expenses/
(income)
Interest
expense, net 44,563 69,698 70,101 3,135
Other (income)/
expenses, net 13,178 (200,888) (174,152) 526,039
Increase/
(decrease) in
fair value of
derivative
liabilities 3,104,666 (654,541) 24,009,802 (2,118,797)
Total other
expenses/
(income), net 3,162,407 (785,731) 23,905,751 (1,589,623)
Earnings before
income tax
expense (2,776,934) (314,748) 7,497,312 15,277,438
Income tax
expense (2,839,165) 41,990 4,997,105 864,292
Net income 62,231 (356,738) 2,500,207 14,413,146
Less: Net income
attributable to
the noncontrolling
interest 176,272 9,962 304,556 1,102,388
Net income attri-
butable to Yongye
International, Inc. (114,041) (366,700) 2,195,651 13,310,758
Earnings per share:
Basic $(0.03) $(0.06) $0.07 $0.68
Diluted $(0.03) $(0.06) $0.07 $0.56
Weighted average
shares used in
computation:
Basic 35,471,826 26,760,258 31,324,830 19,599,054
Diluted 35,640,303 26,760,258 31,324,830 20,106,433
YONGYE INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 2009 December 31, 2008
Current assets
Cash $65,518,181 $4,477,477
Accounts receivable, net of
allowance for doubtful
accounts 6,161,796 2,748,042
Inventories 42,033,261 20,708,193
Prepayments 6,211,896 44,051
Due from a related party -- 192,741
Prepaid expenses 112,879 189,478
Other receivables 383,841 680,752
Total Current Assets 120,421,854 29,040,734
Property, plant and,
equipment, net 9,156,915 5,368,074
Intangible asset, net 85,058 95,453
Land use right, net 4,166,987 --
Other assets 2,029,012 --
Goodwill 9,945,862 --
Total Assets $145,805,688 $34,504,261
Current liabilities
Short-term bank loan $2,925,174 $--
Long-term loans - current
portion 331,693 167,652
Accounts payable - related
party 880,026 46,739
Accounts payable - third
parties 344,774 --
Income tax payable 4,082,424 219,366
Advance from customers 29,157 1,869,400
Accrued expenses 479,609 583,880
Due to a related party 1,663,191 --
Other payables 553,286 774,526
Derivative liabilities -
fair value of warrants 1,380,205 2,107,931
Total Current Liabilities 12,669,539 5,769,494
Long-term loans 545,327 230,121
Total Liabilities 13,214,866 5,999,615
Stockholders' equity
Common stock: par value $.001;
75,000,000 shares authorized;
44,532,241 shares issued and
outstanding at December 31,
2009 and 26,760,258 shares
issued and outstanding at
December 31, 2008 44,532 26,760
Additional paid-in capital 118,583,308 13,633,604
Subscription receivable (8,550,000) --
Retained earnings 15,506,445 13,310,794
Accumulated other
comprehensive income 329,139 329,445
Total Equity of the
Company's Stockholders 125,913,424 27,300,603
Noncontrolling interest 6,677,398 1,204,043
Total Stockholders' Equity 132,590,822 28,504,646
Total Liabilities and
Stockholders' Equity $145,805,688 $34,504,261
YONGYE INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended
December 31, 2009 December 31, 2008
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $2,500,207 $14,413,146
Adjustments to reconcile
net income to net cash used
in operating activities:
Depreciation and
amortization 578,511 118,104
Loss on sale of property,
plant and equipment 5,995 --
(Reversal)/provision of
bad debt provision (305,338) 305,338
Increase/(decrease) in
fair value of derivative
liabilities 24,009,802 (2,118,797)
Changes in operating
assets and liabilities (net
of effect of an acquisition
in 2009):
Accounts receivable (3,099,156) (3,053,380)
Inventories (21,262,135) (20,708,193)
Prepayments (6,107,924) (44,051)
Due from a related party -- (192,741)
Prepaid expenses 77,013 (189,478)
