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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549
 

 
FORM 10-Q
 

 
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended June 30, 2012
 
OR
 
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from                 to                 .
 
Commission file number 001-33397
 

     
SYNUTRA INTERNATIONAL, INC.
 

     
DELAWARE
 
13-4306188
(State or Other Jurisdiction of
Incorporation or Organization)
 
I.R.S. Employer
Identification No.
 
 
2275 Research Blvd., Suite 500
Rockville, Maryland 20850
 
(Address of Principal Executive Offices, Zip Code)
 
(301) 840-3888
(Registrant’s Telephone Number, Including Area Code)
 
 
 

 
 
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No  o
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer o
Accelerated filer x
Non-accelerated filer o
Smaller reporting company o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No  x
 
As of August 9, 2012, there were 57,300,713 shares of the registrant’s common stock outstanding.

 
 

 
 
 
TABLE OF CONTENTS
 
Page
 
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
1
   
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
13
   
Item 3. Quantitative and Qualitative Disclosures About Market Risk
21
   
Item 4. Controls and Procedures
21
   
PART II OTHER INFORMATION
   
Item 1. Legal Proceedings
22
   
Item 1A. Risk Factors
22
   
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
22
   
Item 3. Defaults Upon Senior Securities
22
   
Item 4. Mine Safety Disclosures
22
   
Item 5. Other Information
22
   
Item 6. Exhibits
22
   
Signatures
23
 
 
 

 
 
PART I FINANCIAL INFORMATION
 
ITEM 1.  FINANCIAL STATEMENTS
 
SYNUTRA INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars and shares in thousands, except per share data)
(UNAUDITED)
 
   
June 30, 2012
   
March 31, 2012
 
ASSETS
           
Current Assets:
           
Cash and cash equivalents
 
$
68,083
   
$
64,793
 
Restricted cash
   
43,638
     
30,425
 
Accounts receivable, net of allowance of $7,796 and $7,845, respectively
   
36,709
     
38,753
 
Inventories
   
86,410
     
75,499
 
Due from related parties
   
11,946
     
12,262
 
Income tax receivable
   
3,673
     
227
 
Receivable from assets disposal
   
0
     
1,037
 
Prepaid expenses and other current assets
   
23,390
     
16,320
 
Deferred tax assets
   
12,857
     
17,827
 
Total current assets
   
286,706
     
257,143
 
                 
Property, plant and equipment, net
   
132,553
     
134,902
 
Land use rights, net
   
10,091
     
10,198
 
Intangible assets, net
   
4,368
     
4,377
 
Restricted cash
   
9,486
     
21,019
 
Other assets
   
2,075
     
1,367
 
Deferred tax assets
   
23,693
     
18,907
 
TOTAL ASSETS
 
$
468,972
   
$
447,913
 
                 
LIABILITIES AND EQUITY
               
Current Liabilities:
               
Short-term debt
 
$
128,177
   
$
86,614
 
Long-term debt due within one year
   
43,060
     
40,831
 
Accounts payable
   
58,950
     
70,927
 
Due to related parties
   
1,778
     
1,655
 
Advances from customers
   
6,032
     
5,991
 
Other current liabilities
   
33,915
     
40,560
 
Total current liabilities
   
271,912
     
246,578
 
Long-term debt
   
97,406
     
92,745
 
Deferred revenue
   
4,289
     
4,377
 
Capital lease obligations
   
6,741
     
4,726
 
Other long-term liabilities
   
2,267
     
2,395
 
Total liabilities
   
382,615
     
350,821
 
                 
Commitments and contingencies
               
Equity:
               
Common stockholders’ equity:
               
Common stock, $.0001 par value: 250,000 authorized; 57,301 and 57,301 issued and outstanding at June 30, 2012 and March 31, 2012, respectively
   
6
     
6
 
Additional paid-in capital
   
135,440
     
135,440
 
Accumulated deficit
   
(81,319
)
   
(71,620
)
Accumulated other comprehensive income
   
31,205
     
32,201
 
Total common stockholders’ equity
   
85,332
     
96,027
 
Noncontrolling interest
   
1,025
     
1,065
 
Total equity
   
86,357
     
97,092
 
                 
TOTAL LIABILITIES AND EQUITY
 
$
468,972
   
$
447,913
 

 
The accompanying notes are an integral part of the consolidated financial statements.
 
 
 

 
 
SYNUTRA INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
 (Dollars in thousands, except per share data)
(UNAUDITED)
 
   
Three Months Ended June 30,
 
   
2012
   
2011
 
Net sales
 
$
53,586
   
$
43,757
 
Cost of sales
   
36,285
     
27,678
 
Gross profit
   
17,301
     
16,079
 
Selling and distribution expenses
   
13,117
     
12,461
 
Advertising and promotion expenses
   
6,804
     
7,008
 
General and administrative expenses
   
7,857
     
6,579
 
Other operating income, net
   
885
     
110
 
Loss from operations
   
(9,592
   
(9,859
Interest expense
   
3,556
     
3,412
 
Interest income
   
487
     
311
 
Other income (expense), net
   
(18
   
465
 
Loss before income tax benefit
   
(12,679
   
(12,495
Income tax benefit
   
(2,903
   
(3,049
Net loss
   
(9,776
   
(9,446
Net income (loss) attributable to the noncontrolling interest
   
(77
   
150
 
Net loss attributable to common stockholders
 
$
(9,699
 
$
(9,596
                 
Weighted average common stock outstanding – basic and diluted
   
57,301
     
57,301
 
Loss per share – basic and diluted
 
$
(0.17
 
$
(0.17

The accompanying notes are an integral part of the consolidated financial statements.
 
