BEIJING and LOS ANGELES, April 15 /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 its fiscal
year 2008. Results for the Twelve Months Ended December 31, 2008
Sales increased 17.9% to $193.2 million in 2008 from $163.9 million
in 2007. This increase reflects continued popularity of the
Company's branded products as well as an increase in raw milk
powder sales. In 2008, the Company began distributing raw milk
powder to beverage manufacturers and other wholesalers for use in
blended beverage products. As a result, sales of raw milk powder
increased 70.8% to $60.8 million in 2008, contributing to 31.4% of
total sales compared to only 21.7% of total sales in 2007. Cost of
goods sold increased $25.8 million, or 28.2%, to $117.2 million in
2008 from $91.4 million in 2007. This increase was primarily
attributable to an increase of $32.9 million, or 81.2%, in raw milk
powder purchased from third parties for processing and
distribution, as well as a general increase in costs resulting from
economic conditions. Gross profit increased 4.9% to $76.0 million
in 2008 from $72.5 million in 2007. Gross margin in 2008 was 39.3%,
compared to 44.2% in 2007. Gross profit margin performance reflects
the higher contribution of raw milk powder sales in 2008 as well as
a general increase in costs of raw materials. Mr. Leng You-Bin, the
Company's Chief Executive Officer, stated, "As we closed the year
2008, our growth strategy focused increasingly on driving
premium-branded infant formula sales, which typically carry gross
margins north of 50 percent. The melamine scandal that implicated
many domestic producers has allowed us to capitalize on the market
opportunity and reposition our brand to enter into top tier cities.
As our Feihe brand name continues to be recognized as safe and
high-quality by Chinese consumers, we have increased our marketing
efforts to seize market share from competing top Chinese and
foreign brands in these first tier cities. Our advertising strategy
supported these efforts, and in the fourth quarter, we began to see
milk powder revenue growth increase versus wholesale raw milk
growth, year over year." Income from continuing operations
decreased 64.9% to $6.3 million in 2008 from $17.9 million in the
prior year, reflecting an increase of 27.8% in operating expenses.
Sales and marketing expenses increased 24.4% from $40.7 million in
2007 to $50.7 million in 2008, reflecting an increase of $2.1
million, or 17.7%, in salary and an increase of $2.4 million, or
87.0%, in transportation expenses. General and administrative
expenses increased 37.7% from $13.8 million in 2007 to $19.0
million in 2008. The increase was primarily attributable to an
increase of $2.7 million, or 120.2%, in legal and accounting fees
and an increase of approximately $0.6 million, or 13.7%, in
allowance for receivables. The Company recognized other income of
$7.9 million in 2008, compared to other expense of $4.4 million in
2007. This increase was primarily attributable to a gain on
extinguishment of notes of $30.5 million, offset in part by a
decrease in gain (loss) on derivatives of $11.6 million, an
increase in interest and finance costs of $5.4 million, and a
decrease in government subsidized tax refunds of $6.8 million. The
gain on extinguishment of notes and the loss on derivatives
primarily relate to the Company's agreement to repurchase all of
its 2012 Notes, which the Company expects to be non-recurring. Net
income from continuing operations was approximately $10.6 million,
or $0.60 per diluted share, compared to $7.8 million, or $0.46 per
diluted share, in 2007. Mr. Leng You-Bin continued, "Our strategy
to increase higher margin, premium product sales so that we drive
future profitability continues into 2009. We are particularly
pleased with the revenue mix shift we anticipate in the first
quarter of this year, and we expect that infant milk powder
products contributed to more than 90 percent of our total sales in
the period. We also anticipate significant year over year growth in
the first quarter of 2009, reflecting our increasing market share
in the midst of the melamine crisis." As of December 31, 2008, the
