Yongye Announces Fourth Quarter and Full Year 2009 Financial Results

BEIJING, March 15 /PRNewswire-Asia/ -- Yongye International, Inc. (Nasdaq: YONG), ("Yongye" or the "Company") a leading developer, manufacturer, and distributor of Shengmingsu brand plant and animal nutrient products in China, today announced its financial results for the fourth quarter and fiscal year ended December 31, 2009.

Fourth Quarter 2009 Highlights

-- Revenue increased 248.2% to $10.1 million from $2.9 million in the

fourth quarter of 2008

-- Gross profit increased 275.7% to $5.4 million from $1.4 million

-- Gross margin increased 390 basis points to 53.3% from 49.4%

-- Operating income was $0.4 million, compared to an operating loss of

$1.1 million in the fourth quarter of 2008

-- Net loss was $0.1 million, compared to a net loss of $0.4 million in

the same period last year

-- Adjusted net income, which excludes the impact of non-cash charges

related to the change in fair value of derivative liabilities of $3.1

million, was $3.0 million, or $0.08 per diluted share, compared to an

adjusted net loss of $1.0 million in the prior year period*

-- Expanded the network of Yongye branded stores to 9,110 at the end of

2009, compared to 7,000 at the end of the third quarter of 2009, and

1,125 at the end of 2008

-- Raised $69 million in gross proceeds via a public equity offering

Full Year 2009 Highlights

-- Revenue increased 104.0% to $98.1 million from $48.1 million in 2008

-- Gross profit increased 109.0% to $52.1 million from $24.9 million

-- Gross margin increased 129 basis points to 53.1% from 51.8%

-- Operating income increased 129.4% to $31.4 million from $13.7 million

-- Operating margin increased 355 basis points to 32.0% from 28.5%

-- Net income was $2.2 million, or $0.07 per diluted share, compared to

$13.3 million, or $0.56 per diluted share, last year.

-- Adjusted net income, which excludes the impact of non-cash charges

related to the change in fair value of derivative liabilities of $24.0

million, was $26.2 million, or $0.83 per diluted share, compared to

$11.2 million, or $0.56 per diluted share, last year*

"Due to the seasonality of our business, the fourth quarter of the year is normally our slowest," said Mr. Zishen Wu, Chairman and Chief Executive Officer. "However, based on the rapid expansion of our sales network in 2009, especially in central and southern China, and continued success in increasing our market penetration rates, we achieved very significant year-over-year revenue growth in the quarter. Our growth in the fourth quarter and for the full year reflects the increasing market recognition of the benefits of our Shengmingsu brand plant and animal products and the success of our extensive and growing distribution network in generating sales across the large and growing domestic agricultural market in China."

Fourth Quarter 2009 Results

Revenue for the three months ended December 31, 2009 was $10.1 million compared to $2.9 million for the same period in 2008, an increase of 248.2%. The increase in revenue was due to higher sales penetration in existing markets and the rapid expansion of the Company's distribution network. As of December 31, 2009, Yongye had 9,110 branded stores in its network, compared to 7,000 stores at the end of the third quarter of 2009, and 1,125 stores at the end of 2008.

Gross profit was $5.4 million compared to $1.4 million for the three months ended December 31, 2008, an increase of 275.7%. Gross margin was 53.3% compared to 49.4% in the same period last year. The increase in gross margin was primarily the result of the Company transitioning its manufacturing process in house during the fourth quarter and increasing economies of scale.

Selling, general and administrative expenses were $4.8 million, or 47.5% of sales, in the fourth quarter of 2009, compared to $2.5 million, or 87.3% of sales, in the same period last year. The decrease in margin was primarily due to more efficient marketing spending and increasing economies of scale. Operating income was $0.4 million compared to an operating loss of $1.1 million in the same period last year.

In January 2010, Yongye's sole operating entity in China, Yongye Nongfeng, received government approval for a preferential corporate income tax rate of 15% for the full years of 2009 and 2010. Since Yongye Nongfeng accrued its income tax expenses for the first three quarters of 2009 based on the statutory income tax rate of 25%, such approval resulted in a $2.8 million decrease in provision for income taxes in the fourth quarter of 2009.

