SHISHI, China, November 15, 2012 /PRNewswire-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 the third quarter ended September 30, 2012.
Financial Summary
Third Quarter 2012 Results | |||
Q3 2012 | Q3 2011 | CHANGE | |
Net Sales | $30.8 million | $30.9 million | -0.5% |
Gross Profit | $9.9 million | $7.7 million | +29.2% |
Net Income | -$2.5 million | $0.8 million | -409.6% |
Diluted EPS* | -$0.08 | $0.03 | -366.7% |
Adjusted Net Income** | $0.7 million | $2.0 million | -65.4% |
Adjusted Diluted EPS** | $0.02 | $0.07 | -71.4% |
* Diluted EPS calculated for the period is based on 29.7 million shares on September 30, 2012 and September 30, 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 Q3 2012 and Q3 2011, $0.6 million of after-tax non-cash stock-based compensation expenses in Q3 2011 and $2.6 million of non-cash goodwill impairment in Q3 2012. For more information about the non-GAAP financial measures contained in this press release, please see "About Non-GAAP Financial Measures" below. | |||
"We generated revenue growth in our two main businesses -- seafood snacks and "Hi-Power" beverages -- during the third quarter," started Mr. Pengfei Liu, Chairman and CEO of China Marine. "These strong results reflect our unwavering commitment to invest in our brands. With consistent advertising and marketing support and low channel inventories, we expect to drive further positive sales momentum in the fourth quarter."
Third Quarter 2012 Results
Total net revenues in all segments for the quarter ended September 30, 2012, including Mingxiang®-branded seafood snack foods, "Hi-Power" beverages and marine catch was $30.8 million, down slightly from $30.9 million in the prior year's period.
Seafood Snack Food Segment
China Marine's sale of processed and packaged seafood snack foods generated $15.0 million in revenue, a 3.7% increase from the third quarter of 2011, representing the first year-over-year growth in seafood snacks revenue since the second quarter of 2011. Sales were higher in Fujian province as a result of continuous market penetration efforts and marketing support. Seafood snack foods accounted for 48.7% of total revenues in the third 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 30.3% in the third quarter of 2012 compared to 27.4% in the same period last year as a result of reduction on headcount and the change in product mix to products with lower packaging costs. 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 $13.8 million in the third quarter of 2012, a 63.2% increase compared to $8.4 million in the third quarter of 2011. Sales increased year-over-year in Fujian and Zhejiang provinces.
The total numbers of retail end-points for "Hi-Power" were about 14,000 on September 30, 2012. Since 2011, the Company has focused on increasing sales growth through existing distributors. "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 that carry "Hi-Power" beverages, and certain locations where Mingxiang®-branded seafood products are also sold.
Gross margin was 38.6% in the third quarter of 2012, down 40 basis points from 39.0% in the same period last year due to higher raw materials costs, packaging costs and manufacturing overhead. The Company outsources production, bottling and distribution to minimize its working capital and capital expenditures. China Marine continues to invest in sales and marketing, with various seasonal promotions 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 $2.0 million in the third quarter of 2012 compared to $8.0 million in the same period a year ago. The Company purchases and sells marine catch to distributors on an opportunistic basis. Gross profits were minimal in the marine catch business during the three months ended September 30, 2012 compared to $0.4 million in the same period a year ago.
Consolidated costs of goods sold totaled $20.8 million for the quarter, or 67.7% of net revenues for the period ended September 30, 2012, which consists of the cost of raw materials, packaging materials, direct labor and manufacturing overhead.
Gross profit in the third quarter of 2012 was $9.9 million compared to $7.7 million in the third quarter of 2011. Consolidated gross margins increased 750 basis points to 32.3% for the third quarter of 2012, up from 24.8% for the three months ended September 30, 2011. Gross margin improvements were a direct result of higher sales of seafood snacks and "Hi-Power" beverages, and lower sales of marine catch at relatively lower margins.
Operating expenses in the quarter ended September 30, 2012 were $12.4 million compared to $6.7 million in the prior year's period. The Company increased sales and marketing investments by approximately $3.8 million to $8.4 million in the third quarter of 2012 as a result of $2.5 million in advertising campaigns and $5.4 million in promotional costs to strengthen its brand position and improve market awareness. As a result of significant selling and marketing expenses for the nine months ended September 30, 2012 that resulted in a significant operating loss for the algae-based drink business, the Company is performing an updated valuation of its drink business using updated forecasted results. Preliminary estimated results prepared by the Company do not indicate a probable impairment loss to the intangible assets as of September 30, 2012. However, based on the preliminary results of the Company's valuation of the drink business, the Company recorded a goodwill impairment loss of $2.6 million during the quarter ended September 30, 2012.
