Feihe International, Inc. (NYSE: ADY) ("Feihe International" or the
"Company"), one of the leading producers and distributors of
premium infant formula, milk power and soybean, rice and walnut
products in China, today announced financial results for the third
quarter of 2012. The Company will hold a conference call today at
6:00 am Eastern Time.
Third Quarter 2012 Financial
Highlights:
- Revenue increased approximately $2.7 million, or 4.3%, to $66.1
million in 3Q12 vs. $63.4 million in 2Q12:
- Revenue from branded milk powder products was $62.7 million in
3Q12, up $2.0 million from $60.7 million of 2Q12 and up $7.2
million from $55.5 million of 3Q11.
- Revenue from raw milk powder was $15,000 in 3Q12 vs. $33,000 in
2Q12 and $16.9 million in 3Q11.
- Gross profit increased approximately $8.8 million, or 32.0%, to
$36.3 million in 3Q12 from $27.5 million in 3Q11, and up $1.0
million, or 2.6%, sequentially from $35.3 million in 2Q12.
- Gross profit margin was 54.9% in 3Q12 vs. 36.5% in 3Q11.
- Net income attributable to common shareholders of the Company
was $7.5 million in 3Q12, up approximately $7.1 million from
$473,000 in 3Q11 and up approximately $1.7 million, or 29.0%,
sequentially from $5.8 million in 2Q12.
- Diluted net income from continuing operations per common share
("EPS") was $0.38 in 3Q12, up significantly from $0.11 in 3Q11, and
increased from $0.29 in 2Q12.
Mr. Leng You Bin, the Company's Chairman and Chief Executive
Officer, stated, "We are pleased with our third quarter results.
Our improved gross profit and significantly improved net income
attributable to common shareholders reflects the success of our
efforts to control costs and to focus our sales on higher margin
products. In particular, sales of infant milk powder were up 15%
from the third quarter 2011, especially our Feifan and AstroBaby
series. We plan to continue this strategy and to enhance our
premium quality brand awareness."
The Company's revenue was $66.1 million for the three month
period ended September 30, 2012, up $2.7 million, or 4.3%, from
$63.4 million in the second quarter of 2012, and representing a
decrease of $9.3 million, or 12.4% compared to $75.4 million
revenue for the third quarter of 2011. This year-over-year decrease
was primarily attributable to a decrease in sales of raw milk
powder, a high cost and low gross profit product, of approximately
$16.9 million offset by an increase in sales of branded milk powder
of approximately $7.2 million. The increase in sales compared to
the last quarter in 2012 was primarily attributable to an increase
in sales of branded infant milk powder. Sales of milk powder, our
highest margin products, increased to $62.7 million from $55.5
million in the third quarter of 2011.
The Company's gross profit was $36.3 million in the third
quarter of 2012, an increase of approximately $8.8 million, or
32.0%, compared to $27.5 million in the third quarter of 2011. Our
gross profit margin was 54.9% compared with 36.5% in the third
quarter of 2011. The substantial growth was primarily attributable
to general increases in the sales of high end milk powder and a
decrease in the cost of raw milk powder.
The Company's income from operations was $5.4 million in the
third quarter of 2012, an increase of approximately $2.2 million,
or 69.4%, compared to $3.2 million in the third quarter of 2011.
Our total operating expenses increased by approximately $6.4
million, or 25.8%, from approximately $24.8 million in the three
month period ended September 30, 2011 to approximately $31.2
million in the three month period ended September 30, 2012. This
increase was primarily attributable to an increase of $8.9 million,
or 48.9%, in sales and marketing expenses from approximately $18.2
million for the three month period ended September 30, 2011 to
$27.1 million in the three month period ended September 30, 2012,
and primarily related to increases in advertisement fees, marketing
promotion and transportation expenses.
Net income attributable to common shareholders of the Company
for the third quarter of 2012 was $7.5 million, or diluted EPS of
$0.38, a significant increase from $473,000, or diluted EPS of
$0.11, in the third quarter of 2011, and an increase from $5.8
million, or diluted EPS of $0.29, in the second quarter of
2012.
