Yongye International Announces Fourth Quarter and Full Year 2010 Results

Mar 14, 2011, 09:16 ET from Yongye International, Inc.

BEIJING, March 14, 2011 /PRNewswire-Asia-FirstCall/ -- Yongye International, Inc. (Nasdaq: YONG) ("Yongye" or the "Company"), a leading manufacturer, developer and distributor of agricultural nutrient products in China, today reported its financial results for the three and twelve months ended December 31, 2010.

Fourth Quarter 2010 Highlights

  • Sales increased 177.0% to $28.0 million
  • Gross profit increased 176.1% to $14.9 million
  • Operating income increased to $3.5 million from $0.4 million
  • Net income attributable to Yongye was $2.2 million, or $0.05 per diluted share, compared to a net loss of $0.1 million in the same period last year
  • Adjusted net income attributable to Yongye, which excludes non-cash expenses related to share-based compensation for management and independent directors, the amortization of the acquired Hebei customer list, and a change in the fair value of derivative liabilities, was $7.4 million, or $0.15 per diluted share, compared to $3.0 million, or $0.08 per diluted share, in the same period last year*
  • The number of independently-owned, Yongye-branded stores increased to 24,036 from 21,925 stores at the end of the third quarter

Full Year 2010 Highlights

  • Sales increased 118.3% to $214.1 million
  • Gross profit increased 128.9% to $119.3 million
  • Net income attributable to Yongye was $48.4 million, or $1.05 per diluted share, compared to $2.2 million, or $0.07 per diluted share, in the same period last year
  • Adjusted net income attributable to Yongye, which excludes non-cash expenses related to share-based compensation for management and independent directors, the amortization of the acquired Hebei customer list, and a change in the fair value of derivative liabilities, was $54.1 million, or $1.17 per diluted share, compared to $26.2 million, or $0.84 per diluted share, in the same period last year*
  • Operating cash flow was $15.9 million compared to ($2.2) million in 2009

"We are pleased to announce strong financial results for the fourth quarter and full year 2010," stated Mr. Zishen Wu, Chief Executive Officer.  "In addition to our sales, earnings, and EPS growth, we achieved positive cash flow from operations for the fourth quarter and full year 2010 and an improvement in our accounts receivable.  We believe that 2010 represents an important turning point in terms of cash flow generation for Yongye as we were able to achieve both robust revenue growth and positive operating cash flow as a result of our improved working capital management."

Fourth Quarter 2010 Results

Revenue for the three months ended December 31, 2010, was $28.0 million compared to $10.1 million for the same period in 2009, an increase of 177.0%. The increase in revenue was driven by higher demand for the Company's products in its traditional markets, and growth in several new markets, which resulted in almost all of such growth coming from an increase in the quantity of product sold while the Company's prices remained relatively stable. In addition, after the acquisition of the Hebei customer list, the Company is selling its products at a higher price directly to lower level distributors in Hebei, which is Yongye's largest regional market in China, representing 29% of sales in the fourth quarter of 2010.  After the acquisition of the customer list, sales from Hebei increased 333% period over period in the fourth quarter of 2010. As of December 31, 2010, Yongye had 24,036 independently-owned branded stores in its network, compared to 21,925 stores at the end of the third quarter and 9,110 stores at the end of 2009.

Gross profit was $14.9 million compared to $5.4 million for the same period last year, an increase of 176.1%.  Gross margin was 53.2% compared to 53.3% in the same period last year. The slight decrease in gross margin was mainly due to non-cash expenses of $0.7 million related to the amortization of the acquired Hebei customer list, which is included in cost of sales.  Excluding these non-cash expenses, fourth quarter 2010 adjusted gross profit was $15.6 million, or 55.6% of sales, which represents a 230 basis points increase in gross margin compared to last year's fourth quarter.  After the acquisition of the Hebei customer list in July 2010, the Company's margin on the sales made in Hebei province increased to 63% excluding these non-cash expenses.*            

Selling expenses were $4.0 million compared to $3.0 million in the same period last year, an increase of 34.5%.  As a percentage of sales, selling expenses decreased 1,530 basis points to 14.4% from 29.7% of sales in the same period last year.  The decline in selling expense as a percentage of sales was due to distributor and staff training activities that were held in the fourth quarter of 2009 versus the third quarter of 2010.  