Net loss was $0.1 million in the fourth quarter of 2009, compared to a net loss of $0.4 million in the fourth quarter of 2008. The Company incurred non-cash charges related to the change in fair value of derivative liabilities of $3.1 million in the fourth quarter of 2009. Excluding the impact of these non-cash charges, adjusted net income was $3.0 million, or $0.08 per diluted share compared to an adjusted net loss of $1.0 million in the same period last year.*

*See the table following this press release for a reconciliation of net income and EPS to exclude non-cash charges related to the change in fair value of derivative liabilities.

Full Year 2009 Results

Revenue for twelve months ended December 31, 2009 was $98.1 million compared to $48.1 million in 2008, an increase of 104.0%. Gross profit was $52.1 million with a gross margin of 53.1%, compared to gross profit of $24.9 million with a gross margin of 51.8% for the twelve months ended December 31, 2008. Operating income was $31.4 million with an operating margin of 32.0%, compared to $13.7 million with an operating margin of 28.5% last year. Net income was $2.2 million, or $0.07 per diluted share, compared to $13.3 million, or $0.56 per diluted share, last year.

The Company incurred non-cash charges related to the change in fair value of derivative liabilities of $24.0 million in 2009. Excluding the impact of these non-cash charges, adjusted net income was $26.2 million, or $0.83 per diluted share, compared to $11.2 million, or $0.56 per diluted share, last year.*

The diluted weighted average number of shares outstanding increased from 20,106,433 in 2008 to 31,324,830 in 2009 because additional shares were issued in private placements in May 2009 and as part of the public offering in December 2009.

Financial Condition

As of December 31, 2009, the Company had $65.5 million in cash, compared to $4.5 million as of December 31, 2008. The increase in the Company's cash balance was primarily due to the proceeds the Company received from in the December 2009 financing. Working capital was $107.8 million, compared to $23.3 million at the end of 2008. As of year-end 2009, the Company had only $0.5 million in long-term debt. Stockholders' equity totaled $132.6 million as of December 31, 2009, compared to $28.5 million at the end of 2008.

Based on past experience and its development plan for 2010, the Company expects strong demand for its "Shengmingsu" branded nutrient products in the first half of 2010. Therefore, the Company significantly increased inventory in the fourth quarter of 2009 in order to effectively meet the market demand in 2010. The $107.8 million increase of working capital was primarily due to an increase in inventory of $21.3 million and cash balance of $61.0 million in 2009.

Recent Developments

In March 2010, Yongye's operating entity in China, Yongye Nongfeng Biotechnology, signed an agreement with a local supplier of humic acid to purchase an undeveloped lignite coal resources project in Inner Mongolia, PRC. According to the agreement, Nongfeng will pay Shuntong RMB240 million ($35.1 million) to acquire the development rights for this project. Yongye will use a portion of the proceeds received in the December 2009 public equity offering for this acquisition.

In December 2009, Yongye raised $69 million in gross proceeds via a public equity offering. As further outlined in the "Business Outlook" section of this press release, the proceeds are expected to be used for acquiring a lignite coal mine, constructing a new manufacturing facility and acquisitions and working capital.

In December 2009, the Company's senior management team rang the opening bell at the NASDAQ MarketSite in New York City.

In October 2009, Yongye completed the acquisition of the land, buildings, equipment, and fertilizer license of its predecessor, Inner Mongolia Yongye; thereby becoming a fully integrated manufacturer of agricultural nutrient products.

Business Outlook

From 2010 to 2012, Yongye expects to achieve at least a 50% annual growth rate in revenue through geographic expansion into new markets, increased penetration in existing markets, additional marketing and brand-building efforts, and expanded production capacity. By the end of 2010, the Company plans to expand its total number of branded stores to more than 20,000.

