Record full year 2008 net income increased 157% year-over-year to $11.2 million
BEIJING, March 23 /PRNewswire-Asia/ -- Yongye Biotechnology International, Inc. (OTC Bulletin Board: YGYB; "Yongye" or the "Company"), a leading distributor of nutrients for plants and animals in the People’s Republic of China, today announced its financial results for its fourth quarter and fiscal year ended December 31, 2008.
Full Year 2008 Highlights
-- Revenue increased 266.1% year-over-year to $48.1 million
-- Gross profit increased 325.2% year-over-year to $24.9 million, with
gross margin of 51.8%
-- Net income increased 156.8% to $11.2 million, or $0.64 per fully
diluted share
-- Completed a share exchange transaction to become a publicly traded
company in April 2008
-- Raised $19.4 million in gross proceeds through private placement
financings in April and September 2008
-- Opened new production facility in Hohhot, increasing annual capacity
from 2,000 metric tons (“MT) to 10,000 MT
“2008 was a historic year in Yongye’s development, in which we aggressively expanded our sales network to become a leading plant nutrient product supplier in our sales regions and significantly increased production capacity,” said Mr. Zishen Wu, Chief Executive Officer of Yongye Biotechnology International, Inc. “We successfully completed a share exchange to become a publicly traded company and achieved record financial performance.”
Fourth Quarter 2008 Highlights
-- Revenue was $2.9 million, an increase of 21.7% from the fourth quarter
of 2007
-- Gross profit was $1.4 million, a 200.0% increase from the fourth
quarter of 2007, with gross margin of 49.4%
-- Net loss was $1.0 million, or a loss of $0.05 per basic and diluted
share, compared with a loss of $0.2 million, or a loss of $0.01 per
basic and diluted share, in the same quarter last year
Fourth Quarter 2008 Results
Revenue was $2.9 million in the fourth quarter of 2008, an increase of 21.7% from $2.4 million in the fourth quarter of 2008. The fourth quarter of the year is traditionally the seasonally slowest quarter of the year. The year-over-year revenue growth in the fourth quarter of 2008 resulted from the rapid expansion of the Company’s sales network in 2008. During the three months ended December 31, 2008, Yongye opened 350 trial stores in its sales regions. Trial stores are evaluated according to region specific performance goals, and stores that meet these goals then become branded Yongye stores. The Company expects to brand all 350 trial stores in the first half of 2009. In the fourth quarter of 2008, the Company sold 10,887 plant units and 50,464.75 animal units of which plant nutrient products accounted for 44% of the sales.
Gross profit was $1.4 million in the fourth quarter of 2008, a 200.0% increase from $0.5 million in the fourth quarter of 2007. Gross margin was 49.4% compared to 20.1% in the fourth quarter of 2007.
Selling, general and administrative expenses were $2.5 million in the fourth quarter of 2008, compared to $0.3 million in the fourth quarter of 2007. The significant increase in selling expenses was primarily the result of the sales network expansion in 2008. In addition, both advertisement expenses and freight costs increased significantly as the Company marketed its products in ten provinces in the fourth quarter of 2008 compared with four provinces in the same period last year. Administrative expenses increased from $0.13 million in the fourth quarter of 2007 to $1.3 million in the fourth quarter of 2008 due to increased staff and expenses related to becoming a public company, including expenses to third party professional consultants. The predecessor company that existed in 2007 had a similar cost structure to Yongye’s current cost structure, but on a much smaller scale.
Loss from operations was $1.1 million compared to income from operations of $0.1 million in the fourth quarter of 2007.
Net loss was $1.0 million in the fourth quarter of 2008, or a loss of $0.05 per fully diluted share, compared to a net loss of $0.2 million, or a loss of $0.01 per fully diluted share, in the fourth quarter of 2007.
The diluted weighted average number of shares outstanding increased from 11,444,775 in the fourth quarter of 2007 to 21,401,822 in the fourth quarter of 2008 because additional shares were issued in private placements in April and September 2008.
