WEIFANG, China, March 31, 2011 / PRNewswire-Asia / – 2010 net r evenue increased 43% year over yearto $ 67.5 million 2010 g ross profit increased 44.5% year over year to $ 24.2million Adjusted n et income ( a non-GAAP) increased 5 2 % year over year to $ 19. < / strong> 5 million , or $ 1 15 per fully diluted share 2011 guidance for net income between $ 33 million and $ 3 6 million
Yuhe International, Inc. (Nasdaq: YUII) (“Yuhe” or the ” Company “), a leading supplier of day-old chickens raisedfor meat production, or broilers, in the People Republic of China (” PRC “), today announced its unaudited financial results for the fourth quarter andfiscal year ended December 31, 2010 and its fiscal year 2011 guidance.
Fiscal Year 2010 Highlights Net revenue was $ 67.5 million, a 43% year over year increaseGross profit was $ 24.2 million, a 44.5% year over year increaseAdjusted net income (non-GAAP) was $ 19.5 million, a 52% year over yearincreaseIn December 2010, acquired ten new breeder farms, for a capacity expansionof 950,000 sets of parent breedersIn July 2010, completed acquisition of five breeder farms, for a capacityexpansion of 430,000 sets of parent breeders
“We are very pleased to report a strong fiscal year 2010 with solid financialand operational results.” commented Mr. Zhentao Gao, Chairman and chiefexecutive officer of Yuhe International, Inc. “Our 2010 non-GAAP net income of $ 19.5 million has surpassed our previously raised guidance of $ 18.5 million innet income. The growth was driven by an increase in both sales volume andaverage selling prices of our day-old broilers . In fiscal year 2010, we soldapproximately 146 million day-old broilers, or an increase of 33% from 110million in 2009. The full year 2010 average selling price for day-old broilersincreased 9% year-over-year to RMB 2.97 per bird from RMB 2.74 per bird in 2009.We are particularly pleased with our gross margin performance in fiscal year2010, which rose to 35.9% from 35.4% in 2009, due to our successful marginmanagement in locking in favorable fixed-price supply contracts during themarket downturn and capitalizing on the market rebounds during the third andfourth quarter of 2010. “
” On the operational side, we have also achieved exceptional progress infiscal year 2010. The first acquisition conducted by the Company in December2009 of 13 breeder farms in Shandong Province started contributing to ourproduction in fiscal year 2010, and currently nine out of the 13 farms are fullyoperational. The Company also completed two accretive acquisitions in Liaoningand Henan provinces of a total of 15 breeder farms in July and December 2010, toincrease its production capacity to 3.15 million sets of parent breeders, or 8% of China broiler market in capacity, and to further strengthen its position asChina largest supplier of day-old broilers. In addition, we completedconstruction of our third hatchery facility and the added 60 sets of hatcherscommenced full operation at the year-end 2010, bringing our total sets ofhatchers to 160 to absorb the increased breeding capacity “continued Mr. Gao.
