FEIHE INTERNATIONAL INC 
By BEIJING and LOS ANGELES, March 30, 2012 /PRNewswire-Asia-FirstCall/ -- Feihe International, Inc. (NYSE: ADY; "Feihe International" 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 unaudited financial results for the fourth quarter and full year ended December 31, 2011.(1) The Company will hold a conference call today at 8:00 am ET.
Fourth Quarter 2011 Financial Highlights:
-- Sales increased 42.1% to $87.0 million from $61.2 million in 4Q 2010
-- Sales from branded milk powder products was $60.3 million, or 69.3%
of total sales, in 4Q 2011 vs. $39.4 million, or 64.3% of total
sales, in 4Q 2010
-- Sales of raw milk powder was $24.8 million, or 28.5% of total sales,
in 4Q 2011 vs. $17.4 million, or 28.5% of total sales, in 4Q 2010
-- Gross profit increased to $30.9 million from $17.8 million in 4Q 2010
-- Gross margin was 35.5% in 4Q 2011 vs. 29.1% in 4Q 2010
Mr. Liu Hua, the Company's Vice Chairman and Chief Finance Officer, stated, "Our continued growth demonstrates that we are increasing our footprint in the Chinese infant formula industry. Our results of $87.0 million for the fourth quarter with $60.3 million from branded milk products for 4Q are excellent indications of our continued growth in higher margin branded products. In particular, sales of AstroBaby grew 890.2% and Feifan grew 110.1% compared to the fourth quarter of 2010. Although we had a net loss in the fourth quarter, the loss was due to loss in long term tax liabilities, loss from discontinued operations, and loss from the sale of wholesale milk powder. Sales from our branded infant formula products continue to increase quarter over quarter and we are confident that it will continue to grow in the future." Mr. Liu continued, "2012 is the Company's 50th year anniversary and the fact that we have never had any product quality issues speaks to our strength in this industry. We will continue to strive to be one of the leading infant formula producers and we look forward to another 50 years."
The increase in sales in the fourth quarter of 2011 compared to the fourth quarter of 2010 was primarily attributable to an increase in sales of branded milk powder, as well as the continued commitment to making improvements across all functions including effectiveness of operations. Sales in the fourth quarter of 2011 increased 15.4% sequentially from $75.4 million in the third quarter of 2011, primarily reflecting the Company's efforts to increase sales at existing retail sales points.
Gross profit was $30.9 million in the fourth quarter of 2011 compared to $17.8 million in the fourth quarter of 2010. Gross margin for the fourth quarter of 2011 was 35.5%, compared to 29.1% in the fourth quarter of 2010, which was primarily due to an increase in sales of branded milk powder with a higher margin, and also due to improvements in the Company's marketing and selling operations.
Sales and marketing expenses increased 9.6% from $22.8 million in the fourth quarter of 2010 to $25.0 million in the fourth quarter of 2011. This decrease was primarily due to decreased advertising and salary of marketing staff.
In the fourth quarter of 2011, the Company had an operating loss of $(3.82) million, compared to an operating loss of $(11.0) million in the fourth quarter of 2010. Reduction of operating loss in the fourth quarter of 2011 was primarily due to increase in gross profit as discussed above, and offset by a 9.6% increase of sales and marketing expenses to $25.0 million in the fourth quarter of 2011 from $22.8 million in the fourth quarter of 2010, primarily reflecting a increase in promotional fees and advertisement and the Company's efforts to improve the effectiveness of its selling expenses and sales at existing sales points. General and administrative expenses increased 169.0% to $9.7 million in the fourth quarter of 2011 from $3.6 million in the fourth quarter of 2010, primarily reflecting increased salary, professional service fees and allowances for receivables.
The Company recognized other income of $0.7 million during the fourth quarter of 2011, compared to other income of $12.0 million during the fourth quarter of 2010. The decrease in other income was primarily driven by a reduction of government subsidy and an increase of interest and finance costs.
Net loss attributable to the Company for the fourth quarter of 2011 was $10.5 million, or diluted EPS per common share of $(0.51), a decrease from net income attributable to the Company of $0.8 million, or diluted EPS per common share of $0.10, in the fourth quarter of 2010. Increase in net loss of $11.3 million as compared with the fourth quarter of 2010 was primarily due to a $5.1 million loss in long term tax liabilities, a $5.7 million loss from discontinued operations, and a $3.5 million loss from the sale of wholesale milk powder.