Full Year 2008 Results
Net revenue was $48.1 million for the twelve months ended December 31, 2008, up 266.1% from $13.1 million for the twelve months ended December 31, 2007. Gross profit was $24.9 million with a gross margin of 51.8%, compared to gross profit of $5.9 million with a gross margin of 44.6% for the twelve months ended December 31, 2007. Operating income was $13.7 million with an operating margin of 28.5%, compared to $4.9 million with an operating margin of 37.6% in the twelve months ended December 31, 2007. Net income was $11.2 million, or $0.64 per fully diluted share, compared to $4.4 million, or $0.38 per fully diluted share, for the twelve months ended December 31, 2007.
Financial Condition
On December 31, 2008, cash totaled $4.5 million, compared to $0.4 million as of December 31, 2007. The increase in cash of $4.1 million is due mostly to two financings and increased sales capability in 2008. Accounts receivable was $2.7 million and inventory totaled $20.7 million, compared with $1.6 million and $9.9 million, respectively, on December 31, 2007. Working capital was $25.5 million, a $22.8 million increase from the year ended 2007. Total current liabilities were $3.5 million and the Company had $0.4 million in long-term liabilities. Stockholders’ equity totaled $29.4 million as of December 31, 2008, compared to $12.9 million at the end of 2007.
Based on past experience, the Company expects strong demand for its “Shengmingsu” products from its distributors in the first half of 2009. Therefore the Company significantly increased inventory in the fourth quarter of 2008 in order to effectively meet distributors’ needs in 2009. The $22.8 million increase of working capital was primarily due to an increase in inventory of $10.8 million in 2008, reflecting Yongye Nongfeng’s current business model of purchasing only finished goods as inventory from its predecessor company.
Key Events and Changes
In the quarter ended December 31, 2008, the Company added 350 stores to its trial process through which stores are evaluated according to
region-specific performance goals. When added to the existing 775 stores, this brought the network total to 1,125 stores at the end of 2008.
As previously disclosed, the Company is in the process restructuring its operations to transition manufacturing operations from its predecessor company to Yongye Nongfeng. This will enable Yongye Nongfeng to centralize and better manage the Company’s product research and development, manufacturing, marketing and distribution. The Company hopes to become a more tightly integrated business with greater control over product quality and intellectual property. The Company expects to complete this process in 2009, depending on the receipt of necessary approvals from the PRC government.
Business Outlook
“As we enter 2009, the global and domestic economic environment has dramatically changed compared to the same time in 2008. We understand that China has pledged to stimulate the economy and specifically the agriculture sector in order to continue the long-standing growth in China’s agricultural productivity. In this scenario, our products become even more important to Chinese farmers and China and this gives us greater opportunity,” stated Mr. Zishen Wu, CEO of Yongye. “Along with a series of favorable government policies in China’s agriculture sector, and based on our achievements in 2008, we believe that our newly completed production facility and unique sales model will allow Yongye to continue its rapid growth for the foreseeable future although we remain cautious in view of the global financial crisis.
“We plan to improve the quality of our corporate governance and actively seek a senior exchange listing in 2009,” Mr. Wu added. “As part of the private placement financing which took place in April and September 2008, we entered into a ‘make good’ agreement that set revenue and net income good targets for 2008 and 2009. We have exceeded our ‘make good’ target for 2008 and we expect to exceed our 2009 ‘make good’ targets of $66 million in revenue and $15.8 million in net income.”
Conference Call
The Company will host a conference call at 10:00 a.m. Eastern Time on
March 23, 2009 to discuss its full year 2008 results.
To participate in the live conference call, please dial the following number five to ten minutes prior to the scheduled conference call time:
+1-800-688-0796. International callers should dial +1-617-614-4070. The conference pass code is 936 471 84.
For those who are unable to participate in the conference call at the time of the call, a replay will be available for fourteen days after the call is held. To access the replay, please dial +1-888-286-8010. International callers should dial +1-617-801-6888. The replay pass code is 387 198 95.
About Yongye Biotechnology International, Inc.
