Yuhe International Inc. Reports Record Third Quarter Results

- Affirms Net Income Guidance; Adjusts Revenue Guidance

WEIFANG, China, Nov. 12 /PRNewswire-Asia-FirstCall/ -- Yuhe International,
Inc. (Nasdaq: YUII) ("Yuhe" or "the Company"), a leading supplier of day-old
chickens raised for meat production, or broilers, in the People's Republic of
China ("PRC"), today announced its unaudited financial results for the third
quarter ended September 30, 2009.
Third Quarter 2009 Highlights
-- Net revenue increased 37.4% to $13.2 million, compared to $9.6 million
in the third quarter of 2008
-- Gross profit margin expanded 1,290 basis points to 39.1%, compared to
26.2% million in the same period last year
-- Operating income grew 166.1% to $4.3 million, compared to $1.6 million
in the third quarter of 2008
-- Net income increased 114.8% to $4.1 million, compared to $1.9 million
in the same period last year
-- Fully diluted EPS grew 116.6% to $0.26 per share, compared to $0.12 in
the third quarter of 2008

"The third quarter of 2009 was another very successful quarter," commented
Mr. Zhentao Gao, Chief Executive Officer of Yuhe International. "We achieved
record quarterly revenue and net income, owing to our capacity expansion and
stable customer relationships. Selling prices began to recover sequentially in
the third quarter; the average selling price per day-old broiler increased to
RMB 2.85 in the third quarter from RMB 2.38 in the second quarter. Given our
business momentum, we are confident that demand for high-quality day-old
broilers will remain strong in the fourth quarter of the year."
Third Quarter 2009 Results
Net revenue for the third quarter of 2009 increased 37.4% to $13.2
million,
from net revenue of $9.6 million for the three months ended September 30,
2008.
The increase was mainly driven by 25.5% growth in sales volume of day-old
broilers to 30.0 million from 23.9 million in the comparable period last year,
driven by product capacity expansion, greater parent breeder volume, and
recovery in the average selling price per day-old broiler.
The average selling price per day-old broiler increased 10.9% year over
year to RMB 2.85 from RMB 2.57 for the third quarter of 2008 and 19.7%
sequentially from RMB 2.38 in the second quarter of 2009. The average selling
price per day-old broiler was RMB 2.74 for the first nine months of 2009.
Yuhe recorded $0.4 million in sales of retired breeder stocks and
approximately $130,000 in sales of eggs, compared to $0.3 million and
approximately $120,000, respectively, in the comparable period last year. The
increase was in-line with the production capacity expansion.
Gross profit increased 104.9% to $5.2 million in the third quarter of 2009
from $2.5 million of the prior year period. Gross margin increased 12.9
percentage points, or 1,290 basis points, to 39.1%, as compared to 26.2%
during the same period in 2008. The stronger gross margin was the result of
higher average selling prices per day-old broiler and productivity leverage
that lowered the unit cost of day-old broilers by approximately 12%. During
the quarter, management made strategic purchases of eggs in the open market to
take advantage of unusually low prices as a complement to its internally
sourced eggs.
Total operating expenses were $0.9 million, or 6.8% of net revenue,
compared to $0.9 million, or 9.5% of total revenues, for the third quarter of
2008.
Operating income increased 166.1% to $4.3 million, compared to operating
income of $1.6 million for the same period in 2008. Operating margin increased
15.6 percentage points, or 1,560 basis points, to 32.3%, compared to 16.7% in
the same quarter of 2008.
Net profit for the three months ended September 30, 2009 increased 114.8%
to $4.1 million, compared to $1.9 million for the same period last year. Fully
diluted EPS increased 116.6% to $0.26 per share, compared to $0.12 in the
third quarter of 2008
Nine Month Results
Net revenues increased 90.7% to $34.0 million, from pro forma net
revenues* of $17.8 million in the nine months ended September 30, 2008. Gross
profit grew 153.8% to $12.0 million, as compared to pro forma gross margin of
$4.7 million in the same period last year. Gross margin expanded 880 basis
points to 35.4%, compared to pro forma gross margin of 26.6% in the comparable
period last year. Operating income rose 240.2% to $9.6 million, from $2.8
million in pro forma operating income for the same period of 2008. Reported
operating margin increased 1,230 basis points to 28.1%, compared to pro forma
operating margin of 15.8% for the comparable period in 2008. Net income
increased 208.7% to $9.2 million, compared to pro form net income of $3.0
million in the same period of 2008. Fully diluted earnings per share rose
171.0% to $0.57, from $0.21 for the same period last year.
*Yuhe's reported financial statements represent the consolidated results
of Weifang Yuhe Poultry Co. Ltd., "PRC Yuhe", and Weifang Taihong Feed Co.
