Deyu Agriculture Corp. Announces Third Quarter 2012 Results and Schedules Results Conference Call and Webcast PR Newswire BEIJING, Nov. 15, 2012 BEIJING, Nov. 15, 2012 /PRNewswire-FirstCall/ -- Deyu Agriculture Corp. (OTCBB: DEYU) (the "Company"), a Shanxi Province, China based vertically integrated producer, processor, marketer and distributor of organic and other agricultural products made from corn and grains, today announced its financial results for the third quarter ended September 30, 2012. Third Quarter (Q3) Highlights: For Q3 of Fiscal 2012 as compared to the same period in 2011: osales in the Grain Division improved 45.2% to $17.42 million ogross margin increased from 15.1% to 18.1% For Q3 of Fiscal 2012 as compared to Q2 of Fiscal 2012: orevenue increased 1.1% to $56.5 million onet income rose 23.9% to $3.49 million oearnings per diluted share increased 21.7% to $0.28 Summarized Q3 2012 Results as compared to Q3 2011 Results: Q3 2012 Q3 2011 CHANGE Revenue $56.5 million $84.4 million (33.1)% Gross profit $10.2 million $12.7 million (19.8)% Net Income* $3.5 million $7.6 million (53.9)% EPS (Diluted)** $0.28 $0.61 (54.1)% * Represents net income available to common stockholders. **Earnings per diluted share for the quarter of $0.28 on 12.6 million shares. For Q3 2011, the Company reported fully diluted earnings per share of $0.61 on 12.52 million shares. Financial Results for Q3 2012 as compared to Q2 2012: Q3 2012 Q2 2012 CHANGE Revenue $56.5 million $55.8 million 1.1% Gross profit $10.2 million $10.5 million (2.7)% Net Income* $3.5 million $2.8 million 23.9% EPS (Diluted)** $0.28 $0.23 21.7% * Represents net income available to common stockholders. **Earnings per diluted share for the quarter of $0.28 on 12.6 million shares. For Q2 2012, the Company reported fully diluted earnings per share of $0.23 on 12.6 million shares. "We are repositioning ourselves to be a more integrated agriculture company in China, not only as one of China's largest wholesalers of corn and grain products, but also as one of the country's leading brands of grain products for the consumer market," said Jianming Hao, Chief Executive Officer of the Company. "In view of this goal, we are glad to see that our recent acquisition, the Taizihu Group, which has a diversified product line of 100 types of grain products, contributed $5.7 million in revenues this past quarter. To further penetrate the consumer market, we are also currently exploring strategies that tap into China's emerging commercial sales market for health foods." "In Q3 of last year, we were able to achieve record levels in our revenue and net profit with $12.1 million of bank loans and $28.5 million of bank notes," Mr. Hao continued. "However, this year, our management team has taken a more sustainable approach to our operations by decreasing our overall borrowings from banks from an aggregate of $40.6 million as of Q3 2011 to about $11.2 million as of Q3 2012. This primarily reflected a reduction in bank notes from $28.5 million as of Q3 2011 to $0 as of Q3 2012. We believe such approach significantly reduced our financial risks, especially considering the current global economy downturn. Even though our Q3 2012 results were impacted by a decrease in working capital supported by bank borrowings, we are confident that this strategic move can benefit the Company and our shareholders in the long run. Even with this shift in strategy, we were able to achieve growth in our revenue and net income from Q2 2012 to Q3 2012." "This has been a transformative couple of months for our Company, as we recently elected a new President, Greg Chen, as well as increased our Board with the additions of Greg and Jan Poulsen," Mr. Hao added. "With Greg's experience in developing brands and companies in China, and Jan's twenty-plus years of experience in both asset management and business development within the food and beverage industries, we are confident that we can continue to build on our recent quarter over quarter progress." Third Quarter 2012 Financial Results Net revenue for Q3 2012 was $56.5 million compared with $84.4 million for Q3 2011, a decrease of $27.9 million, or 33.1%. Net revenue from the Company's Corn Division for Q3 2012 was approximately $34.9 million, a decrease of $27.3 million, or approximately 43.9%, as compared to Q3 2011, which was primarily due to the reduction of working capital for inventory procurement supported by bank loans and bank notes, which was reduced from an average balance of $38.1 million to $6.0 million for sustaining businesses. Net revenue from the Company's Grain Division for Q3 2012 was $17.4 million, an