Yuhe International Inc. Reports Strong First Quarter 2009 Results

WEIFANG, Shandong, China, May 15 /PRNewswire-Asia-FirstCall/ -- Yuhe International, Inc. (BULLETIN BOARD: 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 strong financial results for the first quarter of its 2009 fiscal 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 March 31, 2009. For comparison purposes, the Company has provided a pro forma consolidated statement of operations for PRC Yuhe and Taihong for the three months ended March 31, 2008. These pro forma results are presented (in Table 4 below) and discussed because the Company considers them useful for investors as more indicative of the underlying performance of the business as currently constituted for the periods presented.

First Quarter 2009 Highlights -- Revenue for the quarter was $10.9 million, up 320.6% compared to pro forma revenue in the first quarter of 2008 -- Gross profit for the quarter was $4.1 million, up 961.3% from pro forma gross profit in the same period last year -- Operating income was $3.2 million, up from a pro forma operating loss of $78,466 a year earlier -- Net income was $2.9 million, or $0.19 per basic and diluted share, up from a pro forma net loss of $0.1 million, or a loss of $0.01 per basic and diluted share for the same period in 2008

"We are pleased to start out our 2009 fiscal year with such strong top and bottom line growth," stated Mr. Zhengtao Gao, chief executive officer of Yuhe International Inc. "In the first quarter of 2009, the broiler market remained strong despite the macro economic slowdown in China. With our mature breeder stock and recently expanded operations, we were able to take full advantage of favorable market conditions and generate excellent financial results in the quarter."

First Quarter 2009 Results

Total reported revenue for the first quarter of 2009 equaled $10.9 million, up 320.6% from $2.6 million in pro forma revenue for the three month period ended March 31, 2008. The increase in revenues was driven by the increase in sales volume to 23.1 million day-old broilers in the first quarter of 2009 from 4.8 million birds in the same period a year earlier. The increase in sales volume was partially offset by a decrease in selling price to RMB 2.99 per bird in the first quarter of 2009 from RMB 3.27 per bird one year ago. The increase in sales volume was the result of an expansion in production capacity as well as an increase in parent breeder volume at the end of 2008.

Gross profit increased 961.3% to $4.1 million in the first quarter of 2009, compared to $0.4 million in pro forma gross profit in the prior year period. Gross margin was 37.2% compared to pro forma gross margin of 14.7% during the same period in 2008. The increase in gross margin was mainly attributable to the Company reaching a normal level of productivity in 2009 versus a low level of productivity in the first quarter of 2008.

Selling, general and administrative expenses for the first quarter of 2009 were $0.8 million, up 81.5% compared to pro forma operating expenses of $0.5 million for the first quarter of 2008. Selling expenses were $93,000 compared to $78,000 in the same period of 2008. The increase in selling expenses was primarily due to an increase in sales volume. Administrative expenses were $0.7 million in the three months ended March 31, 2009, up from $0.4 million in the same period of 2008. The increase in administrative expenses was mainly attributable to expenses associated with being a public company.

Operating income for the first quarter of 2009 totaled $3.2 million, up from a pro forma operating loss of $78,466 for the same period in 2008. Operating margin was 29.5% for the first quarter of 2009.

Net income for the three months ended March 31, 2009 was $2.9 million, or $0.19 per diluted share, up from a pro forma net loss of $0.1 million, or a loss of $0.01 per basic and diluted share, for the same period last year. For the first quarter of 2009 there were 15.7 million fully diluted weighted shares outstanding versus 10.1 million fully diluted weighted shares outstanding in the prior year period.

Financial Condition

As of March 31, 2009, the Company had $18.1 million in cash and cash equivalents, up from $13.4 million at December 31, 2008. Working capital was $18.7 million and the Company had a current ratio of 2.7 to 1. Shareholders equity stood at $44.8 million compared to $41.6 million at the end of 2008. Cash flows from operating activities in the first quarter of 2009 were $4.4 million.

The company plans to utilize its increase in cash for upcoming capital construction projects.

Business Outlook

For the remainder of 2009, Yuhe will remain focused on its capital construction plan, adding a third hatchery and two additional breeder farms with 100,000 sets of parent breeders each. In addition, the Company expects a new feed plant, currently under construction by Nongbiao Purina, will be finished during the second quarter of 2009. Once operational, Yuhe will perform quality analysis tests on Nongbiao Purina's feed. If Nongbiao Purina's feed meets Yuhe's quality requirements, the production facility will become Yuhe's sole feed supplier while its current in house feed production facility will cease operations.

