Yongye International Announces First Quarter 2013 Financial Results PR Newswire BEIJING, May 10, 2013 BEIJING, May 10, 2013 /PRNewswire-FirstCall/ -- Yongye International, Inc. (NASDAQ: YONG), ("Yongye" or the "Company") a leading developer, manufacturer, and distributor of crop nutrient products in the People's Republic of China ("PRC"), today announced its financial results for the quarter ended March 31, 2013. First Quarter 2013 Financial Highlights oRevenue decreased 29.7% to $45.3 million from $64.4 million in the first quarter of 2012 oShipments of Yongye's agricultural nutrient products decreased 37.3% to $43.7 million in the first quarter of 2013 from $69.6 million in the first quarter of 2012 oGross profit decreased 38.9% year-over-year to $21.6 million oIncome from operations was $1.1 million, compared to $21.9 million in the first quarter of 2012 oNet loss attributable to Yongye was $0.6 million, or a loss of $0.03 per diluted share, from net income of $16.4 million, or income of $0.27 per diluted share, in the same period of 2012 oAdjusted net income attributable to Yongye, which excludes non-cash expenses related to the amortization of the acquired Hebei customer list, share-based compensation for management and independent directors, and a change in the fair value of derivative liabilities, was $0.1 million, or a loss of $0.01 per diluted share, compared to an adjusted net income attributable to Yongye of $18.3 million, or $0.31 per diluted share, in the same period of 2012* oThe Company collected $226 million from its distributors during the first quarter of 2013 oOperating cash flow was $141.1 million compared to $61.7 million in the same period of 2012 Mr. Zishen Wu, Chairman and Chief Executive Officer of Yongye International, stated, "During the first quarter of 2013, we focused our efforts on the collection of overdue account receivables. To better manage our accounts receivable and incentivize certain distributors to pay off accounts payable in a timely manner, we reduced shipment of our products to these distributors. Despite these reduced shipments, we have not seen a decrease in demand for our products based on orders received. As we progress through the second quarter, which is the peak season for our business, our shipments have been back on track. As an evidence of this, from January through April 2013, total shipments have increased approximately $28 million, or 20%, over the same period last year. The underlying fundamentals of our business remain strong and we are confident that our full year guidance for shipments and the expansion of our branded retailer network is achievable." First Quarter 2013 Financial Results Sales decreased by $19.1 million, or 29.7%, to $45.3 million in the first quarter of 2013, from $64.4 million for the same period of 2012. The decrease in revenue was primarily due to the decreased shipments of liquid crop products, which were meant to help manage accounts receivable and incentivize certain distributors to pay off accounts payable in a timely manner. In the first quarter of 2013, $43.9 million, or 96.9% of the total sales, were from liquid crop nutrient, and $1.4 million, or 3.1% of the total sales, were from powder animal nutrient. Of our liquid crop nutrient products, the two products for crop seeds and roots contributed $34.5 million, or 78.7% of total liquid crop nutrient sales, while the regular crop nutrient product contributed $9.4 million, or 21.3% of total liquid crop nutrient sales. During the first quarter of 2013, the number of branded retailers increased from 35,058 to 35,246; the majority of newly recruited branded retailers are from Hebei, Henan, Inner Mongolia and Shaanxi provinces. Gross profit was $21.6 million in the first quarter of 2013, compared to $35.4 million in the first quarter of 2012, a decrease of 38.9%. Gross margin was 47.8% in the first quarter of 2013, compared to 55.0% for the same period of 2012. The decrease of gross margin for the three months ended March 31, 2013 was mainly due to the reduced sales amount and the increase of amortization of distributor vehicles recorded in cost of sales as compared to the same period of 2012. Selling expenses increased by $1.2 million, or 8.7%, to $15.4 million in the first quarter of 2013, from $14.2 million for the same period of 2012. The increase in selling expenses was primarily due to an increase in advertising and promotion expense and distributors' seminar expenditure of $1.6 million relating to marketing and promotional activities for our products. General and administrative ("G&A") expenses increased by $6.3 million, or 284.2%, to $4.1 million in the first quarter of 2013, from a negative $2.2 million for the same period of 2012. The increase of G&A expenses was mainly due to the reversal of allowance for doubtful