Other receivables 298,444 (680,752)
Other assets (1,751,395) --
Accounts payable- related
party 832,723 46,739
Accounts payable- third
parties 344,589 --
Income tax payable 3,860,435 219,366
Advance from customers (1,843,898) 1,869,400
Accrued expenses (105,659) 583,880
Other payables (222,593) 764,526
Net Cash Used in Operating
Activities (2,190,379) (8,666,893)
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of
property, plant and equipment 12,425 --
Purchase of property, plant
and equipment (1,560,587) (5,475,572)
Payment for the acquisition
of Shengmingsu manufacturing
business (2,834,676) --
Net Cash Used in Investing
Activities (4,382,838) (5,475,572)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from bank loans 2,923,600 432,325
Repayment of bank loans (248,150) (34,552)
Proceeds from common stock
and warrants issued 69,547,206 19,350,651
Payment for common stock
and warrants issuance costs (4,528,456) (1,461,659)
Net Cash Provided by
Financing Activities 67,694,200 18,286,765
EFFECT OF FOREIGN EXCHANGE
RATE CHANGES ON CASH (80,279) 325,041
NET INCREASE IN CASH 61,040,704 4,469,341
Cash and cash equivalent at
beginning of year 4,477,477 8,136
Cash and cash equivalent at
end of year $65,518,181 $4,477,477
YONGYE INTERNATIONAL, INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP FINANCIAL DATA
Three Months Ended Three Months Ended
December 31, 2009 December 31, 2008
Net Income Diluted EPS Net Income Diluted EPS
Adjusted Amount $2,990,625 $0.08 ($1,021,241) ($0.04)
Change in fair
value of
derivative
liabilities $3,104,666 $0.09 ($654,541) ($0.02)
GAAP amount per
consolidated
statement of
income ($114,041) $0.00 ($366,700) ($0.01)
Weighted average
number of shares
- diluted 35,640,303 26,760,258
Twelve Months Ended Twelve Months Ended
December 31, 2009 December 31, 2008
Net Income Diluted EPS Net Income Diluted EPS
Adjusted Amount $26,205,453 $0.83 $11,191,961 $0.56
Change in fair
value of
derivative
liabilities $24,009,802 $0.76 ($2,118,797) ($0.00)
GAAP amount per
consolidated
statement of
income $2,195,651 $0.07 $13,310,758 $0.56
Weighted average
number of shares
- diluted 31,461,397 20,106,433
*Diluted EPS calculation in accordance with GAAP (FASB No. 128) requires
the reversal of gain or loss from the change in fair value of derivative
liabilities in the numerator, and an increase in the number of common
shares of ordinary shares equivalents outstanding in the denominator (See
December 31, 2009 and 2008 Financial Statements). Therefore, the change in
fair value of derivative liabilities is not reversed again when
calculating Non-GAAP diluted EPS for three and twelve months ended
December 31, 2009 and 2008.
In the diluted EPS calculation in accordance with GAAP for three and
twelve months ended December 31, 2009 and 2008, the gain or loss from the
change in fair value of derivative liabilities in the numerator was not
reversed, as this effect would have been anti-dilutive. Therefore, the
change in fair value of derivative liabilities is reversed when
calculating Non-GAAP diluted EPS for three and twelve months ended
December 31, 2009 and 2008.
For more information, please contact:
Yongye International, Inc.
Mr. Larry Gilmore, VP of Corporate Strategy
Phone: +86-10-8232-8866 x8880
Email: [email protected]
CCG Investor Relations
Mr. Crocker Coulson, President
Phone: +1-646-213-1915 (New York)
Email: [email protected]
Mr. Athan Dounis, Account Manager
Phone: +1-646-213-1916
Email: [email protected]
Web: http://www.ccgirasia.com
SOURCE Yongye International, Inc.