SHISHI, China, May 11, 2012 /PRNewswire-Asia-FirstCall/ -- China Marine Food Group Limited (NYSE Amex: CMFO) ("China Marine" or the "Company"), a manufacturer of Mingxiang® 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, 2012.
Financial Summary
First Quarter 2012 Results
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Q1 2012 | Q1 2011 | CHANGE | |
Net Sales | $15.1 million | $26.7 million | -43.4% |
Gross Profit | $4.6 million | $9.6 million | -52.2% |
Net Income | -$2.0 million | $5.6 million | -136.4% |
Diluted EPS* | -$0.07 | $0.19 | -136.8% |
Adjusted Net Income** | -$0.8 million | $6.2 million | -112.9% |
Adjusted Diluted EPS** | -$0.03 | $0.21 | -114.3% |
* Diluted EPS calculated for the period is based on 29.7 million shares on March 31, 2012 versus 29.0 million shares reported on March 31, 2011. |
** Adjusted Net Income and Diluted EPS are non-GAAP calculations and do not include $0.6 million of non-cash, amortization of intangible assets related to the Company's acquisition in Q1 2012 and Q1 2011, and $0.6 million of after-tax non-cash stock-based compensation expenses in Q1 2012. For more information about the non-GAAP financial measures contained in this press release, please see "About Non-GAAP Financial Measures" below. |
"Our first quarter results reflect depressed demand for our products and elevated marketing investments," explained Mr. Pengfei Liu, Chairman and CEO of China Marine. "As we discussed on our year-end 2011 earnings call, we anticipated a down first quarter in 2012 as the effects of the radiation leaks in Japan and a clouding agent concern from Taiwan and China continuously affected both our Mingxiang® Food and "Hi-Power" beverage sales. As a result, we maintained an elevated level of investments in advertisements and promotions to communicate the safety and value of our products. While we have seen certain distributors place reorders as they restock inventories, overall consumer demand remained well below levels prior to the Japan disaster. However, sales have rebounded nicely in April and the early part of May."
First Quarter 2012 Results
Total net revenues in all segments for the quarter ended March 31, 2012, including Mingxiang®-branded seafood snack foods, "Hi-Power" beverages and marine catch, was $15.1 million, down 43.4% from $26.7 million in the prior year's period.
Seafood Snack Food Segment
China Marine's sale of processed and packaged seafood snack foods generated $9.9 million in revenue, down 50.2% from the first quarter of 2011 due to depressed demand resulting from continued and negative consumer perceptions regarding the safety of seafood products following the nuclear radiation leaks in Japan. Seafood snack foods accounted for 65.7% of total revenues in the first quarter of 2012. China Marine has maintained its product line of 27 Mingxiang®-branded seafood jerky snacks sold to consumers at retail locations. Gross profits margins for the seafood snack foods segment were 26.6% compared to 33.9% in the same period last year. Retail points for seafood snack foods include major supermarket chains, convenience store chains, general food stores, campus canteens and local corner shops in Fujian, Zhejiang, Guangdong, Shandong and major prefectures like Shenzhen.
"Hi-Power" Beverage Segment
Revenues from the "Hi-Power" algae-based beverage line were $5.2 million compared to $6.7 million in the first quarter of 2011. While the Company's beverage has never contained any toxic materials or clouding agents, overall sales for "Hi-Power" were down due to public concerns over the plasticizer contamination in the beverage industry. The Company generated $1.3 million of sales in Zhejiang province in the first quarter of 2012 after entering the new provincial market in the second quarter of 2011.
The total numbers of retail end-points for "Hi-Power" were 12,000 on March 31, 2012. "Hi-Power" beverages are sold and promoted in major international retailers such as Walmart®, China-based supermarkets like Trust-Mart®, convenience stores, bars, restaurants, school canteens and local corner stores which carry "Hi-Power" beverages, and certain locations where Mingxiang®-branded seafood products are also sold.
Gross margin was 38.0% in the first quarter of 2012, down 430 basis points from 42.3% in the same period last year. The Company outsources production, bottling and distribution to minimize its working capital and capital expenditures. China Marine continues to invest in sales and marketing, including in store promotions and sporting event sponsorships, to drive trial and brand awareness.