Nine Months Ended September 30, 2012
Revenue was $192.4 million for the nine month period ended
September 30, 2012, a decrease of approximately $13.5 million, or
6.6%, from $205.9 million for the nine month period ended September
30, 2011. This decrease was primarily attributable to a decrease in
sales of raw milk power of approximately $37.2 million and a
decrease in sales of soybean powder of approximately $2.9 million,
offset by an increase in sales of milk powder of approximately
$25.4 million and an increase in sales of other products of
approximately $2.1 million. Gross profit was $105.6 million in the
nine month ended September 30, 2012, up $24.2 million from $81.4
million in the same period of 2011. Gross profit margin increased
from 39.5% for the nine month period ended September 30, 2011 to
54.9% for the same period of 2012. The increase was primarily
attributable to general increases in the sales of high end milk
powder and a decrease in the cost of raw milk powder. Income from
operations was $20.3 million in the nine month period ended
September 30, 2012 compared to $13.4 million in the same period of
2011. Net income attributable to the common shareholders of the
Company for the nine month period ended September 30, 2012 was
$21.6 million, or diluted EPS of $1.07, as compared to net income
attributable to the common shareholders of the Company of $10.3
million, or diluted EPS of $0.60, in the prior year period.
As of September 30, 2012, the Company had cash and cash
equivalents of $2.3 million and total current assets of $201.1
million compared to cash and cash equivalents of $15.4 million and
total current assets of $200.5 million as of December 31, 2011. The
Company had a working capital of approximately $31.1 million as of
September 30, 2012, compared to a working capital deficiency of
approximately $8.0 million as of December 31, 2011.
Mr. Liu Hua, the Company's Vice Chairman and Chief Financial
Officer, stated, "We are pleased with our financial results so far
in 2012. We have upgraded the product mix for our sales and
significantly improved our profit margins, with sales of our
premium Feifan series products representing 60.8%, our
super-premium AstroBaby series representing 5.3%, and our
super-premium Feifan series representing 8.5%, of our infant milk
powder sales this quarter. We are confident in our decision to
focus on infant milk powder and decrease raw milk powder sales, and
we believe that we can improve our footprint as a leading infant
formula company in the PRC in the coming years."
Conference Call Details The Company will
also hold a conference call on November 9, 2012 at 6:00 a.m.
Eastern Standard Time to discuss its third quarter results.
Listeners may access the call by dialing the following numbers:
United States toll free:
1-888-437-9357
Hong Kong toll free: 800-968-103
Northern China toll free: 10 800 712
0046
Southern China toll free: 10 800 120
0046
International: 1-719-325-2142
The replay will be accessible through November 16, 2012 by
dialing the following numbers:
United States toll free:
1-877-870-5176
International: 1-858-384-5517
Password: 8043064
About Feihe International, Inc. Feihe
International, 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. Feihe
International 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, Gannan, Longjiang,
Shanxi, and Langfang. Using proprietary processing techniques,
Feihe International makes products that are specially formulated
for particular ages, dietary needs and health concerns. Feihe
International has over 200 company-owned milk collection stations,
six production facilities with an aggregate milk powder production
capacity of approximately 2,020 tons per day and an extensive
distribution network that reaches over 80,000 retail outlets
throughout China. For more information about Feihe International,
Inc., please visit http://ady.feihe.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, 2011, as amended, 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.