The Company also intends to improve its cost structure and enhance its profitability by gaining greater control over its supply chain and distribution network through a vertical integration strategy. In March 2010, Yongye announced an acquisition of an undeveloped lignite coal resources project in Inner Mongolia for RMB 240 million (approximately $35.1 million). According to a third party valuation report, the Lignite Coal Project area is estimated to contain over 40 million cubic meters of surface level lignite coal.

During 2010, the Company also expects to build a new manufacturing facility nearby, which is expected to be capable of extracting humic acid from coal and producing 20,000 tons per year of the Company's liquid plant product and 10,000 tons per year of its powder animal product. The Company's current manufacturing facility operates at almost full capacity to meet peak season demand and inventory requirements. In addition, the Company plans to acquire certain Shengmingsu distributors that have especially strong channel networks.

Mr. Wu added, "By directly sourcing the raw materials that account for the largest percentage of our cost of goods sold and by more tightly integrating the production of humic acid with our fulvic acid extraction process, we expect to achieve significant cost savings and improved long-term visibility into our business. Additionally, we expect that the acquisition of certain of our strongest distributors will help us exert more direct control over our sales process and will ultimately lead to the increased margins and profitability.

"We continue to strengthen Yongye's leadership position in the market through geographic expansion, deeper market penetration, and increasing productivity in our operations. Based on our three-year strategic plan and with the capital we raised in December 2009, we expect to continue to see strong organic growth. In addition, we continue to explore upstream and downstream acquisitions so as to integrate our value chain and further improve the profitability of our business."

Conference Call

The Company will host a conference call at 09:00 a.m. Eastern Time Tuesday, March 16, 2010 to discuss its full year 2009 results.

To participate in the live conference call, please dial the following number five to ten minutes prior to the scheduled conference call time: +1-877-407-5374. International callers should dial +1-702-894-2288. The conference pass code is 631 572 80.

For those who are unable to participate in the conference call at the time of the call, a replay will be available for fourteen days after the call is held. To access the replay, please dial +1-800-642-1687. International callers should dial +1-706-645-9291. The replay pass code is 631 572 80.

Use of Adjusted Financial Measures

GAAP results for the three and twelve months ended December 31, 2009 include non-cash charges related to the change in fair value of derivative liabilities. To supplement the Company's condensed consolidated financial statements presented on a GAAP basis, the Company has provided adjusted financial information excluding the impact of these items in this release. It is a departure of U.S. GAAP, however, the Company's management believes that this adjusted measure provides investors with a better understanding of how the results relate to the Company's historical performance. A reconciliation of the adjustments to 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 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., headquartered in Beijing, is engaged in the development, manufacturing, distribution and sales of Shengmingsu brand plant and animal nutrient products. The Company's patented and patent pending formulas and proprietary extraction processes allow it to create products that increase crop yields and improve the health of livestock. Its sole operating subsidiary, Inner Mongolia Yongye Nongfeng Biotechnology Co., Ltd., is headquartered in Beijing with major operations located in Inner Mongolia, People's Republic of China. For more information, please visit the Company's website at http://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.

- Financial Tables Follow -

YONGYE INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

For the Three Months Ended For the Years Ended

December December December December

31, 2009 31, 2008 31, 2009 31, 2008

Sales

External

customers $10,104,197 $2,902,692 $95,870,906 $48,092,271

Related party 1,853 -- 2,221,936 --

Total sales 10,106,050 2,902,692 98,092,842 48,092,271

Cost of sales 4,714,576 1,467,720 45,989,386 23,165,684

Gross profit 5,391,474 1,434,972 52,103,456 24,926,587

Selling expenses 3,004,950 1,228,242 14,720,657 8,665,755

Research &

development

expenses 207,360 -- 1,690,248 --

General and

administrative

expenses 1,793,691 1,307,209 4,289,488 2,573,017

Income from

operations 385,473 (1,100,479) 31,403,063 13,687,815

Other expenses/

(income)