Company had cash and cash equivalents of $11.8 million and total
current assets of $151.9 million, compared with cash and cash
equivalents of $11.1 million and total current assets of $118.8
million in 2007. The Company believes that cash generated from
operations and existing cash on hand is sufficient to fund current
obligations, including payments of $15.3 million due April 2009,
$15.3 million due July 2009, and $46.0 million due October 2009,
related to outstanding convertible debt. The Company also has
access to a line of credit with the Construction Bank of China and
other Chinese banks to fund its operations. Mr. Jonathan H. Chou,
Chief Financial Officer of American Dairy, stated, "The year 2008
was a transitional year for American Dairy and our financial
results reflect important efforts we made to restructure our
balance sheet, including restructuring our convertible notes due
2012 so that we reduce our cost of capital and create flexibility
for future growth. We also enhanced our financial reporting
capabilities. These efforts help prepare American Dairy to be a
world class organization, at the forefront of China's dairy
industry - especially in the premium, branded infant formula
market. We look forward to speaking with investors and shareholders
on a regular quarterly basis when we report our 2009 first quarter
results." Business Update In 2008, the Company, through its Moveup
subsidiary, recorded a total deposit for investment of $31.6
million related to the proposed purchase of Ausnutria Dairy (Hunan)
Company Ltd. ("Ausnutria"). In December 2008, the Company signed a
letter of intent to unwind the proposed acquisition of Ausnutria,
which included an agreement to sell its subsidiary, Heilongjiang
Moveup Co. Limited ("Moveup"). The operations associated with
Moveup were considered to be discontinuing, and the consolidated
statements of operations and comprehensive income and consolidated
balance sheets were adjusted to show the impact of discontinuing
operations for 2008 and 2007. On February 18, 2009, the Company
entered into an equity purchase agreement to sell Moveup and unwind
the Ausnutria transaction for total consideration of $43.3 million,
payable in two tranches. The Company has received $11.0 million and
the remaining $32.3 million has been deposited into an escrow
account and will be released upon satisfaction of closing
conditions under the agreement. 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 reports on Form 10-Q for its fiscal quarters in
2008, 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: 203-682-8200 In
China: Wei-Jung Yang: 86-10-6599-7968 AMERICAN DAIRY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME For
the years ended December 31, ------------------- 2008 2007 ----
---- US$ US$ Sales 193,191,710 163,898,555 Cost of goods sold
117,180,986 91,429,949 ----------- ---------- Gross profit
76,010,724 72,468,606 ---------- ---------- Operating and
administrative expenses: Sales and marketing 50,685,804 40,739,403
General and administrative 19,046,939 13,836,171 ----------
---------- Total operating expenses 69,732,743 54,575,574
---------- ---------- Income from continuing operations 6,277,981
17,893,032 --------- ---------- Other income (expenses): Interest
income 579,724 374,386 Interest and finance costs -18,843,032
-13,404,841 Amortization of deferred charges -657,258 -369,794
Registration rights penalty -2,389,077 -2,540,000 Gain on
extinguishment of debt 30,497,268 - Gain (loss) on derivatives
-8,321,481 3,279,031 Government subsidy-tax refund 6,810,231
8,140,145 Other income, net 182,406 135,168 ------- ------- Income
from continuing operations before income tax expenses and minority
interests 14,136,762 13,507,127 Income tax expenses 3,567,135
5,661,779 --------- --------- Net income from continuing operations
before minority interests 10,569,627 7,845,348 Minority interests
-9,470 -3,066 ------ ------ Net income from continuing operations
10,560,157 7,842,282 Net income from discontinuing operations
6,462,878 442,111 --------- ------- Net income attributable to
ordinary shareholders 17,023,035 8,284,393 ========== =========
Other comprehensive income: Cumulative currency translation