accounts of $6.3 million which was recorded in the first quarter of 2012. Higher G&A expenses mainly included increases in accrued audit expense, legal fees related to the proposed "going private" transaction, and staff salary expenditures for the three months ended March 31, 2013. Research and development ("R&D") expenses were $1.0 million in the first quarter of 2013, compared to $1.5 million for the same period of 2012. The R&D expenses mainly field test expenses for existing and new products on different crops and in various geographic markets. Operating income was $1.1 million in the first quarter of 2013, compared to $21.9 million for the same period of 2012. Excluding non-cash expenses related to the amortization of the acquired Hebei customer list and share-based compensation for management and independent directors, first quarter 2013 adjusted operating income was $1.9 million, or 4.1% of sales.* The decrease in income from operations was mainly due to the decreases in sales and gross margin, as well as the significant increases in selling expenses and general and administrative expenses, the latter resulting from the reversal in the first quarter of 2012 of allowance for doubtful accounts of $6.3 million whereas no such reversal was recorded in the 2013 period. Net loss attributable to Yongye was $0.6 million, or a loss of $0.03 per diluted share in the first quarter of 2013, compared to a net income of $16.4 million, or $0.27 per diluted share, in the same period of 2012. Excluding the impact of non-cash expenses related to the amortization of the acquired Hebei customer list, share-based compensation for management and independent directors and a change in the fair value of derivative liabilities, adjusted net income attributable to Yongye for the first quarter of 2013 was $0.1 million, or a loss of $0.01 per diluted share, compared to adjusted net income of $18.3 million, or $0.31 per diluted share in the same period of 2012.* (*) See the table following this press release for a reconciliation of gross profit, income from operations, net income and diluted EPS to exclude non-cash items related to the amortization of the acquired Hebei customer list, share-based compensation for management and independent directors, and a change in the fair value of derivative liabilities to the comparable financial measure prepared in accordance with US Generally Accepted Accounting Principles ("U.S. GAAP"). Financial Condition Balance Sheet and Cash Flow As of March 31, 2013, the Company had $184.4 million in cash and restricted cash, compared to $44.6 million as of December 31, 2012. Working capital was $387.7 million, compared to $383.3 million at the end of 2012. The Company had a $51.5 million short-term bank loan, $19.1 million in current and non-current long-term loans and payables, and $2.8 million in current and non-current capital lease obligations as of March 31, 2013. Stockholders' equity totaled $438.8 million as of March 31, 2013, compared to $436.3 million at the end of 2012. Cash flow provided by operating activities were $141.1 million and $61.7 million for the three months ended March 31, 2013 and 2012, respectively. This was primarily driven by collection of $226 million of accounts receivable, but was partially offset by settled payment of accrued expenses. Accounts Receivable Accounts receivable decreased by $179.6 million, which was mainly due to the collection of accounts receivable during the first quarter of 2013. During the first quarter of 2013, the Company collected $226 million from its distributors, including $219 million of the accounts receivable outstanding at December 31, 2012. As of March 31, 2013, the amount of gross accounts receivable outstanding was $123.0 million, of which $26.2 million was past the Company's six-month credit period. Yongye recorded an allowance for doubtful receivables in the amount of $9.1 million as of March 31, 2013, taking into account current market conditions, customers' financial condition, the accounts receivable ageing and the customers' repayment patterns. The Company continues to take measures to increase collection efforts and closely monitor its distributors' financial status. Recent Developments Expansion of Branded Retailer Network The Company continued the expansion of its branded retailers from 35,058 as of December 31, 2012 to 35,246 as of March 31, 2013. The majority of the Company's newly recruited branded retailers are located in Hebei, Henan, Inner Mongolia, and Shaanxi provinces. The Company remains focused on expanding its distribution networks and deepening its penetration in its markets. Update on NASDAQ Trading Halt As the Company previously announced on April 1, 2013 as part of its fourth quarter and full year 2012 earnings announcement, on March 26, 2013, the Company provided a