China YCT International Group Reports Fiscal Year 2018 Financial Results

SISHUI COUNTY, CHINA / ACCESSWIRE / June 29, 2018 / China YCT International Group, Inc. (OTCQB: CYIG) (the “Company) today announced its financial results for the fiscal year ended March 31, 2018.

Total revenues increased by 15.0% year-over-year to $64.94 million with growth in sales across all three product categories: acertruncatumbunge seed oil, health care products and Huoliyuan capsule.
Overall gross margin was 39.0% for the fiscal year ended March 31, 2018, compared to 41.1% for the prior fiscal year. The decrease in overall gross margin was mainly related to the lower gross margin for Huoliyuan capsules as a result of increased raw material and manufacturing costs.
Net income attributable to the Company was $11.39 million, or $0.38 per share, for the fiscal year ended March 31, 2018, compared to $10.8 million, or $0.34 per share, for the prior fiscal year.

Mr. Tinghe Yan, Chairman and Chief Executive Officer of the Company, commented, “With revenue growth of 30.4%, 4.3% and 11.0% for healthcare products, Huoliyuan capsules, and acertruncatumbunge seed oil, respectively, our financial results for the fiscal year ended March 31, 2018 highlighted continued strength in our businesses across the board. This also marked our fifth consecutive year of steady top-line growth – no mean feat for our dedicated team.”

“As we will start to harvest acertruncatum seeds at our own planting bases starting this fall and launch the commercial production of blended edible oil products using acertruncatum seed oil as a key ingredient, we are excited about the long-term outlook of our business and looking forward to extending our growth streak for fiscal year 2019 and beyond,” concluded Mr. Yan.

Fiscal Year Ended March 31, 2018 Financial Results

For the Twelve Months Ended March 31,

($ millions, except per share data)

2018

2017

% Change

Revenues

$64.94

$56.46

15.0%

Gross profit

$25.34

$23.18

9.3%

Gross margin

39.0%

41.1%

-2.0 pp

Operating income

$14.81

$13.20

12.2%

Operating margin

22.8%

23.4%

-0.6 pp

Net income attributable to CYIG

$11.39

$10.08

13.0%

Earnings per share

$0.38

$0.34

12.9%

Revenues

For the fiscal year ended March 31, 2018, total revenues increased by $8.48 million, or 15.0%, to $64.94 million from $56.46 million for the prior fiscal year. The increase in total revenues was across all product categories.

Revenues from health care products increased by $6.14 million, or 30.4%, to $26.30 million for the fiscal year ended March 31, 2018 from $20.16 million for the prior fiscal year. The increase in sales of health care products was primarily due to the growth of our customer base as well as the contribution from Internet direct-sales.

Revenues from Huoliyuan capsules increased by $1.07 million, or 4.3%, to $25.80 million for the fiscal year ended March 31, 2018 from $24.73 million for the prior fiscal year. The increase in sales of Huoliyuan capsules was primarily due to the easing of market competition.

Revenues from acertruncatumbunge seed oil increased by $1.28 million, or 11.0%, to $12.84 million for the fiscal year ended March 31, 2018 from $11.57 million for the prior fiscal year. The increase in sales of acertruncatumbunge seed oil was primarily due to increased marketing efforts in promoting the products. Since July 2015, the Company has produced and sold acertruncatumbunge seed oil extracted from the acertruncatum pods that were purchased from third party vendors. Our self-grown acertruncatum pods will not be ready to be used for production until approximately the fall of 2018.

The sales of health care products, Huoliyuan capsules and acertruncatumbunge seed oil accounted for 40.5%, 39.7% and 19.8%, respectively, of total revenues for the fiscal year ended March 31, 2018, compared to 35.7%, 43.8%, and 20.5%, respectively, for the prior fiscal year.