Full Year Ended December 31, 2011 Financial Highlights:
Sales increased approximately $36.3 million, or 14.2% to $292.9 million during the year ended December 31, 2011 from $256.6 million during the year ended December 31, 2010. Contributions from branded milk powder products were approximately $217.5 million, or 74.3% of total sales during the year ended December 31, 2011, up 20.7% from $180.2 million, or 70.2% of total sales, in the corresponding period in 2010. This increase was primarily due to increased high margin infant formula sales, especially for the Company's super premium AstroBaby series and Feifan series. During the year 2011, the Company focused on marketing of its premium infant formula products and improving sales at existing sales points and, accordingly, its expansion into new market areas was less rapid. Gross profit increased approximately $13.0million, or 13.1% to $112.3 million during the year ended December 31, 2011 from $99.3 million in the same period of 2010. Gross margin for the year ended December 31, 2011 was 38.3%, compared to 38.7% during the year ended December 31, 2010, primarily attributable to increases in sales of branded milk powder. Operating income was $9.6 million in the full year ended December 31, 2011, compared to an operating loss of $(23.3) million in the corresponding period in 2010, the increase was partially attributable to an decrease in selling expense for an amount of $20.3 million and partially offset by an increase of $4.2 million in general and administrative expenses. Income from continuing operations before income tax expenses and noncontrolling interests was $14.6 million during the year ended December 31, 2011, up $18.3 million compared to a loss of $(3.7) million in the corresponding period in 2010. Net loss attributable to the Company for the full year ended December 31, 2011 increased to $0.2 million, or diluted EPS per common share of $0.00, from a loss of $(10.7) million, or diluted EPS per common share of $(0.28), in the corresponding period in 2010. Increase in net loss was primarily due to loss in long term tax liabilities, loss from discontinued operations, and loss from the sale of wholesale milk powder.
As of December 31, 2011, the Company had cash and cash equivalents of $15.4 million and total current assets of $200.5 million, compared with cash and cash equivalents of $16.2 million and total current assets of $258.8 million as of December 31, 2010. The Company believes that it has sufficient cash and cash flows from operations to adequately support its business in the next operating cycle.
Conference Call Details
The Company also held a conference call on March 30, 2012 at 8:00 am Eastern Daylight Time to discuss its fourth quarter results.
The replay will be accessible through April 6, 2012 by dialing the following numbers:
United States toll free: 1-866-5727-808
China toll free: 800-876-5013
Hong Kong toll free: 852-3012-8000
Password: 672060
Appointment of New Director
Neil Shen, who was appointed to the Company's board of directors in connection with the Subscription Agreement dated August 11, 2009 between the Company and Sequoia, has stepped down as an independent director of the Company effective March 30, 2012. The Company will pay the final and remaining $16.3 million to Sequoia Capital China Growth Fund I, L.P. and certain of its affiliates (collectively, "Sequoia") in redemption of the last tranche of 656,250 shares (the "Redemption") pursuant to its redemption agreement with Sequoia by April 30, 2012.
The Board of Directors has appointed Ms. Jingjun Mu to its Board. Ms. Mu will serve as an independent director. Ms. Mu has served as Vice Executive Director of the China Dairy Industry Association ("CDIA") since 2004. From 1997 to 2004, she served as Secretary-General of CDIA. Ms. Mu also served as General Manager of the China Food Group Supplying Corporation from 1986 to 1997. Ms. Mu served as Deputy Manager of Beijing Wind Instruments Factory from 1972 to 1986. Prior to that Ms. Mu served at the Tianjin Planning Bureau from 1962 to 1972. Ms. Mu is a qualified Senior Economist and graduated from the Institute of Light Chemical and Light Industry for Chemical Engineering.
Mr. Leng You Bin, the Company's Chairman and Chief Executive Officer, stated, "We sincerely thank Mr. Shen and Sequoia Capital for their contribution to the Company and we wish Mr. Shen the best in his future endeavors. We are also honored to have Ms. Mu join our board. Her wealth of experience and knowledge in the dairy industry will certainly help the Company continue to grow to be one of China's leading infant formula companies."
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, two dairy farms, seven 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, 2010 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.