detailed written response to NASDAQ's request for certain information relating to the Company's delay in filing its Annual Report on Form 10-K with the Securities and Exchange Commission, the collection of accounts receivable as of year-end 2012, the current state of the Company's auditor's work in connection with the financial statements to be included in the Company's Form 10-K for the fiscal year ended December 31, 2012, and the status of the Company's proposed "going private" transaction. Subsequent to the Company's initial response, NASDAQ requested certain additional information from the Company. The Company is in regular contact with NASDAQ with respect to this matter and is working diligently to address NASDAQ's requests. The Company expects that trading in its securities will remain halted while NASDAQ conducts its inquiry and that such trading will resume only upon NASDAQ being fully satisfied with the additional information provided. Update on Going-Private Proposal On April 1, 2013, the Buyer Parties confirmed to the Special Committee that they remain interested in pursuing the proposed going private transaction set forth in their proposal. On the same day, the Special Committee was provided an amended and restated financing commitment letter issued by Abax to Full Alliance, which would terminate on April 15, 2013 if the common stock of the Company had not resumed trading on NASDAQ. On April 16, 2013 the Special Committee of the board of directors was provided a letter amending the amended and restated financing commitment letter issued by Abax to Full Alliance International Limited on April 1, 2013. Pursuant to the Amendment, the Commitment Letter was amended to (i) include an additional condition precedent that the common stock of the Company has resumed trading on NASDAQ, but without any requirement that the resumption must occur by a specified date, and (ii) extend the expiration of the commitment to the earliest of (A) May 15, 2013, (B) the date the definitive documentation for such financing becomes effective and (C) the date the acquisition agreement for the proposed going private transaction is terminated. Abax's commitment remains subject to a number of other conditions, including Abax's completion of its review of, and satisfaction in all respect with, the audited financial statements of the Company for the fiscal year ended December 31, 2012. As a reminder, no decisions have been made by the Special Committee with respect to the Company's response to the proposed going private transaction. There can be no assurance that any definitive offer will be made, that any agreement will be executed, or that this or any other transaction will be approved or consummated. Business Outlook According to the Company's revenue recognition policy, certain distributors' revenue is being recognized on a cash basis rather than a shipment basis. In addition, the Company's distributors' payment cycle has been longer compared to prior years. As a result, the Company has difficulty knowing what its revenue will be with specificity until cash collection is completed. Yongye will continue to provide expectations on shipments, which is not impacted by the revenue recognition issue mentioned above. The Company continues to expect total shipments in 2013 to be in the range of $650 million to $680 million, representing a growth of 20% to 25% over 2012. The Company also expects that its branded retailer network will be expanded to 36,000 by the end of 2013, which represents a 3% increase over the 2012 year-end number of 35,058. Conference Call The Company will host a conference call at 8:30 a.m. Eastern Time on May 10, 2013, to discuss its first quarter 2012 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 (866) 519-4004. International callers should dial +1 (718) 354-1231. The conference pass code is 686 80 863. For those who are unable to participate on the live conference call, a replay will be available for fourteen days starting from 11:30 a.m. Eastern Time on May 10 to 11:59 p.m. Eastern Time on May 24. To access the replay, please dial +1 (866) 452-5696. International callers should dial +1 (646) 254-3697. The replay pass code is 686 80 863. A webcast recording of the conference call will be accessible through Yongye's website at www.yongyeintl.com. Use of Non-GAAP Financial Measures GAAP results for the three months ended March 31, 2013 and 2012 include non-cash items related to the amortization of the acquired Hebei customer list, share-based compensation for management and independent directors, and a change in the fair value of derivative liabilities. To supplement the Company's condensed consolidated financial statements presented on a U.S. GAAP basis, the Company has provided adjusted financial information excluding the impact of these items in this