As a result, GAAP operating loss in the third quarter of 2012 was $2.4 million compared to an operating profit of $1.0 million in the prior year's period. Excluding the $0.6 million of non-cash amortization expense related to the "Hi-Power" acquisition, and the $2.6 million of non-cash goodwill impairment, adjusted operating income was $0.8 million for the three months ended September 30, 2012.
GAAP net loss attributable to China Marine shareholders was $2.5 million in the three months ended September 30, 2012 compared to $0.8 million net income in the same period a year ago. Excluding the non-GAAP financial measure as mentioned above, adjusted net income for the quarter were $0.7 million, with adjusted earnings per share of $0.02.
Nine Month Results
Year to Date 2012 Results | |||
YTD 2012 | YTD 2011 | CHANGE | |
Net Sales | $107.1 million | $79.6 million | +34.5% |
Gross Profit | $23.5 million | $24.5 million | -3.8% |
Net Income | -$6.2 million | $7.4 million | -183.1% |
Diluted EPS* | -$0.21 | $0.25 | -184.0% |
Adjusted Net Income** | -$1.1 million | $10.5 million | -110.9% |
Adjusted Diluted EPS** | -$0.04 | $0.36 | -111.1% |
* Diluted EPS calculated for the period is based on 29.7 million shares on September 30, 2012 versus 29.5 million shares on September 30, 2011. | |||
** Adjusted Net Income and Diluted EPS are non-GAAP calculations and do not include $1.9 million of non-cash, amortization of intangible assets related to the Company's acquisition in YTD 2012 and YTD 2011, $0.6 million and $1.2 million of after-tax non-cash stock-based compensation expenses in YTD 2012 and YTD 2011, respectively, and $2.6 million of non-cash goodwill impairment in YTD 2012. For more information about the non-GAAP financial measures contained in this press release, please see "About Non-GAAP Financial Measures" below. | |||
Net revenues for the nine months ended September 30, 2012 were $107.1 million compared to $79.6 million in the corresponding period a year ago, representing a 34.5% increase. Sales of Mingxiang®-branded seafood products, "Hi-Power" beverages and marine catch were $35.5 million, $40.3 million and $31.3 million, respectively.
Gross profits were $23.5 million during the year to date of 2012, representing a gross margin of 22.0%. Operating expenses were $29.5 million for the nine months ended September 30, 2012, up 89.7% compared to $15.5 million in the year to date of 2011. The Company had an operating loss of $6.0 million in the first nine months of 2012. Excluding $1.9 million of non-cash amortization expenses related to prior acquisitions, $0.6 million of after-tax non-cash stock-based compensation expenses, and $2.6 million of non-cash goodwill impairment, adjusted operating loss was $0.9 million.
Net loss and net loss per share attributable to China Marine shareholders for the nine months ended September 30, 2012 were $6.2 million and $0.21, respectively. Non-GAAP adjusted net loss was $1.1 million and net loss per share was $0.04. The weighted average shares outstanding were 29.7 million shares.
Financial Condition
As of September 30, 2012, the Company had $1.0 million in cash compared to $0.6 million as of December 31, 2011. China Marine had $8.7 million of debt outstanding at September 30, 2012 as a result of short-term loans used for working capital needs. Cash used for operations were $4.1 million during the first nine months of 2012 compared to $22.5 million of cash generated in the comparable period a year ago. The primary cause of the year-over-year change is higher inventories of trading materials in 2012.
Working capital was $67.3 million as of September 30, 2012, down from $70.2 million as of December 31, 2011. The current ratio was 4.8 to 1 on September 30, 2012 compared to 9.0 to 1 on December 31, 2011. Accounts receivable were $25.6 million as of September 30, 2012 compared to $68.6 million as of December 31, 2011. The accounts receivable takes about 2.5 months to collect on average. Shareholder equity was $124.6 million at September 30, 2012.
Third 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 Q3 2012 conference call".
Date: | Thursday, November 15, 2012 |
Time: | 8:00 am Eastern Standard Time US |
Conference Line Dial-In (U.S.): | +1-877-317-6776 |
International Dial-In: | +1-412-317-6776 |
Conference ID: | "China Marine" or 10021009 |
Webcast: |
Please dial in at least 10-minutes before the call to ensure timely participation. This call is being webcast and can be accessed by clicking on this link:
http://webcast.mzvaluemonitor.com/Home/Login/636
A playback of the call will be available until 8:00 am ET on November 22, 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 10021009.