 
2

 
 
SYNUTRA INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
 (Dollars in thousands)
(UNAUDITED)

   
  Three Months Ended June 30,
     
2012
     
2011
 
Net loss
 
$
(9,776
 
$
(9,446
Other comprehensive income
               
Currency translation adjustment
   
(998
   
1,154
 
Comprehensive loss
   
(10,774
   
(8,292
Less: Comprehensive income (loss) attributable to noncontrolling interest
   
(79
   
155
 
Comprehensive loss attributable to common stockholders
 
$
(10,695
 
$
(8,447

 The accompanying notes are an integral part of the consolidated financial statements.

 
3

 
 
SYNUTRA INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF EQUITY
 (Dollars and shares in thousands)
(UNAUDITED)
 
   
Synutra International, Inc. Stockholders’ Equity
             
   
Common Stock
                               
   
Shares
   
Amount
   
Additional
paid-in capital
   
Retained
earnings (accumulated
deficit)
   
Accumulated
other comprehensive
income
   
Noncontrolling
Interest
   
Total equity
 
Balance, March 31, 2011
   
57,301
   
$
6
   
$
135,440
   
$
(88,357
)
 
$
28,204
   
$
633
   
$
75,926
 
Net loss
   
0
     
0
     
0
     
(9,596
   
0
     
150
     
(9,446
Currency translation adjustments
   
0
     
0
     
0
     
0
     
1,149
     
5
     
1,154
 
Other
   
0
     
0
     
0
     
0
     
0
     
19
     
19
 
Balance, June 30, 2011
   
57,301
   
$
6
   
$
135,440
   
$
(97,953
)
 
$
29,353
   
$
807
   
$
67,653
 
Balance, March 31, 2012
   
57,301
   
$
6
   
$
135,440
   
$
(71,620
)
 
$
32,201
   
$
1,065
   
$
97,092
 
Net loss
   
0
     
0
     
0
     
(9,699
   
0
     
(77
   
(9,776
Currency translation adjustments
   
0
     
0
     
0
     
0
     
(996
   
(2
   
(998
Other
   
0
     
0
     
0
     
0
     
0
     
39
     
39
 
Balance, June 30, 2012
   
57,301
   
$
6
   
$
135,440
   
$
(81,319
)
 
$
31,205
   
$
1,025
   
$
86,357
 
 
 The accompanying notes are an integral part of the consolidated financial statements.
 
 
4

 
 
SYNUTRA INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Dollars in thousands)
(UNAUDITED)
 
   
Three Months Ended June 30,
 
   
2012
   
2011
 
Operating activities:
           
Net loss
 
$
(9,776
)
 
$
(9,446
)
Adjustments to reconcile net loss to net cash used in operating activities:
               
Depreciation and amortization
   
3,321
     
2,835
 
Bad debt expense
   
922
     
2,060
 
Deferred income tax
   
7
     
7
 
Other
   
(389
   
19
 
                 
Changes in assets and liabilities:
               
Accounts receivable
   
1,310
     
17,223
 
Inventories
   
(11,329
)
   
(26,912
)
Due from related parties
   
192
     
9,973
 
Other assets
   
(7,791
)
   
(16,732
)
Accounts payable
   
(11,054
   
7,033
 
Due to related parties
   
183
     
388
 
Advances from customers
   
82
     
6,718
 
Income tax receivable
   
(3,447
   
(3,128
Other liabilities
   
(4,648
   
1,873
 
Net cash used in operating activities
   
(42,417
)
   
(8,089
)
                 
Investing activities:
               
Acquisition of property, plant and equipment
   
(2,894
)
   
(2,050
)
Change in restricted cash
   
(1,935
)
   
(14,801
)
Proceeds from assets disposal
   
1,552
     
0
 
Net cash provided by (used in) investing activities
   
(3,277
)
   
(16,851
)
                 
Financing activities:
               
Proceeds from short-term debt
   
76,446
     
80,467
 
Repayment of short-term debt
   
(34,471
)
   
(95,247
)
Proceeds from long-term debt
   
39,103
     
34,928
 
Repayment of long-term debt
   
(31,688
)
   
(17,347
)
Payment on capital lease obligations
   
(262
)
   
0
 
Net cash provided by (used in) financing activities
   
49,128
     
2,801
 
                 
Effect of exchange rate changes on cash and cash equivalents
   
(144
   
935
 
                 
Net change in cash and cash equivalents
   
3,290
     
(21,204
Cash and cash equivalents, beginning of period
   
64,793
     
48,741
 
Cash and cash equivalents, end of period
 
$
68,083
   
$
27,537
 
                 
Supplemental cash flow information:
               
Interest paid
   
3,223
     
3,260
 
Income tax paid
   
532
     
0
 
                 
Non-cash investing and financing activities:
               
Purchase of property, plant and equipment by accounts payable
   
(618
   
568
 

The accompanying notes are an integral part of the consolidated financial statements.
 
 
5

 
 
SYNUTRA INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)


1. 
ORGANIZATION AND PRINCIPAL ACTIVITIES
 
Synutra International, Inc. (the “Company” or “Synutra”) manufactures, distributes and sells dairy based nutritional products under the “Shengyuan” or “Synutra” line of brands in the People’s Republic of China (“China” or “PRC”). The Company focuses on selling infant formula products, which are supplemented by other nutritional products, such as adult powdered milk formula and prepared baby food, and certain nutritional ingredients and supplements.

2. 
BASIS OF PRESENTATION

The Company is responsible for the unaudited consolidated financial statements included in this document, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) and include all normal and recurring adjustments that management of the Company considers necessary for a fair presentation of its financial position and operating results. The Company prepared these statements following the requirements of the U.S. Securities and Exchange Commission (the “SEC”) for interim reporting. As permitted under those rules, the Company condensed or omitted certain footnotes or other financial information that are normally required by US GAAP for annual financial statements. These statements should be read in combination with the consolidated financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2012.