General & administrative ("G&A") expenses were $7.0 million compared to $1.8 million in the same period last year, an increase of 290.2%.  As a percentage of sales, G&A expenses increased 730 basis points to 25.0% from 17.7% of sales in the same period last year, primarily due to $4.3 million in non-cash expenses related to share-based compensation as a result of the restricted shares granted to management and independent directors in October 2010 in accordance with Yongye's Omnibus Securities and Incentive Plan as approved in Yongye's 2010 Annual Meeting of Shareholders

Research and development ("R&D") expenses were $0.3 million compared to $0.2 million in the same period last year, an increase of 65.0%.  The increase in R&D expense is mainly the result of conducting additional field tests for the Company's products.

Operating income was $3.5 million, or 12.5% of sales, compared to $0.4 million, or 3.8% of sales, in the same period last year.  Excluding non-cash expenses related to share-based compensation for management and independent directors and the amortization of the acquired Hebei customer list, fourth quarter 2010 adjusted operating income was $8.5 million, or 30.3% of sales.*      

Net income attributable to Yongye was $2.2 million, or $0.05 per diluted share, compared to a net loss of $0.1 million in the same period last year.  The Company recorded a non-cash expense related to a change in fair value of derivative liabilities of $198,605 in the fourth quarter of 2010.  Excluding the impact of non-cash expenses related to share-based compensation for management and independent directors, the amortization of the acquired Hebei customer list, and a change in the fair value of derivative liabilities, adjusted net income attributable to Yongye for the fourth quarter of 2010 was $7.4 million, or $0.15 per diluted share, compared to $3.0 million, or $0.08 per diluted share in the same period last year.*        

Full Year 2010 Results

Revenue for the twelve months ended December 31, 2010, was $214.1 million compared to $98.1 million for the same period in 2009, an increase of 118.3%. The increase in revenue was driven by higher demand for the Company's products in its traditional markets, and growth in several new markets, which resulted in almost all of such growth coming from an increase in the quantity of product sold while the Company's prices remained relatively stable. In addition, after the acquisition of the Hebei customer list, the Company is selling its products at a higher price directly to lower level distributors in Hebei, which is Yongye's largest regional market in China, representing 29% of sales in 2010.  After the acquisition of the customer list, sales from Hebei increased 428% period over period in the second half year of 2010. Sales from Hebei increased 111% year over year during the year of 2010.

Gross profit was $119.3 million compared to $52.1 million for the same period last year, an increase of 128.9%. Gross margin increased 260 basis points to 55.7% from 53.1% in the same period last year. The increase in gross margin was mainly due to the benefits of economies of scale.    Included in cost of sales are non-cash expenses related to the amortization of the acquired Hebei customer list of $1.3 million.  Excluding these non-cash expenses, full year 2010 adjusted gross profit was $120.6 million, or 56.3% of sales, which represents a 320 basis points increase in gross margin compared to last year.* After the acquisition of the Hebei customer list in July 2010, the Company's margin for the sales made in Hebei province increased to 63% excluding theses non-cash expenses.          

Selling expenses were $40.6 million compared to $14.7 million in the same period last year, an increase of 175.9%.  As a percentage of sales, selling expenses increased 400 basis points to 19.0% from 15.0% of sales last year, due to an increase in advertising expenses mainly resulting from more promotional activities in 2010, as the Company entered into more geographic markets and conducted several nation-wide joint programs with China Central Television ("CCTV"). Also there was an increase in training expenses for various levels of distributors and staff education as well as an increase in transportation expenses due to the increase in sales.

General & administrative expenses were $14.0 million compared to $4.3 million in 2009, an increase of 226.3%.  As a percentage of sales, G&A expenses increased by 210 basis points to 6.5% from 4.4% of sales last year, primarily due to $4.3 million in non-cash expenses related to share-based compensation as a result of the restricted shares granted to management and independent directors in October 2010 in accordance with Yongye's Omnibus Securities and Incentive Plan as approved in Yongye's 2010 Annual Meeting of Shareholders.

Research and development expenses were $4.9 million compared to $1.7 million last year, an increase of 187.1%.  The increase in R&D expenses is mainly the result of more field test areas for different plant and animal products compared to the prior year.

