American Dairy, Inc. Reports Fourth Quarter and Full Year 2009 Financial Results
Conference Call to be Held Today at 8:00 am ET
BEIJING and LOS ANGELES, March 16 /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 fourth quarter and full year ended 2009. The Company will hold a conference call today at 8:00 am ET.
Revenue decreased 45% to $44.0 million in the fourth quarter of 2009 from $79.6 million in the fourth quarter of 2008. Revenue from milk powder products, which consist primarily of the Company's higher margin infant formula products, was $20.7 million, or 47.2% of total sales, down from $59.3 million, or 74.5% of total sales, in the fourth quarter of 2008. Revenue from raw milk powder was $18.9 million, compared to $16.7 million in the fourth quarter of 2008 and up substantially to 43.0% of total revenue compared to 20.9% of total revenue in the prior year's period.
The Company reported a gross loss of $3.0 million in the fourth quarter of 2009. This compares to a gross profit of $36.6 million in the fourth quarter of 2008. The decline in revenue and gross profit performance in the fourth quarter of 2009 compared to prior periods primarily reflected the impact of cross-territory selling in which distributors disrupted regular sales patterns by diverting infant formula products outside of their delegated geographic regions. Additionally, revenue and gross profit performance in the fourth quarter of 2009 reflects management's efforts to curb the cross-territory selling through offering greater promotions as incentives to distributors, as well as management's decision to sell excess inventory as raw milk powder, in an effort to manage inventory levels.
In January 2010, the Company established a new system to monitor distributor inventory levels and track distributors engaging in cross-territory selling. Additionally, the Company required distributors to collect any unauthorized products in their respective regions, in an effort to protect its brand image and align pricing across geographical regions.
Mr. Leng You Bin, the Company's Chairman and Chief Executive Officer, stated, "We believe we have effectively addressed cross-territory selling activities. Although our rapid expansion presented challenges to our prior information management systems, we have taken steps to ensure that we have the right infrastructure to support our growth in 2010 and beyond, including establishing an anti-cross-territory selling system and a new ERP system in place in January. Though our fourth quarter results were impacted, we believe we have taken the right steps to address the fundamental issues that could impair our long-term growth."
Mr. Leng continued, "We aggressively increased the number of our sales outlets since the melamine crisis, especially during the fourth quarter of 2009, and we now reach over 95,000 points of sale in China. We believe the increase of our retail outlets will accelerate our expansion in southern China in 2010."
Loss from continuing operations was $31.9 million in the fourth quarter of 2009, compared with income from continuing operations of $9.4 million in the fourth quarter of 2008. Sales and marketing expenses increased 39% to $25.3 million in the fourth quarter of 2009 from $18.2 million in the fourth quarter of 2008, primarily reflecting increased promotional activities. General and administrative expenses decreased 61% to $3.5 million in the fourth quarter of 2009 from $8.9 million in the fourth quarter of 2008. The decrease primarily reflects the expenses related to the Company's reaudit in the fourth quarter of 2008.
The Company recognized other income of $604,500 during the fourth quarter of 2009, which included a government tax refund of approximately $6.5 million received in the quarter. In the prior year period, the Company had other income of $15.9 million, which primarily reflected a gain on extinguishment of debt of $30.5 million and a government tax refund of $4.4 million, offset by a loss on derivatives of $15.3 million.
Net loss attributable to common shareholders for the fourth quarter of 2009 was $27.0 million, or ($1.34) per diluted share, compared to net income of $25.1 million, or $1.42 per diluted share, in the prior year period.
Full Year Ended December 31, 2009 Financial Highlights
Revenue increased 40% to $271.1 million in the full year ended December 31, 2009 from $193.2 million in the same period of 2008. Contributions from milk powder products, which consist primarily of the Company's higher margin infant formula products, were approximately $216.2 million, or 80.0%, of sales in the full year ended December 31, up 78% from $121.3 million, or 62.8% of sales, in the prior year period. Gross profit increased 72% to $130.7 million in the full year ended December 31, 2009 from $76.0 million in the same period of 2008. Gross margin for the full year ended December 31, 2009 was 48.2%, compared to 39.3% in the prior year's period. Income from continuing operations increased to $5.1 million in the full year ended December 31, 2009, compared to $6.3 million in the prior year's period. Net income from continuing operations for the full year 2009 increased to $16.3 million, or $0.81 per diluted share, from net income of $10.6 million, or $0.60 per diluted share, in the prior year's period. Net income attributable to common shareholders increased to $19.6 million, or $0.97 per diluted share, from net income of $17.0 million, or $0.97 per diluted share in the prior year's period.
Balance Sheet
As of December 31, 2009, the Company had cash and cash equivalents of $48.9 million and total current assets of $177.6 million, compared with cash and cash equivalents of $43.5 million and total current assets of $181.7 million as of September 30, 2009.