Marine Catch Trade Segment
China Marine's frozen marine catch business segment generated no sales in the first quarter of 2012 compared to minimal sales in the same period a year ago. The Company usually generates the majority of its marine catch sales in the second half of the year.
Consolidated costs of goods sold totaled $10.5 million for the quarter, or 69.5% of net revenues for the period ended March 31, 2012, which consists of the cost of raw materials, packaging materials, direct labor and manufacturing overhead. In the seafood snack food segment, costs of raw materials account for the greatest percentage of costs and were 72.4% for the quarter while packaging represented 11.3%.
Gross profit in the first quarter of 2012 was $4.6 million compared to $9.6 million in the prior year's corresponding period. Consolidated gross margins were 30.5% for the quarter, down from 36.1% for the three months ended March 31, 2011.
Selling, general and administrative expenses in the quarter ended March 31, 2012 were $5.1 million compared to $2.2 million in the prior year period. Sales and marketing increased by $3.0 million to $4.6 million in the first quarter of 2012 as a result of $1.8 million in advertising campaigns and $2.1 million in promotional costs to strengthen its brand position and improve market awareness of its "Hi-Power" beverages. China Marine's advertising efforts included a series of TV commercials and extensive direct marketing activities.
Operating income in the first quarter of 2012 was a loss of $1.9 million compared to $6.7 million of operating income in the prior year period. Excluding the $0.6 million non-cash amortization expense related to the "Hi-Power" acquisition and $0.6 million of after-tax non-cash stock-based compensation expenses, operating loss was $0.7 million for the three months ended March 31, 2012.
Non-GAAP adjusted net loss of $0.8 million, or $0.03 net loss per share, compared to $6.2 million net income and $0.21 earnings per share, respectively, in the first quarter of 2011.
Financial Condition
As of March 31, 2012, the Company had $17.5 million in cash compared to $0.6 million as of December 31, 2011. China Marine had $2.6 million of debt outstanding at March 31, 2012 as a result of a short-term loan taken out in the fourth quarter of 2011. Cash flows from operations were $17.0 million due to an increase in accounts receivable collection, partially offset by an increase in trading inventories.
Working capital was $68.8 million, down from $70.2 million as of December 31, 2011. The current ratio was 11.2 to 1 on March 31, 2012 compared to 9.0 to 1 on December 31, 2011. Accounts receivable were $9.6 million compared to $68.6 million as of December 31, 2011 due to collections of marine catch receivables outstanding at the end of 2011. Shareholder equity was $128.9 million.
Construction Update - V Cold Storage Facility
The Company expects to commence operating its new 20,000 tons cold storage facility by the end of the second quarter of 2012. The project is expected to contribute approximately $8.0 million in revenues and $4.0 million in net income yearly once fully operational. The total construction cost of the project was approximately $24.5 million. Management hosted several customers and local officials on April 16th, 2012 to commemorate the completion of this facility.
First Quarter 2012 Conference Call
Mr. Pengfei Liu, CEO, and Mr. Marco Ku, CFO, will host the conference call. To attend the call, please use the dial in information below. When prompted, ask for the "China Marine Food Group call" and/or be prepared to provide the conference ID.
Date: | Friday, May 11th, 2012 |
Time: | 8:00 a.m. Eastern Time US |
Conference Line Dial-In (U.S.): | 1-877-317-4776 |
International Dial-In: | 1-412-317-6776 |
Conference ID: | "China Marine" |
Webcast: | http://webcast.mzvaluemonitor.com/Home/Login/85216671-3cde-4090-9e32-4398f19bb0f2 |
Please dial in at least 10-minutes before the call to ensure timely participation.
A playback of the call will be available until 8:00 am ET on May 18, 2012. To listen, call 1-877-344-7529 within the United States or 1-412-317-0088 when calling internationally. Please use the replay pin number 10014107.
This call is being webcast and can be accessed by clicking on this link: http://webcast.mzvaluemonitor.com/Home/Login/85216671-3cde-4090-9e32-4398f19bb0f2
About China Marine
China Marine Food Group Ltd. is a food and beverage manufacturer of Mingxiang® seafood-based snack foods and "Hi-Power" marine algae-based health drinks, and a wholesaler of frozen marine catch in five provinces in the PRC. Founded in 1994, China Marine has grown steadily and positioned its Mingxiang® brand as a category leader in 3,200 retail food sales points and 12,000 beverage sales points in China. The Company has received "The Famous Brand" and "Green Food" awards. Located in 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 Adjusted 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 diluted 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 and after-tax non-cash stock-based compensation expenses. 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.