Yongye Biotechnology International, Inc., headquartered in Beijing, is engaged in the development, distribution and sales of fulvic acid based nutrients for plants and animals. The Company’s patent pending processes and proprietary formulas allow it to create products that increase crop yields and improve the health of livestock. Its sole operating subsidiary, Yongye Nongfeng Biotechnology Company, Ltd., is located in Inner Mongolia. The Company sells its products through distributors and directly to farmers located in ten provinces throughout China.
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.
- Financial Tables Follow -
YONGYE BIOTECHNOLOGY INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
Yongye The Yongye The
Biotechnology predecessor Biotechnology predecessor
International, Inner International, Inner
Inc. and Mongolia Inc. and Mongolia
Subsidiaries Yongye Subsidiaries Yongye
For Three For Three For Twelve For Twelve
Months Ended Months Ended Months Ended Months Ended
December December December December
31, 2008 31, 2007 31, 2008 31, 2007
(Unaudited) (Unaudited) (Audited) (Audited)
Sales $2,902,692 $2,384,551 $48,092,271 $13,137,406
Cost 1,467,720 1,906,230 23,165,684 7,274,710
Gross Profit 1,434,972 478,321 24,926,587 5,862,696
Selling Expenses 1,228,242 218,577 8,665,755 449,168
General and
Administrative
Expenses 1,307,209 125,456 2,573,017 476,828
Income (Loss)
from Operations (1,100,479) 134,288 13,687,815 4,936,700
Other Income
(Expense)
Interest Income (69,698) (213,530) (3,135) (212,239)
Other Income 200,888 (86,439) (526,039) (365,907)
Total Other
Income (Expenses) 131,190 (299,969) (529,174) (578,146)
Income (Loss)
Before Provision
for Income Taxes
and Minority
Interest (969,289) (165,681) 13,158,641 4,358,554
Provision for
Income Taxes 41,990 -- 864,292 --
Net Income
(Loss) before
Minority
Interest (1,011,279) (165,681) 12,294,349 4,358,554
Provision for
Minority
Interest 9,962 -- 1,102,388 --
Net Income
(Loss) (1,021,241) (165,681) 11,191,961 4,358,554
Foreign Currency
Translation
Adjustment (88,870) 379,070 331,100 723,298
Comprehensive
Income $(1,110,111) $213,389 $11,523,061 $5,081,852
Net Income (Loss)
Per Share
Basic $(0.05) $(0.01) $0.66 $0.38
Diluted $(0.05) $(0.01) $0.64 $0.38
Weighted Average
Shares
Basic 20,760,258 11,444,775 16,937,852 11,444,775
Diluted 21,401,822 11,444,775 17,546,796 11,444,775
Yongye Biotechnology International, Inc. and Subsidiaries
BALANCE SHEET
Yongye
Biotechnology
International, The predecessor
Inc. and Inner Mongolia
Subsidiaries Yongye
DECEMBER 31, 2008 DECEMBER 31, 2007
(Audited) (Audited)
CURRENT ASSETS
Cash and cash equivalents $ 4,477,477 $ 376,002
Accounts receivable, net 2,748,042 1,630,609
Inventories 20,708,193 9,851,788
Advance payments 44,051 --
Due from related party 192,741 --
Due from affiliates -- 978,384
Prepaid expenses 189,478 --
Other receivables 680,752 27,038
Total Current Assets 29,040,734 12,863,821
PROPERTY AND EQUIPMENT, NET 5,368,074 2,486,487
INTANGIBLE ASSETS, NET 95,453 3,665,584
LONG-TERM INVESTMENTS -- 4,115,764
TOTAL ASSETS $ 34,504,261 $ 23,131,656
Yongye Biotechnology International, Inc. and Subsidiaries
BALANCE SHEET
Yongye
Biotechnology
International, The predecessor
Inc. and Inner Mongolia
Subsidiaries Yongye
DECEMBER 31, 2008 DECEMBER 31, 2007
(Audited) (Audited)
CURRENT LIABILITIES
Short-term bank loans -- 5,484,000
Accounts payable and