The following table summarizes the breakdown of revenues and gross profit by products for the fiscal year ended March 31, 2018 and 2017, respectively:

For the Twelve Months Ended March 31,

2018

2017

Revenues ($M)

Gross Profit ($M)

Gross Margin (%)

Revenues ($M)

Gross Profit ($M)

Gross Margin (%)

Health care supplements

26.30

11.70

44.5%

20.16

8.98

44.5%

Drug (Huoliyuan capsule)

25.80

7.46

28.9%

24.73

8.74

35.4%

Acer truncatum oil

12.84

6.18

48.1%

11.57

5.46

47.2%

Total

64.94

25.34

39.0%

56.46

23.18

41.1%

Cost of Goods Sold

Our cost of goods sold was comprised primarily of the cost of finished goods we purchased from Shandong Yongchuntang, the raw materials we purchased from third party vendors, and the manufacturing cost of acertruncatum bunge seed oil and Huoliyuan capsules. For the fiscal year ended March 31, 2018, total cost of goods sold increased by $6.32 million, or 19.0%, to $39.60 million from $33.28 million for the prior fiscal year. As a percentage of revenues, total cost of goods sold was 61.0% for the fiscal year ended March 31, 2018, compared to 58.9% for the prior fiscal year. The increase was primarily related to the slight increase in raw material costs and manufacturing costs for Huoliyuan capsules.

Cost of goods sold for health care products, Huoliyuan capsules and acer truncatum bunge seed oil were $14.60 million, $18.34 million and $6.66 million, respectively, for the fiscal year ended March 31, 2018, compared to $11.18 million, $15.99 million and $6.11 million, respectively, for the prior fiscal year.

Gross Profit

Gross profit increased by $2.16 million, or 9.3%, to $25.34 million for the fiscal year ended March 31, 2018 from $23.18 million for the prior fiscal year. Gross profit for health care products, Huoliyuan capsules and acer truncatum bunge seed oil were $11.70 million, $7.46 million and $6.18 million, respectively, for the fiscal year ended March 31, 2018, compared to $8.98 million, $8.74 million and $5.46 million, respectively, for the prior fiscal year.

Overall gross margin was 39.0%, with gross margins for health care products, Huoliyuan capsules and acer truncatum bunge seed oil being 44.5%, 28.9% and 48.1%, respectively, for the fiscal year ended March 31, 2018. Overall gross margin was 41.1%, and gross margins for health care products, Huoliyuan capsules and acer truncatum bunge seed oil were 44.5%, 35.4% and 47.2%, respectively, for the prior fiscal year. The decrease in overall gross margin was mainly related to Huoliyuan capsules. The decrease in gross margin for Huoliyuan capsules was a result of increased raw material and manufacturing costs.

Operating Expenses

Our selling expenses consist primarily of sales commissions, advertising and promotion expenses, freight charges and related compensation. For the fiscal year ended March 31, 2018, selling expenses increased by $1.05 million, or 26.7%, to $4.98 million from $3.93 million for the prior fiscal year. The increase in selling expenses was primarily due to the increase in shipping cost and sales commission as a result of increased sales volume andadvertising costs.

General and administrative expenses increased by $0.47 million, or 11.1%, to $4.72 million for the fiscal year ended March 31, 2018 from $4.25 million for the prior fiscal year. The increase in general and administrative expenses was primarily due to the increase in depreciation and amortization expenses, as well as legal and consulting fees offset by the decrease in stock options amortization.

Research and development expenses were $0.49 million for the fiscal year ended March 31, 2018, compared to $0.81 million for the prior fiscal year. The decrease in research and development expenses was mainly due to the decreased purchase of the materials used for R&D. As of March 31, 2018, the Company had 27 staff in the R&D department.

Impairment of $0.33 million and $0.99 million were recorded from reduction in the capitalized costs of acer truncatum bunge planting for the fiscal years ended March 31, 2018 and 2017, respectively.

As a result, total operating expenses increased by $0.55 million, or 5.5%, to $10.53 million for the fiscal year ended March 31, 2018 from $9.98 million for the prior fiscal year.

Operating Income

Total operating income increased by $1.61 million, or 12.2%, to $14.81 million for the fiscal year ended March 31, 2018 from $13.20 million for the prior fiscal year. The increase in total operating income was mainly a result of increased gross profit and partially offset by increased operating expenses. Operating margin was 22.8% for the fiscal year ended March 31, 2018, compared to 23.4% for the prior fiscal year.

Income before Income Taxes

For the fiscal year ended March 31, 2018, the Company recorded gain of $0.64 million from disposal of acertruncatumbunge plants. Other income was $0.12 million for the fiscal year ended March 31, 2018, compared to $0.05 million for the prior fiscal year.

As a result, income before income tax provisions increased by $2.32 million, or 17.5%, to $15.58 million for the fiscal year ended March 31, 2018 from $13.26 million for the prior fiscal year.

Net Income

Income tax expense increased by $0.64 million, or 19.9%, to $3.84 million for the fiscal year ended March 31, 2018 from $3.20 million for the prior fiscal year.