increase of $5.4 million, or 45.2%, as compared to Q3 2011. The increase was attributable to an increase of $5.7 million of sales revenue added by the Taizihu Group. Net Revenue from the Company's Bulk Trading Division for Q3 2012 was $4.2 million, a decrease of $6.0 million, or 59.1% as compared to Q3 2011. This decrease was mainly attributable to the strategic reduction of certain portions of the Company's bulk trade business by shifting more financial resources to the Company's Corn Division and Grain Division. The Company's gross profit decreased by $2.5 million, or 19.8%, from $12.7 million for Q3 2011 to $10.2 million for Q3 2012. The decrease was a combined result of a decrease of $3.9 million in the Corn Division, an increase of $1.6 million in the Grain Division and a decrease of $0.2 million in the Bulk Trading Division. The Company's gross margin increased from 15.1% in Q3 2011 to 18.1% in Q3 2012. Gross margin for the Corn Division was 15.4% for Q3 2012, up by 54 basis points from 14.8% for Q3 2011, which was mainly attributable to the Company's gross margin management. Gross margin for the Grain Division was 26.4% for Q3 2012, an increase of 100 basis points from 25.4% for Q3 2011, which was mainly attributable to the additions of new product portfolios containing mixed gross margins, which targeted a wider scope of end consumers. The Company's operating expenses increased $1.3 million or 28.5% to $6.1 million for Q3 2012 as compared to $4.8 million for Q3 2011. This increase was due to the increase of freight charges for product deliveries and advertisement expenses spent on brand promotion, expenses added by the Taizihu Group, increased depreciation and amortization caused by newly-acquired buildings as well as increased payroll and other expenses caused by inflation. Net income available to common stockholders of $3.5 million for Q3 2012 compared to a net income of $7.6 million for Q3 2011, a decrease of $4.1 million, or 53.9%. Recent Updates In August 2012, the Company reached an agreement with Beijing Suning Appliance Co., Ltd. ("Suning") to supply Suning with refined packaged grain goods valued at RMB115.9 million (approximately $18.4 million). Suning is one of the largest electrical and electronic appliance retailers in China, with 1,700 chain stores of annual sales of $15 billion (RMB 93.9 billion) in 2011. With the demand from the commercial sales market for health foods growing in China, particularly for refined packaged products, the Company plans to continue developing more strategic institutional clients to further enter into the commercial sales segment. Effective October 11, 2012, the Company's Board expanded the number of members serving on the Board from five to seven in accordance with the Company's Bylaws, and subsequently filled the vacancies created by the expansion by appointing Greg Chen and Jan Poulsen to serve on the Board until the next following annual meeting of the stockholders of the Company, at which such directors shall be eligible for election by the stockholders. Additionally, Mr. Chen was appointed the President of the Company, where his responsibilities shall include assisting the Company with its international and domestic market development, enhancing the Company's investor relations programs and the execution of those programs and assisting the Company with its corporate and operational strategies and business planning. Also effective October 11, 2012, Mr. Longjiang Yuan resigned as a member of the Company's Audit Committee, and Mr. Poulsen was appointed to serve on the Audit Committee. Mr. Yuan will still serve as a Board member of the Company. Also in October 2012, the Company announced that it is launching a series of investor relations programs in the near future geared toward increasing awareness in the investment community of the Company and maximizing shareholder value. Business Outlook "We are optimistic about our future and our team is ready to make the most of the opportunities that we see on the horizon," said Mr. Hao. "In recent years, we have accumulated ample resources and advantages through our vertical value chain from farmland to consumer market, reinforced by our advanced production capacities, large warehousing facilities, exclusive logistic infrastructures and extensive sale network. Today, our sales network covers around 20,000 supermarkets and convenience stores across China, with distribution in over 29 provinces in the nation, including key metropolitan areas like Beijing, Tianjin, Jinan, Fuzhou, Chengdu and Shijiazhuang. Importantly, our products are being presented in some supermarket chains under major