- Published: 15 May 2009
- Written by Editor
American Dairy Reports First Quarter 2009 Financial Results
- 1Q09 Sales Increase 191% to $113.8 Million vs $39.1 Million in 1Q08 -- Income from Continuing Operations Up 523% to $32.0 million vs $5.1 million in 1Q08 -- Net Income up 282% to $27.8 Million vs $7.3 Million in 1Q08 -
BEIJING and LOS ANGELES, May 14 /PRNewswire-FirstCall/ -- American Dairy, Inc. (NYSE Arca: ADY) ("American Dairy" or the "Company"), one of the leading producers and distributors of premium infant formula, milk powder and soybean, rice and walnut products in China, today announced financial results for the first quarter 2009.
Sales increased 191.1% to $113.8 million in the first quarter 2009 from $39.1 million in the first quarter of 2008.
Sales performance reflects the Company's expanding market areas and distribution network through China and increased demand for high quality products, as well as an increase in sales quantities of the Company's high profit margin products, such as infant formula and other milk powders. Specifically, the Company's milk powder sales increased 318.4% from the prior year period to $107.6 million, and contributed to 94.5% of total sales in the first quarter of 2009, up significantly from contributing 65.7% of total sales in the first quarter of 2008.
Mr. Leng You-Bin, the Company's Chief Executive Officer, stated, "Our first quarter 2009 sales reflect consumers' flight to quality at the height of the melamine crisis in China. Feihe's consistent quality standards, trusted brand name, secure raw milk supply and ability to meet increased demand, allowed us to drive revenue growth and report record financial results caused by the short-term disruption in the market. The first quarter's growth rate was exceptional, and we expect the second and third quarters to trend in line with historical results, in which we deliver year over year growth. We are focused on consistent and sustainable growth over the long term, particularly measured on an annual basis and not quarter to quarter."
Mr. Leng continued, "We believe the addressable market for infant formula is currently about $5.5 billion in China, and is projected to grow to around $12.0 billion through 2014. Our goal is to capture as much of this addressable market as possible and to build American Dairy into the leading infant formula provider in China. To achieve these goals, we intend to enhance our distribution capabilities into first-tier PRC markets, strengthen our premium-quality brand awareness particularly in southern and western China, expand our production capabilities by investing in world-class production processes, and strategically align sourcing, production and distribution by region."
Gross profit increased 401.5% to $72.6 million in the first quarter of 2009 from $14.5 million in the first quarter of 2008. Gross margin for the first quarter of 2009 was 63.76%, compared to 37.02% in the prior year's period. Gross profit margin performance reflects increasing sales of higher margin infant formula products.
Income from continuing operations increased 523.1% to $32.0 million in the first quarter of 2009 from $5.1 million in the prior year period. Sales and marketing expenses increased 322.3% to $31.6 million in the first quarter of 2009 from $7.5 million in the first quarter of 2008. General and administrative expenses increased 384.5% to $9.0 million in the first quarter of 2009 from $1.9 million in the first quarter of 2008. Operating expenses in the first quarter of 2009, as compared to the first quarter of 2008, reflect a number of new initiatives to reposition the Company's brand on a nationwide basis, in Tier I, II and III cities in China, as well as increased headcount versus the prior year period.
The Company recognized other expenses of $370,000 during the first quarter of 2009, compared to other income of $3.9 million in the first quarter of 2008. The year over year change is primarily attributable to a decrease in gain on derivatives of $9.0 million offset by a decrease in interest and finance costs of approximately $3.7 million.
Net income for the first quarter of 2009 increased 282.0% to $27.8 million, or $1.55 per diluted share, from $7.3 million, or $0.41 per diluted share, in the prior year's period.
As of March 31, 2009, the Company had cash and cash equivalents of $54.1 million and total current assets of $184.3 million, compared with cash and cash equivalents of $11.8 million and total current assets of $151.9 million as of December 31, 2008.
The Company believes that cash generated from operations and existing cash on hand is sufficient to fund current obligations. The Company paid $15.3 million in April 2009 related to the restructuring of its 1% Guaranteed Senior Secured Convertibles Notes, and remaining payments include $15.3 million due July 2009 and $46.0 million due October 2009. The Company also has access to a line of credit with the Construction Bank of China and other Chinese banks to fund its operations. Additionally, the Company received approximately $32.0 million in May 2009 related to the sale of the Company's Moveup subsidiary. Please refer to the Company's Form 10-Q for the first quarter 2009 for additional details.