Ltd., "Taihong", the Company's two operating subsidiaries, from January 1,
2009 to September 30, 2009 and from February 1, 2008 to September 30, 2008.
For comparison purposes, the Company has provided a pro forma consolidated
statement of operations for PRC Yuhe and Taihong from January 1, 2008 through
September 30, 2008 to provide comparable presentation to its reported results
for the nine months ended September 30, 2009. These pro forma results are
discussed in this release, together with reconciliation to the reported
financial information (table 4 below). Pro forma results are presented and
discussed because the Company considers them useful in assessing performance
between periods and in developing expectations of future performance.
Financial Condition
As of September 30, 2009 the Company held $22.0 million in cash and cash
equivalents. Working capital was $10.6 million with a 1.6 to 1 current ratio,
which management views as sufficient for the next 12 months since the Company
can renew its $8.3 million in bank loans that are due in the next 12 months.
The Company had $51.4 million in shareholders' equity compared to $41.6
million at the end of 2008. In the first nine months of 2009, Yuhe generated
$12.8 million in cash flow from operating activities. Capital expenditures
were $4.9 million in the first nine months of the year and were primarily used
for the construction of two new breeder farms and one new hatchery. The new
facilities are expected to be completed by year-end 2009.
Business Outlook
Management has updated its previously announced revenue guidance for the
full year 2009 from $50 million to $46 million, due to the lower than expected
selling prices for day-old broilers in the second half of 2009. However,
management remains confident that the Company will meet net income guidance
for the full year 2009 of $13 million, due to lower unit production costs for
day-old broilers. The Company has also budgeted an additional $10 million that
will be spent through the first half of 2010 to add new breeder farms,
purchase 300,000 new parent breeders and expand its hatcheries. Yuhe has also
ordered 20 sets of hatchers to be installed in the second quarter of 2010,
increasing the Company's total number of hatchers to 160 sets. For 2010, Yuhe
targets sales volume of day-old broilers at 150 million, a 36% increase
compared to projected volume of 110 million for 2009.
"Since the Chinese economy has shown positive signs of recovery in recent
months, we believe Yuhe will continue to generate strong revenue growth from
day-old broilers sales," commented Mr. Gao. "While we are the second largest
provider nationwide, our market share is only 5% in Shandong, which signifies
that we have strong potential for growth from organic expansion and industry
consolidation. In the next two years, we will continue to focus on our
expansion efforts in Shandong, leveraging our mature system, including
technical support and after-sales services."
Upcoming Event
Yuhe International Inc. will present at the Brean Murray, Carret & Co.
China Growth Conference, taking place on November 19, 2009 at the Millennium
Broadway Hotel, New York, NY. During the conference, management will be
available for one-on-one meetings.
Conference Call
The Company will host a conference call at 10:00 a.m. Eastern Standard
Time on Thursday, November 12, 2009 to discuss its third quarter fiscal 2009
results. To participate in the live conference call, please dial (800) 688-
0796 five to ten minutes prior to the scheduled conference call time.
International callers should dial (617) 614-4070. When prompted by the
operator, enter conference pass code 531 429 69. If you are unable to
participate in the call at this time, a replay will be available for fourteen
days after the call is held. To access the replay, please dial (888) 286-8010.
International callers should dial (617) 801-6888. When prompted by the
operator, enter pass code 254 098 55.
In addition, the call will be broadcast live over the Internet via the
following link: http://tinyurl.com/yl69jxs
Please go to the webcast via the link 10 minutes prior to the start of the
call to register.
About Yuhe International, Inc.
Founded in 1996, Yuhe is the third largest day-old broiler breeder in
China. The Company's main operations involve breeding, as all broilers are
sold within a day of hatching. With headquarters 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. 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 -

Table 1
YUHE INTERNATIONAL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS
(Stated in US Dollars)

September 30, December 31,
2009 2008
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $22,036,550 $13,412,205
Accounts receivable, net of
allowances of $18,847 and $18,845 919 902
Prepaid expenses 11,622 --
Inventories 5,985,164 6,644,961
Advances to suppliers 1,485,248 661,138