global brands. Overall, our mission is to grow into a global leader in vertical agricultural value chains, providing diversified product lines delivered to commercial and consumer markets." "To further grow our business, we plan on extending our operations to other producing areas of corn and grain such as Hebei and Jilin Provinces," Mr. Hao continued. "Moreover, we intend to boost commercial sales to institutional clients, particularly in the grain products for the consumer market. We are also carefully considering vertical or horizontal acquisitions for our business growth, although we do not currently have any agreements in place to do so at this time. While we strive to reach these goals, we will continue to develop a diversified vertical agricultural value chain by adding more food products to our product lines and utilizing available global resources and organic certifications to expand through exporting into the US and other regions. 2012 has been a transformative year for our growing company and I am confident that we now have the right people and strategies in place to drive our growth and in effect, better reward the Company's shareholders." Conference Call The Company will host a conference call on November 20, 2012 at 8:30 AM EST to discuss the Company's results for the third quarter ended September 30, 2012. To join the conference call, use the dial-in information below. When prompted, ask for the "Deyu Agriculture Call" and/or be prepared to provide the conference ID. Date: 11/20/2012 Time: 8:30 AM Eastern Conference Line 877-407-9205 Dial-In (US): International Dial-In: 201-689-8054 Conference ID#: 404045 Webcast Link: http://www.investorcalendar.com/IC/CEPage.asp?ID=170257 Dial in at least 10 minutes before the call to ensure timely participation. A playback will be available until 11:59 PM December 4, 2012. To listen, please call 877-660-6853 within the United States or 201-612-7415 if calling internationally. Utilize the pass code below for replay (both required) Account#: 286 Conference ID#: 404045 About Deyu Agriculture Deyu Agriculture Corp. is a vertically integrated agricultural value chain from farmland to consumer market, which produces, processes, markets and distributes organic and other agricultural products made from corn and grains operating in Shanxi Province in China. The Company has access to over 109,000 acres of farmland in Shanxi Province for breeding, cultivating, processing, warehousing and distributing grain and corn products. Deyu Agriculture Corp. has an extensive wholesale network in over 15 provinces and a retail distribution network of approximately 20,000 supermarkets and convenience stores in 29 provinces across China. Deyu Agriculture Corp.'s facilities include sophisticated production lines and modern warehouses with a total production capacity of over 105,000 tons for grain products, storage capacity of over 100,000 tons and annual turnover of 700,000 tons for corn products. The Company's website is located at www.deyuagri.com. SafeHarborStatements This press release contains forward-looking statements made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward looking statements are based upon the current plans, estimates and projections of Deyu Agriculture Corp.'s management and are subject to risks and uncertainties, which could cause actual results to differ from the forward looking statements. Such statements include, among others, those concerning market and industry segment growth and demand and acceptance of new and existing products; any projections of sales, earnings, revenue, margins or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements regarding future economic conditions or performance; uncertainties related to conducting business in China, as well as all assumptions, expectations, predictions, intentions or beliefs about future events. Therefore, you should not place undue reliance on these forward-looking statements. The following factors, among others, could cause actual results to differ from those set forth in the forward-looking statements: business conditions in China, general economic conditions; geopolitical events and regulatory changes, availability of capital, changes in the agricultural industry, the Company's ability to maintain its competitive position. Additional Information regarding risks can be found in the Company's quarterly and annual reports filed with the U.S. Securities and Exchange Commission at www.sec.gov. Company Contact: Deyu Hotline: +1-646-499-5475 Mr. Greg Chen, President Deyu Agriculture Corp. Tel: +1-646-820-8085 Email:firstname.lastname@example.org Ms. Amy He, Chief