- Financial Statements Follow -
CHINA MARINE FOOD GROUP LIMITED CONDENSED CONSOLIDATED BALANCE SHEETS (Currency expressed in United States Dollars ("US$"), except for number of shares)
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March 31, 2012 | December 31, 2011 | |||||
(Unaudited) | (Audited) | |||||
ASSETS | ||||||
Current assets: | ||||||
Cash and cash equivalents | $ | 17,456,053 | $ | 586,914 | ||
Accounts receivable, net | 9,630,543 | 68,643,678 | ||||
Inventories | 43,636,916 | 8,886,234 | ||||
Prepaid expenses and other current assets | 4,795,203 | 849,419 | ||||
Total current assets | 75,518,715 | 78,966,245 | ||||
Property, plant and equipment, net | 11,163,964 | 11,199,244 | ||||
Land use rights, net | 3,022,479 | 3,023,569 | ||||
Construction in progress | 23,659,993 | 22,923,143 | ||||
Intangible assets, net | 19,717,674 | 20,225,220 | ||||
Goodwill | 2,569,980 | 2,553,757 | ||||
TOTAL ASSETS | $ | 135,652,805 | $ | 138,891,178 | ||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||
Current liabilities: | ||||||
Short-term borrowings | $ | 2,566,459 | $ | 2,550,257 | ||
Accounts payable, trade | 1,732,329 | 2,583,549 | ||||
Amount due to a shareholder | 49,136 | 50,361 | ||||
Income tax payable | 764 | 174,525 | ||||
Accrued liabilities and other payables | 2,409,761 | 3,424,288 | ||||
Total current liabilities | 6,758,449 | 8,782,980 | ||||
Commitments and contingencies | ||||||
Shareholders' equity: | ||||||
Preferred stock, $0.001 par value; 1,000,000 shares authorized; 0 shares issued and outstanding as of March 31, 2012 and December 31, 2011 | - | - | ||||
Common stock, $0.001 par value; 100,000,000 shares authorized; 29,697,976 shares issued and outstanding as of March 31, 2012 and December 31, 2011 | 29,698 | 29,698 | ||||
Additional paid-in capital | 50,074,952 | 50,074,952 | ||||
Statutory reserve | 9,696,177 | 9,696,177 | ||||
Accumulated other comprehensive income | 12,727,975 | 11,897,382 | ||||
Retained earnings | 56,009,046 | 58,053,435 | ||||
Total China Marine Food Group Limited shareholders' equity | 128,537,848 | 129,751,644 | ||||
Non-controlling interests | 356,508 | 356,554 | ||||
Total shareholders' equity | 128,894,356 | 130,108,198 | ||||
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ | 135,652,805 | $ | 138,891,178 | ||
CHINA MARINE FOOD GROUP LIMITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (Currency expressed in United States Dollars ("US$"), except for number of shares) (Unaudited)
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For the Three Months Ended March 31, | ||||||||||||
2012 | 2011 | |||||||||||
REVENUE, NET | ||||||||||||
Processed seafood products | $ | 9,903,103 | $ | 19,868,771 | ||||||||
Marine catch | - | 75,976 | ||||||||||
Algae-based beverage products | 5,180,826 | 6,711,817 | ||||||||||
15,083,929 | 26,656,564 | |||||||||||
COST OF REVENUE (inclusive of depreciation and amortization) | ||||||||||||
Processed seafood products | (7,270,735) | (13,123,646) | ||||||||||
Marine catch | - | (47,350) | ||||||||||
Algae-based beverage products | (3,214,251) | (3,873,104) | ||||||||||
(10,484,986) | (17,044,100) | |||||||||||
GROSS PROFIT | 4,598,943 | 9,612,464 | ||||||||||
OPERATING EXPENSES: | ||||||||||||
Depreciation and amortization | (696,070) | (663,287) | ||||||||||
Sales and marketing | (4,581,249) | (1,586,120) | ||||||||||
General and administrative | (538,141) | (660,632) | ||||||||||
Stock-based compensation | (667,246) | - | ||||||||||
TOTAL OPERATING EXPENSES | (6,482,706) | (2,910,039) | ||||||||||
(LOSS) INCOME FROM OPERATIONS | (1,883,763) | 6,702,425 | ||||||||||