Fourth Quarter 2010 Results < strong>
Net revenue increased 64.06% to $ 21.8 million, as compared to $ 13.3 millionfor the fourth quarter of 2009. The revenue increase was mainly driven by the46% gain in sales volume of day- old broilers and a 16% increase in averageselling prices. For the three months ended December 31, 2010, the sales volumeof day-old broilers amounted to 45 million birds with an average sellingprice of RMB 3.18 per bird, as compared to the sales volume of 31 million birdswith an average selling price of RMB 2.73 per bird in the fourth quarter of2009. Gross profit increased 59.4% year over year to $ 7.5 million, with grossmargin of 34.5%, as compared to $ 4.7 million, or 35.5% gross margin for the sameperiod in 2009. The decrease in gross margin was mainly due to a 19% increase inaverage unit cost to RMB 2.11 per bird from RMB 1.77 per bird in the fourthquarter of the prior year. Net income (loss) for the three months ended December31, 2010 was a net loss of $ 47.6 million, a decrease of $ 51.2 million from netincome of $ 3.6 million for the same period in 2009, due mainly to incurrence ofthe non-recurring stock-based compensation expense of $ 53.81 million derivingfrom the share transfer between Mr. Kunio Yamamoto and Mr. Gao Zhentao. Thepurpose of the arrangement between Mr. Yamamoto and Mr. Gao Zhentao was totransfer Mr. Yamamoto shares to Mr. Gao Zhentao in exchange for the servicesthat Mr. Gao Zhentao has rendered, which resulted in the strong performance ofthe Company in the years 2008 and 2009. Adjusted net income (non-GAAP) for thethree months ended December 31, 2010 was $ 6.20 million, or $ 0.32 per fullydiluted share, up 71.13% compared with net income of $ 3.6 million , or $ 0.23 perfully diluted share for the same period in 2009. For the fourth quarter of 2010there were 19.3 million fully diluted weighted shares outstanding versus 15.9million fully diluted weighted shares outstanding in the prior year period.
< strong> Full Year 2010 Results
Net revenue increased 43% year over year to $ 67.5 million in 2010 from $ 47.25million in 2009. The revenue increase was driven by the increase in sales volumeof day- old broilers to 145.7 million birds, or 33%, from 109.9 million birds in2009. In addition, the unit selling price of day-old broilers increased 9% toRMB 2.97 per bird for the year ended December 31, 2010 from RMB 2.74 per bird in2009 . The increased unit selling price reflected the pass-through of higher costof corn and other raw materials to downstream customers. For the year endedDecember 31, 2010, $ 63.9 million, or 94.7%, of total sales was derived from thesales of day-old broilers .
Gross profit in 2010 grew 44.5% to $ 24.2 million, as compared to $ 16.7million in 2009.Gross margin was 35.9% for the year ended December 31, 2010, as compared to 35.4% for the year ended December 31, 2009.
General and administrative expenses increased by $ 54.72 million to $ 57.68million for the year ended December 31, 2010, from $ 2.96 million for the yearended December 31, 2009. The increase in general and administrative expenses wasmainly due to the non-cash non-recurring stock-based compensation expense of $ 53.81 million deriving from the share transfer between Mr. Kunio Yamamoto andMr. Gao Zhentao. The stock-based compensation represented 79.70% of salesrevenue in 2010. Such non -cash compensation charge is not expected to recur.Adjusted general and administrative expenses (non-GAAP) increased 30.8% to $ 3.87million, from $ 2.96 million in 2009. The increase in the adjusted general andadministrative expenses (non-GAAP) was mainly due to increased public companyrelated expenses, prepaid expenses, advisory expenses and public offeringrelated expenses.
Selling expenses increased 68.50% year over year to $ 731,401 in 2010 from $ 434,056 in 2009. As a percentage of net revenues , selling expenses were 1.08% for the year ended December 31, 2010, as compared to 0.92% for 2009. Theincrease in selling expenses was primarily due to the increase in sales volume.Selling expenses mainly comprised of packaging and sales-force travelexpenses. < br />
Net income decreased by $ 47.13 million to a net loss of $ 34.34 million forthe year ended December 31, 2010 from net income of $ 12.79 million for the yearended December 31, 2009, primarily due to the impact of non-cash stock-basedcompensation related to the share transfer between Mr. Gao Zhentao and Mr.Yamamoto as explained above. Adjusted net income (non-GAAP) for the year endedDecember 31, 2010 increased 52% year over year to $ 19.47 million, as comparedwith $ 12.79 million in 2009.
Financial Condition
As of December 31, 2010, the Company held $ 34.5 million in cash and cashequivalents, as compared to $ 14.0 million at year-end 2009. Working capital was $ 24.5 million with a 2.04:1 current ratio. The Company had $ 107.8 million inshareholders equity compared to $ 55.3 million at year-end 2009.
