Attached files
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| 8-K - FORM 8-K - Feihe International Inc | v221714_8k.htm |
Feihe International, Inc. Reports
First Quarter 2011 Financial Results
Revenue of $76.4 Million
Diluted EPS per common share of $0.26
Conference Call to be Held Today at 9:00 am ET
BEIJING and LOS ANGELES, May 10, 2011 /PRNewswire Asia-FirstCall/ -- Feihe International, Inc. (NYSE: ADY; "Feihe International" or the "Company") (formerly known as American Dairy, Inc.), 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 of 2011. The Company will hold a conference call today at 9:00am ET.
First Quarter 2011 Financial Highlights:
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Revenue of $76.4 million in 1Q11 vs. $81.4 million in 1Q10, up 22.6% sequentially from $62.3 million in 4Q10:
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Revenue from branded milk powder products was $47.9 million in 1Q11 vs. $64.8 million in 1Q10, up 21.3% sequentially from $39.5 million in 4Q10;
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-
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Revenue from raw milk powder was $16.1 million in 1Q11 vs. $12.4 million in 1Q10, down 6.9% sequentially from $17.3 million in 4Q10;
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Gross profit of $27.9 million in 1Q11 vs. $38.4 million in 1Q10, up 46.8% sequentially from $19.0 million in 4Q10;
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Gross margin was 36.5% in 1Q11 vs. 47.2% in 1Q10, up from 30.5% in 4Q10;
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Net income of $4.7 million in 1Q11 vs. net income of $5.5 million in 1Q10, up 487.5% from $0.8 million in 4Q10; and
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Diluted EPS per common share was $0.26 in 1Q11 vs. $0.25 in 1Q10, up significantly from $0.08 in 4Q10.
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Mr. Leng You Bin, the Company's Chairman and Chief Executive Officer, stated, “We are extremely pleased with our first quarter results. Our results of $76.4 million in revenue and $4.7 million in net income demonstrate the progress we have made the last few months in strengthening our brand and market position, and our footprint in the competitive Chinese milk powder industry. With strong profits in the past few quarters, we plan to continue improving our operations across all functions, including improving the cost effectiveness of our selling expenses and increasing sales at existing retail sales points to drive greater profitability. We remain committed to being one of the leading infant formula providers in China and we believe that we are well positioned to execute our strategic initiatives to grow sales at existing retail sales points throughout 2011 and capitalize on market opportunities.”
The Company’s revenue of $76.4 million in the first quarter of 2011 was a decrease of $5.0 million compared to the first quarter of 2010, which was primarily attributable to a decrease in sales of milk powder of $16.9 million. The decrease was offset in part by an increase in sales of raw milk powder of $3.7 million and an increase in sales of raw milk of $8.8 million, as well as increased competition from new competitors entering into the Company’s industry and old competitors aggressively attempting to reclaim market share. The revenue in the first quarter of 2011 increased 22.6% sequentially from $62.3 million in the fourth quarter of 2010, primarily reflecting the Company’s efforts to increase sales at existing retail sales points, as well as the continued commitment to making improvements across all functions including effectiveness of operations.
Gross profit was $27.9 million in the first quarter of 2011 compared to $38.4 million in the first quarter of 2010, up 46.8% sequentially from $19.0 million in the fourth quarter of 2010. Gross margin for the first quarter of 2011 was 36.5%, compared to 47.2% in the first quarter of 2010, up from 30.5% in the fourth quarter of 2010. Gross profit in the first quarter of 2011 was lower than gross profit in the first quarter of 2010 primarily due to changes in the Company’s revenue mix and increased costs of raw milk supply. Gross profit in the first quarter of 2011 was sequentially higher than gross profit in the fourth quarter of 2010 primarily due to the Company’s efforts to increase sales of branded milk powder with a higher margin, as well as improvements in the Company’s sales and marketing functions.
Income from operations was $6.0 million in the first quarter of 2011, compared with income from operations of $2.1 million in the first quarter of 2010, up significantly from a loss of $(11.3) million in the fourth quarter of 2010. Sales and marketing expenses decreased 42.8% to $16.2 million in the first quarter of 2011 from $28.3 million in the first quarter of 2010, and decreased 29.3% compared to $22.9 million in the fourth quarter of 2010, primarily reflecting a decrease in promotional fees and advertisement and the Company’s efforts to improve the effectiveness of its selling expenses and sales at existing sales points rather than expand its distribution network. General and administrative expenses increased 13.4% to $6.2 million in the first quarter of 2011 from $5.5 million in the first quarter of 2010, primarily reflecting increased professional service fees and bad debt provision, offset in part by a decrease in salary. In addition, loss on disposal of biological assets, which reflects the Company’s sale of under-producing cows at its dairy farms, decreased by $1.2 million, or 42.9%, to $1.6 million for the first quarter of 2011.
