SKYPEOPLE FRUIT JUICE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME FOR THE
THREE MONTHS ENDED MARCH 31, 2011 AND 2010 (UNAUDITED)
For the Three Months Ended March 31, | ||||||||
2011 | 2010 | |||||||
Revenue | $ | 19,414,915 | $ | 17,721,296 | ||||
Cost of Sales | 10,809,357 | 10,558,248 | ||||||
Gross Margin | 8,605,558 | 7,163,048 | ||||||
Operating Expenses | ||||||||
General and administrative expenses | 816,160 | 766,232 | ||||||
Selling expenses | 454,674 | 364,777 | ||||||
Research and development expenses | 136,467 | 278,152 | ||||||
Total operating expenses | 1,407,301 | 1,409,161 | ||||||
Income from Operations | 7,198,257 | 5,753,887 | ||||||
Other Income (Expenses) | ||||||||
Interest income | 76,312 | 22,096 | ||||||
Subsidy income | 483,067 | 43,562 | ||||||
Interest expense | (163,795 | ) | (222,959 | ) | ||||
Change in fair value of warrant liability | -- | (2,092,972 | ) | |||||
Others | (3,033 | ) | (238 | ) | ||||
Total other income (expenses) | 392,551 | (2,250,511 | ) | |||||
Income Before Income Tax | 7,590,808 | 3,503,376 | ||||||
Income Tax Provision | 1,929,808 | 1,505,897 | ||||||
Net Income | 5,661,000 | 1,997,479 | ||||||
Less: Net Income Attributable to Noncontrolling Interests | 368,824 | 332,262 | ||||||
NET INCOME ATTRIBUTABLE TO SKYPEOPLE FRUIT JUICE, INC. | $ | 5,292,176 | $ | 1,665,217 | ||||
Earnings Per Share: | ||||||||
Basic earnings per share | $ | 0.20 | $ | 0.08 | ||||
Diluted earnings per share | $ | 0.20 | $ | *0.08 | ||||
Weighted Average Shares Outstanding | ||||||||
Basic | 25,690,402 | 18,341,103 | ||||||
Diluted | 26,662,599 | 20,637,806 | ||||||
Comprehensive Income | ||||||||
Net income | $ | 5,661,000 | $ | 1,997,479 | ||||
Foreign currency translation adjustment | 1,141,578 | (29,365 | ) | |||||
Total Comprehensive Income | $ | 6,802,578 | $ | 1,968,114 | ||||
Comprehensive income attributable to noncontrolling interests | 413,802 | 301,701 | ||||||
Comprehensive Income Attributable to SkyPeople Fruit Juice, Inc. | $ | 6,388,776 | $ | 1,666,413 | ||||
* The effect of 1,228,333 warrants and the related change in fair value of warrant liability was not included for the computation of diluted earnings per share for the period ended as the inclusion would be anti-dilutive.
First Quarter of Fiscal 2011 Highlights
· | Revenue increased to $19.4 million for the first quarter of fiscal 2011, an increase of $1.7 million or 9.6%, compared to $17.7 million for the first quarter of 2010. |
· | Gross profit margin increased by 3.9% to 44.3% for the first quarter of fiscal 2011 from 40.4% for the same quarter of fiscal 2010. |
· | Operating expenses decreased slightly by $1,860 to $1.4 million for the first quarter of fiscal 2011, which was mainly due to a decrease in research and development expenses. Operating expenses as a percentage of revenue decreased by 10.0% to 7.2% for the first quarter of fiscal 2011 from 8.0% for the same quarter of fiscal 2010, primarily due to the increase in revenue, as most of our operating expenses are fixed costs. |
· | Income from operations increased by $1.4 million, or 24.1%, to $7.2 million for the first quarter of fiscal 2011 from $5.8 for the same quarter of fiscal 2010 mainly due to the increase in revenue and an improvement in gross margin. |
· | Net income attributable to the Company increased by $3.7 million, or 185.0%, to $5.7 million for the first quarter of fiscal 2011 as compared with $2.0 million for the same quarter of fiscal 2010. |
Results of Operations and Business Outlook
Revenues
The following table presents our consolidated revenues for our main products for the three months ended March 31, 2011 and 2010, respectively (in thousands):
Three Months Ended March 31, | ||||||||||||
2011 | 2010 | % Change | ||||||||||
Concentrated apple juice and apple aroma | $ | 3,673 | $ | 4,483 | (18.1 | %) | ||||||
Concentrated kiwifruit juice and kiwifruit puree (excluding inter-segment sales) | 2,985 | 2,661 | 12.2 | % | ||||||||
Concentrated pear juice | 4,022 | 4,169 | (3.5 | %) | ||||||||
Fruit juice beverages | 7,277 | 2,841 | 156.1 | % | ||||||||
Fresh fruits and vegetables | 1,458 | 3,567 | (59.1 | %) | ||||||||
Consolidated | $ | 19,415 | $ | 17,721 | 9.6 | % | ||||||
Revenue for the three months ended March 31, 2011 was $19.4 million, an increase of $1.7 million, or 9.6%, when compared to $17.8 million for the same period of the prior year. This increase was primarily due to an increase in sales of concentrated kiwifruit juice and kiwifruit puree and fruit juice beverages.