Net income increased by $1.68 million, or 16.7%, to $11.74 million for the fiscal year ended March 31, 2018 from $10.05 million for the prior fiscal year. After the deduction of non-controlling interest, net income attributable to the Company was $11.39 million or $0.38 per basic and diluted share, for the fiscal year ended March 31, 2018, compared to $10.08 million, or $0.34 per basic and diluted share, for the prior fiscal year.

Liquidity and Capital Resources

As of March 31, 2018, the Company had cash and cash equivalents of $25.35 million, and inventories of $2.38 million, compared to $10.31 million and $5.48 million, respectively, as of March 31, 2017. Total working capital was $28.08 million as of March 31, 2018, compared to $15.49 million as of March 31, 2017.

Net cash provided by operating activities was $17.87 million for the fiscal year ended March 31, 2018, compared to $9.74 million for the prior fiscal year. Net cash used in investing activities was $4.54 million for the fiscal year ended March 31, 2018, compared to $6.50 million for the prior fiscal year. Net cash provided by financing activities was $nil for the fiscal year ended March 31, 2018 and 2017, respectively.

Recent Developments

On February 1, 2018, the Company announced that Shandong Spring Pharmaceutical Co., Ltd., a 97% owned subsidiary of the Company, has been ratified and issued a Food Production License for production of edible vegetable oil, which includes acertruncatumbunge seed oil, and related blended edible oil products (the “License”). The License was granted by the Food and Drug Administration of Sishui County and is valid for five years.

About China YCT International Group, Inc.

Based in Sishui County, Shandong Province and established in January 1989, China YCT International Group, Inc., through its subsidiaries, engages in the business of (i) distributing health care supplement products manufactured by Shandong Yongchuntang Group Co., Ltd. in the PRC, (ii) developing, manufacturing, and selling Huoliyuan capsules, a prescription medicine, (iii) developing acer truncatum bunge planting bases, and manufacturing and selling acer truncatum bunge seed oil in the PRC. Acer truncatum bunge plants are a species of maple tree. For more information about the Company, please visit www.yctgroup.com.

Forward-Looking Statements

This news release contains forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements that are other than statements of historical facts. These statements are subject to uncertainties and risks including, but not limited to, product and service demand and acceptance, changes in technology, economic conditions, the impact of competition and pricing, government regulations, and other risks contained in reports filed by the company with the Securities and Exchange Commission. All such forward-looking statements, whether written or oral, and whether made by or on behalf of the Company, are expressly qualified by this cautionary statement and any other cautionary statements which may accompany the forward-looking statements. In addition, the Company disclaims any obligation to update any forward-looking statements to reflect events or circumstances after the date hereof.

For more information, please contact:

At the Company:
Zecheng Shao, Vice President
Phone: +86-156-5377-2006
Email: zc_shao@126.com

Investor Relations:
Tony Tian, CFA
Weitian Group LLC
Phone: +1-732-910-9692
Email: ttian@weitianco.com

CHINA YCT INTERNATIONAL GROUP, INC.
CONSOLIDATED BALANCE SHEETS

MARCH 31, 2018

MARCH 31, 2017

Assets

Current assets:

Cash and cash equivalents

$
25,353,360

$
10,308,622

Accounts receivable

174,558

1,134,967

Inventories

2,383,382

5,483,040

Purchase deposit to vendors

–

650,790

Purchase deposit to related party

1,412,864

–

Prepaid leases – current portion

741,583

900,547

Total current assets

30,065,747

18,477,966

Prepaid leases

641,349

1,265,252

Development cost of acer truncatum bunge planting

48,984,881

42,055,972

Plant, property, and equipment, net

16,793,413

14,487,135

Intangible assets, net

11,862,017

12,042,758

Deferred tax assets

200,387

508,521

Security deposit – related party

1,590,305

1,449,422

Total assets

$
110,138,099

$
90,287,026

Liabilities and Stockholders’ Equity

Current liabilities:

Accounts payable to related party

$
–

$
706,048

Accounts payable and other accrued expenses

372,782

251,307

Advance from customers

445,829

–

Taxes payable

1,164,198

2,028,190

Total current liabilities

1,982,809

2,985,545

Stockholders’ Equity

Preferred stock, par value $500 per share; 45 shares authorized, issued and outstanding