Operating income was $59.8 million, or 27.9% of sales, compared to $31.4 million, or 32.0% of sales last year.  Excluding non-cash expenses related to share-based compensation for management and independent directors and the amortization of the acquired Hebei customer list, full year 2010 adjusted operating income was $65.5 million, or 30.6% of sales.*      

Net income attributable to Yongye was $48.4 million, or $1.05 per diluted share, compared to $2.2 million, or $0.07 per diluted share in the same period last year.   The Company recorded a non-cash item related to a change in fair value of derivative liabilities of $41,212 in 2010.  Excluding non-cash expenses related to share-based compensation for management and independent directors, the amortization of the acquired Hebei customer list, and a change in the fair value of derivative liabilities, adjusted net income attributable to Yongye for full year 2010 was $54.1 million, or $1.17 per diluted share, compared to $26.2 million, or $0.84 per diluted share last year.*      

(*) See the table following this press release for a reconciliation of gross profit, income from operations, net income and diluted EPS to exclude non-cash items related to the amortization of the acquired Hebei customer list, share-based compensation, and a change in the fair value of derivative liabilities.  

Financial Condition

As of December 31, 2010, the Company had $42.0 million in cash and restricted cash compared to $65.5 million as of December 31, 2009. Working capital was $124.3 million, compared to $107.8 million at the end of 2009. As of December 31, 2010, the Company had only $0.4 million in long-term debt. Stockholders' equity totaled $225.1 million as of December 31, 2010, compared to $132.6 million at the end of 2009.  

Recent Developments

  • In March 2011, the Company announced that it has partnered with Stanford University to jointly develop innovative programs to help address rural poverty, education, nutrition and health issues in China.
  • In January 2011, CCTV honored Mr. Baosheng Tong, the Company's Chief Scientist, naming him the "2010 Person of the Year for San Nong."
  • In November 2010, Yongye's Shengmingsu plant and animal nutrient products received the "Special Houji Award" at the 17th Annual China Yangling Agricultural Hi-Tech Fair (the "CAF").  
  • On November 18, 2010, Yongye's technology as well as its research and development received the "2010 Award for Excellence in Science and Technology" from the All-China Federation of Industry and Commerce (the "ACFIC Award").  

Business Outlook

For full year 2011, the Company expects revenues of between $315 million and $325 million, representing an increase of 47.1% and 51.8% over 2010's revenue of $214.1 million. The Company expects adjusted net income attributable to Yongye, which excludes non-cash expenses related to share-based compensation for management and independent directors, the amortization of the acquired Hebei customer list, and a change in the fair value of derivative liabilities, of between $80 million and $82 million, representing an increase of between 47.9% and 51.6% over 2010 adjusted net income attributable to Yongye of $65.5 million. The Company has a year-end target of at least 30,000 for the number of independently-owned, branded stores selling Yongye's Shengmingsu products.  

Mr. Wu concluded, "Our lignite coal resource project, for which we expect final government approvals by the end of 2011, and our new state-of-the-art production facility, which has begun normal operations, position us to effectively meet our anticipated increase in future market demand.  The strong demand for our products has been driven by the efficacy of our product in helping Chinese farmers improve yield as well as our innovative, integrated marketing approach which educates and trains the Chinese rural community on the appropriate and most effective use of agricultural nutrients like ours.  We have established long term cooperative relationships with tier-one media in China, such as Farmer's Daily and CCTV, and Shengmingsu is rapidly becoming a nationwide recognized brand among Chinese farmers. We believe that Yongye has built a solid business foundation in its market and is now the largest liquid agricultural nutrient product provider in China. We look forward to continuing to strengthen our market leadership position in 2011 and beyond."

Conference Call

The Company will host a conference call at 8:00 a.m. Eastern Time on Tuesday, March 15, 2011, to discuss its fourth quarter and full year 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: (866) 759-2078. International callers should dial + 1 (706) 643-0585. The conference pass code is 50180885. 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 50180885.

Use of Adjusted Financial Measures

GAAP results for the three and twelve months ended December 31, 2010 include non-cash items related to the amortization of the acquired Hebei customer list, management share-based compensation expenses, and 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 these adjusted measures provide 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 leading agricultural nutrient company headquartered in Beijing, with its production facilities located in Hohhot, Inner Mongolia, China. Yongye produces and 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 technologies and formulas 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 over 24,000 independently owned, Yongye branded stores or directly to rural farmers and government farms 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.