Yuhe generated $ 17.41 million in operating cash flow in the twelve monthsended December 31, 2010. Including investing and financing activities, the totalnet cash inflow was $ 20.5 million for the twelve-month period. For the fiscalyear ended December 31, 2010, the net cash outflow in investing activities was $ 24.87 million, mainly related to the construction and the purchase of breederfarms. The Company expects its strong working capital and operating cash flow tosufficiently meet its working capital requirements for the next 12 months.
Fiscal Year < / strong> 201 1 Outlook
Given the expected strong day-old broiler market in 2011 and the increasedvolume contribution from the Company previous acquisitions made in December2009 and July 2010, the management at Yuhe International forecasts its fiscalyear 2011 net income to be in the range between $ 33 million and $ 36 million.
“Currently, China day-old broiler market continues to experience higheraverage unit selling prices as compared with the same period of 2010. Inaddition, the capacity increase from our previous acquisitions made in December2009 and July 2010 is expected to be reflected in our increased day-old broileroutput throughout 2011. We have commenced construction of the fourth hatcheryfacility designed to have 100 sets of hatchers, which is expected to commenceoperation in 2011. Given the strong capacity pipeline and the prevailing higheraverage selling prices in the market, we are confident that the Company willcontinue to leverage its operational expertise in the day-old broiler industryto continue delivering superb results and to achieve our projected 2011guidance, “concluded Mr. Gao.
Conference Call
The Company will host a conference call at 9:00 am Eastern Time onThursday, March 31, 2011, to discuss the unaudited financial results for itsfiscal 2010 fourth quarter and year ended December 31, 2010 and its businessoutlook for the fiscal year 2011. To participate in the live conference call, please dial the following number five to ten minutes prior to the scheduledconference call time. Conference ID # 52384499
USA Toll-free :
18,662,421,388
China Toll-Free:
4006988166
International Dial-In:
< br /> 61288236760
A replay of the conference call will be accessible within 24 hours via Yuhe website at:
http://www.yuhepoultry.com/newEbiz1 / EbizPortalFG / portal / html / luyin.html
NON-GAAP DISCLOSURE
To supplement the Company consolidated financial results presented inaccordance with US GAAP, the Company uses the following non-GAAP measures: adjusted net income, adjusted earnings per share, adjusted operating income andadjusted general and administrative expense. These measures represent netincome, earnings per share, operating income and general and administrativeexpense, respectively, as adjusted to exclude share-based compensation expensederiving from the share transfer between Mr. Kunio Yamamoto and Mr. Gao Zhentao.
The Company believes that, in conjunction with GAAP financial measures, thesenon-GAAP measures provide meaningful supplemental information regarding itsperformance and liquidity and both management and investors benefit fromreferring to these non-GAAP measures in assessing the Company performance andwhen planning and forecasting future periods. The calculation of these non-GAAPmeasures allows the Company to compare its operating results with those of othercompanies without giving effect to expenses related to stock-based compensation, which may vary for different companies for reasons unrelated to the overalloperating performance of a company business.
These non-GAAP measures are not measures of performance under accountingprinciples generally accepted in the United States (US GAAP). The Companyincludes them in this press release in order to: improve transparency for investors; assist investors in their assessment of the Company operating performance; facilitate comparisons to historical performance; ensure that these measures are fully understood in light of how the Companyevaluates its operating results; andproperly define the metrics used and confirm theircalculation.
These non-GAAP measures are not meant to be considered in isolation or as asubstitute for items appearing on the Company financial statements prepared inaccordance with US GAAP. Rather, the non-GAAP measures should be used as asupplement to US GAAP results to assist the reader in better understanding theoperational performance of the Company. The Company recognizes that theusefulness of these non-GAAP measures has certain limitations, including thefact that the manner in which the Company calculates these non-GAAP measures maydiffer from that of other companies, which limits their usefulness ascomparative measures.
