8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

November 16, 2009

Date of report (Date of earliest event reported):

American Dairy, Inc.

(Exact Name of Registrant as Specified in Its Charter)

Utah	001-32473	90-0208758
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(I.R.S. Employer Identification Number)

Star City International Building, 10 Jiuxianqiao Road, C-16th Floor

Chaoyang District, Beijing, China 100016

(Address of principal executive offices, including Zip Code)

+1 (626) 757-8885

(Registrant’s Telephone Number, Including Area Code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02 Results of Operations and Financial Condition

On November 16, 2009, American Dairy, Inc. (the “Company”) reported its results of operations for the quarter ended September 30, 2009.  The Company’s earnings release is furnished herewith as Exhibit 99.1.

Item 9.01 Financial Statements and Exhibits

(d) Exhibits.

Exhibit	Description
99.1	Press release of American Dairy, Inc. dated November 16, 2009.

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 hereunto duly authorized.

AMERICAN DAIRY, INC.
By:	/s/ Jonathan H. Chou
	Jonathan H. Chou
	Chief Financial Officer

Date: November 16, 2009

INDEX TO EXHIBITS

Exhibit	Description
99.1	Press release of American Dairy, Inc. dated November 16, 2009.

EX-99.1

American Dairy, Inc. Reports

Third Quarter 2009 Financial Results

Conference Call to be Held Today at 8:00 am ET

BEIJING and LOS ANGELES, November 16, 2009 /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 third quarter of 2009.

Third Quarter 2009 Financial Highlights

-- Revenue increased 94.1% to $72.1 million from $37.2 million in 3Q08

-- Gross profit increased 196.6% to $37.0 million from $12.5 million in 3Q08

-- Gross margin was 51.3% in 3Q09 compared to 33.6% in 3Q08

-- Income from continuing operations increased to $3.9 million from a loss of $8.5 million in 3Q08

-- Net income from continuing operations increased to $11.1 million from a loss of $22.1 million in 3Q08

-- EPS per diluted share increased to $0.52 from a loss of $1.19 in 3Q08

Mr. Leng You-Bin, the Company's Chief Executive Officer, stated, “We are pleased with our third quarter results, which reflected our strengthening competitive position and our trusted, premium national brands.  In the third quarter we continued our focus on expanding our presence, consumer education and quality control.  Additionally, we remain focused on driving long term profitability through the growth of our premium brands, which we continue to strengthen through our ongoing investment in advertising and media, including national as well as provincial television commercials.”

Revenue increased 94.1% to $72.1 million in the third quarter of 2009 from $37.2 million in the third quarter of 2008.  Contributions from milk powder products, which consist primarily of the Company’s higher margin infant formula products, were approximately $55.9 million, or 77.5%, of sales in the third quarter of 2009, up 209% from $18.1 million, or 48.7% of sales, in the prior year period.  Revenue performance was primarily attributable to an ongoing demand for the Company’s high quality products, the strong market acceptance of these products, and the Company’s increased distribution network and presence in new geographic areas in China.  On a year over year basis, the Company continued to increase its market share in the infant formula market, which was disrupted in the wake of the melamine crisis.

Gross profit increased 196.6% to $37.0 million in the third quarter of 2009 from $12.5 million in the third quarter of 2008. Gross margin for the third quarter of 2009 was 51.3%, compared to 33.6% in the third quarter of 2008, reflecting a product mix shift to higher margin infant formula products.  On a sequential basis, compared to gross margin of 58.6% in the second quarter of 2009, gross margin for the third quarter of 2009 reflects an increase in the cost of raw milk and select nutritional ingredients.

Income from continuing operations increased to $3.9 million in the third quarter of 2009 from a loss of $8.5 million in the prior year period. Sales and marketing expenses increased 75.2% to $27.5 million in the third quarter of 2009 from $15.7 million in the third quarter of 2008. General and administrative expenses increased 7.8% to $5.7 million in the third quarter of 2009 from $5.2 million in the third quarter of 2008. Operating expenses reflected costs associated with the Company's continued expansion of its distribution network throughout China, efforts to drive brand awareness, and non-cash expenses related to the issuance of performance stock options under the Company's 2009 Stock Incentive Plan.

The Company recognized other income of $5.6 million during the third quarter of 2009, which included a government tax refund of approximately $7.9 million received in the quarter.  In the prior year period, the Company had other expense of $16.1 million, which included an $8.7 million non-cash loss on derivatives.

Net income from continuing operations for the third quarter of 2009 was $11.1 million, or $0.52 per diluted share, compared to a loss of $22.1 million, or ($1.32) per diluted share, in the prior year period. Net income attributable to ordinary shareholders increased to $11.1 million, or $0.52 per diluted share, from a loss of $20.2 million, or ($1.19) per diluted share in the prior year’s period.