Jonathan Chou, the Chief Financial Officer of American Dairy, stated, "We believe much of the dairy market in China is underserved, particularly with respect to infant formula. We have successfully capitalized on the increased demand for high quality products in the recent past, operating our milk production facilities at maximum capacity, and aggressively branding our products in the premium and super-premium categories. Going forward, we believe we can continue to drive market share gains with increased production capacity and strengthened premium-quality brand awareness. These efforts will require a degree of reinvestment in our operations and our revenue performance and cash generation allows us to invest in key, strategic areas so that we ultimately drive long-term shareholder value."
Chou concluded, "As we move through the remainder of the year, we are confident that we have a solid team to navigate the growing dairy market in China. We recently adopted an option plan so that we attract and retain top talent across the organization. We have a stronger accounting and finance team than ever before, and in 2008 we engaged a big four accounting firm and made several new hires to address areas of improvement in our internal controls. We also intend to meet regularly with investors and host an analyst day in the U.S. or in China later this year."
Investor questions and inquiries should be directed toward management by contacting the Company's investor relations representatives at 1-203-682-8208.
About American Dairy, Inc.
American Dairy, Inc. (NYSE Arca: ADY) is one of the leading producers and distributors of premium infant formula, milk powder, and soybean, rice walnut products in the People's Republic of China. American Dairy conducts operations in China through its wholly owned subsidiary, Feihe Dairy. Founded in 1962, Feihe Dairy is headquartered in Beijing, China, and has processing and distribution facilities in Kedong, Qiqihaer, Baiquan, Gannan, Shanxi, and Langfang. Using proprietary processing techniques, American Dairy makes products that are specially formulated for particular ages, dietary needs and health concerns. American Dairy has over 200 company-owned milk collection stations, six production facilities with an aggregate milk powder production capacity of approximately 1,220 tons per day and an extensive distribution network that reaches over 50,000 retail outlets throughout China. For more information about American Dairy, please visit http://www.americandairyinc.com.
Cautionary Note Regarding Forward-Looking Statements
This document contains forward-looking information about the Company's operating results and business prospects that involve substantial risks and uncertainties. Statements that are not purely historical are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended. These statements include, but are not limited to, statements about the Company's plans, objectives, expectations, strategies, intentions or other characterizations of future events or circumstances and are generally identified by the words "may," "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates," "could," "would," and similar expressions. Because these forward-looking statements are subject to a number of risks and uncertainties, the Company's actual results could differ materially from those expressed or implied by these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed under the heading "Risk Factors" in the Company's annual report on Form 10-K for the fiscal year ended December 31, 2008, quarterly report on Form 10-Q for its first quarter in 2009, and in current reports on Form 8-K filed with the United States Securities and Exchange Commission and available at www.sec.gov. The Company assumes no obligation to update any such forward-looking statements.
CONTACT
Integrated Corporate Relations, Inc.
