EX-99.1 2 v194039_ex99-1.htm Unassociated Document
Exhibit 99.1
 
Contact:
 
Yuhe International, Inc.
CCG Investor Relations Inc.
Mr. Vincent Hu, CFO
Mr. Athan Dounis, Account Manager
Phone: +86-536-7300-667
Phone: +1 (646) 213-1916
Email: vincent.hu@yuhepoultry.com
Email: athan.dounis@ccgir.com
 
www.ccgir.com
Mr. Jason Wang, Director of IR
 
Phone: +1-765-409-1844
 
Email: jason.wang@yuhepoultry.com
 
www.yuhepoultry.com
 
 
 
Yuhe International, Inc. Announces Record Second Quarter 2010 Results
 
Weifang, Shandong Province, P.R.C. August 16, 2010 Yuhe International, Inc. (NASDAQ: YUII) (“Yuhe” or “the Company”), a leading supplier of day-old chickens raised for meat production, or broilers, in the Peoples Republic of China (“PRC”), today announced financial results for the quarter ended June 30, 2010.

Second Quarter 2010 Highlights

·  
Net revenue increased 26.9% to $12.5 million year over year
·  
Sales volume grew 34.4% to 34.6 million birds year over year
·  
Gross profit increased 47.1% to $4.1 million with gross margin of 33.0%
·  
Operating income was $3.1 million, up 51.1% year over year
·  
Net income increased 46.1% to $3.1 million, or $0.19 per fully diluted share

“The second quarter of 2010 was another successful quarter for Yuhe commented Mr. Zhentao Gao, Chairman and Chief Executive Officer of Yuhe. “We benefited from the fact that we were able to use our industry expertise to accurately forecast the trends in our market earlier in the year and were able to respond accordingly during the quarter to maximize our sales, margins and earnings performance. We executed according to our plan and our business achieved record revenue and net income.”

Second Quarter 2010 Results

Net revenue for the second quarter of 2010 increased 26.9% to $12.5 million, compared to $9.8 million for the same period last year. The increase was mainly driven by the 34.4% gain in sales volume of day-old broilers to 34.6 million from 25.7 million in the comparable period last year. The average selling price per broiler was RMB 2.38 in the second quarter of 2010, remaining the same as that in the same period last year.  Sales of broilers accounted for $12.1 million or 96.8% of the Company’s net revenue.
 
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Gross profit increased 47.1% year over year to $4.1 million, compared to $2.8 million in the same period last year. Gross profit margin was 33.0%, compared to 28.5% in the same quarter last year. The increase in gross profit margin was mainly attributable to the fact that the Company was able to successfully adjust its business so as to decrease the unit costs of its day-old broilers by increasing the proportion of externally-purchased eggs, which had lower costs than internally-produced eggs.

Operating income increased 51.1% to $3.1 million, compared to $2.1 million in the same period of 2009. Operating margin was 24.9%, compared to 20.9% in the same quarter of 2009.

Net income increased 46.1% to $3.1 million, or $0.19 per diluted share, compared to $2.1 million, or $0.13 per diluted share, in the same period last year.

Six Month Results
 
In the six months ended June 30, 2010, Yuhe reported net revenues increased 16.8% to $24.2 million, from $20.7 million in the six months ended June 30, 2009. Gross profit grew 16.9% year over year to $8.0 million, with a gross margin of 33.1%, flat with the same period of 2009. Operating income rose 15.1% to $6.1 million, with an operating margin of 25.1%. Net income increased 19.5% to $6.0 million, or $0.37 per diluted share, compared to $5.0 million, or $0.32 per diluted share, in the same period of 2009.

Financial Condition

As of June 30, 2010, the Company held $19.6 million in cash and cash equivalents, as compared to $14.0 million at year-end 2009. Working capital was $14.7 million with a 2:1 current ratio. The Company had $61.9 million in shareholders' equity compared to $55.3 million at year-end 2009. Yuhe generated $6.2 million in operating cash flow in the six months ended June 30, 2010.

