Synutra Reports First Quarter Fiscal 2014 Financial Results ~ Formula Sales Recovery Demonstrates Effectiveness of Gold Mining Program ~~ Exceeds 1Q14 Sales Forecast PR Newswire QINGDAO, China and ROCKVILLE, Md., Aug. 8, 2013 QINGDAO, China and ROCKVILLE, Md., Aug. 8, 2013 /PRNewswire/ -- Synutra International, Inc. (NASDAQ: SYUT), ("Synutra" or the "Company"), which owns subsidiaries in China that produce, distribute and sell nutritional products for infants, children and adults, today announced financial results for the first quarter of fiscal 2014 ended June 30, 2013. Mr. Liang Zhang, Chairman and CEO of Synutra, commented, "We are very pleased with our overall performance and the ongoing recovery of our core business this quarter, highlighted by our better than forecasted quarterly sales results and improved profitability during a seasonally slower period. We continued to strengthen the sales operation in our core branded powdered formula segment and also experienced significant results within our nutritional ingredients segment. As our sales organization and outlet network continued to stabilize, we experienced year-over-year as well as sequential increases to both our shipment volume and average selling price." "We also experienced notable progress in our Nutritional Ingredients and Supplements segment, winning substantial orders that propelled us into the leading market share position of chondroitin sulfate materials in the world for the first time. Our capacity utilization in this business segment increased to approximately 70% in the first quarter and is expected to increase further in the coming quarters." "The Chinese infant formula industry has experienced some major changes in recent months. We are closely watching and evaluating any impact this may have on Synutra, while also capitalizing on opportunities that could come with the changes. We will proactively communicate any risk factors we perceive with the investment market. With our strong supply chain, our state-of-the-art production facility, our brand equity and our solid sales operation after the Gold Mining program, we remain confident in Synutra's ability to be a leading player in the Chinese infant milk formula industry." concluded Mr. Zhang. Financial Results for the First Quarter of Fiscal 2014 versus the Fourth Quarter of Fiscal 2013 Quarter Ended QoQ Change June 30, 2013 March 31, 2013 (in USD 000's except per share and percentage data) Net sales 82,205 72,856 9,349 13% Cost of sales 46,124 44,583 1,541 3% Gross profit 36,081 28,273 7,808 28% Gross margin 43.9% 38.8% 510 bps Selling and distribution 14,771 11,704 3,067 26% expenses Advertising and promotion 8,476 5,674 2,802 49% expenses General and administrative 6,452 8,234 (1,782) -22% expenses Gain on disposal and liquidation 367 1,015 (648) -64% of subsidiaries Government subsidies 165 3,036 (2,871) -95% Total operating expenses 29,167 21,561 7,606 35% Income from operations 6,914 6,712 202 3% Operating margin 8.4% 9.2% -80bps Interest income, interest expense and other income (loss), (2,059) (3,261) 1,202 -37% net Income tax expense 79 100 (21) -21% Net income attributable to the 1 84 (83) -99% noncontrolling interest Net income attributable to 4,775 3,267 1,508 46% common stockholders Earnings per share – Basic $0.08 $0.06 $0.02 46% Net sales increased 13% to $82.2 million for the first quarter of fiscal 2014 from $72.9 million in the fourth quarter of fiscal 2013. Net sales from the Company's branded powdered formula segment were $68.1 million, or 83% of net sales in the quarter, compared to $61.5 million, or 84% of net sales, in the previous quarter. By volume, sales of powdered formula products were 5,744 tons in the first quarter, which increased from 5,661 tons in the previous quarter. Average selling price of powdered formula products improved to $11,852 per ton from $10,862 per ton in the previous quarter mainly due to less discounts and rebates to distributors. Net sales from Nutritional ingredients and supplements, which is comprised of external sales of chondroitin sulfate to third parties, was $6.3 million, or 8% of net sales, in the first quarter of fiscal 2014, compared to $3.2 million, or 4% of net sales in the previous quarter. Net sales from Other Products, which includes imported whole milk powder and whey protein powder sold to industrial customers, was $7.7 million, or 9% of net sales, in the first quarter of fiscal 2014, compared to $8.0 million, or 11% of net sales in the previous quarter. As explained in detail in