FEIHE INTERNATIONAL, INC
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
September 30, 2012 December 31, 2011
------------------ ------------------
US$ US$
Assets
Current assets:
Cash and cash equivalents 2,274,955 15,353,882
Restricted cash 6,769,629 1,056,579
Notes and loans receivable, net of - -
allowance for doubtful accounts of
$3,350,056, as of September 30,
2012 and December 31, 2011,
respectively
Trade receivables, net of allowance
for doubtful accounts of $812,090
and $810,864, as of September 30,
2012 and December 31, 2011,
respectively 16,607,970 40,690,638
Due from related parties 37,791 194,759
Advances to suppliers 27,475,374 11,841,936
Inventories, net 44,782,639 33,328,949
Prepayments and other current assets - 50,427
Income taxes receivable 1,408,779 1,406,653
Input value-added taxes 1,297,389 965,685
Other receivables 17,649,157 13,742,625
Consideration receivable- current 80,291,499 79,337,423
Investment in mutual funds -
available-for-sale 116,546 111,116
Assets held for sale 2,387,996 2,384,391
------------------ ------------------
Total current assets 201,099,724 200,465,063
------------------ ------------------
Investments: 286,422 285,990
------------------ ------------------
Investment at cost 286,422 285,990
------------------ ------------------
Property, plant and equipment:
Property, plant and equipment, net 123,683,509 128,739,637
Construction in progress 17,137,526 14,895,512
------------------ ------------------
140,821,035 143,635,149
------------------ ------------------
Other assets:
Advance to suppliers - non-current 6,382,308 3,741,454
Long term deposit 78,336,834 46,139,913
Consideration receivables - non-
current - 19,450,201
Deferred tax assets - non-current 2,863,870 9,805,701
Prepaid leases for land use rights 17,987,709 18,280,745
------------------ ------------------
Total assets 447,777,902 441,804,216
------------------ ------------------
Liabilities
Current liabilities:
Short term bank loans 59,035,071 54,616,375
Accounts payable 44,465,872 39,077,499
Notes payable 3,182,484 -
Accrued expenses 6,371,885 6,943,370
Income tax payable 514,361 734,389
Advances from customers 10,799,243 17,899,560
Due to related parties 50,920 86,213
Advances from employees 328,888 415,253
Employee benefits and salary payable 8,013,360 9,777,537
Other payables 31,150,099 39,561,388
Current portion of long term bank
loans 5,953,631 5,945,439
Current portion of capital lease
obligation 134,710 288,066
Accrued interest - 395,783
Redeemable common stock (US$0.001 -
par value, nil and 1,312,500 shares
issued and outstanding as of
September 30, 2012 and December 31,
2011), respectively 32,696,658
------------------ ------------------
Total current liabilities 170,000,524 208,437,530
Long term bank loans, net of current
portion 2,976,293 5,943,726
Capital lease obligation, net of
current portion 288,683 430,180
Other long term loan 59,222,577 32,803,289
Accrued interest - 170,555
Unrecognized tax benefits - non-
current 10,654,787 14,806,768
Deferred income 4,607,006 3,711,033
------------------ ------------------
Total liabilities 247,749,870 266,303,081
------------------ ------------------
Commitments and contingencies (see
Note 23)
Equity
Feihe International, Inc.
shareholders' equity:
Common stock (US$0.001 par value,
50,000,000 shares authorized;
19,784,291 and 19,714,291 shares
issued and outstanding as of
September 30, 2012 and December 31,
2011, respectively) 19,784 19,714
Additional paid-in capital 61,380,588 58,920,283
Common stock warrants 1,774,151 1,774,151
Statutory reserves 11,341,427 11,341,427
Accumulated other comprehensive
income 43,216,008 42,730,802
Retained earnings 82,296,074 60,696,815
------------------ ------------------
Total Feihe International, Inc.