Interest

expense, net 44,563 69,698 70,101 3,135

Other (income)/

expenses, net 13,178 (200,888) (174,152) 526,039

Increase/

(decrease) in

fair value of

derivative

liabilities 3,104,666 (654,541) 24,009,802 (2,118,797)

Total other

expenses/

(income), net 3,162,407 (785,731) 23,905,751 (1,589,623)

Earnings before

income tax

expense (2,776,934) (314,748) 7,497,312 15,277,438

Income tax

expense (2,839,165) 41,990 4,997,105 864,292

Net income 62,231 (356,738) 2,500,207 14,413,146

Less: Net income

attributable to

the noncontrolling

interest 176,272 9,962 304,556 1,102,388

Net income attri-

butable to Yongye

International, Inc. (114,041) (366,700) 2,195,651 13,310,758

Earnings per share:

Basic $(0.03) $(0.06) $0.07 $0.68

Diluted $(0.03) $(0.06) $0.07 $0.56

Weighted average

shares used in

computation:

Basic 35,471,826 26,760,258 31,324,830 19,599,054

Diluted 35,640,303 26,760,258 31,324,830 20,106,433

YONGYE INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

December 31, 2009 December 31, 2008

Current assets

Cash $65,518,181 $4,477,477

Accounts receivable, net of

allowance for doubtful

accounts 6,161,796 2,748,042

Inventories 42,033,261 20,708,193

Prepayments 6,211,896 44,051

Due from a related party -- 192,741

Prepaid expenses 112,879 189,478

Other receivables 383,841 680,752

Total Current Assets 120,421,854 29,040,734

Property, plant and,

equipment, net 9,156,915 5,368,074

Intangible asset, net 85,058 95,453

Land use right, net 4,166,987 --

Other assets 2,029,012 --

Goodwill 9,945,862 --

Total Assets $145,805,688 $34,504,261

Current liabilities

Short-term bank loan $2,925,174 $--

Long-term loans - current

portion 331,693 167,652

Accounts payable - related

party 880,026 46,739

Accounts payable - third

parties 344,774 --

Income tax payable 4,082,424 219,366

Advance from customers 29,157 1,869,400

Accrued expenses 479,609 583,880

Due to a related party 1,663,191 --

Other payables 553,286 774,526

Derivative liabilities -

fair value of warrants 1,380,205 2,107,931

Total Current Liabilities 12,669,539 5,769,494

Long-term loans 545,327 230,121

Total Liabilities 13,214,866 5,999,615

Stockholders' equity

Common stock: par value $.001;

75,000,000 shares authorized;

44,532,241 shares issued and

outstanding at December 31,

2009 and 26,760,258 shares

issued and outstanding at

December 31, 2008 44,532 26,760

Additional paid-in capital 118,583,308 13,633,604

Subscription receivable (8,550,000) --

Retained earnings 15,506,445 13,310,794

Accumulated other

comprehensive income 329,139 329,445

Total Equity of the

Company's Stockholders 125,913,424 27,300,603

Noncontrolling interest 6,677,398 1,204,043

Total Stockholders' Equity 132,590,822 28,504,646

Total Liabilities and

Stockholders' Equity $145,805,688 $34,504,261

YONGYE INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Years Ended

December 31, 2009 December 31, 2008

CASH FLOWS FROM OPERATING ACTIVITIES

Net income $2,500,207 $14,413,146

Adjustments to reconcile

net income to net cash used

in operating activities:

Depreciation and

amortization 578,511 118,104

Loss on sale of property,

plant and equipment 5,995 --

(Reversal)/provision of

bad debt provision (305,338) 305,338

Increase/(decrease) in

fair value of derivative

liabilities 24,009,802 (2,118,797)

Changes in operating

assets and liabilities (net

of effect of an acquisition

in 2009):

Accounts receivable (3,099,156) (3,053,380)

Inventories (21,262,135) (20,708,193)

Prepayments (6,107,924) (44,051)

Due from a related party -- (192,741)

Prepaid expenses 77,013 (189,478)