OTHER INCOME (EXPENSES): | ||||||||||||
Rental income | 49,305 | 23,968 | ||||||||||
Interest income | 33,049 | 21,164 | ||||||||||
Interest expense | (35,306) | - | ||||||||||
(LOSS) INCOME BEFORE INCOME TAXES | (1,836,715) | 6,747,557 | ||||||||||
INCOME TAX EXPENSE | (207,720) | (1,129,801) | ||||||||||
NET (LOSS) INCOME | (2,044,435) | 5,617,756 | ||||||||||
Less: net loss attributable to non-controlling interests | 46 | 44 | ||||||||||
NET (LOSS) INCOME ATTRIBUTABLE TO CHINA MARINE FOOD GROUP LIMITED | $ | (2,044,389) | $ | 5,617,800 | ||||||||
Other comprehensive income: | ||||||||||||
- Foreign currency translation gain | 830,593 | 738,499 | ||||||||||
COMPREHENSIVE (LOSS) INCOME | $ | (1,213,796) | $ | 6,356,299 | ||||||||
Net (loss) income per share attributable to China Marine Food Group Limited | ||||||||||||
- Basic | $ | (0.07) | $ | 0.19 | ||||||||
- Diluted | $ | (0.07) | $ | 0.19 | ||||||||
Weighted average shares outstanding - Basic | 29,697,976 | 28,977,976 | ||||||||||
- Diluted | 29,697,976 | 28,977,976 | ||||||||||
CHINA MARINE FOOD GROUP LIMITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Currency expressed in United States Dollars ("US$")) (Unaudited)
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For the Three Months Ended March 31, | ||||||||
2012 | 2011 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net (loss) income | $ | (2,044,435) | $ | 5,617,756 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 771,392 | 735,764 | ||||||
Reversal of doubtful accounts | (296,548) | (161,701) | ||||||
Compensatory stock awards | ||||||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | 59,309,683 | 32,340,093 | ||||||
Inventories | (34,750,682) | (11,036,477) | ||||||
Prepaid expenses and other current assets | (3,945,784) | (1,296,252) | ||||||
Accounts payable, trade | (851,220) | (1,190,736) | ||||||
Income tax payable | (173,761) | (379,326) | ||||||
Accrued liabilities and other payables | (1,014,527) | (3,162,080) | ||||||
Net cash provided by operating activities | 17,004,118 | 21,467,041 | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Purchase of property, plant and equipment | (6,868) | (14,316) | ||||||
Cash paid to construction in progress | (592,595) | (1,734,258) | ||||||
Net cash used in investing activities | (599,463) | (1,748,574) | ||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
(Repayment of) Advance from amount due to a shareholder | (1,225) | 5,846 | ||||||
Net cash (used in) provided by financing activities | (1,225) | 5,846 | ||||||
NET CHANGE IN CASH AND CASH EQUIVALENTS | 16,403,430 | 19,724,313 | ||||||
Effect of exchange rate changes in cash and cash equivalents | 465,709 | (78,890) | ||||||
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD | 586,914 | 15,556,772 | ||||||
CASH AND CASH EQUIVALENTS, END OF PERIOD | $ | 17,456,053 | $ | 35,202,195 | ||||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION | ||||||||
Cash paid for income taxes | $ | 381,481 | $ | 1,509,127 | ||||
Cash paid for interest | $ | 35,306 | $ | - | ||||
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING TRANSACTIONS | ||||||||
Transfer from construction in progress to property, plant and equipment | $ | - | $ | 1,807,283 | ||||
For more information, please contact:
COMPANY
Marco Hon Wai Ku, CFO
Suite 815, 8th Floor
Ocean Centre, Harbour City
Tsimshatsui, Kowloon, HONG KONG
Tel: +852-2111-8768
Email: marco.ku@china-marine.cn
Web: www.china-marine.cn
INVESTOR RELATIONS
John Mattio, SVP
MZ North America
Tel: +1-212-301-7130
Email: john.mattio@mzgroup.us
Web: www.mz-ir.com