In August 2010, there were several media reports alleging the Company’s infant formula products caused symptoms of hormone-triggered sexual prematurity in infants in the Hubei province of China (“prematurity event”). The Company’s business was significantly impacted by the prematurity event, and as a result, the Company experienced a net loss and cash outflows from operations in the year ended March 31, 2011. The Company also had a high asset liability ratio as of March 31, 2012. The Company suffered loss and cash outflows from operations for the three months ended June 30, 2012 and maintained a high asset liability ratio as of June 30, 2012. However, considering the following facts, the Company regards the going concern assumption as appropriate: 1) the Company has obtained new loans from banks; and 2) the first quarter’s net loss is mainly caused by cyclicality and the short term effect of a substantial price increase beginning April 1, 2012. Accordingly, management believes the Company will be able to realize its assets and satisfy its liabilities in the normal course of business. As a result, the accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern.

The unaudited consolidated financial statements include the financial statements of Synutra International, Inc. and its subsidiaries, its consolidated variable interest entity, Beijing Shengyuan Huimin Technology Service Co., Ltd., its subsidiaries and Heilongjiang Shengyuan Huiren Clinical Examination Co., Ltd., in which it has a controlling financial interest. A controlling financial interest is typically determined when a company holds a majority of the voting equity interest in an entity. US GAAP provides guidance on the identification and financial reporting for entities over which control is achieved through means other than voting interests, which requires certain VIEs to be consolidated by the primary beneficiary of the entity if the equity investors in the entity do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. Through the contractual arrangements between the Company and the VIEs, the Company controls the operating activities and holds all the beneficial interests of the VIEs and has been determined to be the primary beneficiary of the VIEs. The Company has concluded that such contractual arrangements are legally enforceable. The operations associated with the consolidated VIEs are insignificant and hold deminimis assets and liabilities.

All inter-company accounts and transactions have been eliminated in consolidation.

The operating results for interim periods are not necessarily indicative of results that may be expected for any other interim period or for the full year
 
 
6

 
 
 
3.
INVENTORIES
 
The Company’s inventories at June 30, 2012 and March 31, 2012 are summarized as follows:
 
(In thousands)
 
June 30, 2012
   
March 31, 2012
 
Raw materials
 
$
59,404
   
$
51,844
 
Work-in-progress
   
16,107
     
6,073
 
Finished goods
   
10,899
     
17,582
 
Total
 
$
86,410
   
$
75,499
 
The value of goods-in-transit included in raw materials was $14.3 million and $21.4 million as of June 30, 2012 and March 31, 2012, respectively, which mainly represented the overseas purchase of milk powder and whey protein.

4. 
DUE FROM (TO) RELATED PARTIES AND RELATED PARTY TRANSACTIONS

A. 
Classification of related party balances by name

a. 
Due from related parties
 
 (In thousands)
 
June 30, 2012
   
March 31, 2012
 
Sheng Zhi Da Dairy Group Corporation
 
$
1,865
   
$
1,874
 
Beijing Honnete Dairy Co., Ltd.
   
2,852
     
3,181
 
St. Angel (Beijing) Business Service Co. Ltd.
   
6,277
     
5,987
 
Beijing Ao Naier Feed Stuff Co., Ltd.
   
952
     
1,220
 
Total
 
$
11,946
   
$
12,262
 

b. 
Due to related parties
 
 (In thousands)
 
June 30, 2012
   
March 31, 2012
 
Sheng Zhi Da Dairy Group Corporation
 
$
1,214
   
$
1,156
 
Beijing Honnete Dairy Co., Ltd.
   
503
     
499
 
Beijing St. Angel Cultural Communication Co., Ltd.
   
55
     
0
 
Beijing Kelqin Dairy Co., Ltd.
   
6
     
0
 
Total
 
$
1,778
   
$
1,655
 

The Company had certain related party borrowings which were recorded in long-term debt. See Note 6. Except for the related party borrowings, the amount due to and due from related parties were unsecured and interest free.
 
 
7

 
  

B. 
Sales to related parties
 
In the fiscal quarter ended June 30, 2012, the Company’s sales to related parties included whey protein powder to Honnete, and powdered formula products to St. Angel (Beijing) Business Service. In the fiscal quarter ended June 30, 2011, the Company’s sales to related parties included whey protein to Honnete, powdered formula products to St. Angel (Beijing) Business Service, and feed grade milk powder to Ao Naier.

     
Three Months Ended June 30,
 
(In thousands)
   
2012
     
2011
 
Beijing Honnete Dairy Co., Ltd.
 
$
328
   
$
368
 
St. Angel (Beijing) Business Service Co., Ltd.
   
2,489
     
46
 
Beijing Ao Naier Feed Stuff Co., Ltd.
   
0
     
40
 
Total
 
$
2,817
   
$
454
 
 
Before September 2011, St. Angel (Beijing) Business Service Co., Ltd. also acted as a sub-distributor of the Company's products. From September 2011, St. Angel (Beijing) Business Service Co., Ltd. began to make all the purchases directly from the Company, which also led to the increase in the amount due from St. Angel (Beijing) Business Service Co., Ltd. since then. Sales of powdered formula products from independent distributors to St. Angel (Beijing) Business Service were $4.0 million for the fiscal quarter ended June 30, 2011, which were not included in the amounts disclosed above.

C.
Purchases from related parties
 
In the fiscal quarter ended June 30, 2012, St. Angel Cultural Communication developed and implemented certain marketing strategies for the Company, and the Company purchased supplies for the employee canteen from Kelqin.
 
     
Three Months Ended June 30,
 
(In thousands)
   
2012
     
2011
 
Beijing St. Angel Cultural Communication Co. Ltd.
 
$
170
   
$
0
 
Beijing Kelqin Dairy Co., Ltd.
   