Management compensates for these limitations by using these non-GAAP measuresas comparative tools, together with US GAAP measurements, to assist in theevaluation of its operating performance. Please refer to the non-GAAPreconciliation tables at the end of this press release for a reconciliation ofadjusted net income, adjusted earnings per share, adjusted operating income andadjusted general and administrative expense to net income attributable to netincome, earnings per share, operating income and general and administrativeexpense, respectively, which are the most directly comparable US GAAPfinancial measures.
About Yuhe International, Inc.
Yuhe International, Inc. is one of the largest day-old broiler producers inChina. Founded in 1996, the Company operates in the middle of the commercialbroiler chicken supply chain, where it purchases parent breeding stock frombreeder farms, raises them to produce hatching eggs, and hatches the eggs tolive day-old broilers, which are then sold through 38 distributors to itsend-users, such as integrated chicken companies and broiler raisers.Headquartered in Weifang, Shandong province, the Company has two operationalsubsidiaries, Weifang Yuhe Poultry Co. Ltd. and Weifang Taihong Feed Co. Ltd., the latter of which largely supplies the Company internal demand for chickenfeed. Currently, the Company has approximately 1600 employees with 43 breedingfarms and 3 hatchery facilities. Approximately 90 % of the Company currentsales are in the Shandong province with a customer base across 10 Provinces inChina. The Company has passed ISO9001 certification and operates importedstate-of-the-art equipment, adhering to the international standards ofoperation. 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 theCompany business, products and financial results. TheCompany actual results may differ materially from thoseanticipated in the forward-looking statements depending on a number of riskfactors including, but not limited to, the following: general economic andbusiness conditions, development, shipment, market acceptance, additionalcompetition from existing and new competitors, changes in technology, andvarious other factors beyond the Company control. Allforward-looking statements are expressly qualified in their entirety by thisCautionary Statement and the risk factors detailed in theCompany reports filed with the Securities and ExchangeCommission. The financial results contained in this press releaseare unaudited and are subject to changes. The final results are subject to the Company filing of its annual report on Form 10-K with the Securities andExchange Commission. The Company undertakes no duty to revise or update the information disclosed in this press release.
Contact Information:
Yuhe International, Inc.
www.yuhepoultry.com
Ms. Serena Wu
InvestorRelations Manager
1 (646) 502-8625
Email: serena.wu @ yuhepoultry . com
Mr. Vincent Hu
Chief FinancialOfficer
Email: vincent.hu @ yuhepoultry.com
– FINANCIAL TABLES FOLLOW-
TABLE 1
YUHE INTERNATIONAL, INC.
CONSOLIDATEDSTATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(Stated in USDollars)
For the Year Ended
December 31
2010
2009
Netrevenue
$
67,480,359
$
47,245,758
Cost ofrevenue
(43,289,031)
(30,504,187)
Grossprofit
24,191,328
16,741,571
Operatingexpenses
Selling
(731,401)
(434,056)
General andadministrative expenses
(57,680,767)
(2,963,536)
Total operatingexpenses
(58,412 , 168)
(3,397,592)
Income fromoperations
(34,220,840)
13,343,979
Non-operatingincome (expenses)
Interestincome
35,519
237 < br />
Other income (expenses)
5,699
849
(Loss) gain ondisposal of fixed assets
238,412
24,567
Investmentincome
15,744
15, 522
Interestexpenses
(401,038)
(608,789)
Total other income (expenses)
(105,664)
(567,614)
Net income beforeincome taxes
(34,326 , 504)
12,776,365
Income taxexpenses
(10,843)
17,756
Netincome
$
(34,337,347)
$
12,794,121
Other comprehensiveincome
Foreign currencytranslation
2,502,328
106,520 < br />
Comprehensiveincome
$
(31,835,019)
$
12 , 900,641
Earnings pershare
Basic
$
(2.06)
$
0.81
Diluted (Anti-dilutive)
$
(2.06)
< br /> $
0.81
Weighted averageshares outstanding
Basic
16,672,957
15,722,180
Diluted
16,913,054
15,792,540
TABLE 2
YUHE INTERNATIONAL, INC.