the Company's 10-K for fiscal year 2013, Synutra expects to continuously incur ancillary sales of raw milk / whey protein powder due to its production methods, and such sales may vary from quarter to quarter. Gross profit was $36.1 million in the first quarter of fiscal 2014, compared to $28.3 million in the previous quarter. Gross margin in the first quarter of fiscal 2014 was 44% compared to 39% in the previous quarter. Powdered formula margin increased to 53% from 48% in the previous quarter. At 53%, the powdered formula segment margin reached the higher end of the Company's historical range, driven mainly by a higher average selling price. Income from operations was $6.9 million, compared to income from operations of $6.7 million in the previous quarter. Selling and distribution expenses were $14.8 million, compared with $11.7 million in the fourth quarter of fiscal 2013, reflecting reduced sales staff bonuses in the previous quarter as full year fiscal 2013 sales targets were not met. Advertising and promotional expenses were $8.5 million, compared with $5.7 million in the previous quarter, reflecting increased expenses associated with the nation-wide promotional events organized in May 2013. General and administrative expenses were $6.5 million, compared with $8.2 million in the previous quarter, reflecting less bad-debt expenses. Fiscal 2014 first quarter income tax expense was $79 thousand compared to $100 thousand in the fourth quarter of fiscal 2013, which was mainly withholding income tax paid on intercompany services. The Company fully provided valuation allowance for the deferred tax assets as of June 30, 2013 and March 31, 2013. The Company had released the valuation allowance on deferred tax assets of $1.2 million which was equal to the income tax expense generated from this quarter's profit. Net income attributable to common stockholders was $4.8 million in the first quarter of fiscal year 2014, or $0.08 per basic share, compared with a net income of $3.3 million, or $0.06 per basic share, in the previous quarter. Balance Sheet As of June 30, 2013, the Company had cash and cash equivalents of $80.9 million and restricted cash of $111.7 million, including the current and non-current portion. Net account receivables decreased to $24.7 million on June 30, 2013 from $30.2 million on March 31, 2013 while the Company's sequential inventory position decreased 9% to $79.9 million from $87.7 million. Total debt was $317.6 million, including $207.2 million of short-term debt, as compared to $312.3 million as of March 31, 2013, which included $210.1 million of short-term debt. Conference Call Details The Company will hold a conference call on Friday, August 9, 2013 at 8:00 a.m. Eastern Time to discuss the financial results. Listeners may access the call by dialing the following numbers: United States Toll Free: +1 (855) 500-8701 United State Toll: +1 (845) 675-0438 International Toll: + 65 6723-9385 China Toll Free: 400-120-0654 Conference ID: 20101746 A webcast and replay of the conference call will be available through the Company's IR website at www.synutra.com. About Synutra International, Inc. Synutra International, Inc. (Nasdaq: SYUT) is a leading infant formula company in China. It principally produces, markets and sells its products through its operating subsidiaries under the "Shengyuan" or "Synutra" name, together with other complementary brands. It focuses on selling premium infant formula products, which are supplemented by more affordable infant formulas targeting the mass market as well as other nutritional products and ingredients. It sells its products through an extensive nationwide sales and distribution network covering all provinces and provincial-level municipalities in mainland China. As of June 30, 2013, this network comprised over 670 independent distributors and over 710 independent sub-distributors who sell Synutra products in approximately 27,000 retail outlets. Forward-looking Statements This press release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 that are based on our current expectations, assumptions, estimates and projections about Synutra International, Inc. and its industry. All statements other than statements of historical fact in this release are forward-looking statements. In some cases, these forward-looking statements can be identified by words or phrases such as "anticipate," "believe," "continue," "estimate," "expect," "intend," "is/are likely to," "may," "plan," "should," "will," "aim," "potential," "continue," or