For the fiscal year 2009 Yuhe International Inc. is forecasting $50 million in revenues and $13 million in net income with an anticipated sales volume of 110 million day old breeders. This exceeds the Company to meet its make good provision of $41.0 million in revenues and $12.3 million in net income.

"With a positive start to the new year, we look forward to continued growth throughout the remainder of 2009. In 2008, we saw uneven growth throughout the year due to a variety of one time factors. During the third quarter, many of our downstream customers lowered demand as they were forced to shut down due to electricity conservation measures and pollution restrictions put in place by the government due to the Olympics. What's more, our production was uneven as we ramped up capacity throughout the year. In 2009 we expect to exhibit more consistent results from quarter to quarter now that many of our expansion projects have been completed and are operational," stated Mr. Gao.

"While the recent outbreak of swine flu in North America has heightened concerns over livestock-borne illness, we foresee no imminent threats to our operations or the poultry industry in general in China. On the contrary, after the last outbreak of bird flu several years ago, the government implemented stringent safety and hygiene measures in the broiler industry. Yuhe not only meets, but exceeds these standards as we view product quality and safety as our top priority. As a result, we remain confident about trends in our operations and in the industry as a whole," Mr. Gao concluded.

Upcoming Events

Yuhe International, Inc. will present at the upcoming China Rising Investment Conference to be held on May 18, 2009 at the Yale Club in New York. During the conference, Yuhe's management will be available for one-on-one meetings.

Conference Call

The Company will host a conference call at 10:00 a.m. eastern time on Monday, May 18, 2009 to discuss results for the first quarter of fiscal year 2009. To participate in the live conference call, please dial the following number five to ten minutes prior to the scheduled conference call time: 1-888-419-5570. International callers should dial [phone]. When prompted by the operator, mention conference pass code 208 590 72. The call will be available to replay beginning at 12:00 p.m. eastern time for fourteen days after it occurs. If you would like to listen to the replay, please dial 1-888-286-8010 or [phone] from outside the US and enter pass code 21975169.

About Yuhe International, Inc.