CONSOLIDATEDSTATEMENTS OF INCOME AND COMPREHENSIVE INCOME
< br /> (Stated in USDollars)
For the Three Months Ended
December 31
2010
2009
Netrevenue
$
21,801,185
$
13,288,765
Cost ofrevenue
(14,289,844)
(8,577,489) < br />
Grossprofit
7,511,341
4,711,276
Operatingexpenses
Selling
(179,381)
(118,684)
General andadministrative expenses
(55, 053,021)
(799,896)
Total operatingexpenses
(55,232,402)
(918,580)
Income fromoperations
(47,721,061)
3,792,696
Non-operatingincome (expenses)
Interestincome
35,294
55
Other income (expenses) < br />
(9,416)
(682)
(Loss) gain ondisposal of fixed assets
236,731
(2,131)
Investmentincome
87
13
Interestexpenses < br />
(144,901)
(167,553)
Total other income (expenses)
117,795
(170,298)
Net income beforeincome taxes
(47,603,266)
3, 622,398
Income taxexpenses
(3,922)
17,756
Netincome
$
(47,607,188)
$
3,640,154
Other comprehensiveincome
Foreign currencytranslation
1,089,458
2,523
Comprehensiveincome
< br /> $
(46,517,730)
$
3,642,677
Earnings pershare
Basic
$
(2.49)
$
0.23
Diluted (Anti-dilutive)
$
(2.49)
$
0.23
Weighted averageshares outstanding
Basic
19,124,563
15,722,180
Diluted
19,341,935
15,931,379
TABLE 3
< strong> YUHE INTERNATIONAL, INC.
CONSOLIDATEDBALANCE SHEETS
(in USDollars)
December 31,
December 31,
2010
2009
(audited)
ASSETS
Currentassets:
Cash and cashequivalents
$
34,541,658
$
14,047,147
Accountsreceivable, net of allowances of $ 20,446 and $ 18,868
838
Inventories
13,004,698
6,560,783
Advances tosuppliers
329,190
359,179
Deferred taxassets
8,527
17, 766
Total currentassets
47,884,073
20,985,713
Plant andequipment, net < br />
34,588,401
29,556,712
Deposits paid foracquisition of long term assets
33, 921,510
16,082,613
Notes receivable, net and other receivable, net
3,454,787
33,635
Unlistedinvestments held for sale
–
300,172
Intangible assets, net
1,726,082
2,851,411
Investment indirect financing lease
262,440
382,742
Long term prepaidrent
9,356,843
6,570,038
Totalassets
$
131,194,136
$
76,763, 036
LIABILITIES ANDSTOCKHOLDERS QUITY
Currentliabilities:
Accountspayable
5,757,951
< br /> 5,740,912
Current portion oflong term loans
9,433,686
Otherpayable
1,053,626
1,343,901
Short termborrowings
$
11,691, 219
$
–
Accrued expensesand payroll related liabilities
2,934,296
< br /> 2,366,134
Advances fromcustomers
1,380,852
678,366
Other taxespayable
155,172
150,764
Loan fromdirector
302,489
< br /> 292,517
Otherliabilities
148,856
143,949
Due to relatedcompanies
1,208
Total currentliabilities
23,424,461
20,151,437
< br /> Non-currentliabilities
Long-termloans
1,360,206
Totalliabilities
23,424 , 461
21,511,643
Stockholders quity
Preferred stock, $ .001 par value, 1,000,000 shares authorized ,
no shares issuedand outstanding
–
–
Common stock, $ .001 par value, 500,000 , 000 shares authorized, 20,249,563
and 15,722,180 equivalent shares issued and outstanding at December 31, 2010
and December 31,2009, respectively
20,249
15,722
Additional paid-incapital
115,021,623
< br /> 30,672,849
Retainedearnings (deficit)
(11,020,553)
23,316,794
Accumulated othercomprehensive income
3,748,356
1,246,028
Total stockholders quity
107,769,675
55,251,393
Total liabilitiesand stockholders equity
$
< br /> 131,194,136
$
76,763,036
TABLE 4
YUHE INTERNATIONAL, INC.
