BEIJING and LOS ANGELES, Aug. 14 /PRNewswire-FirstCall/ -- American
Dairy, Inc. (NYSE: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 second quarter of 2009. The
Company provided preliminary second quarter 2009 revenue results on
July 13, 2009. Second Quarter 2009 Financial Highlights -- Revenue
up 10.4% to $41.2 million vs. $37.3 million in 2Q08 -- Gross profit
up 92.9% to $24.1 million vs $12.5 million in 2Q08 -- Gross margin
58.59% in 2Q09 vs. 33.52% in 2Q08 -- Net Income up 59.1% to $7.6
million vs. $4.8 million in 2Q08 -- EPS per diluted share up 48.1%
to $0.40 vs. $0.27 in 2Q08 Sales increased 10.4% to $41.2 million
in the second quarter of 2009 from $37.3 million in the second
quarter of 2008. As previously announced, sales performance in the
second quarter was affected by a temporary interruption in
distributor orders relating in part to new package labeling for
dairy products mandated by the Food Safety Law of the People's
Republic of China, effective June 1, 2009. Mr. Leng You-Bin, the
Company's Chief Executive Officer, stated, "We are satisfied with
our second quarter results, and we believe that our market position
is continuing to grow stronger. Our second quarter of 2009 sales
performance reflects an industry-wide disruption as distributors
intentionally lowered inventory levels in an effort to move excess
inventory built up in the beginning of the year, as well as to run
off older inventory in advance of new product package labeling
regulatory requirements in the PRC. Despite this, our financial
results for the second quarter of 2009 reflect increased
profitability year over year. We believe we have increased infant
formula market share since the third quarter of 2008 in a very
competitive environment, and we remain committed to being one of
the leading infant formula providers in China." Gross profit
increased 92.9% to $24.1 million in the second quarter of 2009 from
$12.5 million in the second quarter of 2008. Gross margin for the
second quarter of 2009 was 58.59%, compared to 33.52% in the prior
year's period. Gross profit margin performance reflects a lower
cost environment as well as a product mix shift to higher margin
infant formula products. Cost of goods sold decreased 31.3% to
$17.1 million in the second quarter of 2009, primarily reflecting a
decrease of approximately $3.7 million, or 24%, in the cost of
fresh milk. Income from continuing operations increased 603.4% to
$1.1 million in the second quarter of 2009 from $161,000 in the
prior year period. Sales and marketing expenses increased 122.8% to
$20.7 million in the second quarter of 2009 from $9.3 million in
the second quarter of 2008. General and administrative expenses
decreased 24.2% to $2.3 million in the second quarter of 2009 from
$3.1 million in the second quarter of 2008. Operating expenses
reflect costs associated with the Company's continued expansion of
its distribution network throughout China, efforts to drive brand
awareness as well as the issuance of performance stock options
under the Company's 2009 Stock Incentive Plan. The Company
recognized other income (expenses) of $4.5 million during the
second quarter of 2009, compared to other income (expenses) of $4.1
million in the second quarter of 2008. Other income primarily
reflects a government tax refund of $6.0 million, offset by
interest and finance costs of $1.8 million. In the prior year
period, the Company received a government tax refund of $3.3
million. Net income attributable to ordinary shareholders increased
59.1% to $7.6 million, or $0.40 per diluted share, from $4.8
million, or $0.27 per diluted share in the prior year's period. Net
income from continuing operations for the second quarter of 2009
increased 26.2% to $4.3 million, or $0.24 per diluted share, from
$3.4 million, or $0.19 per diluted share, in the prior year's
period. First Half 2009 Financial Highlights Sales increased 102.9%
to $155.0 million in the first half of 2009 from $76.4 million in
the same period of 2008. Gross profit increased 258.4% to $96.7
million in the first half of 2009 from $27.0 million in the same
period of 2008. Gross margin for the first half of 2009 was 62.4%,
compared to 35.3% in the prior year's period, primarily reflecting
a product mix shift to higher margin infant formula products.