adjustments 13,169,453 9,314,690 Change in fair value of available
for sale investments -104,865 - -------- -- Total comprehensive
income 30,087,623 17,599,083 ========== ========== Earnings per
ordinary share - Basic Income from continuing operations $0.62
$0.48 Income from discontinuing operation, net of tax $0.38 $0.03
Net income $1.00 $0.51 Earnings per ordinary share - Diluted Income
from continuing operations $0.60 $0.46 Income from discontinuing
operation, net of tax $0.37 $0.02 Net income $0.97 $0.48 Weighted
average ordinary shares outstanding Basic 16,993,390 16,327,616
Diluted 17,636,862 17,696,997 AMERICAN DAIRY, INC. CONSOLIDATED
BALANCE SHEETS December 31, December 31, 2008 2007 ---- ---- US$
US$ ASSETS Current assets: Cash and cash equivalents 11,785,408
11,057,874 Time deposit - 8,214,002 Notes and loans receivable, net
1,493,245 1,285,382 Trade receivables, net 12,275,497 4,518,647 Due
from related parties 265,479 115,477 Employee receivable 307,249
105,662 Advances to suppliers 24,943,046 28,051,487 Receivable from
discontinuing operations 31,002,897 25,949,410 Inventories, net
52,330,333 24,696,034 Prepayments and other current assets 63,711
2,567,262 Refundable taxes 488,938 143,703 Deposit for land use
right - 6,889,251 Other receivables 4,598,359 3,853,267 Current
assets of discontinuing operations 12,392,384 1,346,657 ----------
--------- Total current assets 151,946,546 118,794,115 Investments:
Investment in mutual funds - available for sale 77,504 171,125
Investment at cost 262,611 246,420 ------- ------- 340,115 417,545
Property and equipment: Property and equipment, net 88,289,858
52,279,168 Construction in progress 28,847,959 33,009,992
---------- ---------- 117,137,817 85,289,160 ----------- ----------
Biological assets: Immature biological assets 23,784,479 - Mature
biological assets, net 1,483,355 - --------- -- 25,267,834 - Other
assets: Deferred tax assets 730,490 - Long-term notes and loans
receivable - 1,368,999 Prepaid leases 29,146,748 20,967,898
Goodwill 2,282,838 2,142,079 Deferred charges, net 107,396
3,328,140 Long-term assets of discontinuing operations 31,587,018
28,270,501 ---------- ---------- Total assets 358,546,802
260,578,437 ----------- ----------- LIABILITIES AND SHAREHOLDERS'
EQUITY Liabilities Current liabilities: Current maturities of long-
term debt 4,018,704 101,990 Convertible debt redeemable within one
year 91,541,926 - Notes and loans payable 8,055,450 8,512,446
Accounts payable 36,643,041 9,970,688 Accrued expenses 10,620,393
5,830,658 Income tax payable 1,185,528 18,267 Advances from
customers 9,864,080 4,738,848 Due to related parties 1,017,399
401,560 Advances from employees 1,016,173 574,579 Accrued employee
benefits 2,873,889 1,088,171 Other payable 19,513,681 10,413,156
Current liabilities of discontinuing operations 35,063,603
27,787,737 ---------- ---------- Total current liabilities
221,413,867 69,438,100 ----------- ---------- Long-term debt, net
of current portion 9,146,034 382,465 Long-term tax payable
2,750,887 1,714,429 Convertible debt, net - 55,237,771 Derivatives
- 50,019,300 Deferred income 8,416,492 1,580,508 Long-term
liability of discontinuing operation 395,176 - ------- -- Total
liabilities 242,122,456 178,372,573 ----------- -----------
Minority interests 546,447 536,977 Shareholders' equity Ordinary
shares (US$0.001 par value, 50,000,000 shares authorized;
17,253,907 and 16,961,768 issued and outstanding as of December 31,
2008 and 2007, respectively) 17,254 16,961 Additional paid-in
capital 26,758,425 22,629,333 Ordinary share warrants 3,003,448
3,011,444 Statutory reserves 6,861,224 6,040,382 Accumulated other
comprehensive income 25,146,055 12,081,467 Retained earnings
54,091,493 37,889,300 ---------- ---------- Total shareholders'
equity 115,877,899 81,668,887 ----------- ---------- Total
liabilities and shareholders' equity 358,546,802 260,578,437
----------- ----------- DATASOURCE: American Dairy, Inc. CONTACT:
United States, Ashley Ammon, +1-203-682-8200, or China, Wei-Jung
Yang, 86-10-6599-7968, both of Integrated Corporate Relations, Inc.
Web Site: http://www.americandairyinc.com/
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