release. Such adjustment is a departure of U.S. GAAP; however, the Company's management believes that these adjusted measures provide investors with a better understanding of how the results relate to the Company's historical performance. These adjusted measures should not be considered an alternative to net income, or any other measure of financial performance or liquidity presented in accordance with U.S. GAAP. These measures are not necessarily comparable to a similarly titled measure of another company. A reconciliation of the adjustments to U.S. GAAP results appears in the table accompanying this press release. This additional adjusted information is not meant to be considered in isolation or as a substitute for U.S. GAAP financials. The adjusted financial information that the Company provides also may differ from the adjusted information provided by other companies. About Yongye International, Inc. Yongye International, Inc. is a leading crop nutrient company headquartered in Beijing, with its production facilities located in Hohhot, Inner Mongolia, China. Yongye's principal product is a liquid crop nutrient, from which the Company derived substantially all of the sales in 2012. The Company also produces powder animal nutrient product which is mainly used for dairy cows. Both products are sold under the trade name "Shengmingsu," which means "life essential" in Chinese. The Company's patented formula utilizes fulvic acid as the primary compound base and is combined with various micro and macro nutrients that are essential for the health of the crops. The Company sells its products primarily to provincial level distributors, who sell to the end-users either directly or indirectly through county-level and village-level distributors. For more information, please visit the Company's website at www.yongyeintl.com. 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. Contacts Yongye International Ms. Kelly Wang Finance Director – Capital Markets Phone: +86-10-8231-9608; +86-10-8232-8866 x 8827 E-mail: firstname.lastname@example.org FTI Consulting Mr. John Capodanno (U.S. Contact) Phone: +1-212-850-5705 E-mail: email@example.com (Financial Tables to Follow) YONGYE INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS March31,2013 December31,2012 Current assets Cash $ 184,395,831 $ 44,511,404 Restricted cash 40,000 40,000 Accountsreceivable,netofallowance 113,978,908 293,600,762 for doubtful accounts Inventories 140,855,471 118,693,596 Deposits to suppliers 23,358,158 24,048,028 Perpaid expenses 251,432 312,648 Other receivables 873,943 1,189,633 Deferred tax assets 11,503,113 11,591,797 Total Current Assets 475,256,856 493,987,868 Property, plant and equipment, net 26,111,149 26,224,957 Intangible assets, net 18,281,376 18,909,349 Land use right, net 4,806,695 4,807,313 Prepayment for mining project 35,989,226 35,792,410 Distributor vehicles 42,271,014 44,125,293 Total Assets $ 602,716,316 $ 623,847,190 Current liabilities Short-term bank loans $ 51,468,537 $ 50,857,163 Long-termloansandpayables-current 9,282,861 9,149,280 portion Capital lease obligations - current portion 452,518 395,878 Accounts payable 8,981,338 12,364,193 Income tax payable 3,543,045 3,196,078 Advance from customers 163,765 154,944 Accrued expenses 11,162,501 31,389,630 Other payables 2,460,217 2,828,262 Derivativeliabilities-fairvalueof - 348,364 warrants Total Current Liabilities 87,514,782 110,683,792 Long-term loans and payables 9,841,664 10,254,922 Capital lease obligations - non-current 2,351,557 2,134,155 Other non-current liability 6,683,802 6,683,802 Deferred tax liabilities 6,340,652 6,618,794 Total Liabilities $ 112,732,457 $ 136,375,465 RedeemableSeriesAconvertiblepreferred shares: par value $.001; 7,969,044 shares authorized; 6,079,545 shares issued and $ 51,208,657 $ 51,208,657 outstanding as of March 31, 2013 and December 31, 2012, respectively Equity Common stock: par value $.001; 75,000,000 shares authorized; 50,685,216 shares and 50,604,026sharesissuedandoutstandingat $ 50,685 $ 50,604 March 31, 2013 and December 31, 2012, respectively Additional paid-in capital 155,265,347 154,792,050 Retained earnings 240,066,823 240,679,395 Accumulatedothercomprehensive 22,487,695 19,950,447 income TotalequityattributabletoYongye 417,870,550 415,472,496 International, Inc. Noncontrolling interest 20,904,652 20,790,572 Total Equity $ 438,775,202 $ 436,263,068 Commitments and Contingencies - - Total Liabilities, Redeemable Series A $ 602,716,316 $ 623,847,190 ConvertiblePreferredSharesandEquity YONGYE INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME For the Three Months Ended March 31, March 31, 2013 2012 Sales $ 45,268,520 $ 64,365,644 Cost of sales 23,636,421 28,953,139 Gross profit 21,632,099 35,412,505 Selling expenses 15,435,060 14,203,057 Research and development