Founded in 1996, Yuhe is the second 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, 85% of the Company's sales are in Shandong province with a customer base of 27 local agents. 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. CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (Stated in US Dollars) For The Three Months Ended March 31 2009 2008 Net revenue $ 10,914,390 $ 1,103,551 Cost of revenue (6,852,353) (874,707) Gross profit 4,062,037 228,844 Operating Expenses Selling expenses (92,940) (48,540) General and administrative expenses (743,990) (260,969) Total operating expenses (836,930) (309,509) Income (loss) from operations 3,225,107 (80,665) Non-operating income (expenses) Bad debts recovery -- 13,145 Interest income 96 158 Other income 15,509 5,900 Interest expenses (325,427) (180,474) Other expenses (465) (30,545) Total other income (expenses) (310,287) (191,816) Net income (loss) before income taxes 2,914,820 (272,481) Income taxes -- -- Net income (loss) $ 2,914,820 $ (272,481) Other comprehensive income Foreign currency translation 48,272 417,921 Comprehensive income $ 2,963,092 $ 145,440 Earnings (Loss) per share Basic $ 0.19 $ (0.03) Diluted $ 0.19 $ (0.03) Weighted average shares outstanding Basic 15,722,178 10,146,353 Diluted 15,722,178 10,146,353 Table 2 YUHE INTERNATIONAL, INC. CONSOLIDATED BALANCE SHEETS (Stated in US Dollars) March 31, December 31, 2009 2008 (unaudited) ASSETS Current assets: Cash and cash equivalents $ 18,091,979 $ 13,412,205 Accounts receivable, net of allowances of $18,845 and $18,845 904 902 Inventories 7,076,604 6,644,961 Advances to suppliers 4,521,030 4,472,509 Total current assets 29,690,517 24,530,577 Plant and equipment, net 26,751,684 27,112,276 Deposits paid for acquisition of long term assets 2,219,243 2,280,988 Notes receivable, net and other receivable, net 103,228 74,720 Unlisted investments held for sale 299,804 299,427 Intangible assets, net 2,897,034 2,909,752 Due from related companies 3,669,798 3,706,589 Deferred expenses 596,287 604,973 Total assets $ 66,227,595 $ 61,519,302 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 5,661,377 $ 4,606,055 Current portion of long term loans 292,158 1,356,832 Other payables 1,225,619 937,535 Accrued expenses and payroll related liabilities 2,000,062 2,125,587 Advances from customers 725,807 673,528 Loan from director 292,158 291,792 Other liabilities 286,107 285,132 Due to related companies 491,095 210,633 Total current liabilities 10,974,383 10,487,094 Non-current liabilities Long-term loans 10,488,489 9,410,289 Total liabilities 21,462,872 19,897,383 Commitments and contingencies -- -- Stockholders' Equity Common stock at $.001 par value; authorized 500,000,000 shares authorized, 15,722,178 equivalent shares issued and outstanding 15,722 15,722 Additional paid-in capital 30,123,728 29,944,016 Retained earnings 13,437,493 10,522,673 Accumulated other comprehensive income 1,187,780 1,139,508 Total stockholders' equity 44,764,723 41,621,919 Total liabilities and stockholders' equity $ 66,227,595 $ 61,519,302 Table 3 YUHE INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Stated in US Dollars) For The Three Months Ended March 31 2009 2008 Net cash provided by (used in) operating activities $ 4,386,943 $ (2,544,215) Cash flows from investing activities Deposit paid and acquisition of property, plant and equipment (41,133) (248,616) Advance to notes receivable (335) (11,036,697) Acquisition of subsidiaries -- (10,567,946) Proceeds received from related parties receivables 41,442 -- Advance to related companies -- (208,458) Net cash used in investing activities (26) (22,061,717) Cash flows from financing activities Proceeds from loan payable -- 778,870 Proceeds from related party payable 275,336 1,285,168 Capital contribution by shareholder -- 12,149,750 Proceeds from common stock sale - - net of offering costs -- 12,205,586 Net cash flows provided by financing activities: 275,336 26,419,374 Effect of foreign currency translation on cash 17,521 124,985 Net increase in cash 4,679,774 1,938,427 Cash- beginning of period 13,412,205 1,050,168 Cash- end of period $ 18,091,979 $ 2,988,595 Cash paid during the period for: Interest paid $ 357,632 $ 181,474 Income taxes paid $ -- $ -- Non-cash investing activities: Transfer of construction in progress to fixed assets $ 1,831,131 $ -- Table 4 PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS All amounts, All amounts, All amounts, other than other than other than percentage, in percentage, in percentage, in U.S. dollars U.S. dollars U.S. dollars For the three For the three For the three months months months ended ended ended 31-Mar 31-Mar 31-Mar 2009 2008 2008 (Pro forma) (As reported) Sales revenue 10,914,390 2,594,880 1,103,551 Costs of goods sold 6,852,353 2,212,145 874,707 Gross profit 4,062,037 382,735 228,844 Selling expenses 92,940 77,537 48,540 General and administrative expenses 743,990 383,664 260,969 Operating (loss) income 3,225,107 -78,466 -80,665 Bad debts recovery -- 233,038 13,145 Interest income 96 163 158 Other income 15,509 11,504 5,900 Interest expenses 325,427 266,641 180,474 Other expenses 465 30,545 30,545 Income taxes -- -- -- Net income (loss) 2,914,820 -130,947 -272,481

The pro forma financial information above was prepared based on the unaudited financial results for the Company's Weifang and Taihong subsidiaries for the three months ended March 31, 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 Tel: [phone] Email: [e-mail] Web: http://www.yuhepoultry.com/ CCG Investor Relations Inc. Mr. Crocker Coulson, President Tel: [phone] (New York) Email: [e-mail] Mr. Graham Reed, Financial Writer Tel: [phone] Email: [e-mail] Web: http://www.ccgirasia.com/

Yuhe International, Inc.

CONTACT: Vincent Hu, CFO, Yuhe International, Inc. at [phone] or
[e-mail]; Or Crocker Coulson, President, CCG Investor
Relations Inc. at [phone] or [e-mail]; Graham Reed,
Financial Writer, CCG Investor Relations Inc. at [phone] or
[e-mail]

Web site: http://www.yuhepoultry.com/