4
     
0
 
Total
 
$
174
   
$
0
 
 
 
8

 
 

5.
PROPERTY, PLANT AND EQUIPMENT, NET

(In thousands)
 
June 30, 2012
   
March 31, 2012
 
Property, plant and equipment, cost:
           
Capital lease of building
 
$
4,703
   
$
4,321
 
Buildings and renovations
   
84,451
     
84,558
 
Plant and machinery
   
82,156
     
83,387
 
Office equipment and furnishings
   
7,829
     
7,986
 
Motor vehicles
   
2,899
     
2,951
 
Others
   
643
     
636
 
Total cost
 
$
182,681
   
$
183,839
 
Less: Accumulated depreciation:
               
Capital lease of building
   
500
     
530
 
Buildings and renovations
   
12,734
     
12,240
 
Plant and machinery
   
34,201
     
33,338
 
Office equipment and furnishings
   
2,983
     
2,792
 
Motor vehicles
   
1,967
     
1,909
 
Others
   
445
     
431
 
Total accumulated depreciation
   
52,830
     
51,240
 
Construction in progress
   
2,702
     
2,303
 
Property, plant and equipment, net
 
$
132,553
   
$
134,902
 

Construction in progress mainly represents headquarter renovation and manufacturing equipments.
 
The Company recorded depreciation expense for owned assets and capital leased assets of $3.4 million and $2.8 million for the fiscal quarters ended June 30, 2012 and 2011, respectively.
 
 
9

 
 

6.
DEBT

As of June 30, 2012 and March 31, 2012, the Company had short-term debt from PRC banks in the amount of $128.2 million and $86.6 million, respectively.  The maturity dates of the short-term debt outstanding range from July 2012 to June 2013. The weighted average interest rate on short-term debt outstanding at June 30, 2012 and March 31, 2012 was 5.3% and 5.7%, respectively. Certain portion of these debts use floating interest rates, which are calculated based on the benchmark lending interest rate published by China’s central bank. The short-term debt at June 30, 2012 and March 31, 2012 were secured by the pledge of certain fixed assets totaling $13.4 million and $5.6 million, respectively; the pledge of the Company’s land use right of $1.5 million and $0.5 million, respectively; and the pledge of restricted cash deposits of $20.9 million and $15.8 million, respectively.
 
As of June 30, 2012 and March 31, 2012, the Company had long-term debt, including current portion, from banks in the amount of $137.6 million and $130.7 million, respectively. The maturity dates of the long-term debt outstanding range from November 2012 to June 2015. The weighted average interest rate of outstanding long-term debt at June 30, 2012 and March 31, 2012 was 6.6% and 6.6%, respectively. Certain portion of these debts use floating interest rates, which are calculated based on the benchmark lending interest rate published by China’s central bank. The indebtedness at June 30, 2012 and March 31, 2012 was secured by the pledge of certain fixed assets of $16.8 million and $17.4 million, respectively; the pledge of land use right of $1.2 million and $1.2 million, respectively; and the pledge of restricted cash deposits of $20.9 million and $21.0 million, respectively.

As of June 30, 2012 and March 31, 2012, the Company had long-term loan from a related party of $2.9 million. The maturity date of the long-term related party loan principal and interest is in November 2013, and the loan is extendable on the same terms upon maturity as agreed by both parties. The interest rate of the long-term loan at June 30, 2012 and March 31, 2012 was 10.0%. The interest expense of related party loans for the quarters ended June 30, 2012 and 2011 was $72,000 and $97,000, respectively.

Maturities on long-term debt subject to mandatory redemption are as follows:

(In thousands)
 
Year Ending March 31,
 
2013
 
$
9,644
 
2014
   
98,094
 
2015
   
17,392
 
2016
   
15,336
 
   
$
140,466
 


7.
OTHER CURRENT LIABILITIES

(In thousands)
 
June 30, 2012
   
March 31, 2012
 
Accrued rebate and slotting fee
 
$
6,593
   
$
3,242
 
Accrued product replacement cost
   
2,135
     
3,556
 
Payroll and bonus payables
   
4,840
     
7,978
 
Accrued selling expenses
   
3,043
     
3,750
 
Accrued advertising and promotion expenses
   
9,608
     
10,708
 
Other tax payable
   
0
     
2,358
 
Accrued rental fee
   
3,726
     
4,819
 
Others
   
3,970
     
4,149
 
Total
 
$
33,915
   
$
40,560
 
 
 
10

 
 

8.
INCOME TAXES
 
The effective tax rate is based on expected income (loss), statutory tax rates and incentives available in the various jurisdictions in which the Company operates. For interim financial reporting, the Company estimates the annual tax rate based on projected taxable income for the full year and records a quarterly income tax provision (benefit) in accordance with the ASC No. 740-270, “Income tax – Interim reporting” (previously FIN 18, " Accounting for Income Taxes in Interim Period "). As the year progresses, the Company refines the estimates of the year’s taxable income as new information becomes available. This continual estimation process often results in a change to the expected effective tax rate for the year. When this occurs, the Company adjusts the income tax provision (benefit) during the quarter in which the change in estimate occurs so that the year-to-date provision reflects the expected annual tax rate.
 
9.
LOSS PER SHARE

For purposes of calculating basic and diluted earnings per share, the Company used the following weighted average common stocks outstanding:

   
Three Months Ended June 30,
 
(In thousands except for per share data)
 
2012
   
2011
 
Net loss attributable to common stockholders
 
$
(9,699
 
$
(9,596
Weighted average common stock outstanding – basic and diluted
   
57,301
     
57,301
 
Loss per share – basic and diluted
 
$
(0.17
 
$
(0.17

The Company granted ABN AMRO Bank N.V., Hong Kong Branch (now known as The Royal Bank of Scotland N.V. ("RBS")) warrants to purchase 400,000 shares of common stock in connection with the RBS Loan in fiscal year 2008. These warrants were excluded from the computation of diluted earnings per share for all periods presented as they would be anti-dilutive.
  