About China Marine
China Marine Food Group Limited 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 3,500 retail food sales points and 14,000 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, after-tax non-cash stock-based compensation expenses and non-cash goodwill impairment. 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$")) | ||||||
(Unaudited) | ||||||
September 30, 2012 | December 31, 2011 | |||||
ASSETS | ||||||
Current assets: | ||||||
Cash and cash equivalents | $ | 1,004,962 | $ | 586,914 | ||
Accounts receivable, net | 25,592,080 | 68,643,678 | ||||
Inventories | 52,828,681 | 8,886,234 | ||||
Prepaid expenses and other current assets | 5,635,902 | 849,419 | ||||
Total current assets | 85,061,625 | 78,966,245 | ||||
Property, plant and equipment, net | 35,898,223 | 11,199,244 | ||||
Land use rights, net | 2,978,676 | 3,023,569 | ||||
Construction in progress | - | 22,923,143 | ||||
Intangible assets, net | 18,425,759 | 20,225,220 | ||||
Goodwill | - | 2,553,757 | ||||
TOTAL ASSETS | $ | 142,364,283 | $ | 138,891,178 | ||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||
Current liabilities: | ||||||
Short-term borrowings | $ | 8,735,559 | $ | 2,550,257 | ||
Accounts payable, trade | 4,727,694 | 2,583,549 | ||||
Amount due to a shareholder | 46,615 | 50,361 | ||||
Income tax payable | - | 174,525 | ||||
Accrued liabilities and other payables | 4,214,689 | 3,424,288 | ||||
Total current liabilities | 17,724,557 | 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 September 30, 2012 and December 31, 2011 | - | - | ||||
Common stock, $0.001 par value; 100,000,000 shares authorized; 29,722,976 and 29,697,976 shares issued and outstanding as of September 30, 2012 and December 31, 2011 | 29,723 | 29,698 | ||||
Additional paid-in capital | 50,097,677 | 50,074,952 | ||||
Statutory reserve | 9,696,177 | 9,696,177 | ||||
Accumulated other comprehensive income | 12,589,757 | 11,897,382 | ||||
Retained earnings | 51,869,983 | 58,053,435 | ||||
Total China Marine Food Group Limited shareholders' equity | 124,283,317 | 129,751,644 | ||||
Non-controlling interests | 356,409 | 356,554 | ||||
Total shareholders' equity | 124,639,726 | 130,108,198 | ||||
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ | 142,364,283 | $ | 138,891,178 | ||
CHINA MARINE FOOD GROUP LIMITED | ||||||||||||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) | ||||||||||||||||||||||
(Currency expressed in United States Dollars ("US$")) | ||||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||
For the Three Months Ended | For the Nine Months Ended | |||||||||||||||||||||
2012 | 2011 | 2012 | 2011 | |||||||||||||||||||
Revenue, net | ||||||||||||||||||||||
Processed seafood products | $ | 14,974,488 | $ | 14,440,645 | $ | 35,534,875 | $ | 47,732,721 | ||||||||||||||
Marine catch | 2,004,746 | 8,033,004 | 40,338,847 | 8,108,980 | ||||||||||||||||||
Algae-based beverage products | 13,781,445 | 8,444,457 | 31,255,077 | 23,802,183 | ||||||||||||||||||
30,760,679 | 30,918,106 | 107,128,799 | 79,643,884 | |||||||||||||||||||
Cost of revenue (inclusive of depreciation and amortization) | ||||||||||||||||||||||
Processed seafood products | (10,434,366) | (10,468,698) | (25,335,659) | (33,355,105) | ||||||||||||||||||
Marine catch | (1,919,388) | (7,599,621) | (39,005,493) | (7,646,971) | ||||||||||||||||||
Algae-based beverage products | (8,459,448) | (5,153,109) | (19,265,702) | (14,181,468) | ||||||||||||||||||
(20,813,202) | (23,221,428) | (83,606,854) | (55,183,544) | |||||||||||||||||||
Gross profit | 9,947,477 | 7,696,678 | 23,521,945 | 24,460,340 | ||||||||||||||||||
Operating expenses: | ||||||||||||||||||||||
Depreciation and amortization | (693,795) | (684,922) | (2,085,010) | (2,024,749) | ||||||||||||||||||
Sales and marketing | (8,430,540) | (4,677,574) | (21,710,102) | (10,181,898) | ||||||||||||||||||
General and administrative | (682,132) | (613,047) | (2,429,194) | (1,956,030) | ||||||||||||||||||
Stock-based compensation | - | (705,157) | (667,246) | (1,368,531) | ||||||||||||||||||
Goodwill impairment | (2,571,488) | - | (2,571,488) | - | ||||||||||||||||||
TOTAL OPERATING EXPENSES | (12,377,955) | (6,680,700) | (29,463,040) | (15,531,208) | ||||||||||||||||||
