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Yongye International Announces First Quarter 2013 Financial Results



     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

  o Revenue decreased 29.7% to $45.3 million from $64.4 million in the first
    quarter of 2012
  o Shipments 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
  o Gross profit decreased 38.9% year-over-year to $21.6 million
  o Income from operations was $1.1 million, compared to $21.9 million in the
    first quarter of 2012
  o Net 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  
  o Adjusted 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*
  o The Company collected $226 million from its distributors during the first
    quarter of 2013
  o Operating 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: ir@yongyeintl.com

FTI Consulting

Mr. John Capodanno (U.S. Contact)
Phone: +1-212-850-5705
E-mail: john.capodanno@fticonsulting.com 

(Financial Tables to Follow)

YONGYE INTERNATIONAL, INC. AND SUBSIDIARIES 
CONSOLIDATED BALANCE SHEETS
                                            March 31, 2013  December 31, 2012
Current assets
Cash                                        $  184,395,831  $   44,511,404
Restricted cash                                40,000           40,000
Accounts receivable, net of allowance
                                               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-term loans and payables - 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
Derivative liabilities- fair value of
                                               -                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
Redeemable Series A convertible preferred

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

50,604,026 shares issued and outstanding at $  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
Accumulated other comprehensive
                                               22,487,695       19,950,447
income
Total equity attributable to Yongye
                                               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
Convertible Preferred Shares and Equity

  

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

allowance for doubtful accounts of nil and US$6,334,832 for three   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)/income attributable to the noncontrolling 
                                                                    (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
Foreign currency translation adjustment, net of US$ nil
                                                                    2,663,236      2,341,251
income taxes
Comprehensive income                                                2,038,756      19,658,567
Less: Comprehensive income attributable to the noncontrolling
                                                                    114,080        1,043,895
interest
Comprehensive income attributable to Yongye International, Inc.   $ 1,924,676    $ 18,614,672

  

YONGYE INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
                                             For the Three Months Ended
                                             March 31, 2013   March 31, 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
Repayment of long-term loans and payables      (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:
Acquisition of property, plant and equipment
                                               331,434          -
under capital leases
Acquisition of distributor vehicles by
                                               816,126          4,780,243
assuming long-term loans and payables
Acquisition of property, plant and equipment
                                               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
GAAP amount per consolidated
                                    $21,632,099          $35,412,505
statement of income
Amortization of the acquired Hebei
                                    $728,206             $725,044
customer list 
Adjusted Amount                     $22,360,305          $36,137,549
                                    Income from Operations
                                    Three Months Ended March 31,
                                    2013                 2012
GAAP amount per consolidated
                                    $1,135,397           $21,910,181
statement of income
Amortization of the acquired
                                    $728,206             $725,044
Hebei customer list
Non-cash management compensation
                                    -                    $1,212,158
expense
Adjusted Amount                     $1,863,603           $23,847,383
                                    Net income (attributable to Yongye)
                                    Three Months Ended March 31,
                                    2013                 2012
GAAP amount per consolidated
                                    ($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
Change in fair value of derivative
                                    -                    ($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
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