10.
CONTINGENCIES

The Company is subject to legal proceedings and claims which arise in the ordinary course of business. Claims have been made against the Company from time to time. The Company intends to contest each lawsuit vigorously. The Company is not involved in any legal proceedings which it believes will have the potential for a materially adverse impact on the Company’s business or financial condition, results of operations or cash flows.
 
 
11

 
 

11.
SEGMENT REPORTING

The Company focuses on selling infant formula products, which are supplemented by other nutritional products, such as adult powdered formula and prepared baby food, and certain nutritional ingredients and supplements. The activities of each segment are as follows:
 
Powdered Formula - Sales of powdered infant and adult formula products.
 
Baby Food - Sales of prepared baby food for babies and children.
 
Nutritional Ingredients and Supplements - Sales of nutritional ingredients and supplements such as chondroitin sulfate, and microencapsulated Docosahexanoic Acid (“DHA”) and Arachidonic Acid (“ARA”).
 
“All Other” includes non-core businesses such as sales of ingredients and materials to industrial customers.
 
The Company’s underlying accounting records are maintained on a legal entity basis for government and public reporting requirements. Segment disclosures are on a performance basis consistent with internal management reporting.

   
Three Months Ended June 30,
 
(In thousands)
 
2012
   
2011
 
NET SALES TO EXTERNAL CUSTOMERS
           
Powdered formula
 
$
50,455
   
$
40,163
 
Baby food
   
65
     
65
 
Nutritional ingredients and supplements
   
2,126
     
453
 
All other
   
940
     
3,076
 
Net sales
 
$
53,586
   
$
43,757
 
INTERSEGMENT SALES
               
Powdered formula
 
$
0
   
$
0
 
Baby food
   
236
     
119
 
Nutritional ingredients and supplements
   
2,241
     
2,179
 
All other 
   
51
     
516
 
Intersegment sales
 
$
2,528
   
$
2,814
 
GROSS PROFIT
               
Powdered formula
 
$
18,433
   
$
16,936
 
Baby food
   
(353
   
(256
Nutritional ingredients and supplements
   
(1,040
   
(132
All other 
   
261
     
(469
Gross profit
 
$
17,301
   
$
16,079
 
Selling and distribution expenses
   
13,117
     
12,461
 
Advertising and promotion expenses
   
6,804
     
7,008
 
General and administrative expenses
   
7,857
     
6,579
 
Other operating income, net
   
885
     
110
 
Loss from operations
   
(9,592
   
(9,859
Interest expense
   
3,556
     
3,412
 
Interest income
   
487
     
311
 
Other income (expense), net
   
(18
   
465
 
Income (loss) before income tax expense (benefit)
 
$
(12,679
 
$
(12,495
       
TOTAL ASSETS
           
Powdered formula
 
$
488,103
   
$
406,647
 
Baby food
   
24,584
     
27,677
 
Nutritional ingredients and supplements
   
49,307
     
30,633
 
All other
   
149,741
     
148,140
 
Intersegment elimination
   
(242,763
)
   
(205,081
)
Total
 
$
468,972
   
$
408,016
 

 
12

 

 
ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
Sections of this Quarterly Report on Form 10-Q (the “Form 10-Q”) including, in particular, the Company’s Management’s Discussion and Analysis of Financial Condition and Results of Operations contain forward-looking statements. These forward-looking statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict; therefore, actual results may differ materially from those expressed, implied or forecasted in any such forward-looking statements.

Expressions of future goals and expectations or similar expressions including, without limitation, “may,” “should,” “could,” “expects,” “does not currently expect,” “plans,” “anticipates,” “intends,” “believes,” “estimates,” “predicts,” “potential,” “targets,” or “continue,” reflecting something other than historical fact are intended to identify forward-looking statements. The factors described in the Company’s Annual Report on Form 10-K under Part I. Item 1A. Risk Factors and below in Part II. Other Information – Item 1A. Risk Factors could cause the Company’s actual results to differ materially from those described in the forward-looking statements. Unless required by law, the Company undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise. However, readers should carefully review the reports and documents the Company files from time to time with the SEC, particularly its Quarterly Reports on Form 10-Q, Annual Report on Form 10-K , Current Reports on Form 8-K and all amendments to those reports.

Available Information

The Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to reports filed pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), are filed with the SEC. Such reports and other information filed by the Company with the SEC are available on the Company’s website at http://www.synutra.com when such reports are available on the SEC website. The public may read and copy any materials filed by the Company with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Room 1580, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC at http://www.sec.gov. The contents of these websites are not incorporated into this filing. Further, the Company’s references to the URLs for these websites are intended to be inactive textual references only.

 
13

 
 
 
Overview of Our Business
 
We are a leading infant formula company in China. We principally manufacture, distribute and sell dairy based nutritional products under the “Shengyuan” or “Synutra” brand, together with sub brands in mainland China. We focus on selling infant formula products, which are supplemented by other nutritional products, such as adult powdered milk formula and prepared baby food, and certain nutritional ingredients and supplements. We sell our products through an extensive nationwide sales and distribution network covering all provinces and provincial-level municipalities in mainland China. As of June 30, 2012, this network comprised over 650 independent distributors and over 800 independent sub-distributors who sell our products in over 66,000 retail outlets.
 
We currently have three reportable segments which are:

Powdered formula segment: Powdered formula segment covers the sale of powdered infant and adult formula products. Major brands include Super, U-Smart, My Angel and Helanruniu;
   
Baby food segment: Baby food segment covers the sale of prepared baby food for babies and children. It includes the brand of Huiliduo;
   
Nutritional ingredients and supplements segment: Nutritional ingredients and supplements segment covers the production and sale of nutritional ingredients and supplements such as chondroitin sulfate, and microencapsulated Docosahexanoic Acid (“DHA”) and Arachidonic Acid (“ARA”).

Our Other business includes non-core businesses such as sales of surplus milk powder and whey protein to industrial customers.