Note:
(1) Certain prior year amounts have been reclassified to conform with the current year presentation.
CONTACT
In the U.S.: ir@americandairyinc.com
In China: Doris Zhang
86-10-8457-4688 x8810
doriszhang@americandairyinc.com
-------------------------------
FEIHE INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
December 31, December 31,
2011 2010
---- ----
US$ US$
ASSETS
Current assets:
Cash and cash equivalents 15,353,882 16,183,493
Restricted cash 1,056,579 3,078,564
Trade receivables, net of an allowance for doubtful accounts of $810,864 40,690,638 14,812,821
and $1,084,308, as of December 31, 2011 and 2010, respectively
Notes receivable, net of an allowance for doubtful accounts of $3,350,056 - 136,120
and $3,500,028, as of December 31, 2011 and 2010, respectively
Due from related parties 194,759 1,806,889
Advances to suppliers 11,841,936 3,079,246
Receivable from discontinued operations - 121,583,818
Inventories, net 33,328,949 62,716,959
Prepayments and other current assets 50,427 167,306
Income tax receivable 1,406,653 4,970,271
Recoverable value-added taxes 965,685 6,886,531
Other receivables 13,742,625 1,844,338
Consideration receivable -current 79,337,423 -
Investment in mutual funds - available for sale 111,116 139,294
Assets of discontinued operations - 21,358,239
Assets held for sale 2,384,391 -
--------- ---
Total current assets 200,465,063 258,763,889
Investments:
Investment at cost 285,990 272,239
------- -------
285,990 272,239
Property, plant and equipment:
Property, plant and equipment, net 128,739,637 97,688,788
Construction in progress 14,895,512 40,566,480
---------- ----------
143,635,149 138,255,268
Other assets:
Advance to suppliers, non-current 3,741,454 7,937,244
Long term deposits 46,139,913 -
Consideration receivables, non-current 19,450,201 -
Deferred tax assets, non-current 9,805,701 5,522,990
Prepaid leases for land use rights 18,280,745 15,607,918
Other intangible assets - 585,671
Goodwill - 445,842
Assets of discontinued operation, non-current - 158,502,039
--- -----------
Total assets 441,804,216 585,893,100
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Current liabilities:
Notes payable - 378,112
Short term bank loans 54,616,375 63,522,793
Accounts payable 39,077,499 31,988,273
Accrued expenses 6,943,370 6,436,243
Income tax payable 734,389 1,589,165
Advances from customers 17,899,560 12,183,444
Due to related parties 86,213 79,257
Advances from employees 415,253 456,260
Employee benefits and salary payable 9,777,537 6,636,128
Other payables 39,561,388 33,740,305
Currrent portion of long term bank loans 5,945,439 -
Current portion of capital lease obligation 288,066 116,770
Accrued interest 395,783 -
Redeemable common stock ($0.001 par value, 1,312,500 shares issued 32,696,658 -
and outstanding as of December 31, 2011)
Liabilities of discontinued operations - 160,974,996
--- -----------
Total current liabilities 208,437,530 318,101,746
Long term bank loans, net of current portion 5,943,726 16,977,222
Capital lease obligation, non current 430,180 532,467
Other long term loans 32,803,289 -
Accrued interest 170,555
Unrecognized tax benefits, non-current 14,806,768 5,062,336
Deferred income 3,711,033 4,924,395
Liabilities of discontinued operations, non-current - 12,442,830
Total liabilities 266,303,081 358,040,996
----------- -----------
Commitment and contingencies (See Note 33)
Redeemable common stock (US$0.001 par value, 2,625,000 shares - 66,113,715
issued and outstanding as of December 31, 2010)
Stockholders' equity
Ordinary shares (US$0.001 par value, 50,000,000 shares authorized; 19,714 19,671
19,714,291 and 19,671,291 issued and outstanding as of December
31, 2011 and 2010, respectively)
Additional paid-in capital 58,920,283 57,177,680
Common stock warrants 1,774,151 1,774,151
Statutory reserves 11,341,427 9,132,581
Accumulated other comprehensive income 42,730,802 32,836,344
Retained earnings 60,696,815 60,731,029