CONSOLIDATEDSTATEMENTS OF CASH FLOWS (in USDollars)
For the Year Ended
December 31
2010
2009
Cash flows fromoperating activities < br />
Netincome
$
(34,337,347)
$
12 , 794,121
Adjustments toreconcile net income to net cash used in operating activities:
Stock basedcompensation
54,534,860
728,833
Depreciation
2,495,395
2,035,813
Amortization
63,907
65,541
Amortization ofunearned rental income
(31,559) < br />
Capitalizedinterest in construction in progress
(530,915)
(662,711)
Bad debts expense ( recovery)
18,351
56,220
Loss (gain) ondisposal of fixed assets
(238 , 412)
(24,567)
Income fromunlisted investment
–
(15,522) < br />
Changes inoperating assets and liabilities:
Accountsreceivable
(67)
66
Advances tosuppliers
(37,056)
4,113,119
Inventories
(6,067, 059)
100,646
Deferred taxassets
9,602
(17,756)
Otherreceivable
6,530
Long term prepaidrent
184,875
Accountspayable
(175,450)
760,193
Otherpayable
(327,088)
403,821
Accrued expensesand payroll related liabilities
489,642
235,576
Advances fromcustomers
1,355,972
3,161
Other taxespayable
(714)
< br /> 8,866
Net cash providedby operating activities
17,413,467
20,585,420
< br /> Cash flows frominvesting activities
Deposit paid andacquisition of property, plant and equipment
(25,302,994)
(18, 187,196)
Advance to notesreceivable
(34,699)
Proceeds fromdisposal of fixed assets
–
27,834
Advance to relatedcompanies
–
–
Repayment ofrelated companies
–
44,637
Proceeds receivedfrom related parties receivables
–
3,713,806
Purchase of leasedland use rights
–
(5,960,354)
Proceeds fromunlisted investments
302,760
–
Investment in direct financing lease
161,624
592,004
Net cash used ininvesting activities
(24,873,309)
(19,769, 269)
Cash flows fromfinancing activities
Proceeds from loanpayable
11,403,282
1,067, 114
Repayment of loanpayable
(10,886,963)
(1,067,114)
Proceeds fromrelated party payable
–
Repayment ofrelated party payable
–
(209,828)
Proceeds from issuance of common stock
27,082,442
Net cash flows (used in) provided by financing activities:
27,598,761
(209,828)
Effect of foreigncurrency translation on cash and cash equivalents
355,592
28,619
Net increase incash
20,494,511
634,942
Cash-beginning ofperiod
14,047,147
13,412,205
Cash-end ofperiod
$
34,541,658
$
14,047,147
Cash paid duringthe period for:
Interestpaid
$
931,952
$
1, 405,500
Income taxespaid
$
–
$
– < br />
Supplementaldisclosure
Transfer fromconstruction in progress to fixed assets
$
2,711,986
< br /> $
4,009,791
Transfer fromadvances to suppliers and deposit paid for acquisition of
long term assets tofixed assets
$
7,102,605
$
–
Transfer fromdeposit paid for acquisition of long term assets to long
term prepaidrent
$
2,684,586
$
–
Cashless exerciseof 142,816 warrants
$
87
$
–
Issue 300,000 restricted shares for deposit to purchaseassets
$
2,736,000
$
–
TABLE 5
YUHE INTERNATIONAL, INC.