22,500

Common stock, par value $0.001 per share; 100,000,000 shares authorized; 29,789,168 shares issued and outstanding

29,789

Additional paid-in capital

4,322,838

Statutory reserve

1,828,504

Retained earnings

94,447,937

83,061,604

Accumulated other comprehensive income (loss)

4,455,017

(4,386,845)

Total stockholders’ equity attributable to the Company

105,106,585

84,878,390

Noncontrolling interest

3,048,705

2,423,091

Total stockholders’ equity

108,155,290

87,301,481

Total liabilities and stockholders’ equity

$
110,138,099

$
90,287,026

CHINA YCT INTERNATIONAL GROUP, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

YEARS ENDED

MARCH 31,

2018

2017

Sales

$
64,942,737

$
56,463,164

Cost of goods sold (including $14,404,967 and $11,015,268
from a related party for the years ended March 31, 2018 and 2017,
respectively)

39,603,995

33,284,237

Gross profit

25,338,742

23,178,927

Operating expenses

Selling expenses

4,984,794

3,934,334

General and administrative expenses

4,719,402

4,248,095

Research and development expenses

492,078

809,485

Impairment of assets

332,090

986,406

Total operating expenses

10,528,364

9,978,320

Income from operations

14,810,378

13,200,607

Gain on disposal of acer truncatum bunge plants

642,532

–

Interest income

124,410

54,672

Income before income tax provision

15,577,320

13,255,279

Income tax provision

3,838,832

3,200,625

Net income

11,738,488

10,054,654

Less: Net income (loss) attributable to noncontrolling interest

352,155

(23,649)

Net income attributable to the Company

11,386,333

10,078,303

Other comprehensive income (loss):

Foreign currency translation adjustment

9,115,321

(5,228,368)

Comprehensive income

20,853,809

4,826,286

Less: Comprehensive income (loss) attributable to noncontrolling interest

625,614

(28,108)

Comprehensive income attributable to the Company

$
20,228,195

$
4,854,394

Earnings per common share

Basic and Diluted

$
0.38

$
0.34

Weighted average number of common shares outstanding

Basic and Diluted

29,789,168

29,763,531

CHINA YCT INTERNATIONAL GROUP, INC
CONSOLIDATED STATEMENTS OF CASH FLOWS

YEARS ENDED

MARCH 31,

2018

2017

Cash flows from operating activities:

Net income

$
11,738,488

$
10,054,654

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization of plant, property and equipment

1,300,651

746,931

Amortization of intangible assets

1,282,495

1,098,757

Amortization of prepaid leases

884,950

923,380

Stock-based compensation

–

123,135

Deferred taxes

339,358

(319,501)

Loss on disposal of property, plant and equipment

–

184,262

Gain on abandonment of acer truncatum bunge plants

(642,532)

–

Impairment of assets

332,090

986,406

Changes in operating assets and liabilities:

Purchase deposit to vendors

677,695

(667,291)

Inventory

3,447,670

(3,425,678)

Accounts receivable

1,016,216

(651,680)

Cash received from cancellation of lease

57,858

–

Taxes payable

(1,007,109)

1,369,927

Security deposit to related party

–

(1,486,171)

Purchase deposit and accounts payable to related party, net

(2,076,172
)

663,222

Advance from customers

423,132

–

Accounts payable and other accrued expenses

92,108

135,721

Net cash provided by operating activities

17,866,898

9,736,074

Cash flows from investing activities:

Acquisition of property, plant and equipment

(2,153,063)

(2,880,051)

Proceeds from disposal of acer truncatum bunge plants

2,156,510

–

Development cost of acer truncatum bunge planting

(4,542,518)

(3,618,469)

Net cash used in investing activities

(4,539,071)

(6,498,520)

Effect of exchange rate changes on cash and cash equivalents

1,716,911

(568,016)

Net increase in cash and cash equivalents

15,044,738

2,669,538

Cash and cash equivalents at beginning of year

10,308,622

7,639,084

Cash and cash equivalents at end of year

$
25,353,360

$
10,308,622

Supplemental disclosures of cash flow information:

Cash paid during the years for:

Interest

$
–

Income taxes

$
4,445,597

$
2,521,061

Noncash Investing Activities:

Transfer 3% equity of Shandong Spring in exchange for equipment and intangible assets

$
–

$
2,134,537

SOURCE: China YCT International Group, Inc.

ReleaseID: 504117

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