shareholders' equity 200,028,032 175,483,192
Noncontrolling interests - 17,943
------------------ ------------------
Total equity 200,028,032 175,501,135
------------------ ------------------
Total liabilities and equity 447,777,902 441,804,216
------------------ ------------------
FEIHE INTERNATIONAL, INC
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited)
Three months ended Nine months ended
September 30, September 30,
-------------------------- --------------------------
2012 2011 2012 2011
------------ ------------ ------------ ------------
Sales 66,063,396 75,372,031 192,382,797 205,920,601
Cost of goods sold (29,810,627) (47,897,512) (86,832,560) (124,487,794)
============ ============ ============ ============
Gross profit 36,252,769 27,474,519 105,550,237 81,432,807
------------ ------------ ------------ ------------
Operating and
administrative
expenses:
Sales and
marketing (27,084,010) (18,189,157) (70,834,189) (54,013,376)
General and
administrative (4,109,154) (6,620,974) (14,841,476) (17,376,737)
------------ ------------ ------------ ------------
Total operating
expenses (31,193,164) (24,810,131) (85,675,665) (71,390,113)
============ ============ ============ ============
Other operating
income, net 311,666 506,956 405,569 3,367,465
------------ ------------ ------------ ------------
Income from
operations 5,371,271 3,171,344 20,280,141 13,410,159
Other income
(expenses):
Interest income 14,604 20,067 55,109 65,486
Interest and
finance costs (635,644) (1,076,261) (2,920,757) (3,123,153)
Government subsidy 1,841,887 3,418,184 8,040,128 7,391,065
Gain on
deregistration of
subsidiaries - - 180,077 -
------------ ------------ ------------ ------------
Income from
continuing
operations before
income tax expenses
and noncontrolling
interests 6,592,118 5,533,334 25,634,698 17,743,558
Income tax credit
(expenses) 936,679 (2,546,209) (4,002,635) (5,178,588)
============ ============ ============ ============
Net income from
continuing
operations 7,528,797 2,987,125 21,632,063 12,564,970
Loss from
discontinued
operations, net of
tax - (1,969,820) - (1,629,948)
------------ ------------ ------------ ------------
Net income 7,528,797 1,017,305 21,632,063 10,935,022
Net income
attributable to
noncontrolling
interests - (544,655) (24,209) (599,442)
------------ ------------ ------------ ------------
Net income
attributable to
common
stockholders of
Feihe
International,
Inc. 7,528,797 472,650 21,607,854 10,335,580
------------ ------------ ------------ ------------
Net income 7,528,797 1,017,305 21,632,063 10,935,022
Other comprehensive
income, net of tax
Foreign currency
translation
adjustments 2,920,875 3,543,477 429,029 8,995,227
Change in fair
value of
available for
sale investments (1,988) (16,522) 5,430 (15,618)
------------ ------------ ------------ ------------
Other comprehensive
income 2,918,887 3,526,955 434,459 8,979,609
------------ ------------ ------------ ------------
Comprehensive income 10,447,684 4,544,260 22,066,522 19,914,631
Comprehensive
income
attributable to
the
noncontrolling
interest - 54,065 17,943 10,692
------------ ------------ ------------ ------------
Comprehensive
income
attributable to
common
stockholders of
Feihe
International,
Inc. 10,447,684 4,598,325 22,084,465 19,925,323
============ ============ ============ ============
Net income from
continuing
operations per
share of common
stock
Basic 0.38 0.11 1.07 0.60
Diluted 0.38 0.11 1.07 0.60
Net income from
continuing
operations per
share of redeemable
common stock
Basic - 0.11 1.07 0.55
Diluted - 0.11 1.07 0.55
Net income from
discontinued
operations, net of
tax per share of
common stock
Basic - (0.09) - (0.07)
Diluted - (0.09) - (0.07)
Net income from
discontinued
operations, net of
tax per share of
redeemable common
stock
Basic - (0.09) - (0.07)
Diluted - (0.09) - (0.07)
Weighted average
shares used in
calculating net
income per share of
common stock
Basic 19,784,291 19,694,117 19,747,247 19,678,983
Diluted 19,784,291 19,694,117 19,747,247 19,688,903
Weighted average
shares used in
calculating net
income per share of
redeemable common
stock
Basic - 1,968,750 364,051 2,252,404
Diluted - 1,968,750 364,051 2,252,404
CONTACT In the U.S.: Renee Ren Email Contact In China: Renee Ren
86-10-8457-4688 x8810 Email Contact
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