The Company recognized other operating income of $2.1 million for the first quarter of 2011, compared to $0.2 million for the prior year period, primarily reflecting contractual payments received from distributors for improper cross-territory selling. In addition, the Company recognized other income of $0.1 million during the first quarter of 2011, compared to other income of $5.0 million during the first quarter of 2010. The lower other income was primarily attributable to a decrease in government subsidy and an increase in interest and finance costs.
Net income attributable to the Company for the first quarter of 2011 was $4.7 million, or diluted EPS per common share of $0.26, compared to net income attributable to the Company of $5.5 million, or diluted EPS per common share of $0.25, in the first quarter in 2010, but improved significantly from net income attributable to the Company of $0.8 million, or diluted EPS per common share of $0.08, in the fourth quarter of 2010.
As of March 31, 2011, the Company had cash and cash equivalents of $19.1 million and total current assets of $138.1 million, compared with cash and cash equivalents of $17.5 million and total current assets of $137.2 million as of December 31, 2010. The Company had a working capital deficit of $115.7 million as of March 31, 2011, primarily associated with $65.1 million in annually renewed, short-term bank loans and $69.5 million in redemption liability of redeemable common stock. However, the Company believes that will be able to refinance much of its short-term bank loans when they become due and that it has sufficient cash, cash flows from operations and available credit to adequately support its business in the next operating cycle.
Financial Guidance
Mr. Liu Hua, the Company’s Vice Chairman and Chief Financial Officer, stated, “We are pleased to report our first quarter 2011 financial results today. As we approach the middle of the second quarter of 2011, we would like to reiterate our revenue guidance of approximately $290 million and net income guidance of approximately $22 - $24 million for the full year of 2011.”
Conference Call Details
The Company will hold a conference call on May 10, 2011 at 9:00 am ET to discuss its results. Listeners may access the call by dialing the following numbers:
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United States toll free:
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1-888-569-5033
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Hong Kong toll free:
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800-901-111
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Northern China toll free:
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10 800 714 1202
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Southern China toll free:
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10 800 140 1181
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International:
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1-719-457-2653
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The replay will be accessible through May 17, 2011 by dialing the following numbers:
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United States toll free:
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1-877-870-5176
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International:
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1-858-384-5517
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| Password: | 5581728 |
About Feihe International, Inc.
Feihe International, Inc. (NYSE: ADY) (formerly known as American Dairy, Inc.) 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, Baiquan, 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, two dairy farms, seven production facilities with an aggregate milk powder production capacity of approximately 1,950 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, 2010, 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.
CONTACT
In the U.S.: ir@americandairyinc.com
In China: May Shen, IR Manager
86-10-8457-4688 x8810
shenchunmei@americandairyinc.com
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FEIHE INTERNATIONAL, INC.
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CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
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March 31,
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December 31,
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2011
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2010
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US$
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US$
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Assets
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Current assets:
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Cash and cash equivalents
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19,097,434 | 17,529,582 | ||||||
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Restricted cash
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264,447 | 3,078,564 | ||||||
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Notes and loans receivable, net of allowance for doubtful accounts of
$3,350,056 and $3,500,028, as of March 31, 2011 and December 31, 2010,
respectively
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- | 136,120 | ||||||
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Trade receivables, net of allowance for doubtful accounts of $1,600,560 and
$1,084,308, as of March 31, 2011 and December 31, 2010, respectively
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18,603,129 | 15,885,708 | ||||||
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Due from related parties
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1,795,240 | 1,806,889 | ||||||
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Advances to suppliers
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12,435,923 | 7,520,804 | ||||||
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Inventories
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62,399,998 | 71,683,471 | ||||||
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Prepayments and other current assets
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166,055 | 266,935 | ||||||
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Income taxes receivable
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3,615,068 | 4,970,271 | ||||||
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Input value-added taxes
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3,134,056 | 6,886,531 | ||||||
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Other receivables
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16,425,641 | 7,275,903 | ||||||
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Investment in mutual funds – available-for-sale
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137,944 | 139,294 | ||||||
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Total current assets
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138,074,935 | 137,180,072 | ||||||
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Investments:
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Investment at cost
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274,879 | 272,239 | ||||||
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Property, plant and equipment:
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Property, plant and equipment, net
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171,309,921 | 170,354,132 | ||||||
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Construction in progress
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43,507,177 | 43,152,905 | ||||||
| 214,817,098 | 213,507,037 | |||||||
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Biological assets:
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Immature biological assets
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21,681,136 | 26,713,971 | ||||||
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Mature biological assets, net
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32,319,172 | 27,683,821 | ||||||
| 54,000,308 | 54,397,792 | |||||||
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Other assets:
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Advance to suppliers – non-current
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19,709,635 | 22,643,263 | ||||||
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Deferred tax assets – non-current
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5,522,990 | 5,522,990 | ||||||
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Prepaid leases for land use rights
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29,857,746 | 29,754,376 | ||||||
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Other intangible assets, net
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542,613 | 585,671 | ||||||
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Goodwill
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474,821 | 445,842 | ||||||
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Total assets
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463,275,025 | 464,309,282 | ||||||
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Liabilities
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Current liabilities:
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Notes payable
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- | 378,112 | ||||||
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Short term bank loans
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69,483,683 | 68,816,359 | ||||||
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Accounts payable
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38,338,543 | 43,729,571 | ||||||
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Accrued expenses