Income from continuing operations increased 525.6% to $33.1 million
in the first half of 2009 from $5.3 million in the prior year's
period. Net income attributable to ordinary shareholders increased
193.5% to $35.4 million, or $1.84 per diluted share, from $12.1
million, or $0.69 per diluted share in the prior year's period. Net
income from continuing operations for the first half 2009 increased
199.8% to $32.1 million, or $1.67 per diluted share, from $10.7
million, or $0.61 per diluted share, in the prior year's period. As
of June 30, 2009, the Company had cash and cash equivalents of
$42.2 million and total current assets of $160.0 million, compared
with cash and cash equivalents of $54.1 million and total current
assets of $184.3 million as of March 31, 2009. The Company
completed a $15.3 million debt repurchase in July 2009 related to
the restructuring of its 1% Guaranteed Senior Secured Convertibles
Notes, with the only remaining payment of $46.0 million due in
October 2009. Additionally, the Company announced on August 12,
2009 that it entered into a subscription agreement with Sequoia
Capital pursuant to which the Company has agreed to issue 2.1
million shares of its common stock to Sequoia Capital for an
aggregate purchase price of $63.0 million. The aggregate purchase
price includes $47.0 million in cash and the conversion of a $16.0
million bridge loan the Company received from Sequoia Capital on
July 29, 2009. The transaction is expected to close by August 27,
2009. Jonathan H. Chou, the Company's Chief Financial Officer
stated, "We are very pleased to enter into a financial partnership
with Sequoia Capital, a renowned private investment firm known for
assisting high growth companies. We believe our financial position
will provide us flexibility to achieve our strategic goals and
continue to gain market share going forward." Financial Outlook The
Company today reiterates its revenue guidance for 2009 of $330
million - $360 million. Conference Call Details The Company will
hold a conference call to discuss second quarter results on Monday,
August 17, 2009, at 5:00 pm ET. Dial-in information for the
earnings conference call is as follows: United States:
1-888-466-4440; China North: 86-10-800-712-0046; China South:
86-10-800-120-0046; Hong Kong: 852-800-968103; International:
1-719-325-2117. A telephone replay will be available from two hours
after the conclusion of the call through August 24, 2009. Listeners
may access the replay by dialing 1-888-203-1112 or 1-719-457-0820
for international callers, access code: 4846950. A webcast will
also be available through the Company's website at
http://www.americandairyinc.com/. About American Dairy, Inc.
American Dairy, Inc. (NYSE:ADY) is one of the leading producers and
distributors of premium infant formula, milk powder, and soybean,
rice and walnut products in the People's Republic of China.
American Dairy conducts operations in China through its wholly
owned subsidiary, Feihe Dairy, and other subsidiaries. Founded in
1962, Feihe Dairy is headquartered in Beijing, China, and has
processing and distribution facilities in Kedong, Qiqihaer,
Baiquan, Gannan, Longjiang, 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, two dairy farms, 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 84,000 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," "targets," "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 second
quarter of 2009, and in current reports on Form 8-K filed with the
United States Securities and Exchange Commission and available at
http://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 STATEMENTS OF OPERATIONS AND COMPREHENSIVE
INCOME (unaudited) Three months ended Six months ended June 30,
June 30, ------------------ ---------------- 2009 2008 2009 2008
---- ---- ---- ---- US$ US$ US$ US$ Sales 41,186,466 37,314,647
155,008,313 76,415,301 Cost of goods sold 17,054,053 24,807,281
58,298,322 49,434,464 ---------- ---------- ---------- ----------
Gross profit 24,132,413 12,507,366 96,709,991 26,980,837 ----------
---------- ---------- ---------- Operating and administrative
expenses: Sales and marketing 20,676,176 9,282,198 52,316,064
16,773,882 General and administrative 2,322,879 3,064,038
11,301,083 4,916,959 --------- --------- ---------- --------- Total
operating expenses 22,999,055 12,346,236 63,617,147 21,690,841
---------- ---------- ---------- ---------- Income from continuing
operations 1,133,358 161,130 33,092,844 5,289,996 --------- -------
---------- --------- Other income (expenses): Interest income
118,768 190,610 211,085 231,419 Interest and finance costs
-1,828,430 -5,096,604 -3,413,977 -10,373,322 Amortization of
deferred charges -33,914 -184,897 -67,828 -369,794 Registration
rights penalty - -720,325 - -1,440,650 Gain on derivatives -
6,706,859 - 15,707,645 Government subsidy-tax refund 6,014,120
3,309,942 6,744,408 3,870,734 Other income (expenses), net 269,743
-64,948 693,880 444,275 ------- ------- ------- ------- Income from
continuing operations before income tax expense and noncontrolling
interests 5,673,645 4,301,767 37,260,412 13,360,303 Income tax
