EX-99.1 2 v149556_ex99-1.htm Unassociated Document
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.
Integrated Corporate Relations, Inc.
In the United States: Ashley Ammon: 1-203-682-8200
In China: Wei-Jung Yang: 86-10-6599-7968



March 31,
December 31,
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
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  
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  
    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  
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  
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  



For the period ended March 31,
    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
    17,253,907       16,962,823  
    17,926,990       17,588,852