(LOSS) Income FROm operations | (2,430,478) | 1,015,978 | (5,941,095) | 8,929,132 | ||||||||||||||||||
Other income (expenses): | ||||||||||||||||||||||
Subsidy income | - | - | 15,866 | - | ||||||||||||||||||
Rental income | 50,556 | 26,907 | 149,085 | 75,134 | ||||||||||||||||||
Interest income | 21,989 | 47,892 | 83,710 | 115,275 | ||||||||||||||||||
Interest expense | (142,322) | - | (283,443) | - | ||||||||||||||||||
(LOSS) Income before income taxes | (2,500,255) | 1,090,777 | (5,975,877) | 9,119,541 | ||||||||||||||||||
Income tax expense | - | (283,216) | (207,720) | (1,682,711) | ||||||||||||||||||
NET (LOSS) INCOME | (2,500,255) | 807,561 | (6,183,597) | 7,436,830 | ||||||||||||||||||
Less: net loss attributable to non-controlling interests | 53 | 45 | 145 | 163 | ||||||||||||||||||
Net (LOSS) income attributable to China Marine Food Group Limited | $ | (2,500,202) | $ | 807,606 | $ | (6,183,452) | $ | 7,436,993 | ||||||||||||||
Other comprehensive income: | ||||||||||||||||||||||
- Foreign currency translation (loss) gain | (201,797) | 1,425,259 | 692,375 | 3,787,888 | ||||||||||||||||||
COMPREHENSIVE (LOSS) INCOME | $ | (2,701,999) | $ | 2,232,865 | $ | (5,491,077) | $ | 11,224,881 | ||||||||||||||
Net (loss) income per share attributable to China Marine Food Group Limited - Basic | $ | (0.08) | $ | 0.03 | $ | (0.21) | $ | 0.25 | ||||||||||||||
- Diluted | $ | (0.08) | $ | 0.03 | $ | (0.21) | $ | 0.25 | ||||||||||||||
Weighted average shares outstanding - Basic | 29,715,911 | 29,695,150 | 29,703,998 | 29,452,996 | ||||||||||||||||||
- Diluted | 29,715,911 | 29,695,150 | 29,703,998 | 29,452,996 | ||||||||||||||||||
CHINA MARINE FOOD GROUP LIMITED | ||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||
(Currency expressed in United States Dollars ("US$")) | ||||||
(Unaudited) | ||||||
For the Nine Months Ended September 30, | ||||||
2012 | 2011 | |||||
Cash flows from operating activities: | ||||||
Net (loss) income | $ | (6,183,597) | $ | 7,436,830 | ||
Adjustments to reconcile net income to net cash provided by ooperating activities: | ||||||
Depreciation and amortization | 2,405,530 | 2,248,254 | ||||
Stock issued for service | 22,750 | 51,800 | ||||
Reversal of doubtful accounts | (216,340) | (108,336) | ||||
Loss on disposal of property, plant and equipment | - | 22,045 | ||||
Compensatory stock awards | - | 2,646,000 | ||||
Goodwill impairment | 2,571,488 | - | ||||
Changes in operating assets and liabilities: | ||||||
Accounts receivable | 43,267,938 | 21,667,348 | ||||
Inventories | (43,942,447) | (6,866,217) | ||||
Prepaid expenses and other current assets | (4,786,483) | (2,409,978) | ||||
Accounts payable, trade | 2,144,145 | (182,884) | ||||
Income tax payable | (174,525) | (536,996) | ||||
Accrued liabilities and other payables | 790,401 | (1,497,187) | ||||
Net cash (used in) provided by operating activities | (4,101,140) | 22,470,679 | ||||
Cash flows from investing activities: | ||||||
Purchase of property, plant and equipment | (172,991) | (26,045) | ||||
Cash paid to construction in progress | (1,974,826) | (8,213,324) | ||||
Net cash used in investing activities | (2,147,817) | (8,239,369) | ||||
Cash flows from financing activities: | ||||||
Repayment of amount due to a shareholder | (3,746) | (211,714) | ||||
Proceeds from short-term borrowings | 8,750,099 | - | ||||
Repayment on short-term borrowings | (2,570,327) | - | ||||
Net cash provided by (used in) financing activities | 6,176,026 | (211,714) | ||||
NET CHANGE IN CASH AND CASH EQUIVALENTS | (72,931) | 14,019,596 | ||||
Effect of exchange rate changes in cash and cash equivalents | 490,979 | 1,740,730 | ||||
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD | 586,914 | 15,556,772 | ||||
CASH AND CASH EQUIVALENTS, END OF PERIOD | $ | 1,004,962 | $ | 31,317,098 | ||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION | ||||||
Cash paid for income taxes | $ | 382,245 | $ | 2,219,707 | ||
Cash paid for interest | $ | 283,443 | $ | - | ||
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING TRANSACTIONS | ||||||
Transfer from construction in progress to property, plant and equipment | $ | 24,897,969 | $ | 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.mzgroup.us