Contact:

Yongye International

Ms. Kelly Wang

Finance Director – Capital Markets  

Phone: +86-10-8231-9608

E-mail: ir@yongyeintl.com

Ms. Wendy Xuan – Business Associate

Phone: +86-10-8232-8866 x 8827          

E-mail: ir@yongyeintl.com

CCG Investor Relations

Mr. Athan Dounis

Phone: +1-646-213-1916

Email: athan.dounis@ccgir.com

– Financial Tables Follow –

YONGYE INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

 

For Three Months Ended December 31,

For Twelve Months Ended December 31,

 

2010

2009

2010

2009

Sales

27,990,543

10,106,050

214,091,716

98,092,842

Cost of sales

13,101,989

4,714,576

94,833,834

45,989,386

Gross profit

14,888,554

5,391,474

119,257,882

52,103,456

 

 

 

Selling expenses

4,041,866

3,004,950

40,612,300

14,720,657

Research and development expenses

342,157

207,360

4,852,004

1,690,248

General and administrative expenses

6,998,352

1,793,691

13,994,936

4,289,488

Income from operations

3,506,179

385,473

59,798,642

31,403,063

Other income/(expenses)

 

 

 

 

 Interest expense, net

-4,195

-44,563

-25,536

-70,101

 Government Subsidy

1,329,317

-2

3,081,049

237,364

 Other expenses, net

-528,811

-13,176

-613,105

-63,212

 Change in fair value of derivative liabilities

-198,605

-3,104,666

-41,212

-24,009,802

 

 

 

 

 

Total other income/(expenses), net

597,706

-3,162,407

2,401,196

-23,905,751

Earnings/(Loss) before income tax expense

4,103,885

-2,776,934

62,199,838

7,497,312

Income tax expense/(benefit)

1,478,550

-2,839,165

10,867,857

4,997,105

Net income

2,625,335

62,231

51,331,981

2,500,207

Less: Net income attributable to the noncontrolling interest

383,670

176,272

2,895,055

304,556

Net income/(loss) attributable to Yongye International, Inc.

2,241,665

-114,041

48,436,926

2,195,651

 

 

 

 

 

Earnings per share:

 

 

 

 

Basic

$0.05

-$0.00

$1.05

$0.07

Diluted

$0.05

-$0.00

$1.05

$0.07

Weighted average shares used in computation:

 

 

 

 

Basic

48,187,044

35,471,826

46,119,772

31,324,830

Diluted

48,584,755

35,471,826

46,308,924

31,324,830

YONGYE INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

December 31, 2010

December 31, 2009

Current assets

 Cash

$

41,913,469

$

65,518,181

 Restricted cash

40,000

-

 Accounts receivable, net of allowance for doubtful accounts

26,110,813

6,161,796

 Inventories

65,878,047

42,033,261

 Deposits to suppliers

10,906,295

6,211,896

 Prepaid expenses

733,429

112,879

 Other receivables

760,377

383,841

 Deferred tax assets, net

158,675

-

    Total Current Assets

146,501,105

120,421,854

 Property, plant and equipment, net

21,547,152

9,156,915

 Intangible asset, net

23,598,739

85,058

 Land use right, net

4,218,006

4,166,987

 Prepayment for mining project

34,151,063

-

 Other assets

7,325,049

2,029,012

 Goodwill

10,284,922

9,945,862

   Total Assets

$

247,626,036

$

145,805,688

Current liabilities

 Short-term bank loan

$

-

$

2,925,174

 Long-term loans and payables - current portion

457,880

331,693

 Accounts payable - related party

-

880,026

 Accounts payable - third parties

6,127,606

344,774

 Income tax payable

6,137,119

4,082,424

 Advance from customers

60,841

29,157

 Accrued expenses

3,024,235

479,609

 Due to a related party

-

1,663,191

 Other payables

5,310,517

553,286

 Derivative liabilities - fair value of warrants

1,036,268

1,380,205

    Total Current Liabilities

22,154,466

12,669,539

 Long-term loans and payables

383,285

545,327

   Total Liabilities

22,537,751

13,214,866

Equity

 Common stock: par value $.001; 75,000,000 shares authorized;   8,187,044 shares issued and outstanding at December 31, 2010   and 44,532,241 shares issued and outstanding at December 31,   2009

48,187

44,532

 Additional paid-in capital

144,599,839

118,583,308

 Subscription receivable

-

-8,550,000

 Retained earnings

63,943,371

15,506,445

 Accumulated other comprehensive income

6,623,806

329,139

    Total equity attributable to Yongye International, Inc.