Recent Developments

On July 19, 2010, Yuhe announced that its wholly owned subsidiary, Weifang Yuhe Poultry Co., Ltd., entered into an asset purchase agreement with Liaoning Haicheng Songsen Stock Farming and Feed Company Limited to purchase five breeder farms in Haicheng City, Liaoning Province. The payment included RMB 21.3 million (approximately $3.1 million) in cash and approximately 300,000 restricted shares of Yuhe common stock calculated at a price of $10 per share. The restricted shares are subject to a six-month lock-up period. The five breeder farms have a total production capacity of 430,000 sets of parent breeders.
 
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As of August 13, 2010, six of the thirteen breeder farms which were purchased in 2009 and 2010 have begun operations and the other seven farms are expected to commence operations by the end of 2010.

Outlook

The Company’s management expects sales volume and net income to rise in the second half of the year, given the seasonality of the business and the fact that the new parent breeders that were purchased in 2009 and 2010 will begin to generate revenue in the fourth quarter of 2010. Therefore, management re-affirms its previously issued guidance for 2010 with production of 150 million broilers in total and net income of approximately $17 million.

Considering the contribution of the five newly acquired breeder farms, management expects the output of broilers in 2011 to reach 250 million. Management also believes their existing sales network is capable enough to absorb the increased output in the short run. The Company plans to build sales networks gradually around those production facilities outside Shandong province to provide pre-sales services, marketing and after-sales support.

The construction of Yuhe’s new hatchery was, to some extent, affected by the recent hot weather because the Chinese government enforces shorter working hours for construction workers on high temperature days. Management expects the new hatchery to commence operation in September 2010.

Mr. Gao added, “We believe Yuhe is very well positioned to capitalize on the opportunities in our market.  With our recently closed and announced acquisitions and the construction of our new hatchery, we are confident that we are making the right investments today to position our Company for profitable growth.  We have a very experienced team that understands our market very well and is adept at optimizing our input costs and maximizing our sales potential to drive both sales and earnings.  We are very pleased with our first half performance.  As we enter the second half of the year, we are encouraged by the market environment.  We previously stated that we believe there will be a supply shortage in our market going forward and we are beginning to see tangible signs of this.  Our day-old broilers are currently commanding average selling prices that are up significantly from the prices we were seeing in the second quarter.  We believe that demand and prices for high-quality day-old broilers will stay strong through at least the second half of the year.  This together with our expanding capacity gives us confidence that we will be able to deliver strong results for our shareholders through the balance of the year and beyond.”
 
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Conference Call

The Company will host a conference call at 9:00 a.m. EDT on Monday, August 16, 2010, to discuss financial results for the second quarter of 2010. To participate in the live conference call, please dial the following number five to ten minutes prior to the scheduled conference call time: (877) 509-7549. International callers should dial (706) 902-4287. When promoted, enter the conference passcode: 921 562 84.

A replay will be available for two weeks beginning on Monday, August 16, 2010 at 10:00 a.m. EDT. To access the replay, dial (800) 642-1687. International callers should dial (706) 645-9291. When prompted, enter the conference passode: 921 562 84.
 
About Yuhe International, Inc.
 
Founded in 1996, Yuhe is the largest day-old broiler breeders in China. The Company’s main operations involve breeding, as all broilers are sold within a day of hatching. Headquartered in Weifang, Shandong Province, the Company has modern facilities and is led by an experienced team which includes experts in chicken breeding, disease prevention and animal husbandry science. Yuhe has two operational subsidiaries, Weifang Yuhe Poultry Co. Ltd. and Weifang Taihong Feed Co. Ltd., which largely supplies the Company’s internal demand for chicken feed. Currently, 90% of the Company's sales of day-old broilers are in Shandong province through 28 local agents. There are 10 other sales agents in adjacent provinces. The Company has imported state-of-the-art equipment from the United States, Germany and Japan and has passed ISO9001 certification, allowing it to adhere to international standards of operation. For more information on the Company and its products, please visit http://www.yuhepoultry.com.
 
 
Cautionary Statement
 
This press release contains forward-looking statements concerning the Company’s business, products and financial results. The Company’s actual results may differ materially from those anticipated in the forward-looking statements depending on a number of risk factors including, but not limited to, the following: general economic and business conditions, development, shipment, market acceptance, additional competition from existing and new competitors, changes in technology, and various other factors beyond the Company’s control. All forward-looking statements are expressly qualified in their entirety by this Cautionary Statement and the risk factors detailed in the Company's reports filed with the Securities and Exchange Commission. The Company undertakes no duty to revise or update any forward-looking statements to reflect events or circumstances after the date of this release.
 