Executive Summary

We believe our business has recovered significantly from the impact of the prematurity event during the second half of fiscal year 2012 as our net sales of the powdered formula segment has returned to the pre-event level. In order to reduce the pressure from rising cost and bench mark our products with our competitors, we announced a price increase effective on April 1, 2012 on major infant products. The price increase has had a negative impact on our sales volume, which we believe is short-term, and has resulted in a decrease in sales volume for the quarter ended June 30, 2012 comparing with the quarter ended March 31, 2012. The weak sales orders have also been exaggerated by a seasonal sales slow-down we typically experience during the hot summer months. We believe the price increase will continue to negatively impact our results for the quarter ending September 30, 2012. However, in the long run, we believe the price increase will have a positive impact on our financial performance.

 
14

 

Three Months Results of Operations
 
Below is a summary of selected comparative results of operations for the quarters ended June 30, 2012 and 2011:

   
Three Months Ended June 30,
       
(In thousands, except per share data)
 
2012
   
2011
   
% Change
 
Net sales
 
$
53,586
   
$
43,757
     
22%
 
 - Powdered formula segment
   
50,455
     
40,163
     
26%
 
Cost of sales
   
36,285
     
27,678
     
31%
 
 - Powdered formula segment
   
32,022
     
23,227
     
38%
 
Gross profit
   
17,301
     
16,079
     
8%
 
 - Powdered formula segment
   
18,433
     
16,936
     
9%
 
Gross Margin
   
32
%
   
37
%
       
 - Powdered formula segment
   
37
%
   
42
%
       
Loss from operations
   
(9,592
)
   
(9,859
)
   
-3%
 
Interest expense, net
   
3,069
     
3,101
     
-1%
 
Loss before income tax benefit
   
(12,679
)
   
(12,495
)
   
1%
 
Income tax benefit
   
(2,903
)
   
(3,049
)
   
-5%
 
- Effective tax rate
   
22.9
%
   
24.4
%
       
Net loss
   
(9,776
)
   
(9,446
)
   
3%
 
Net loss attributable to common stockholders
 
$
(9,699
)
 
$
(9,596
)
   
1%
 
Weighted average common stock outstanding – basic and diluted
   
57,301
     
57,301
         
Loss per share – basic and diluted
 
$
(0.17
)
 
$
(0.17
)
   
1%
 

Unless otherwise noted, all translations from Renminbi to U.S. dollars were made at the mid rate published by the People’s Bank of China, or the mid rate, as of June 30, 2012, which was RMB 6.3249 to $1.00. We make no representation that the Renminbi amounts referred to in this Quarterly Report on Form 10-Q could have been or could be converted into U.S. dollars at any particular rate or at all. On August 3, 2012, the mid rate was RMB 6.3421 to $1.00.

 
15

 
 
Net Sales
 
Our net sales by reportable segments are shown in the table below:

   
Three Months Ended June 30,
         
% Change in
 
(In thousands, except percentage data)
 
2012
   
2011
   
% Change
   
Volume
   
Price
 
Powdered formula
  $ 50,455     $ 40,163       26 %     12 %     12 %
Baby food
    65       65       0 %                
Nutritional ingredients and supplements
    2,126       453       369 %                
All other
    940       3,076       -69 %                
Net sales
  $ 53,586     $ 43,757       22 %                

Net sales of our powdered formula segment include powdered formula products for infants, children and adults. The increase of net sales of our powdered formula products was mainly due to the following factors:
 
 
Sales volume of powdered formula products for the fiscal quarter ended June 30, 2012 was 4,380 tons, as compared to 3,909 tons for the same period in the previous year, due primarily to the recovery from the prematurity event beginning with the second quarter of fiscal year 2012, and partially offset by the short term impact of the price increase beginning on April 1, 2012.
 
 
The average selling price of our powdered formula products for the fiscal quarter ended June 30, 2012 was $11,519 per ton, compared to $10,274 per ton for the same period in the previous year. The increase in average selling price was mainly due to the price increase we instituted on April 1, 2012.
 
The sales volume and average selling price excluded the amount of free products provided to customers. The previous period sales volume and average selling price had been adjusted for consistency.
 
The product mix in baby food segment is comprised mainly of prepared baby food, such as cooked meat and vegetables. As part of our sustained response to the prematurity event, we continued to focus our efforts on the recovery of the powdered formula segment, and did not develop the baby food segment as planned.
 
The product mix in nutritional ingredients and supplements segment is comprised of external sales of chondroitin sulfate to third parties, and inter-segment sales of microencapsulated DHA and ARA to the powdered formula segment. While the international market price of chondroitin sulfate is at a historically low level compared to our cost and we incurred gross loss on our chondroitin sulfate sales, we have experienced a significant increase in sales to certain international pharmaceutical companies in the fiscal quarter ended June 30, 2012.

Our Other business mainly includes sales of surplus milk powder, whey protein and feed level milk powder. We sold surplus imported milk powder of $154,000 to industrial customers in the fiscal quarter ended June 30, 2012, as compared to nil in the same period in the previous year. The decrease in Other business in the fiscal quarter ended June 30, 2012 from the prior year quarter was due to sales of raw milk to industrial customers in the same period in the previous year, while we did not sell raw milk in the current year quarter.
 
 
16

 
 

Cost of Sales
 
Our cost of sales by reportable segments is shown in the table below:

   
Three Months Ended June 30,
       
(In thousands, except percentage data)
 
2012
   
2011
   
% Change
 
Powdered formula
 
$
32,022
   
$
23,227
     
38%
 
Baby food
   
418
     
321
     
30%
 
Nutritional ingredients and supplements
   
3,166
     
585
     
441%
 
All other
   
679
     
3,545
     
-81%
 
Cost of sales
 
$
36,285
   
$
27,678
     
31%
 
                         

The increase in the cost of sales of the powdered formula segment was mainly due to the increase in sales volume as we recovered from the prematurity event, the volume increase in free products and the write-down of aged products in the imported Super series. 