In the United States: Ashley Ammon: 1-203-682-8200
In China: Wei-Jung Yang: 86-10-6599-7968
AMERICAN DAIRY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, December 31,
2009 2008
US$ US$
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents 54,112,534 11,785,408
Notes and loans receivable, net - 1,493,245
Trade receivables, net of
allowance of $3,491,543 and
$670,113, respectively 9,628,016 12,275,497
Due from related parties 1,902,701 265,479
Employee receivable 596,526 307,249
Advances to suppliers 26,516,230 24,943,046
Receivable from discontinuing
operations 31,041,845 31,002,897
Inventories, net 46,925,871 52,330,333
Prepayments and other current
assets 89,776 63,711
Refundable taxes 291,321 488,938
Deposit for equity investment 2,191,189
Other receivables 1,427,143 4,598,359
Current assets of discontinuing
operations 9,554,368 12,392,384
Total current assets 184,277,520 151,946,546
Investments:
Investment in mutual funds -
available for sale 97,631 77,504
Investment at cost 262,942 262,611
360,573 340,115
Property and equipment:
Property and equipment, net 88,282,947 88,289,858
Construction in progress 39,210,806 28,847,959
127,493,753 117,137,817
Biological assets:
Immature biological assets 19,785,266 23,784,479
Mature biological assets, net 7,454,456 1,483,355
27,239,722 25,267,834
Other assets:
Deferred tax assets 730,490 730,490
Prepaid leases 29,018,719 29,146,748
Goodwill 2,285,706 2,282,838
Deferred charges, net 73,483 107,396
Long term assets of discontinuing
operations 31,626,665 31,587,018
Total assets 403,106,631 358,546,802
LIABILITIES AND SHAREHOLDERS'
EQUITY
Liabilities
Current liabilities:
Current maturities of long term
debt 4,023,752 4,018,704
Convertible debt redeemable within
one year 17,888,021 17,732,033
Short term debts 71,683,981 73,809,893
Notes and loans payable 13,908,184 8,055,450
Accounts payable 30,133,611 36,643,041
Accrued expenses 14,145,168 10,620,393
Income tax payable 3,309,098 1,185,528
Advances from customers 6,259,924 9,864,080
Due to related parties 338,211 1,017,399
Advances from employees 484,259 1,016,173
Accrued employee benefits 2,394,168 2,873,889
Other payables 29,141,932 19,513,681
Current liabilities of
discontinuing operations 32,250,818 35,063,603
Total current liabilities 225,961,128 221,413,867
Long term debt, net of current
portion 12,976,584 9,146,034
Long term tax payable 4,154,934 2,750,887
Deferred income 14,997,192 8,416,492
Long term liability of
discontinuing operations 395,176 395,176
Total liabilities 258,485,014 242,122,456
Equity
Ordinary shares (US$0.001 par
value, 50,000,000 shares
authorized; 17,253,907 issued and
outstanding as of March 31, 2009
and December 31, 2008) 17,254 17,254
Additional paid-in capital 26,899,114 26,758,425
Ordinary share warrants 3,003,448 3,003,448
Statutory reserves 6,861,224 6,861,224
Accumulated other comprehensive
income 25,442,002 25,146,055
Retained earnings 81,878,276 54,091,493
Total shareholders' equity 144,101,318 115,877,899
Minority interests 520,299 546,447
Total equity 144,621,617 116,424,346
Total liabilities and equity 403,106,631 358,546,802
AMERICAN DAIRY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(unaudited)
For the period ended March 31,
2009 2008
US$ US$
Sales 113,821,847 39,100,654
Cost of goods sold 41,244,269 24,627,183
Gross profit 72,577,578 14,473,471
Operating and administrative expenses:
Sales and marketing 31,639,888 7,491,684
General and administrative 8,978,204 1,852,921
Total operating expenses 40,618,092 9,344,605
Income from continuing operations 31,959,486 5,128,866
Other income (expenses):
Interest income 92,317 40,809
Interest and finance costs (1,585,546) (5,276,718)
Amortization of deferred charges (33,914) (184,897)
Registration rights penalty - (720,325)
Gain on derivatives - 9,000,786
Government subsidy-tax refund 730,289 560,792
Other income, net 424,137 509,223
Income from continuing operations
before income tax expenses
and minority interests 31,586,769 9,058,536
Income tax expenses 3,829,348 1,772,076
Net income from continuing
operations before minority interests 27,757,421 7,286,460
Minority interests 26,148 (13,179)
Net income from continuing operations 27,783,569 7,273,281
Net income (loss) from discontinuing
operations 3,214 (1,776)
Net income attributable to ordinary
shareholders 27,786,783 7,271,505
Other comprehensive income:
Cumulative currency translation adjustments 275,917 7,763,882
Change in fair value of available for
sale investments 20,030 (46,117)
Total comprehensive income 28,082,730 14,989,270
Earnings per ordinary share - Basic
Income from continuing operations $1.61 $0.43
Income from discontinuing operations,
net of tax $0.00 $0.00
Net income $1.61 $0.43
Earnings per ordinary share - Diluted
Income from continuing operations $1.55 $0.41
Income from discontinuing operations,
net of tax $0.00 $0.00
Net income $1.55 $0.41
Weighted average ordinary shares outstanding
Basic 17,253,907 16,962,823
Diluted 17,926,990 17,588,852