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1,827,814 | 6,436,898 | ||||||
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Income tax payable
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507,258 | 1,589,165 | ||||||
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Advances from customers
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17,928,118 | 12,183,444 | ||||||
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Due to related parties
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89,481 | 79,257 | ||||||
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Advances from employees
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406,166 | 456,261 | ||||||
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Employee benefits and salary payable
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6,442,134 | 7,018,794 | ||||||
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Other payable
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42,527,135 | 45,957,104 | ||||||
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Current portion of long term bank loans
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10,985,643 | 9,756,193 | ||||||
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Current portion of capital lease obligation
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157,646 | 116,770 | ||||||
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Redeemable common stock (US$0.001 par value, 2,625,000 shares issued and
outstanding as of March 31, 2011)
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65,079,979 | - | ||||||
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Total current liabilities
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253,773,600 | 196,517,928 | ||||||
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Long term bank loans, net of current portion
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27,240,461 | 28,102,786 | ||||||
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Capital lease obligation, net of current portion
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506,589 | 532,467 | ||||||
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Unrecognized tax benefits – non-current
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5,254,327 | 5,062,336 | ||||||
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Deferred income
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6,288,123 | 6,241,661 | ||||||
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Total liabilities
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293,063,100 | 236,457,178 | ||||||
| Commitment and contingencies (See Note 19) | ||||||||
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Redeemable common stock (US$0.001 par value, 2,625,000 shares issued and
outstanding as of December 31, 2010)
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- | 66,113,715 | ||||||
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Equity
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Feihe International, Inc. shareholders’ equity:
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Common stock (US$0.001 par value, 50,000,000 shares authorized;
19,671,291 shares issued and outstanding as of March 31, 2011 and
December 31, 2010, respectively)
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19,671 | 19,671 | ||||||
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Additional paid-in capital
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57,579,834 | 57,177,680 | ||||||
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Common stock warrants
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1,774,151 | 1,774,151 | ||||||
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Statutory reserves
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9,132,581 | 9,132,581 | ||||||
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Accumulated other comprehensive income
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35,152,882 | 32,836,344 | ||||||
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Retained earnings
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66,461,441 | 60,731,029 | ||||||
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Total Feihe International, Inc. shareholders’ equity
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170,120,560 | 161,671,456 | ||||||
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Noncontrolling interests
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91,365 | 66,933 | ||||||
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Total equity
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170,211,925 | 161,738,389 | ||||||
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Total liabilities, redeemable common stock and equity
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463,275,025 | 464,309,282 | ||||||
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FEIHE INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
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(unaudited)
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Three months ended March 31,
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2011
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2010
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US$
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US$
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Sales
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76,449,422 | 81,435,903 | ||||||
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Cost of goods sold
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(48,578,176 | ) | (42,998,182 | ) | ||||
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Gross profit
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27,871,246 | 38,437,721 | ||||||
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Operating expenses:
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Sales and marketing
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(16,170,266 | ) | (28,281,824 | ) | ||||
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General and administrative
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(6,229,148 | ) | (5,493,823 | ) | ||||
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Loss on disposal of biological assets
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(1,601,685 | ) | (2,785,262 | ) | ||||
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Total operating expenses
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(24,001,099 | ) | (36,560,909 | ) | ||||
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Other operating income, net
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2,093,580 | 208,682 | ||||||
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Operating income
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5,963,727 | 2,085,494 | ||||||
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Other income (expenses):
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Interest income
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22,428 | 97,636 | ||||||
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Interest and finance costs
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(1,439,080 | ) | (864,183 | ) | ||||
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Government subsidy
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1,534,151 | 5,738,773 | ||||||
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Income before income taxes
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6,081,226 | 7,057,720 | ||||||
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Income tax expenses
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(1,341,683 | ) | (1,585,817 | ) | ||||
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Net income
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4,739,543 | 5,471,903 | ||||||
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Net income (loss) attributable to noncontrolling interests
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(42,867 | ) | 61,693 | |||||
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Net income attributable to common shareholders of Feihe International, Inc.
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4,696,676 | 5,533,596 | ||||||
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Net income per share of common stock
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Basic
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0.26 | 0.25 | ||||||
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Diluted
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0.26 | 0.25 | ||||||
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Net income per share of redeemable common stock
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Basic
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0.21 | 0.24 | ||||||
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Diluted
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0.21 | 0.24 | ||||||
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Weighted average shares used in calculating net income per share of common stock
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Basic
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19,671,291 | 19,607,376 | ||||||
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Diluted
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19,689,849 | 20,054,189 | ||||||
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Weighted average shares used in calculating net income per share of redeemable common stock
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Basic
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2,625,000 | 2,625,000 | ||||||
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Diluted
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2,625,000 | 2,625,000 | ||||||