other similar expressions. The forward-looking statements included in this press release relate to, among others, Synutra's goals and strategies; its future business development, financial condition and results of operations; the expected growth of the nutritional products and infant formula markets in China; market acceptance of Synutra's products; the safety and quality of Synutra's products; Synutra's expectations regarding demand for its products; Synutra's ability to stay abreast of market trends and technological advances; competition in the infant formula industry in China; PRC governmental policies and regulations relating to the nutritional products and infant formula industries, and general economic and business conditions in China. These forward-looking statements involve various risks and uncertainties. Although Synutra believes that the expectations expressed in these forward-looking statements are reasonable, these expectations may turn out to be incorrect. Synutra's actual results could be materially different from the expectations. Important risks and factors that could cause actual results to be materially different from expectations are generally set forth in Synutra's filings with the Securities and Exchange Commission. The forward-looking statements are made as of the date of this press release. Synutra International, Inc. undertakes no obligation to update any forward-looking statements to reflect events or circumstances after the date on which the statements are made or to reflect the occurrence of unanticipated events. Synutra International, Inc. Consolidated Balance Sheets Dollars and shares in thousands, except per share data June 30, 2013 March 31, 2013 ASSETS Current Assets: Cash and cash equivalents $ 80,934 $ 79,050 Restricted cash 63,108 68,410 Accounts receivable, net of allowance 24,651 30,183 Inventories 79,894 87,707 Due from related parties 3,020 2,696 Income tax receivable 6 5 Prepaid expenses and other current assets 22,520 18,404 Total current assets 274,133 286,455 Property, plant and equipment, net 129,934 130,121 Land use rights, net 10,923 10,829 Intangible assets, net 4,123 4,135 Restricted cash 48,557 39,883 Due from related parties 2,908 2,981 Other assets 2,938 1,740 TOTAL ASSETS $ 473,516 $ 476,144 LIABILITIES AND EQUITY Current Liabilities: Short-term debt $ 116,400 $ 127,449 Long-term debt due within one year 90,823 82,663 Accounts payable 48,455 48,717 Due to related parties 1,629 1,862 Advances from customers 9,878 12,982 Other current liabilities 42,858 52,788 Total current liabilities 310,043 326,461 Long-term debt 110,414 102,164 Deferred revenue 4,371 4,402 Capital lease obligations 7,938 7,848 Other long-term liabilities 6,215 6,062 Total liabilities 438,981 446,937 Equity: Synutra International, Inc. shareholders' equity Common stock, $.0001 par value: 250,000 authorized; 57,301 and 57,301 issued and outstanding at 6 6 June 30, 2013 and March 31, 2013, respectively Additional paid-in capital 135,440 135,440 Accumulated deficit (130,733) (135,508) Accumulated other comprehensive income 29,380 28,828 Total Synutra common shareholders' equity 34,093 28,766 Noncontrolling interest 442 441 Total equity 34,535 29,207 TOTAL LIABILITIES AND EQUITY $ 473,516 $ 476,144 Synutra International, Inc. Consolidated Statements of Operations Dollars in thousands, except per share data Three Months Ended June 30, 2013 2012 Net sales $ 82,205 $ 53,586 Cost of sales 46,124 36,285 Gross profit 36,081 17,301 Selling and distribution expenses 14,771 13,117 Advertising and promotion expenses 8,476 6,804 General and administrative expenses 6,452 7,857 Gain on disposal and liquidation of 367 420 subsidiaries Government subsidy 165 885 Income (loss) from operations 6,914 (9,172) Interest expense 3,887 3,556 Interest income 1,087 487 Other income (expense), net 741 (438) Income (loss) before income tax expense 4,855 (12,679) (benefit) Income tax expense (benefit) 79 (2,903) Net income (loss) 4,776 (9,776) Net income (loss) attributable to the 1 (77) noncontrolling interest Net income (loss) attributable to common $ 4,775 $ (9,699) stockholders Earnings (loss) per share - basic $ 0.08 $ (0.17) Weighted average common stock outstanding - 57,301 57,301 basic SOURCE Synutra International, Inc. Website: http://www.synutra.com Contact: Synutra International, Inc., Investor Relations Department, firstname.lastname@example.org, 646-328-2552
Synutra Reports First Quarter Fiscal 2014 Financial Results
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