Financial Officer Deyu Agriculture Corp. Tel: +86-10-5224-1802 X389 Email:email@example.com Investor Contact: Mr. Kevin Ma NUWA Group LLC Tel: +1-212-984-1869 Email:firstname.lastname@example.org - Financial Tables Follow - DEYU AGRICULTURE CORP AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS September30, 2012 December31, 2011 (Unaudited) (Audited) Assets Current Assets Cash and cash equivalents $ 11,963,208 $ 8,741,703 Restricted cash 982,593 1,850,999 Accounts receivable, net 27,658,431 36,167,136 Due from related parties 196,745 587,108 Inventory 26,741,018 20,314,090 Advance to supplier 5,077,232 7,233,371 Prepaid expenses 379,116 391,537 Assets held for sale — 1,634,274 Other current assets 440,397 2,204,934 Total Current Assets 73,438,740 79,125,152 Property, plant, and equipment, net 19,621,491 12,355,946 Construction-in-progress 2,638,347 — Long-term Investment 57,918 — Other assets — 727,535 Intangible assets, net 13,335,500 10,651,844 Total Assets $ 109,091,996 $ 102,860,477 Liabilities and Equity Current Liabilities Short-term loan $ 11,196,379 $ 14,413,480 Accounts payable 2,165,152 1,833,190 Note payables — 1,588,840 Advance from customers 2,278,185 8,488,272 Accrued expenses 1,584,246 1,149,205 Tax payable 253,503 — Preferred stock dividends payable 113,235 219,721 Due to related parties 7,356,286 5,445,115 Other current liabilities 1,813,668 583,196 Total Current Liabilities 26,760,654 33,721,019 Equity Series A convertible preferred stock, $.001 par value, 10,000,000 shares 2,040 1,997 authorized, 2,039,970 and 1,997,467 shares outstanding, respectively Common stock, $.001 par value; 75,000,000 shares authorized, 10,658 10,565 10,658,266 and 10,544,774 shares outstanding, respectively Additional paid-in capital 20,910,876 20,367,138 Other comprehensive income 5,018,518 4,831,354 Retained earnings 55,996,699 43,491,464 Total Stockholders' Equity 81,938,791 68,702,518 Noncontrolling Interests 392,551 436,940 Total Equity 82,331,342 69,139,458 Total Liabilities and Equity $ 109,091,996 $ 102,860,477 DEYU AGRICULTURE CORP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (UNAUDITED) ForTheThreeMonthsEnded ForTheNineMonthsEnded September30, September30, 2012 2011 2012 2011 Net revenue $ 56,472,324 $ 84,379,681 $ 175,048,803 $ 170,482,201 Cost of goods (46,256,954) (71,643,030) (141,911,226) (140,985,703) sold Gross Profit 10,215,370 12,736,651 33,137,577 29,496,498 Selling (3,795,367) (3,165,190) (11,926,786) (8,188,037) expenses General and administrative (2,311,508) (1,586,847) (6,276,679) (4,398,667) expenses Total Operating (6,106,875) (4,752,037) (18,203,465) (12,586,704) Expenses Operating 4,108,495 7,984,614 14,934,112 16,909,794 income Interest 7,242 4,387 24,918 30,848 income Interest (330,771) (269,725) (1,260,810) (481,549) expense Non-operating (7,063) 26,981 569,587 36,273 income Total Other (330,592) (238,357) (666,305) (414,428) Expenses Income from continuing operations 3,777,903 7,746,257 14,267,807 16,495,366 before income taxes Income taxes (184,485) (541,464) (1,475,181) (28,959) Income from continuing 3,593,418 7,204,793 12,792,626 16,466,407 operations Loss from discontinued operations, — 681,712 — (2,886,430) net of income taxes Net income 3,593,418 7,886,505 12,792,626 13,579,977 Net loss attributable to noncontrolling interests: Net loss from continuing 3,826 1,934 44,695 1,934 operations Net loss from discontinued — (247,339) — 738,374 operations Total net loss attributable to 3,826 (245,405) 44,695 740,308 noncontrolling interests Net income attributable to Deyu 3,597,244 7,641,100 12,837,321 14,320,285 Agriculture Corp. Preferred stock (112,035) (83,404) (332,087) (313,550) dividends Net income available to 3,485,209 7,557,696 12,505,234 14,006,735 common stockholders Foreign currency 822,431 917,581 187,472 1,887,420 translation (loss) gain Comprehensive 4,307,640 8,475,277 12,692,706 15,894,155 income Other comprehensive income attributable (4,157) (47,881) (306) (91,952) to noncontrolling interests Comprehensive income attributable $ 4,303,483 $ 8,427,396 $ 12,692,400 $ 15,802,203 to Deyu Agriculture Corp. Amounts attributable to common stockholders: Net income from continuing $ 3,485,209 $ 7,123,323 $ 12,505,234 $ 16,154,791 operations, net of income taxes Discontinued operations, — 434,373 — (2,148,056) net of income taxes Net income attributable $ 3,485,209 $ 7,557,696 $ 12,505,234 $ 14,006,735 to common stockholders Net income attributable to common stockholders per share - basic: Income from continuing $ 0.33 $ 0.68 $ 1.18 $ 1.54 operations Loss from discontinuing — 0.04 — (0.20) operations Net income attributable $ 0.33 $ 0.72 $ 1.18 $ 1.34 to common stockholders Net income attributable to common stockholders per share - diluted: Income from continuing $ 0.28 $ 0.58 $ 1.02 $ 1.32 operations Loss from discontinuing — 0.03 — (0.17) operations Net income attributable $ 0.28 $ 0.61 $ 1.02 $ 1.15 to common stockholders Weighted average number of common 10,604,081 10,544,774 10,578,570 10,514,243 shares outstanding - basic Weighted average number of common 12,632,585 12,522,039 12,585,860 12,481,313 shares outstanding - diluted DEYU AGRICULTURE CORP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) ForTheNineMonthsEnded September30, 2012 2011 CASH FLOWS FROM OPERATING ACTIVITIES Net income available to common stockholders $ 12,505,234 $ 14,006,735 Loss from discontinued operations — 2,886,430 attributable to Deyu Agriculture Corp. Adjustments to reconcile net income to net cash provided by operating activities: Depreciation & amortization 1,801,515 676,807 Allowance for doubtful accounts 16,314 — Reserve for inventory valuation — 76,963 Share-based compensation 250,290 412,745 Preferred stock dividends accrued 332,087 322,180 Common stocks issued for services 114,400 43,050 Grain on bargain purchase (499,079) — Deferred income tax expense (benefit) 875,706 26,234 Noncontrolling interests (44,695) (1,934) Decrease (increase) in current assets: Accounts receivable 8,616,800 (16,598,485) Related-parties trade receivable 466,980 (206,999) Inventories (5,060,976) (9,949,227) Advance to suppliers 2,988,738 (1,763,486) Prepaid expense and other current assets 907,358 (187,423) Increase (decrease) in liabilities: Accounts payable 8,987 2,087,140 Advance from customers (6,415,884) (2,561,976) Accrued expense and other liabilities 517,019 277,194 Net cash provided by (used in) operating 17,380,794 (10,454,052) activities of continuing operations Net cash used in operating activities of — (2,855,969) discontinued operations Net cash provided by (used in) operating 17,380,794 (13,310,021) activities CASH FLOWS FROM INVESTING ACTIVITIES Consideration paid for acquisition (5,166,095) — Construction and remodeling of factory and (312,588) (109,287) warehouses Purchase of machinery and equipment (47,829) (458,214) Advances to related parties (78,604) — Cash held by the Taizihu Group at acquisition 20,272 — date Net cash used in investing activities of (5,584,844) (567,501) continuing operations Net cash used in investing activities of — (2,183,644) discontinued operations Net cash used in investing activities (5,584,844) (2,751,145) CASH FLOWS FROM FINANCING ACTIVITIES Cash released from restriction (restricted) 1,104,382 (11,676,877) for credit line of bank acceptance notes Net (repayments of) proceeds from short-term (9,690,871) 9,235,600 loans from bank and others Net (repayments of) proceeds from short-term (1,579,604) 27,971,554 bank acceptance notes Net proceeds from short-term loans from 1,812,544 5,009,698 related parties Payment of preferred dividends (266,795) (242,418) Net proceeds from short-term loan from others — (883,591) Proceeds from capital contributions — 461,780 Release of cash restricted held at a trust — 125,560 account Net cash (used in) provided by financing (8,620,344) 30,001,306 activities of continuing operations Net cash provided by financing activities of — 4,993,433 discontinued operations Net cash (used in) provided by financing (8,620,344) 34,994,739 activities EFFECT OF EXCHANGE RATE CHANGE ON CASH AND 45,899 547,575 CASH EQUIVALENTS NET (DECREASE) INCREASE IN CASH & CASH 3,221,505 19,481,148 EQUIVALENTS NET DECREASE IN CASH & CASH EQUIVALENTS FROM — (29,987) DISCONTINUED OPERATIONS NET (DECREASE) INCREASE IN CASH & CASH 3,221,505 19,511,135 EQUIVALENTS FROM CONTINUING OPERATIONS CASH & CASH EQUIVALENTS, BEGINNING BALANCE 8,741,703 5,791,418 CASH & CASH EQUIVALENTS, ENDING BALANCE $ 11,963,208 $ 25,302,553 SUPPLEMENTAL DISCLOSURES: Income tax paid $ 180,705 $ 46 Interest paid $ 765,725 $ 349,259 NONCASH INVESTING AND FINANCING ACTIVITIES: Construction completed and transferred to $ — $ 5,762,034 property, plant, and equipment Construction completed and transferred to $ — $ 2,308,900 land use rights Note: Please refer to the Company's quarterly report on Form 10-Q for the three months ended September 30, 2012 for additional notes, which are an integral part of these consolidated financial statements SOURCE Deyu Agriculture Corp. Website: http://www.deyuagri.com Website: http://www.investorcalendar.com/IC/CEPage.asp?ID=170257
Deyu Agriculture Corp. Announces Third Quarter 2012 Results and Schedules Results Conference Call and Webcast
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