expenses 991,670 1,508,738 General and administrative expenses, including a reversal of allowancefordoubtfulaccountsofnilandUS$6,334,832forthree 4,069,972 (2,209,471) months ended March 31, 2013 and 2012, respectively Income from operations 1,135,397 21,910,181 Other (expenses)/income Interest expenses (1,866,378) (1,004,169) Interest income 165,758 60,074 Other (expenses)/income, net (64,336) 32,054 Change in fair value of derivative liabilities - 59,398 Total other income, net (1,764,956) (852,643) (Losses)/earnings before income tax expense (629,559) 21,057,538 Income tax (benefit)/expense (5,079) 3,740,222 Net (loss)/income (624,480) 17,317,316 Less:Net(loss)/incomeattributabletothenoncontrolling (11,908) 935,026 interest Net (loss)/income attributable to Yongye International, Inc. $ (612,572) $ 16,382,290 Net (loss)/income per share of common stock Basic $ (0.03) $ 0.28 Diluted $ (0.03) $ 0.27 Weighted average shares used in computation: Basic 50,669,880 49,370,711 Diluted 50,669,880 49,460,252 Net (loss)/income (624,480) 17,317,316 Other comprehensive income Foreigncurrencytranslationadjustment,netofUS$nil 2,663,236 2,341,251 income taxes Comprehensive income 2,038,756 19,658,567 Less:Comprehensiveincomeattributabletothenoncontrolling 114,080 1,043,895 interest ComprehensiveincomeattributabletoYongyeInternational,Inc. $ 1,924,676 $ 18,614,672 YONGYE INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Forthe Three MonthsEnded March31,2013 March31,2012 CASH FLOWS FROM OPERATING ACTIVITIES Net (loss)/income $ (624,480) $ 17,317,316 Adjustments to reconcile net (loss)/income to net cash provided by operating activities: Depreciation and amortization 4,345,695 3,348,206 Amortized interest expense 331,335 - Reversal of allowance for doubtful - (6,334,832) accounts Change in fair value of derivative - (59,398) liabilities Stock compensation expense - 1,212,158 Deferred tax (benefit)/expense (297,094) 654,850 Changes in operating assets and liabilities: Accounts receivable 181,025,679 79,401,906 Inventories (21,484,206) (24,655,838) Deposit to suppliers 821,150 (12,373,644) Prepaid expenses 62,851 2,242,938 Other receivables 320,144 104,013 Distributor Vehicles 50,165 (2,033,790) Accounts payable- third parties (3,446,833) 6,960,594 Income tax payable 292,015 (713,913) Advance from customers 7,960 (3,958,275) Accrued expenses (20,375,053) 521,525 Other payables 115,944 97,839 Net Cash Provided by Operating 141,145,272 61,731,655 Activities CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property, plant and equipment (502,297) (14,723) Net Cash Used in Investing Activities (502,297) (14,723) CASH FLOWS FROM FINANCING ACTIVITIES Repaymentoflong-termloansandpayables (1,202,053) (1,356,948) Proceeds from warrants exercised 125,014 - Repayment for capital lease obligations (71,220) - Net Cash Provided by/(Used in) (1,148,259) (1,356,948) Financing Activities EFFECT OF FOREIGN EXCHANGE 389,711 375,227 RATE CHANGES ON CASH NET INCREASE IN CASH 139,884,427 60,735,211 Cash at beginning of year 44,511,404 81,154,880 Cash at end of year $ 184,395,831 $ 141,890,091 Supplemental cash flow information: Cash paid for income taxes - 3,799,284 Cash paid for interest expense 1,529,429 942,181 Noncash investing and financing activities: Acquisitionofproperty,plantandequipment 331,434 - under capital leases Acquisition of distributor vehicles by 816,126 4,780,243 assuming long-term loans and payables Acquisitionofproperty,plantandequipment 972,282 1,302,630 included in other payables Exercise of warrants that were liability 348,364 - classified YONGYE INTERNATIONAL, INC. AND SUBSIDIARIES RECONCILIATION OF NON-GAAP FINANCIAL DATA Gross Profit Three Months Ended March 31, 2013 2012 GAAPamountperconsolidated $21,632,099 $35,412,505 statement of income AmortizationoftheacquiredHebei $728,206 $725,044 customer list Adjusted Amount $22,360,305 $36,137,549 Income from Operations Three Months Ended March 31, 2013 2012 GAAPamountperconsolidated $1,135,397 $21,910,181 statement of income Amortizationoftheacquired $728,206 $725,044 Hebei customer list Non-cashmanagementcompensation - $1,212,158 expense Adjusted Amount $1,863,603 $23,847,383 Net income (attributable to Yongye) Three Months Ended March 31, 2013 2012 GAAPamountperconsolidated ($612,572) $16,382,290 statement of income Amortization of the acquired Hebei $728,206 $725,044 customer list Non-cash management compensation - $1,212,158 expense Changein fairvalueofderivative - ($59,398) liabilities Adjusted Amount $115,634 $18,260,094 Weighted average shares -- diluted 50,669,880 49,460,252 Adjusted diluted earnings per share ($0.01) $0.31 SOURCE Yongye International, Inc. Website: http://www.yongyeintl.com
Yongye International Announces First Quarter 2013 Financial Results
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