Other receivables 298,444 (680,752)

Other assets (1,751,395) --

Accounts payable- related

party 832,723 46,739

Accounts payable- third

parties 344,589 --

Income tax payable 3,860,435 219,366

Advance from customers (1,843,898) 1,869,400

Accrued expenses (105,659) 583,880

Other payables (222,593) 764,526

Net Cash Used in Operating

Activities (2,190,379) (8,666,893)

CASH FLOWS FROM INVESTING ACTIVITIES

Proceeds from sale of

property, plant and equipment 12,425 --

Purchase of property, plant

and equipment (1,560,587) (5,475,572)

Payment for the acquisition

of Shengmingsu manufacturing

business (2,834,676) --

Net Cash Used in Investing

Activities (4,382,838) (5,475,572)

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from bank loans 2,923,600 432,325

Repayment of bank loans (248,150) (34,552)

Proceeds from common stock

and warrants issued 69,547,206 19,350,651

Payment for common stock

and warrants issuance costs (4,528,456) (1,461,659)

Net Cash Provided by

Financing Activities 67,694,200 18,286,765

EFFECT OF FOREIGN EXCHANGE

RATE CHANGES ON CASH (80,279) 325,041

NET INCREASE IN CASH 61,040,704 4,469,341

Cash and cash equivalent at

beginning of year 4,477,477 8,136

Cash and cash equivalent at

end of year $65,518,181 $4,477,477

YONGYE INTERNATIONAL, INC. AND SUBSIDIARIES

RECONCILIATION OF NON-GAAP FINANCIAL DATA

Three Months Ended Three Months Ended

December 31, 2009 December 31, 2008

Net Income Diluted EPS Net Income Diluted EPS

Adjusted Amount $2,990,625 $0.08 ($1,021,241) ($0.04)

Change in fair

value of

derivative

liabilities $3,104,666 $0.09 ($654,541) ($0.02)

GAAP amount per

consolidated

statement of

income ($114,041) $0.00 ($366,700) ($0.01)

Weighted average

number of shares

- diluted 35,640,303 26,760,258

Twelve Months Ended Twelve Months Ended

December 31, 2009 December 31, 2008

Net Income Diluted EPS Net Income Diluted EPS

Adjusted Amount $26,205,453 $0.83 $11,191,961 $0.56

Change in fair

value of

derivative

liabilities $24,009,802 $0.76 ($2,118,797) ($0.00)

GAAP amount per

consolidated

statement of

income $2,195,651 $0.07 $13,310,758 $0.56

Weighted average

number of shares

- diluted 31,461,397 20,106,433

*Diluted EPS calculation in accordance with GAAP (FASB No. 128) requires

the reversal of gain or loss from the change in fair value of derivative

liabilities in the numerator, and an increase in the number of common

shares of ordinary shares equivalents outstanding in the denominator (See

December 31, 2009 and 2008 Financial Statements). Therefore, the change in

fair value of derivative liabilities is not reversed again when

calculating Non-GAAP diluted EPS for three and twelve months ended

December 31, 2009 and 2008.

In the diluted EPS calculation in accordance with GAAP for three and

twelve months ended December 31, 2009 and 2008, the gain or loss from the

change in fair value of derivative liabilities in the numerator was not

reversed, as this effect would have been anti-dilutive. Therefore, the

change in fair value of derivative liabilities is reversed when

calculating Non-GAAP diluted EPS for three and twelve months ended

December 31, 2009 and 2008.

For more information, please contact:

Yongye International, Inc.

Mr. Larry Gilmore, VP of Corporate Strategy

Phone: +86-10-8232-8866 x8880

Email: larry.gilmore@yongyeintl.com

CCG Investor Relations

Mr. Crocker Coulson, President

Phone: +1-646-213-1915 (New York)

Email: crocker.coulson@ccgir.com

Mr. Athan Dounis, Account Manager

Phone: +1-646-213-1916

Email: athan.dounis@ccgir.com

Web: http://www.ccgirasia.com

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