---------- ----------
Total Feihe International Inc. stockholders' equity 175,483,192 161,671,456
Non-controlling interests in discontinued operations 17,943 66,933
------ ------
Total equity 175,501,135 161,738,389
----------- -----------
Total liabilities, redeemable common stock and equity 441,804,216 585,893,100
=========== ===========
FEIHE INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended December 31, For the three month ended December 31,
-------------------------------- --------------------------------------
2011 2010 2011 2010
---- ---- ---- ----
US$ US$ US$ US$
Sales 292,935,374 256,614,328 87,014,773 61,240,140
Cost of goods sold -180,614,710 -157,325,418 -56,126,954 -43,399,978
------------ ------------ ----------- -----------
Gross profit 112,320,664 99,288,910 30,887,819 17,840,163
----------- ---------- ---------- ----------
Operating expenses:
Sales and marketing -78,988,475 -99,276,220 -24,975,099 -22,817,946
General and
administrative -26,018,366 -21,306,074 -9,654,039 -3,629,903
Goodwill and other
intangible assets
impairment -1,012,410 -1,437,005 - -1,437,005
---------- ---------- --- ----------
Total operating
expenses -106,019,251 -122,019,299 -34,629,138 -27,884,854
------------ ------------ ----------- -----------
Other operating
income (expense),
net 3,280,679 -551,390 -86,786 -893,251
--------- -------- ------- --------
Income (loss) from
operations 9,582,092 -23,281,779 -3,828,105 -10,937,942
Other income
(expenses):
Interest income 90,008 287,967 24,522 23,608
Interest and
finance costs -4,235,956 -2,011,282 -1,112,803 -532,203
Amortization of
deferred debt
issuance cost - -379,413 - -2,316
Loss on derivative - - - -
Government subsidy 9,205,157 21,709,399 1,814,128 12,540,652
--------- ---------- --------- ----------
Income (loss) from
continuing
operations before
income tax
expenses and
noncontrolling
interests 14,641,301 -3,675,108 -3,102,258 1,091,799
Income tax expenses -10,010,427 279,722 -4,831,839 1,011,865
----------- ------- ---------- ---------
Income (loss) from
continuing
operations 4,630,874 -3,395,386 -7,934,097 2,103,664
(Loss) income from
discontinued
operations, net of
tax -5,705,228 -6,165,918 -3,558,023 -354,848
---------- ---------- ---------- --------
Net (loss) income -1,074,354 -9,561,304 -11,492,120 1,748,816
Net income
attributable to
noncontrolling
interests -126,302 -22,567 -44,117 131,044
Settlement of
redeemable common
stock 1,033,738 - 1,033,738 -
Accretion of
redemption premium
on redeemable
common stock - -1,086,622 - -1,086,622
--- ---------- --- ----------
Net income (loss)
attributable to
common
stockholders of
Feihe
International,
Inc. -166,918 -10,670,493 -10,502,499 793,238
======== =========== =========== =======
Net income (loss)
from continuing
operations per
share of common
stock
Basic 0.26 -0.21 -0.31 0.06
Diluted 0.26 -0.21 -0.31 0.06
Net income (loss)
from continuing
operations per
share of
redeemable common
stock
Basic -0.23 -0.15 -0.34 0.12
Diluted -0.23 -0.15 -0.34 0.12
Net income (loss)
from discontinued
operations, net of
tax per share of
common stock
Basic -0.26 -0.28 -0.17 -0.02
Diluted -0.26 -0.28 -0.17 -0.02
Net income (loss)
from discontinued
operations, net of
tax per share of
redeemable common
stock
Basic -0.26 -0.28 -0.17 -0.02
Diluted -0.26 -0.28 -0.26 -0.02
Net income (loss)
per share of
common stock
Basic - -0.49 -0.48 0.04
Diluted - -0.49 -0.48 0.04
Net income (loss)
per share of
redeemable common
stock
Basic -0.03 -0.43 -0.51 0.10
Diluted -0.03 -0.43 -0.51 -0.10
Weighted average
shares used in
calculating net
income (loss) per
share of common
stock
Basic 19,688,551 19,647,844 19,714,291 19,671,291
Diluted 19,688,551 19,647,844 19,714,291 19,671,291
Weighted average
shares used in
calculating net
income (loss) per
share of
redeemable common
stock
Basic 2,065,839 2,625,000 1,853,682 2,625,000
Diluted 2,065,839 2,625,000 1,853,682 2,625,000
SOURCE Feihe International, Inc.
