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.
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.
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.
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.
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 .
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 .
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: firstname.lastname@example.org Mr. Jason Wang, Director of IR Phone: +1-765-409-1844 Email: email@example.com Web: http://www.yuhepoultry.com CCG Investor Relations Inc. Mr. Athan Dounis, Account Manager Phone: +1-646-213-1916 Email: firstname.lastname@example.org Shaun Smolarz, Financial Writer Phone: +1-646-101-7444 Email: email@example.com Web: http://www.ccgirasia.com
SOURCE Yuhe International, Inc.