Nine Months Ended September 30, 2009 Financial Highlights

Revenue increased 100.0% to $227.1 million in the nine months ended September 30, 2009 from $113.6 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 $195.5 million, or 86.0%, of sales in the nine months ended September 30, 2009, up 215.6% from $61.9 million, or 54.5% of sales, in the prior year period.  Gross profit increased 238.9% to $133.7 million in the nine months ended September 30, 2009 from $39.4 million in the same period of 2008. Gross margin for the nine months ended September 30, 2009 was 58.9%, compared to 34.7% in the prior year’s period, primarily reflecting a product mix shift to higher margin infant formula products and a decrease in sales of low margin raw milk powder. Income from continuing operations increased to $37.0 million in the nine months ended September 30, 2009, compared to a loss of $3.2 million in the prior year’s period. Net income from continuing operations for the first nine months of 2009 increased to $43.3 million, or $2.21 per diluted share, from a loss of $11.4 million, or ($0.67) per diluted share, in the prior year’s period. Net income attributable to ordinary shareholders increased to $46.6 million, or $2.38 per diluted share, from a loss of $8.1 million, or ($0.47) per diluted share in the prior year’s period.

Balance Sheet

As of September 30, 2009, the Company had cash and cash equivalents of $43.5 million and total current assets of $181.7 million, compared with cash and cash equivalents of $42.2 million and total current assets of $160.0 million as of June 30, 2009.

In September 2009, the Company paid down $34.0 million, or 75%, of the $46.0 million outstanding of its 1% Guaranteed Senior Secured Convertibles Notes due 2012.  The remaining payment, which was approximately $11.5 million, was completed at the end of October 2009.  Additionally, the Company’s 7.75% Convertible Notes due 2009 were fully converted as of October 2, 2009 and the Company has no convertible notes remaining.

On August 26, 2009, the Company issued 2.1 million shares of its common stock to Sequoia Capital for an aggregate purchase price of $63.0 million. The aggregate purchase price included $47.0 million in cash as well as the conversion of a $16.0 million bridge loan into equity.

Jonathan H. Chou, the Company’s Chief Financial Officer, stated, “We are delighted to share with investors our financial results and operational improvements we achieved during the third quarter of 2009.  We strengthened our balance sheet and enhanced our financial flexibility so that we support our future growth in this unique and dynamic infant milk formula market.”

Financial Outlook

Today, the Company adjusted its full year 2009 revenue guidance.  The Company now anticipates that revenue for the full year 2009 will be between $270 million to $290 million, which represents year over year growth of 40% to 50%.

Mr. Chou concluded, “We believe it is prudent to adjust our full year revenue expectation today after reviewing our preliminary October results, combined with recent industry data that suggests that the seasonal strength we typically experience in the fourth quarter may be less than previously expected.  Additionally, our fourth quarter comparison is particularly difficult due to the exceptional growth we exhibited last year, in the wake of the melamine crisis.  With this in mind, our revised guidance anticipates at least 40% year over year revenue growth, and we remain confident in our leading competitive position based on our unique vertically integrated business model.  Our addressable market remains exciting and continues to exhibit strong fundamentals with compelling long term growth opportunities for American Dairy.” 

Conference Call Details

The Company will hold a conference call to discuss third quarter results today at 8:00 am ET. Listeners may access the call by dialing 1-800-211-3767 or 1-719-457-2600 for international callers, access code: 3746752. A live webcast will also be available through the Company’s website at www.americandairyinc.com and http://irpage.net/ady/events_presentations.html.

The replay of the call will be available through November 23, 2009. Listeners may access the replay by dialing 1-888-203-1112 or 1-719-457-0820 for international callers, access code: 3746752.

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 90,000 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 third 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 New York: Ashley M. Ammon: 1-646-277-1227

In Beijing: Wei-Jung Yang: 86-10-6599-7968

AMERICAN DAIRY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(unaudited)