Financial Guidance
Jonathan H. Chou, Chief Financial Officer, stated, "Despite our disappointing fourth quarter performance, we are glad to report full year revenue growth of 40% year over year. Specifically, sales of our branded infant formula products grew 78% year over year to $216 million, representing 80% of total sales for the full year 2009. As we approach the end of the first quarter of 2010, we are confident that measures taken to address the fourth quarter's operational issues will be effective as we continue to make improvements across all functions. With new systems in place, we have much more control in the level of goods in our distribution channels, enhancing our ability to monitor our distribution points. Based on cash and actual purchase orders received this quarter, we believe that revenue from our branded formula products should exceed $70 million in the first quarter of 2010."
Mr. Chou continued, "In 2010, in addition to building on our strengths, including established brand image and nationwide presence, we have launched several key sales and marketing initiatives to continue to expand in northern China markets where we have a strong presence and solidify our foothold in southern China. These initiatives include strengthening human resources development, improving our nutrition education program, enhancing customer services, improving our ability to utilize data as well as increasing operating efficiencies in existing retail outlets."
Conference Call Details
The Company will hold a conference call on March 16, 2010 at 8:00 am ET to discuss its results. Listeners may access the call by dialing the following numbers:
United States toll free: |
1-888-208-1815 |
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Hong Kong toll free: |
800-968-103 |
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Northern China toll free: |
10-800-712-0046 |
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Southern China toll free: |
10-800-120-0046 |
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International: |
1-719-325-2470 |
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The replay will be accessible through March 23, 2010 by dialing the following numbers:
United States toll free: |
1-888-203-1112 |
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International: |
1-719-457-0820 |
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Password: |
1841116 |
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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, seven production facilities with an aggregate milk powder production capacity of approximately 1,234 tons per day and an extensive distribution network that reaches over 95,000 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, 2009 and in other reports 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 |
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In the U.S.: [email protected] |
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In China: May Shen 86-10-6431-9357 |
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AMERICAN DAIRY, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (unaudited) For the years ended For the quarter For the quarter December 31, ended ended ------------------- --------------- --------------- December December 2009 2008 31, 2009 31, 2008 ---- ---- ---------- ---------- US$ US$ US$ US$ Sales 271,077,948 193,191,710 43,958,701 79,623,405 Cost of goods sold 140,426,711 117,180,986 46,998,857 43,061,168 ----------- ----------- ---------- ---------- Gross profit (loss) 130,651,237 76,010,724 (3,040,156) 36,562,237 ----------- ---------- ---------- ---------- Operating and administrative expenses: Sales and marketing 105,109,120 50,685,804 25,337,484 18,237,153 General and administrative 20,478,875 19,046,939 3,521,676 8,881,202 ---------- ---------- --------- --------- Total operating expenses 125,587,995 69,732,743 28,859,160 27,118,355 ----------- ---------- ---------- ---------- Income (loss) from continuing operations 5,063,242 6,277,981 (31,899,316) 9,443,882 --------- --------- ----------- --------- Other income (expenses): Interest income 306,691 579,724 33,358 209,985 Interest and finance costs (6,139,152) (18,843,032) (1,024,473) (3,317,229) Amortization of deferred charges (124,110) (657,258) (22,368) (102,567) Registration rights penalty - (2,389,077) - (228,103) Gain on extinguishment of debt - 30,497,268 - 30,497,268 Goodwill impairment expense (929,526) - (929,526) - Loss on derivatives (2,162,000) (8,321,481) (1,372,000) (15,337,099) Government subsidy-tax refund 21,177,132 6,810,231 6,537,098 4,434,991 Other income (loss), net (1,765,267) 182,406 (2,617,559) (239,537) ---------- ------- ---------- -------- Income (loss) from continuing operations before income tax expenses and noncontrolling interests 15,427,010 14,136,762 (31,294,786) 25,361,591 Income tax (benefit) expenses (746,198) 3,567,135 (4,248,772) 3,413,256 -------- --------- ---------- --------- Net income (loss) from continuing operations before noncontrolling interests 16,173,208 