Attached files
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| 8-K - FORM 8-K - Feihe International Inc | feihe_8k.htm |
Exhibit 99.1
Feihe International, Inc. Reports
Third Quarter 2012 Financial Results
BEIJING, November 9, 2012 – 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: |
| Ø | 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. | |
| Ø | 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.
CONTACT
| In the U.S.: | renyi@feihe.com |
| In China: | Renee Ren 86-10-8457-4688 x8810 renyi@feihe.com |
| 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 | ||||||||||||