accrued expenses $ 630,619 1,271,852
Due to shareholders -- 2,507,371
Taxes payables 366,981 893,892
Advance from customers 1,869,400 --
Other payables 626,911 50,916
Total Current Liabilities 3,493,911 10,208,031
LONG-TERM LOANS 397,773 12,153
Minority interest 1,202,388 --
STOCKHOLDERS’ EQUITY
Capital stock: par value $.001;
26,760,258 shares authorized and
issued at December 31, 2008 26,760 --
Capital contribution -- 7,260,000
Additional paid-in
capital- Common stock 13,976,900 --
Additional paid-in
capital- Warrants 3,883,432 --
Retained earnings 9,984,085 4,024,111
Statutory reserve 1,207,912 480,629
Accumulated other
comprehensive income 331,100 1,146,732
Total Stockholders’ Equity 29,410,189 12,911,472
TOTAL LIABILITIES AND
STOCKHOLDERS’ EQUITY $ 34,504,261 $ 23,131,656
YONGYE BIOTECHNOLOGY INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Yongye
Biotechnology
International, The predecessor
Inc. and Inner Mongolia
Subsidiaries Yongye
FOR YEAR ENDED FOR YEAR ENDED
DECEMBER 31, 2008 DECEMBER 31, 2007
(Audited) (Audited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $11,191,961 $4,358,554
Adjustments to reconcile net
loss to net cash provided (used)
in operating activities
Depreciation and amortization 118,104 212,423
Provision for bad debt 305,338 31,907
Provision for minority interest 1,102,388 --
Loss on disposal of fixed assets -- 149,853
Changes in assets and liabilities:
Accounts receivable (3,053,380) (1,124,042)
Inventories (20,708,193) (7,814,789)
Advances payments (44,051) 93,091
Due to related party (192,741) --
Due from affiliates -- (267,345)
Prepaid expense (189,478) 5,741
Other receivables, net (680,752) 66,926
Accounts payable and accrued
expenses 630,619 1,068,613
Taxes payable 366,981 835,137
Advance from customers 1,869,400 --
Other payables 616,911 (2,234,407)
Total Adjustments (19,858,854) (8,976,892)
Net Cash Used in Operating
Activities (8,666,893) (4,618,338)
YONGYE BIOTECHNOLOGY INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (cont.)
Yongye
Biotechnology
International, The predecessor
Inc. and Inner Mongolia
Subsidiaries Yongye
FOR YEAR ENDED FOR YEAR ENDED
DECEMBER 31, 2008 DECEMBER 31, 2007
(Audited) (Audited)
CASH FLOWS FROM INVESTING ACTIVITIES
Investment -- --
Acquisition of property and
equipment (5,475,572) (308,312)
Additions to intangible assets -- (909)
Net Cash Used in Investing
Activities (5,475,572) (309,221)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from bank loans 397,773 4,345,110
Proceeds from share issued 19,350,651 --
Proceeds from shareholder loans -- 864,258
Proceeds from long-term loans -- (12,131)
Payment for stock issuance costs (1,461,659) --
Net Cash From Financing
Activities 18,286,765 5,197,237
EFFECT OF FOREIGN CURRENCY
TRANSLATION ON CASH 325,041 17,301
NET INCREASE IN CASH AND CASH
EQUIVALENTS 4,469,341 286,979
CASH AND CASH EQUIVALENTS - BEGINNING 8,136 89,023
CASH AND CASH EQUIVALENTS - ENDING $4,477,477 $376,002
Supplemental cash flow information:
Cash paid for income taxes 648,331 --
Cash paid for interest expense payment 11,301 212,239
For more information, please contact:
Yongye Biotechnology International, Inc.
Mr. Larry Gilmore-VP of Corporate Strategy
Tel: +1-818-390-1272
Email: larry.gilmore@gmail.com
CCG Investor Relations, Inc.
Mr. Crocker Coulson, President
Tel: +1-646-213-1915 (New York)
Email: crocker.coulson@ccgir.com
Web: http://www.ccgir.com