 

- FINANCIAL TABLES FOLLOW-
 
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YUHE INTERNATIONAL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS
(Stated in US Dollars)

   
June 30,
   
December 31,
 
   
2010
   
2009
 
   
(unaudited)
       
     
US$
   
ASSETS
           
Current assets:
           
Cash and cash equivalents
  $ 19,633,056     $ 14,047,147  
Accounts receivable, net of allowances of $18,947 and $18,868
    842       838  
Inventories
    9,344,534       6,560,783  
Advances to suppliers
    264,991       359,179  
Deferred tax assets
    11,888       17,766  
Total current assets
    29,255,311       20,985,713  
                 
Plant and equipment, net
    32,625,090       29,556,712  
Deposits paid for acquisition of long-term assets
    11,342,811       16,082,613  
Notes receivable, net and other receivable, net
    52,866       33,635  
Unlisted investments held for sale
    301,433       300,172  
Intangible assets, net
    2,830,463       2,851,411  
Net investment in direct financing lease
    400,436       382,742  
Long-term prepaid rent
    8,118,188       6,570,038  
Total assets
  $ 84,926,598     $ 76,763,036  
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY
               
                 
Current liabilities:
               
Accounts payable
  $ 6,008,463     $ 5,740,912  
Current portion of long term loans
    2,026,848       9,433,686  
Other payable
    1,061,094       1,343,901  
Accrued expenses and payroll related liabilities
    3,001,702       2,366,134  
Advances from customers
    1,860,833       678,366  
Other taxes payable
    149,941       150,764  
Loan from director
    293,746       292,517  
Other liabilities
    144,553       143,949  
Due to related companies
    1,208       1,208  
Total current liabilities
    14,548,388       20,151,437  
                 
Non-current liabilities
               
Long-term loans
    8,518,638       1,360,206  
Total liabilities
    23,067,026       21,511,643  

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 YUHE INTERNATIONAL, INC.
 
CONDENSED CONSOLIDATED BALANCE SHEETS
 (Continued)
 
 
Stockholders' Equity
           
Preferred stock, $.001 par value, 1,000,000 shares authorized, no shares issued and outstanding
    -       -  
Common stock, $.001 par value; authorized 500,000,000 shares, 15,809,563 and 15,722,180 shares issued and outstanding at June 30, 2010 and December 31, 2009, respectively
    15,809       15,722  
Additional paid-in capital
    31,034,149       30,672,849  
Retained earnings
    29,299,177       23,316,794  
Accumulated other comprehensive income
    1,510,437       1,246,028  
Total stockholders’ equity
    61,859,572       55,251,393  
                 
Total liabilities and stockholders’ equity
  $ 84,926,598     $ 76,763,036  
 
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements
 
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 YUHE INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (UNAUDITED)
(Stated in US Dollars)

   
For The Three Months Ended
   
For The Six Months Ended
 
   
June 30
   
June 30
 
   
2010
   
2009
   
2010
   
2009
 
           
US$
         
Net revenue
  $ 12,478,631     $ 9,834,373     $ 24,235,548     $ 20,748,763  
                                 
Cost of revenue
    (8,355,543 )     (7,031,426 )     (16,212,105 )     (13,883,779 )
   
 
   
 
   
 
   
 
 
Gross profit
  $ 4,123,088       2,802,947     $ 8,023,443     $ 6,864,984  
                                 
Operating Expenses
                               
Selling expenses
    (201,568 )     (108,656 )     (312,515 )     (201,596 )
General and administrative expenses
    (810,623 )     (635,247 )     (1,631,139 )     (1,379,237 )
   
 
   
 
   
 
   
 
 
Total operating expenses
  $ (1,012,191 )     (743,903 )   $ (1,943,654 )   $ (1,580,833 )
                                 
Income from operations
    3,110,897       2,059,044       6,079,789       5,284,151  
                                 
Non-operating income (expenses)
                               
Interest income
    81       45       139       141  
Other income (expenses)
    (3,081 )     5,126       8,084       4,661  
(Loss) gain on disposal of fixed assets
    -       27,778       (176 )     27,778  
Investment income
    3       -       15,615       15,509  
Interest expenses
    (49,188 )     -       (115,138 )     (325,427 )
   