215,215,203

125,913,424

 Noncontrolling interest

9,873,082

6,677,398

    Total Equity

225,088,285

132,590,822

Commitments

 Total Liabilities and Equity

$

247,626,036

$

145,805,688

YONGYE INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

For the Years Ended

 

December 31, 2010

December 31, 2009

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

Net income

$51,331,981

$2,500,207

Adjustments to reconcile net income to net cash provided by/(used in) operating activities:

 

 

Depreciation and amortization

3,723,839

578,511

Loss on sale of property, plant and equipment

-

5,995

(Reversal of allowance for doubtful accounts)/ allowance for doubtful accounts

-

-305,338

Change in fair value of derivative liabilities

41,212

24,009,802

Stock compensation expense

4,310,640

-

Deferred tax assets benefit

-154,767

-

Changes in operating assets and liabilities (net of effect of an acquisition in 2009):

 

 

Accounts receivable

-19,252,818

-3,099,156

Inventories

-21,859,880

-21,262,135

Prepayments

-4,436,327

-6,107,924

Due from a related party

-

-

Prepaid expenses

-603,146

77,013

Other receivables

-354,500

298,444

Other assets

-6,076,207

-1,751,395

Accounts payable- related party

-887,614

832,723

Accounts payable- third parties

5,628,946

344,589

Income tax payable

1,868,346

3,860,435

Advance from customers

29,934

-1,843,898

Accrued expenses

2,444,434

-105,659

Other payables

137,178

-222,593

Net Cash Provided by/(Used in) Operating Activities

15,891,251

-2,190,379

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

Change in restricted cash

-40,000

-

Prepayment for mining project

-33,309,976

-

Proceeds from sale of property, plant and equipment

93,412

12,425

Purchase of property, plant and equipment

-11,028,190

-1,560,587

Payment for the acquisition of Shengmingsu manufacturing business

-1,677,532

-2,834,676

Net Cash Used in Investing Activities

-45,962,286

-4,382,838

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

Proceeds from bank loans

-

2,923,600

Repayment of long-term loans and payables

-712,391

-248,150

Repayment of short term loans

-2,950,396

 

Proceeds from common stock and warrants issued and warrants exercised

8,634,397

69,547,206

Payment for common stock and warrants issuance costs

-

-4,528,456

Net Cash Provided by Financing Activities

4,971,610

67,694,200

EFFECT OF FOREIGN EXCHANGE RATE CHANGES ON CASH

1,494,713

-80,279

NET INCREASE /(DECREASE) IN CASH

-23,604,712

61,040,704

Cash and cash equivalent at beginning of year

65,518,181

4,477,477

Cash and cash equivalent at end of year

41,913,469

65,518,181

YONGYE INTERNATIONAL, INC. AND SUBSIDIARIES

RECONCILIATION OF NON-GAAP FINANCIAL DATA

 

Gross Profit

 

Three Months Ended December 31,

Twelve Months Ended December 31,

 

2010

2009

2010

2009

GAAP amount per consolidated statement of income

$14,888,554

$5,391,474

$119,257,882

$52,103,456

Amortization of the acquired Hebei customer list

$674,935

$0

$1,349,557

$0

Adjusted Amount

$15,563,489

$5,391,474

$120,607,439

$52,103,456

 

 

 

 

 

 

Income from Operations

 

Three Months Ended Decembe31,

Twelve Months Ended December 31,

 

2010

2009

2010

2009

GAAP amount per consolidated statement of income

$3,506,179

$385,473

$59,798,642

$31,403,063

Amortization of the acquired Hebei customer list

$674,935

$0

$1,349,557

$0

Non-cash management compensation expense

$4,310,640

$0

$4,310,640

$0

Adjusted Amount

$8,491,754

$385,473

$65,458,839

$31,403,063

 

 

 

 

 

 

 

 

 

 

 

Net Income (attributable to Yongye)

 

Three Months Ended Decembe31,

Twelve Months Ended December31,

 

2010

2009

2010

2009

GAAP amount per consolidated statement of income

$2,241,665

-$114,041

$48,436,926

$2,195,651

Amortization of the acquired Hebei customer list

$674,935

0

$1,349,557

$0

Non-cash management compensation expense

$4,310,640

0

$4,310,640

$0

Change in fair value of derivative liabilities

$198,605

$3,104,666

$41,212

$24,009,802

Adjusted Amount

$7,425,845

$2,990,625

$54,138,335

$26,205,453

Weighted average shares -- diluted

48,584,755

35,471,826

46,308,924

31,324,830

 

 

 

 

 

Adjusted diluted earnings per share

$0.15

$0.08

$1.17

$0.84

SOURCE Yongye International, Inc.



RELATED LINKS

http://www.yongyeintl.com