Total current assets 29,519,503 20,719,206

Plant and equipment, net 26,584,622 27,112,276
Deposits paid for acquisition of
long-term assets 10,109,322 6,092,359
Notes receivable, net and other
receivable, net 125,636 74,720
Unlisted investments held for sale 300,154 299,427
Intangible assets, net 2,867,637 2,909,752
Due from related companies 2,770,165 3,706,589
Deferred expenses 554,922 604,973

Total assets $72,831,961 $61,519,302

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Accounts payable $5,204,642 $4,606,055
Current portion of long term loans 8,336,258 1,356,832
Other payables 1,405,067 937,535
Accrued expenses and payroll related
liabilities 2,202,367 2,125,587
Advances from customers 1,208,451 673,528
Loan from director 292,500 291,792
Other liabilities 295,053 285,132
Due to related companies 5,612 210,633

Total current liabilities 18,949,950 10,487,094

Non-current liabilities
Long-term loans 2,457,002 9,410,289
Total liabilities 21,406,952 19,897,383

Commitments and contingencies

Stockholders' Equity
Common stock at $.001 par value;
500,000,000 shares authorized,
15,722,180 shares issued and
outstanding 15,722 15,722
Additional paid-in capital 30,489,143 29,944,016
Retained earnings 19,676,639 10,522,673
Accumulated other comprehensive income 1,243,505 1,139,508

Total stockholders' equity 51,425,009 41,621,919

Total liabilities and stockholders' equity $72,831,961 $61,519,302

Table 2
YUHE INTERNATIONAL, INC.

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

For The Nine Months Ended For The Three Months Ended

September 30, September 30,
2009 2008 2009 2008

Net revenue $33,956,993 $16,318,263 $13,208,230 $9,609,781

Cost of revenue (21,926,699) (11,732,602) (8,042,920) (7,089,355)

Gross profit 12,030,294 4,585,661 5,165,310 2,520,426

Operating Expenses

Selling expenses (315,372) (280,489) (113,776) (135,658)
General and
administrative
expenses (2,163,639) (1,500,458) (784,402) (781,247)

Total operating
expenses (2,479,011) (1,780,947) (898,178) (916,905)

Income from
operations 9,551,283 2,804,714 4,267,132 1,603,521

Non-operating income
(expenses)

Bad debts recovery -- 641,103 -- 554,188
Interest income 182 4,518 41 63
Other income 5,126 98,962 -- 93,062
(Loss) gain on
disposal
of fixed assets 26,697 87,588 (1,081) --
Investment income 15,509 6,074 -- --
Interest expenses (441,236) (763,168) (115,809) (320,048)
Other expenses (3,595) (56,342) (3,130) --

Total other (expenses) (397,317) 18,735 (119,979) 327,265

Net income before
income taxes 9,153,966 2,823,449 4,147,153 1,930,786
Income taxes -- -- -- --

Net income $9,153,966 $2,823,449 $4,147,153 $1,930,786

Other comprehensive
income
Foreign currency
translation 103,997 1,142,354 51,919 73,604

Comprehensive income $9,257,963 $3,965,803 $4,199,072 $2,004,390

Earnings per share
Basic $0.58 $0.21 $0.26 $0.12
Diluted $0.57 $0.20 $0.26 $0.12

Weighted average shares
outstanding

Basic 15,722,180 13,750,966 15,722,180 15,543,330

Diluted 15,931,379 13,985,255 15,931,379 15,989,256

Table 3
YUHE INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS - (UNAUDITED)
(Stated in US Dollars)

For The Nine Months Ended
September 30,
2009 2008
Cash flows from operating activities
Net income $9,153,966 $2,823,449
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Stock based compensation 545,127 217,653
Depreciation 1,556,610 996,126
Amortization 49,144 42,853
Bad debts recovery -- (641,103)
Gain on disposal of fixed assets (26,697) (87,588)
Income from unlisted investment -- (6,074)
Changes in operating assets and
liabilities:
Accounts receivable (15) (25)
Prepaid expenses (11,622) --
Inventories 676,030 (4,011,259)
Advances to suppliers (868,859) (1,067,073)
Deferred expenses 51,488 (17,183)
Accounts payable 586,255 (331,343)
Other payables 464,785 (386,548)
Accrued expenses 248,356 (433,797)
Payroll and payroll related liabilities (176,201) 52,590
Advances from customers 533,066 (178,218)
Other taxes payable 9,223 9,386