The increase in the cost of sales of nutritional ingredients and supplements segment was mainly due to the sales of chondroitin sulfate to certain international pharmaceutical companies as discussed above.

Gross Profit and Gross Margin

   
Three Months Ended June 30,
       
(In thousands, except percentage data)
 
2012
   
2011
   
% Change
 
Gross profit
 
$
17,301
   
$
16,079
     
8%
 
- Powdered formula
   
18,433
     
16,936
     
9%
 
Gross Margin
   
32
%
   
37
%
       
- Powdered formula
   
37
%
   
42
%
       

The decrease in gross margin of powdered formula segment was mainly due to increased free products and inventory write down in the fiscal quarter ended June 30, 2012, partially offset by the increase in average selling price.
 
Expenses

   
Three Months Ended June 30,
       
(In thousands, except percentage data)
 
2012
   
2011
   
% Change
 
Selling and distribution expenses
 
$
13,117
   
$
12,461
     
5%
 
Advertising and promotion expenses
   
6,804
     
7,008
     
-3%
 
 - Advertising expenses
   
2,871
     
2,287
     
26%
 
 - Promotion expenses
   
3,933
     
4,721
     
-17%
 
General and administrative expenses
   
7,857
     
6,579
     
19%
 
Other operating income, net
   
885
     
110
     
705%
 
 
 
17

 

Selling and distribution expenses primarily include compensation expense for sales staff, freight charges, and travel expense. The increase in selling and distribution expenses in the fiscal quarter ended June 30, 2012 from the same period in the previous year was mainly due to the increase in a service charge for our bonus point plan administrated by a third party.

Advertising expenses primarily include media expenses paid to national and local TV stations. The increase in advertising expenses in the fiscal quarter ended June 30, 2012 was due to our decision to pull back our advertising efforts in the same period in the previous year. Promotion expenses primarily include promotional products to end customers. The decrease in promotion expenses in the fiscal quarter ended June 30, 2012 was mainly due to more free gifts to end customers in the same period in the previous year.

General and administrative expenses primarily include salaries for staff and management, expenditure for headquarter rental, and bad debt expense. The increase in general and administrative expenses in the fiscal quarter ended June 30, 2012 from the same period in the previous year was mainly due to the increased office supplies expense as we moved into our new headquarters, and the increased depreciation expense related to the new headquarter renovation.

Other operating income represented the receipt of general purpose subsidies from local governments. In the fiscal quarter ended June 30, 2012, we received $780,000 land compensation from a local government as they took back the land from one of our subsidiaries, Heilongjiang Mingshan Nutritional Food Co., Ltd.
 
Interest Expense and Interest Income
 
The increase in interest expense in the fiscal quarter ended June 30, 2012 from the same period in the previous year was mainly due to an increase in average borrowing balance.

The increase in interest income in the fiscal quarter ended June 30, 2012 from the same period in the previous year was mainly due to an increase in average restricted cash balance, which earned a higher interest rate than cash and cash equivalents.

Income Tax Benefit
 
The decrease in the effective tax rate was driven primarily by the valuation allowance established for net operating loss carryforwards of certain PRC subsidiaries.

Net Income (Loss) Attributable to Noncontrolling Interest

Net income (loss) attributable to noncontrolling interest mainly represents the interest held by third parties in Meitek Technology (Qingdao) Co., Ltd..

Net Loss Attributable to Common Stockholders
 
As a result of the foregoing, net loss attributable to common stockholders for the fiscal quarter ended June 30, 2012 was $9.7 million, compared to a net loss of $9.6 million for the same period in the previous year.
 
 
18

 
 
 
Liquidity and Capital Resources

Overview

Our primary sources of liquidity are cash on hand, cash from operations and available borrowings. Cash flows from operating activities represent the inflow of cash from our customers and the outflow of cash for inventory purchases, manufacturing, operating expenses, interest and taxes. Cash flows used in investing activities primarily represent capital expenditures for equipment and buildings. Cash flows from financing activities primarily represent proceeds and repayments of borrowings.

Cash and cash equivalents totaled $68.1 million at June 30, 2012, of which $67.2 million was held outside of the United States.

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. Under that assumption, it is expected that assets will be realized and liabilities will be satisfied in the normal course of business. Management believes the Company has the ability to meet its financial obligations as they come due, for at least the next twelve months and will continue as a going concern.

Cash Flows

The following table sets forth, for the periods indicated, certain information relating to our cash flows:

   
Three Months Ended June 30,
 
(In thousands)
 
2012
   
2011
 
Cash flow provided by/(used in):
           
Operating activities
               
Net loss
 
$
(9,776
)
 
$
(9,446
)
Depreciation and amortization
   
3,321
     
2,835
 
Bad debt expense
   
922
     
2,060
 
Other
   
(382
)
   
26
 
Changes in assets and liabilities
   
(36,502
)
   
(3,564
)
Total operating activities
   
(42,417
)
   
(8,089
)
Investing activities
   
(3,277
)
   
(16,851
)
Financing activities
   
49,128
     
2,801
 
Effect of foreign currency translation on cash and cash equivalents
   
(144
   
935
 
Net increase/(decrease) in cash and cash equivalents
 
$
3,290
   
$
(21,204
 
 
19

 
 
Cash flow provided by operating activities included net loss, non-cash items and changes in working capital. The changes in working capital for the quarter ended June 30, 2012 were primarily related to $11.3 million increase in inventory, $7.8 million increase in other assets, $11.1 million decrease in accounts payable, and $4.7 million decrease in other liabilities. The increase in inventory was mainly due to orders from our customers in the fiscal quarter ended June 30, 2012 being lower than what we expected several months ago when we ordered the milk powder and whey protein. In the quarter ended June 30, 2012, we spent $80.6 million to purchase raw materials and other production materials, $14.8 million in staff compensation and social welfare, $11.2 million in income and other taxes, $16.9 million in operating expenses, $3.2 million in interest, and received $84.4 million from our customers.