Sales from apple related products decreased by $0.8 million, or 18.1%, to $3.7 million for the three months ended March 31, 2011, compared to $4.5 million for the same period of 2010, primarily due to a shortage of raw material of fresh apples in the first quarter of 2011, which was the result of cold weather in the first quarter of 2011, compared with the same period of the previous year. The reduction of product capacity was offset by an increase in the unit price of concentrated apple juice in the first quarter of 2011. In terms of sales volume, we sold approximately 2,138 tons of concentrated apple juice in the first quarter of 2011, compared with approximately 5,155 tons in the same period of 2010, representing a decrease of 58.5%.
Sales of concentrated pear juice decreased to $4.0 million in the first quarter of 2011, a decrease of $0.2 million, or 3.5%, from $4.2 million in the same quarter of 2010, primarily due to a shortage of raw material of fresh pear in the first quarter of 2011, which is the result of cold weather in the first quarter of 2011, compared with the same period of the previous year. In terms of sales volume, we sold approximately 3,481 tons of concentrated pear juice in the first quarter of 2011, compared with approximately 4,930 tons in the same period of 2010, representing a decrease of 29.4%.
Sales from concentrated kiwifruit juice and kiwifruit puree were $3.0 million for the first quarter of 2011, an increase of $0.3 million, or 12.2%, from $2.7 million in the same quarter of 2010, primarily due to an increase in production amount of concentrated kiwifruit puree in the first quarter of 2011 compared with the same quarter of the previous year. We believe that farmers were storing the fresh kiwifruit towards the end of 2010 to sell during the Chinese New Year holiday which fell in February of 2011 as the fresh fruit market was expected to go strong for the first quarter of 2011 in the squeezing season of 2010, which fell in February of 2011 this year. During the first quarter of 2011, there were more abundant fresh kiwifruits in the market in the first quarter of fiscal 2011.
Revenue from our fruit juice beverages in the PRC increased to $7.3 million, an increase of $4.5 million or 156.1%, compared to $2.8 million for the same period of fiscal 2010, due to our enhanced marketing efforts, an increase of product offering in our product portfolio and an increase in market demand for fruit juice beverages in the PRC.
Revenue from our fresh fruits and vegetables in the PRC decreased to $1.5 million, a decrease of $2.1 million or 59.1%, compared to $3.6 million for the same period of fiscal 2010, primarily due to a decrease in selling volume of fresh fruits coupled with a decrease in unit price of fresh fruits in the first quarter of 2011 as compared to the same period of last fiscal year. As we foresaw that the market price of fresh fruits would fall in the first quarter of 2011 due to large inventory built by the fruit vendors in the fourth quarter of 2010, we reduced our purchased amount of fresh fruits from the market to control our risk in the fourth quarter of 2010. Our selling volume decreased as a shortage of inventory.
Gross Margin
The following table presents the consolidated gross profit of our main products and the consolidated gross profit margin, which is gross profit as a percentage of related revenues, for the three months ended March 31, 2011 and 2010, respectively (in thousands):
Three Months Ended March 31, | ||||||||||||
Gross profit from: | 2011 | 2010 | % Change | |||||||||
Concentrated apple juice and apple aroma | $ | 1,082 | $ | 875 | 23.7 | % | ||||||
Concentrated kiwifruit juice and kiwifruit puree | 1,587 | 1,730 | (8.3 | %) | ||||||||
Concentrated pear juice | 1,221 | 1,617 | (24.5 | %) | ||||||||
Fruit juice beverages | 3,946 | 1,058 | 273.0 | % | ||||||||
Fresh fruits and vegetables | 770 | 1,883 | (59.1 | %) | ||||||||
Consolidated | $ | 8,606 | $ | 7,163 | 20.1 | % | ||||||
Gross profit as a % of revenue (Gross Margin) | ||||||||||||
Concentrated apple juice and apple aroma | 29.5 | % | 19.5 | % | 51.3 | % | ||||||
Concentrated kiwifruit juice and kiwifruit puree | 53.2 | % | 65.0 | % | (18.2 | %) | ||||||
Concentrated pear juice | 30.4 | % | 38.8 | % | (21.6 | %) | ||||||
Fruit juice beverages | 54.2 | % | 37.2 | % | 45.7 | % | ||||||
Fresh fruits and vegetables | 52.8 | % | 52.8 | % | -- | |||||||
Consolidated | 44.3 | % | 40.4 | % | 9.7 | % | ||||||
Yonkue Xue, Chief Executive Officer of SkyPeople Fruit Juice explained, "Our diversified product portfolio produced respectable growth in the first quarter despite weather effects on the harvest seasons for apple and pear over the last six months. Sales of our Hedetang and Qian Mei Duo beverages grew significantly in the quarter and were the single largest revenue stream for the Company. Our branded beverages are now sold in over 100 retail stores in approximately 13 cities including Xi'an, Beijing and now, Tianjin. We are excited about the growth potential for this market and the continued growth of our concentrate business in China and international markets."
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