Net cash provided by (used in) operating
activities 12,790,656 (3,018,154)

Cash flows from investing activities
Deposit paid and acquisition of
property, plant and equipment (4,944,105) (11,053,497)
Advance to notes receivable (25,282) (3,432,603)
Proceeds from disposal of fixed assets 27,778 118,216
Acquisition of subsidiaries -- (10,567,946)
Proceeds from notes receivable -- 4,329,857
Proceeds from related parties receivables -- 67,216
Advance to related companies 944,874 --

Net cash (used in) investing activities (3,996,735) (20,538,757)

Cash flows from financing activities
Proceeds from loan payable -- 1,300,726
Repayment of loan payable -- (1,099,842)
Proceeds from related party payable 360,094 1,106,240
Repayment of related party payable (570,506) (30,311)
Capital contribution by shareholder -- 12,149,750
Proceeds from common stock sale - net of
offering costs -- 15,359,523

Net cash flows (used in) provided by
financing activities: (210,412) 28,786,086

Effect of foreign currency translation
on cash and cash equivalents 40,836 140,328

Net increase in cash 8,624,345 5,369,503

Cash- beginning of period 13,412,205 1,050,168

Cash- end of period $22,036,550 $6,419,671

Cash paid during the period for:
Interest paid $1,101,194 $1,079,117

Supplemental disclosure of
non cash activities:
Transfer of construction
in progress to fixed assets $1,831,131 $--
Accrual on construction in progress $-- $304,524

Table 4
Pro forma
for the As reported
period from from
January February
1, 2008 to 1, 2008 to
January September Pro forma Pro forma
31, 2008 30, 2008 Adjustment Total

Net revenues $1,491,329 $16,318,263 $ $17,809,592

Cost of revenue (1,337,438) (11,732,602) (13,070,040)
Gross profit 153,891 4,585,661 4,739,552

Operating expenses
Selling expenses (28,997) (280,489) (309,486)
General and
administrative
expenses (122,695) (1,500,177) (1,622,872)
Total operating
expenses (151,692) (1,780,666) (1,932,358)

Income from
operations 2,199 2,804,995 2,807,194

Non-operating
income (expenses)
Bad debts recovery 219,893 641,103 860,996
Interest income 5 4,518 4,523
Other income 5,604 192,624 198,228
Interest expenses (86,167) (763,168) (849,335)
Other expenses -- (56,623) (56,623)

Total other income
(expenses) 139,335 18,454 157,789

Net Income (loss)
before income tax 141,534 2,823,449 2,964,983
Income Tax -- -- --

Net income (loss) $141,534 $2,823,449 $ $2,964,983

Earnings per
share
Basic $0.02 $0.18 $0.22
Diluted $0.02 $0.18 $0.21

Weighted average
shares outstanding
Basic 8,626,318 15,543,330 13,750,966
Diluted 8,626,318 15,989,256 13,985,255

The pro forma financial information above was prepared based on the
unaudited financial results for the Company's Weifang and Taihong subsidiaries
for the nine-month period ended September 30, 2008.
The pro forma financial information has been prepared based upon available
information and assumptions that the Company believes are reasonable. However,
the pro forma financial information is presented for illustrative and
informational purposes only and does not purport to represent the Company's
actual results during the corresponding reporting periods nor is it
necessarily indicative of the Company's future performance.
For more information, please contact:

Yuhe International, Inc.
Mr. Vincent Hu, CFO
Phone: +86-536-7300-667
Email: vincent.hu@yuhepoultry.com

Mr. Jason Wang, Director of Investor Relations
Phone: +1-765-409-1844
Email: jason.wang@yuhepoultry.com
Web: http://www.yuhepoultry.com

CCG Investor Relations Inc.
Mr. Crocker Coulson, President
Phone: +1-646-213-1915 (New York)
Email: crocker.coulson@ccgir.com
Web: http://www.ccgirasia.com

SOURCE Yuhe International, Inc.

Vincent Hu, CFO of Yuhe International, Inc., +86-536-7300-667,
vincent.hu@yuhepoultry.com, or Jason Wang, Director of Investor Relations,
+1-765-409-1844, jason.wang@yuhepoultry.com; Crocker Coulson, President of CCG
Investor Relations Inc., +1-646-213-1915 (New York),
crocker.coulson@ccgir.com