	Three months ended September 30,						Nine months ended September 30,
	2009			2008			2009			2008
	US$			US$			US$			US$
Sales		72,110,934			37,153,003			227,119,247			113,568,304
Cost of goods sold		35,129,532			24,685,354			93,427,854			74,119,818
Gross profit		36,981,402			12,467,649			133,691,393			39,448,486
Operating and administrative expenses:
Sales and marketing		27,455,572			15,674,769			79,771,636			32,448,651
General and administrative		5,656,116			5,248,778			16,957,199			10,165,737
Total operating expenses		33,111,688			20,923,547			96,728,835			42,614,388
Income (loss) from continuing operations		3,869,714			(8,455,898	)		36,962,558			(3,165,902	)
Other income (expenses):
Interest income		62,248			138,320			273,333			369,739
Interest and finance costs		(1,700,702	)		(5,152,481	)		(5,114,679	)		(15,525,803	)
Amortization of deferred charges		(33,914	)		(184,897	)		(101,742	)		(554,691	)
Registration rights penalty		-			(720,324	)		-			(2,160,974	)
Gain (loss) on derivatives		(790,000	)		(8,692,027	)		(790,000	)		7,015,618
Government subsidy-tax refund (reversal)		7,895,626			(1,495,494	)		14,640,034			2,375,240
Other income (expenses), net		158,410			(22,331	)		852,290			421,944
Income (loss) from continuing operations before income tax expense and noncontrolling interests		9,461,382			(24,585,132	)		46,721,794			(11,224,829	)
Income tax expense (benefit)		(1,672,167	)		(2,479,496	)		3,502,574			153,879
Net income (loss) from continuing operations before noncontrolling interests		11,133,549			(22,105,636	)		43,219,220			(11,378,708	)
Noncontrolling interests		7,548			(14,200	)		50,193			(24,402	)
Net income (loss) from continuing operations					(22,119,836	)		43,269,413			(11,403,110	)
		11,141,097
Net income from discontinued operations					1,963,565			3,289,908			3,315,595
		-
Net income (loss) attributable to ordinary shareholders		11,141,097			(20,156,271	)		46,559,321			(8,087,515	)
Other comprehensive income (loss):
Cumulative currency translation adjustments		254,556			(3,139,688	)		593,949			9,138,266
Change in fair value of available for sale investments		(2,429	)		(20,159	)		40,933			(99,226	)
Total comprehensive income (loss)		11,393,224			(23,316,118	)		47,194,203			951,525
Earnings (loss) per ordinary share – Basic
Net income (loss) from continuing operations		0.57			(1.32	)		2.39			(0.67	)
Net income from discontinued operations, net of tax		-			0.13			0.18			0.20
Net income (loss)		0.57			(1.19	)		2.57			(0.47	)
Earnings (loss) per ordinary share – Diluted
Net income (loss) from continuing operations		0.52			(1.32	)		2.21			(0.67	)
Net income (loss) from discontinued operations, net of tax		-			0.13			0.17			0.20
Net income (loss)		0.52			(1.19	)		2.38			(0.47	)
Weighted average ordinary shares outstanding
Basic		19,659,657			16,964,768			18,093,104			16,964,122
Diluted		21,597,188			16,964,768			19,541,775			16,964,122

AMERICAN DAIRY, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)

	September 30,		December 31,
	2009		2008
	US$		US$
ASSETS
Current assets:
Cash and cash equivalents		43,491,803		11,785,408
Notes and loans receivable, net		-		1,493,245
Trade receivables, net of allowance of $1,002,883 and $1,311,331, respectively		32,308,418		12,275,497
Due from related parties		2,250,874		265,479
Employee receivables		199,563		307,249
Advances to suppliers		27,120,715		24,943,046
Receivable from discontinued operations		-		31,002,897
Inventories, net of allowance of $546,503 and $575,916, respectively		65,959,828		52,330,333
Prepayments and other current assets		97,218		63,711
Refundable taxes		4,135,779		488,938
Other receivables		6,138,410		4,598,359
Current assets of discontinued operations		-		12,392,384
Total current assets		181,702,608		151,946,546
Investments:
Investment in mutual funds – available for sale		118,437		77,504
Investment at cost		263,249		262,611
		381,686		340,115
Property and equipment:
Property and equipment, net		96,780,672		88,289,858
Construction in progress		62,272,749		28,847,959
		159,053,421		117,137,817
Biological assets:
Immature biological assets		35,901,697		23,784,479
Mature biological assets, net		11,589,288		1,483,355
		47,490,985		25,267,834
Other assets:
Deferred tax assets		730,491		730,490
Prepaid leases		29,367,017		29,146,748
Goodwill		2,288,380		2,282,838
Deferred charges, net		5,653		107,396
Long term assets of discontinued operations		-		31,587,018
Total assets		421,020,241		358,546,802
LIABILITIES AND EQUITY
Liabilities
Current liabilities:
Current maturities of long term debt		3,919,504		4,018,704
Convertible debt redeemable within one year		4,500,000		17,732,033
Short term debt		11,106,018		73,809,893
Notes and loans payable		39,634,714		8,055,450
Accounts payable		42,127,814		36,643,041
Accrued expenses		9,298,412		10,620,393
Income tax payable		1,367,039		1,185,528
Advances from customers		3,958,534		9,864,080
Due to related parties		594,057		1,017,399
Advances from employees		469,731		1,016,173
Accrued employee benefits		2,760,033		2,873,889
Other payable		20,076,776		19,513,681
Current liabilities of discontinued operations		-		35,063,603
Total current liabilities		139,812,632		221,413,867
Long term debt, net of current portion		19,626,770		9,146,034
Long term tax payable		5,883,747		2,750,887
Deferred income		7,695,346		8,416,492
Contingent share obligation		10,010,000		-
Long term liability of discontinued operations		-		395,176
Total liabilities		183,028,495		242,122,456
Commitments and contigencies		-		-
Temporary equity
Redeemable ordinary shares (2,100,000 and 0 shares issued and outstanding, respectively)		53,780,010		-
Equity
Shareholders’ equity:
Ordinary shares (US$0.001 par value, 50,000,000 shares authorized; 19,183,492 and 17,253,907 issued and outstanding)		19,184		17,254
Additional paid-in capital		48,366,564		26,758,425
Ordinary share warrants		2,119,485		3,003,448
Statutory reserves		6,861,224		6,861,224
Accumulated other comprehensive income		25,780,937		25,146,055
Retained earnings		100,650,814		54,091,493
Total shareholders’ equity		183,798,208		115,877,899
Noncontrolling interests		413,528		546,447
Total equity		184,211,736		116,424,346
Total liabilities and equity		421,020,241		358,546,802