expense 1,345,393 861,299 5,174,741 2,633,375 --------- -------
--------- --------- Net income from continuing operations before
noncontrolling interests 4,328,252 3,440,468 32,085,671 10,726,928
Noncontrolling interests 16,497 2,977 42,645 -10,202 ------ -----
------ ------- Net income from continuing operations 4,344,749
3,443,445 32,128,316 10,716,726 Net income from discontinued
operations 3,286,694 1,353,806 3,289,908 1,352,030 ---------
--------- --------- --------- Net income attributable to ordinary
shareholders 7,631,443 4,797,251 35,418,224 12,068,756 =========
========= ========== ========== Other comprehensive income:
Cumulative currency translation adjustments 63,476 4,514,072
339,393 12,277,954 Change in fair value of available for sale
investments 23,333 -32,950 43,362 -79,067 ------ ------- ------
------- Total comprehensive income 7,718,252 9,278,373 35,800,979
24,267,643 ========= ========= ========== ========== Earnings per
ordinary share - Basic Income from continuing operations 0.25 0.20
1.86 0.63 Income from discontinued operations, net of tax 0.19 0.08
0.19 0.08 Net income 0.44 0.28 2.05 0.71 Earnings per ordinary
share - Diluted Income from continuing operations 0.24 0.19 1.67
0.61 Income from discontinued operations, net of tax 0.16 0.08 0.17
0.08 Net income 0.40 0.27 1.84 0.69 Weighted average ordinary
shares outstanding Basic 17,339,311 16,964,768 17,296,845
16,963,795 Diluted 20,161,916 17,609,463 19,712,263 17,600,046
AMERICAN DAIRY, INC. CONDENSED CONSOLIDATED BALANCE SHEETS June 30,
December 31, 2009 2008 ------- ----------- US$ US$ (unaudited)
ASSETS Current assets: Cash and cash equivalents 42,191,219
11,785,408 Notes and loans receivable, net - 1,493,245 Trade
receivables, net of allowance of $1,634,917 and $1,311,331,
respectively 6,976,229 12,275,497 Due from related parties
2,982,629 265,479 Employee receivable 199,563 307,249 Advances to
suppliers 32,532,341 24,943,046 Receivable from discontinued
operations - 31,002,897 Inventories, net of allowance of $448,226
and $575,916, respectively 65,056,264 52,330,333 Prepayments and
other current assets 54,525 63,711 Refundable taxes 3,647,030
488,938 Other receivables 5,956,961 4,598,359 Current assets of
discontinued operations - 12,392,384 --- ---------- Total current
assets 159,596,761 151,946,546 Investments: Investment in mutual
funds - available for sale 120,963 77,504 Investment at cost
262,975 262,611 ------- ------- 383,938 340,115 Property and
equipment: Property and equipment, net 91,617,929 88,289,858
Construction in progress 45,450,721 28,847,959 ----------
---------- 137,068,650 117,137,817 Biological assets: Immature
biological assets 20,633,116 23,784,479 Mature biological assets,
net 10,672,203 1,483,355 ---------- --------- 31,305,319 25,267,834
Other assets: Deferred tax assets 730,491 730,490 Prepaid leases
29,509,049 29,146,748 Goodwill 2,285,973 2,282,838 Deferred
charges, net 39,568 107,396 Long term assets of discontinued
operations - 31,587,018 --- ---------- Total assets 360,919,749
358,546,802 ----------- ----------- LIABILITIES AND EQUITY
Liabilities Current liabilities: Current maturities of long term
debt 3,915,381 4,018,704 Convertible debt redeemable within one
year 18,044,009 17,732,033 Short term debt 58,615,525 73,809,893
Notes and loans payable 17,679,043 8,055,450 Accounts payable
36,414,291 36,643,041 Accrued expenses 11,784,858 10,620,393 Income
tax payable 842,020 1,185,528 Advances from customers 9,304,533
9,864,080 Due to related parties 1,063,950 1,017,399 Advances from
employees 310,927 1,016,173 Accrued employee benefits 2,360,734
2,873,889 Other payable 14,951,205 19,513,681 Current liabilities
of discontinued operations - 35,063,603 --- ---------- Total
current liabilities 175,286,476 221,413,867 ----------- -----------
Long term debt, net of current portion 19,606,124 9,146,034 Long
term tax payable 4,828,743 2,750,887 Deferred income 7,398,498
8,416,492 Long term liability of discontinued operations - 395,176
--- ------- Total liabilities 207,119,841 242,122,456 -----------
----------- Equity Shareholders' equity: Ordinary shares (US$0.001
par value, 50,000,000 shares authorized; 17,554,307 and 17,253,907
issued and outstanding as of June 30, 2009 and December 31, 2008)
17,554 17,254 Additional paid-in capital 28,752,781 26,758,425
Ordinary share warrants 2,708,746 3,003,448 Statutory reserves
6,861,224 6,861,224 Accumulated other comprehensive income
25,528,810 25,146,055 Retained earnings 89,509,717 54,091,493
---------- ---------- Total shareholders' equity 153,378,832
115,877,899 ----------- ----------- Noncontrolling interests
421,076 546,447 ----------- ----------- Total equity 153,799,908
116,424,346 ----------- ----------- Total liabilities and equity
360,919,749 358,546,802 ----------- ----------- DATASOURCE:
American Dairy, Inc. CONTACT: United States, Ashley Ammon of
Integrated Corporate Relations, Inc., +1-203-682-8200, for American
Dairy, Inc.; or China, Wei-Jung Yang of American Dairy,
Inc.,+86-10-6599-7968 Web Site: http://www.americandairyinc.com/
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