 
   
 
   
 
   
 
 
Total other income (expenses)
  $ (52,185 )     32,949     $ (91,476 )   $ (277,338 )
                                 
Net income before income taxes
    3,058,712       2,091,993       5,988,313       5,006,813  
Income tax expenses
    (3,329 )     -       (5,930 )     -  
   
 
   
 
   
 
   
 
 
Net income
  $ 3,055,383     $ 2,091,993     $ 5,982,383     $ 5,006,813  
                                 
Other comprehensive income
                               
Foreign currency translation
    255,534       3,806       264,409       52,078  
Comprehensive income
  $ 3,310,917     $ 2,095,799     $ 6,246,792     $ 5,058,891  
                                 
Earnings per share
                               
Basic
  $ 0.19     $ 0.13     $ 0.38     $ 0.32  
Diluted
  $ 0.19     $ 0.13     $ 0.37     $ 0.32  
                                 
Weighted average shares outstanding
                               
Basic
    15,809,563       15,722,180       15,772,872       15,722,180  
Diluted
    16,029,036       15,722,180       16,041,393       15,722,180  
 
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YUHE INTERNATIONAL, INC.

CONDENSED UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Stated in US Dollars)

   
For The Six Months Ended
 
   
June 30
 
   
2010
   
2009
 
Cash flows from operating activities
   
US$
   
Net income
  $ 5,982,383     $ 5,006,813  
Adjustments to reconcile net income to net cash used in operating activities:
               
Stock based compensation
    361,387       361,421  
Depreciation
    1,123,534       1,027,465  
Amortization
    32,800       32,759  
Capitalized interest in construction in progress
    (370,223 )     (302,058 )
Loss (gain) on disposal of fixed assets
    176       (27,778 )
Changes in operating assets and liabilities:
               
Accounts receivable
    -       (75 )
Advances to suppliers
    10,128       (526,528 )
Inventories
    (2,745,647 )     199,889  
Deferred tax assets
    5,930       29,459  
Long-term prepaid rent
    104,930       -  
Accounts payable
    242,505       1,011,712  
Other payable
    (287,265 )     254,103  
Accrued expenses and payroll related liabilities
    624,891       344,100  
Advances from customers
    1,175,104       588,416  
Other taxes payable
    (1,451 )     9,090  
Net investment in direct financing lease
    (16,025 )     -  
                 
Net cash provided by operating activities
    6,243,157       8,008,788  
                 
Cash flows from investing activities
               
Deposit paid and acquisition of property, plant and equipment
    (438,884 )     (4,371,637 )
Advance to notes receivable
    (11,370 )     (23,602 )
Advance to related parties
    (3,022,463 )     (144,350 )
Proceeds from related parties
    3,022,463          
Proceeds from disposal of fixed assets
    -       27,778  
Proceeds received from related parties receivables
    -          
                 
Net cash used in investing activities
    (450,254 )     (4,511,811 )
                 
Cash flows from financing activities
               
Repayment of loan payable
    (292,622 )     -  
Proceeds from related party payable
    -       360,094  
                 
Net cash flows (used in) provided by financing activities:
    (292,622 )     360,094  
 
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YUHE INTERNATIONAL, INC.
 
CONDENSED UNAUDIT CONSOLIDATED STATEMENTS OF CASH FLOWS
(CONTINUED)
 

Effect of foreign currency translation on cash and cash equivalents
    85,628       20,210  
                 
Net increase in cash
    5,585,909       3,877,281  
                 
Cash- beginning of period
    14,047,147       13,412,205  
                 
Cash- end of period
  $ 19,633,056     $ 17,289,486  
                 
Cash paid during the period for:
               
Interest paid
  $ 447,091     $ 448,487  
Income taxes paid
  $ -     $ -  
                 
Supplemental disclosure
               
Transfer from construction in progress to fixed assets
  $ 2,656,342     $ 1,831,131  
Transfer from advances to suppliers and deposit paid for acquisition of long-term assets to fixed assets
  $ 3,316,607     $ -  
Transfer from deposit paid for acquisition of long-term assets to long-term prepaid rent
  $ 1,619,664     $ -  
Cashless exercise of 142,816 warrants
  $ 87     $ -  

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