10,569,627 (27,046,014) 21,948,335 Noncontrolling interests 118,270 (9,470) 68,078 14,932 ------- ------ ------ ------ Net income (loss) from continuing operations 16,291,478 10,560,157 (26,977,936) 21,963,267 Net income from discontinued operations 3,289,908 6,462,878 - 3,147,283 --------- --------- --- --------- Net income (loss) attributable to common shareholders 19,581,386 17,023,035 (26,977,936) 25,110,550 ========== ========== =========== ========== Other comprehensive income (loss): Cumulative currency translation adjustments 446,554 13,169,453 (147,395) 4,031,187 Change in fair value of available for sale investments 58,962 (104,865) 18,029 (5,639) ------ -------- ------ ------ Total comprehensive income (loss) 20,086,902 30,087,623 (27,107,302) 29,136,098 ========== ========== =========== ========== Earnings (Loss) per share of common stock – Basic Income (loss) from continuing operations $0.86 $0.62 (1.42) 1.29 Income from discontinued operations, net of tax $0.17 $0.38 0.00 0.19 Net income (loss) $1.03 $1 (1.42) 1.48 Earnings (Loss) per share of common stock – Diluted Income (loss) from continuing operations $0.81 $0.6 (1.34) 1.25 Income from discontinued operations, net of tax $0.16 $0.37 0.00 0.18 Net income (loss) $0.97 $0.97 (1.34) 1.42 Weighted average shares of common stock outstanding Basic 19,004,337 16,993,390 19,004,337 16,993,390 Diluted 20,180,598 17,636,862 20,180,598 17,636,862
AMERICAN DAIRY, INC. CONDENSED CONSOLIDATED BALANCE SHEETS December 31, December 31, 2009 2008 ---- ---- US$ US$ ASSETS Current assets: Cash and cash equivalents 48,949,524 11,785,408 Notes and loans receivable, net of allowance of $4,000,000 438,776 1,493,245 Trade receivables, net of allowance of $791,119 and $1,311,331, respectively 27,495,190 12,275,497 Due from related parties 2,188,243 265,479 Employee receivables 396,724 307,249 Advances to suppliers 24,417,968 24,943,046 Receivable from discontinued operations - 31,002,897 Inventories, net of allowance of $518,561 and $575,916, respectively 59,044,665 52,330,333 Prepayments and other current assets 1,814,472 63,711 VAT refundable taxes 8,532,629 488,938 Other receivables 4,307,680 4,598,359 Current assets of discontinued operations - 12,392,384 --- ---------- Total current assets 177,585,871 151,946,546 Investments: Investment in mutual funds – available for sale 136,466 77,504 Investment at cost 263,264 262,611 ------- ------- 399,730 340,115 Property and equipment: Property and equipment, net 154,572,409 88,289,858 Construction in progress 23,170,909 28,847,959 ---------- ---------- 177,743,318 117,137,817 ----------- ----------- Biological assets: Immature biological assets 35,672,123 23,784,479 Mature biological assets, net 13,232,124 1,483,355 ---------- --------- 48,904,247 25,267,834 Other assets: Deferred tax assets 3,632,815 730,490 Prepaid leases 29,016,486 29,146,748 Other intangible assets 821,331 - Goodwill 1,784,331 2,282,838 Deferred charges, net 369,608 107,396 Long term assets of discontinued operations - 31,587,018 --- ---------- Total assets 440,257,737 358,546,802 ----------- ----------- LIABILITIES AND SHAREHOLDERS’ EQUITY Liabilities Current liabilities: Current maturities of long term debt 7,312,935 4,018,704 Convertible debt redeemable within one year - 17,732,033 Short term debt - 73,809,893 Notes and loans payable 62,372,922 8,055,450 Accounts payable 37,956,046 36,643,041 Accrued expenses 8,365,245 10,620,393 Income tax payable 2,980,774 1,185,528 Advances from customers 6,893,947 9,864,080 Due to related parties 10,531,851 1,017,399 Advances from employees 483,647 1,016,173 Accrued employee benefits 4,120,053 2,873,889 Other payable 23,693,617 19,513,681 Current liabilities of discontinued operations - 35,063,603 --- ---------- Total current liabilities 164,711,037 221,413,867 ----------- ----------- Long term debt, net of current portion 32,427,230 9,146,034 Long term tax payable 4,747,083 2,750,887 Deferred income 10,538,313 8,416,492 Performance share obligation 11,382,000 - Long term liability of discontinued operations - 395,176 --- ------- Total liabilities 223,805,663 242,122,456 ----------- ----------- Temporary equity Redeemable shares of common stock (2,100,000 and 0 shares issued and outstanding, respectively) 53,645,093 - Shareholders’ equity Common stock (US$0.001 par value, 50,000,000 shares authorized; 19,607,376 and 17,253,907 issued and outstanding as of December 31, 2009 and 2008, respectively) 19,607 17,254 Additional paid-in capital 54,482,098 26,758,425 Common stock warrants 1,774,151 3,003,448 Statutory reserves 6,861,224 6,861,224 Accumulated other comprehensive income 25,651,571 25,146,055 Retained earnings 73,672,879 54,091,493 ---------- ---------- Total shareholders’ equity 162,461,530 115,877,899 ----------- ----------- Noncontrolling interests 345,451 546,447 Total equity 162,806,981 116,424,346 ----------- ----------- Total liabilities and shareholders’ equity 440,257,737 358,546,802 ----------- -----------
SOURCE American Dairy, Inc.
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