Cash flow used in investing activities represents $2.9 million payment for our new headquarter renovation and purchase of manufacturing equipment, $1.9 million outflow for restricted cash required as a pledge for new loans and as a collateral for new letters of credit, and $1.6 million in proceeds from disposed assets during the fiscal quarter ended June 30, 2012.

Cash flow used in financing activities mainly represents net cash inflow of $42.0 million of short-term loans and net cash inflow of $7.4 million of long-term loans.
 
Outstanding Indebtedness
 
For information on our short-term and long-term borrowings, see “Item 1. Financial Statements—Note 6”.

Capital Expenditures
 
Our capital expenditures were $1.8 million and the corresponding cash outflow was $2.9 million for the fiscal quarter ended June 30, 2012, which mainly represented expenditure for our new headquarter renovation and purchase of manufacturing equipments.

Off-Balance Sheet Arrangements
 
We do not have off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

 
20

 
 
 
ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
There is no material change in the information reported under Item 7A, “Foreign Exchange Risk”, “Inflation”, “Interest Rate Risk”, “Concentration of Credit Risk” and “Commodities Risk” contained in our Form 10-K for the fiscal year ended March 31, 2012.

ITEM 4.  CONTROLS AND PROCEDURES

Conclusion Regarding Effectiveness of Disclosure Controls and Procedures
 
The Company’s management, with the participation of the Company’s Chief Executive Officer and Interim Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act) as of the end of the period covered by this report.

Based on such evaluation, the Company’s Chief Executive Officer and Interim Chief Financial Officer have concluded that, as of June 30, 2012, the Company’s disclosure controls and procedures were not effective to ensure that the information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is (a) recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and (b) accumulated and communicated to the Company’s management, including its Chief Executive Officer and Interim Chief Financial Officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. The Chief Executive Officer and Interim Chief Financial Officer’s conclusion regarding the Company’s disclosure controls and procedures is based solely on management’s conclusion that the Company’s internal control over financial reporting was not effective, as described below.

As of June 30, 2012, we had the following material weakness:

The Company lacks a Chief Financial Officer with requisite skills to perform a sufficient review of the US GAAP consolidated financial statements and related footnote disclosures. As a result, the Company was unable to effectively operate period-end financial reporting and disclosure controls related to unusual and complex transactions.

 
Changes and Proposed Changes in Internal Control over Financial Reporting

The Company is in the process of developing and implementing remediation plans to address the material weakness in our internal control over financial reporting. We intend to implement measures during the year ending March 31, 2013 to address the material weakness. This includes our continued effort to search for a qualified candidate to replace the Chief Financial Officer who resigned on August 29, 2011, and implement alternative controls on period-end financial reporting and disclosure process related to unusual and complex transactions.

Other than as described above, there have not been any other changes in the Company’s internal control over financial reporting during the quarter ended June 30, 2012, which were identified in connection with management’s evaluation required by paragraph (d) of Rules 13a-15 and 15d-15 under the Exchange Act, that have materially affected, or are reasonably likely to materially affect the Company’s internal control over financial reporting. As described above, we plan to implement changes to our internal controls over financial reporting for the year ending March 31, 2013.

 
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 PART II OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS
 
 As of June 30, 2012, the end of the period covered by this report, the Company was subject to various legal proceedings and claims that have not been fully resolved and that have arisen in the ordinary course of business. In the opinion of management, the Company does not have a potential liability related to any current legal proceedings and claims that would individually or in the aggregate have a material adverse effect on its financial condition or operating results. However, the results of legal proceedings cannot be predicted with certainty. The Company intends to contest each lawsuit vigorously but should the Company fail to prevail in any of these legal matters or should several of these legal matters be resolved against the Company in the same reporting period, the operating results of a particular reporting period could be materially and adversely affected.

ITEM 1A. RISK FACTORS

For information regarding the risks and uncertainties affecting our business, please refer to “Part I, Item 1A Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended March 31, 2012. There have been no material changes to these risks and uncertainties during the quarter ended June 30, 2012.
  
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

ITEM 6.  EXHIBITS
 
Exhibit Number
 
Description
31.1
 
Certification of Principal Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a), promulgated under the Securities and Exchange Act of 1934, as amended
31.2
 
Certification of Principal Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a), promulgated under the Securities and Exchange Act of 1934, as amended
32.1
 
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Executive Officer)
32.2
 
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Financial Officer)
101
 
Interactive data files pursuant to Rule 405 of Regulation S-T: (i) the Consolidated Balance Sheets—June 30, 2012 and March 31, 2012, (ii) the Consolidated Statements of Operations—Three Months Ended June 30, 2012 and 2011, (iii) the Consolidated Statements of Comprehensive Income(Loss)—Three Months Ended June 30, 2012 and 2011, (iv) the Consolidated Statements of Equity—Three Months Ended June 30, 2012 and 2011, (v) the Consolidated Statements of Cash Flows—Three Months Ended June 30, 2012 and 2011, and (vi) Notes to Consolidated Financial Statements.*
 

*
As provided in Rule 406T of Regulation S-T, this information is furnished and not filed for purposes of Sections 11 and 12 of the Securities Act of 1933 and Section 18 of the Securities Exchange Act of 1934.
 
 
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SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 
   
SYNUTRA INTERNATIONAL, INC.
 
       
       
Date:  August 9, 2012
 
By:
/s/ Liang Zhang
 
       
Name:
Liang Zhang
 
       
Title:
Chief Executive Officer and Chairman
 
           
     
By:
/s/ Weiguo Zhang
 
       
Name:
Weiguo Zhang
 
       
Title:
Interim Chief Financial Officer and President
 
 
 
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