FEIHE INTERNATIONAL INC 
By BEIJING and LOS ANGELES, May 10, 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 financial results for the first quarter of 2012. The Company will hold a conference call today at 8:00 am ET.
First Quarter 2012 Financial Highlights:
-- Revenue of $62.9 million in 1Q 2012 vs. $67.7 million in 1Q 2011:
-- Revenue from branded milk powder products was $59.4 million, or
94.4% of total sales, in 1Q 2012 vs. $47.9 million, or 70.8% of
total sales, in 1Q 2011
-- Revenue from raw milk powder was $0.9 million, or 1.4% of total
sales, in 1Q 2012 vs. $16.1 million, or 23.8% of total sales, in 1Q
2011, and $24.8 million, or 28.5% of total sales in 4Q 2011
-- Gross profit increased to $34.0 million, or 39.3%, in 1Q 2012 vs. $24.4
million in 1Q 2011, and up from $30.9 million in 4Q 2011
-- Gross margin was 54.0% in 1Q 2012 vs. 36.0% in 1Q 2011, up from 35.5% in
4Q 2011
-- Income from operations was $9.7 million in 1Q 2012 vs. $5.0 million in
1Q 2011, and up significantly from a loss of $3.8 million in 4Q 2011
-- Net income was $8.3 million in 1Q 2012 vs. $4.7 million in 1Q 2011, and
up significantly from a loss of $10.5 million in 4Q 2011
-- Diluted net income (loss) from continuing operations per common share
("EPS") was $0.40 in 1Q 2012 vs. $0.23 in 1Q 2011, and up significantly
from $(0.31) in 4Q 2011
Mr. Leng You Bin, the Company's Chairman and Chief Executive Officer, stated, "We are extremely pleased with our first quarter results. Our high margin and strongly improved net income demonstrated the effectiveness of our decision to concentrate on the sales of our premium branded infant formula products. In particular, sales of AstroBaby grew 203.2% and Feifan grew 74.6% compared to the first quarter of 2011. Net income improved 179.0% in the first quarter of 2012 compared with the fourth quarter of 2011. We will remain focused and committed to expanding sales of our premium infant formula."
The Company's revenue of $62.9 million in the first quarter of 2012 represents a decrease of $4.8 million compared to the first quarter of 2011. This decrease was primarily attributable to a $15.2 million decrease in sales of raw milk powder and a $1.5 million decrease in sales of soybean powder, offset in part by sales of milk powder of $11.5 million. This decrease more broadly reflects the Company's decision to decrease the production of raw milk powder, which generated a negative margin during the first quarter of 2012.
The Company's gross profit was $34.0 million in the first quarter of 2012, up 39.3% from $24.4 million in the first quarter of 2011, and up 10.0% sequentially from $30.9 million in the fourth quarter of 2011. Gross margin for the first quarter of 2012 was 54.0%, compared to 36.0% in the first quarter of 2011, up from 35.5% in the fourth quarter of 2011. The increase in the Company's gross profit for the first quarter of 2012 was primarily due to increased sales of premium and super-premium milk powder and decreased cost of raw milk powder.
The Company's income from operations increased to $9.7 million in the first quarter of 2012, up from $5.0 million in the first quarter of 2011, and up significantly from a loss of $3.8 million in the fourth quarter of 2011. Sales and marketing expenses increased $2.8 million, or 18.2%, to $18.8 million in the first quarter of 2012 from $15.9 million in the first quarter of 2011, and decreased 24.8% compared to $25.0 million in the fourth quarter of 2011. General and administrative expenses decreased to $5.6 million in the first quarter of 2012 from $5.7 million in the first quarter of 2011, and decreased $4.1 million, or 42.3%, compared to $9.7 million in the fourth quarter of 2011.
The Company's net income attributable to the Company for the first quarter of 2012 was $8.3 million, or diluted EPS of $0.40, an increase from $4.7 million, or diluted EPS of $0.23, in the first quarter in 2011, and a significant increase from the net loss attributable to the Company of $10.5 million, or diluted EPS of $(0.31), in the fourth quarter of 2011.
As of March 31, 2012, the Company had cash and cash equivalents of $9.8 million and total current assets of $194.8 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 working capital of $18.6 million as of March 31, 2012.
Mr. Liu Hua, the Company's Vice Chairman and Chief Financial Officer, stated, "We are pleased to report our first quarter 2012 financial results today. Given our strong growth, we are very confident in our business going forward. In addition, we completed the redemption of all of Sequoia's redeemable common stock in April 2012. We are continuing our plan of focusing on sales of premium products and look forward to bringing value to consumers and our shareholders."
Conference Call Details
The Company will also hold a conference call on May 10, 2012 at 8:00 am Eastern Time to discuss its results. Listeners may access the call by dialing the following numbers:
United States toll free: 1-877-675-4753
Hong Kong toll free: 800-968-835
Northern China toll free: 10-800-714-1511
Southern China toll free: 10-800-140-1377
International: 1-719-325-4917
The replay will be accessible through May 17, 2012 by dialing the following numbers:
United States toll free: 1-877-870-5176
International: 1-858-384-5517
Password: 1811442
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 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.: zhangdongshu@feihe.com
In China: Doris Zhang
86-10-8457-4688 x8810
zhangdongshu@feihe.com
FEIHE INTERNATIONAL, INC
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
March 31, 2012 December 31,
2011
-------------- -------------
US$ US$
Assets
Current assets:
Cash and cash
equivalents 9,849,284 15,353,882
Restricted cash 2,777,800 1,056,579
Notes and loans
receivable, net of
allowance for - -
doubtful accounts of
$3,350,056, as of
March 31,
2012 and December 31,
2011
Trade receivables, net
of allowance for
doubtful 14,119,378 40,690,638
accounts of $810,323
and $810,864, as of
March
31, 2012 and December
31, 2011,
respectively
Due from related
parties 27,280 194,759
Advances to suppliers 19,270,059 11,841,936
Inventories 33,847,620 33,328,949
Prepayments and other
current assets 37,795 50,427
Income taxes
receivable 2,020,559 1,406,653
Input value-added
taxes 1,388,348 965,685
Other receivables 13,537,187 13,742,625
Consideration
receivable- current 95,386,958 79,337,423
Investment in mutual
funds - available-
for-sale 113,777 111,116
Assets held for sale 2,382,801 2,384,391
--------- ---------
Total current assets 194,758,846 200,465,063
Investments: 285,799 285,990
------- -------
Investment at cost 285,799 285,990
Property, plant and
equipment:
Property, plant and
equipment, net 127,275,263 128,739,637
Construction in
progress 15,505,095 14,895,512
142,780,358 143,635,149
----------- -----------
Other assets:
Advance to suppliers -
non-current 3,431,727 3,741,454
Long term deposits 67,210,746 46,139,913
Consideration
receivables, non-
current - 19,450,201
Deferred tax assets -
non-current 9,805,701 9,805,701
Prepaid leases for
land use rights 18,165,232 18,280,745
Total assets 436,438,409 441,804,216
----------- -----------
Liabilities
Current liabilities:
Short term bank loans 53,150,950 54,616,375
Accounts payable 41,357,588 39,077,499
Accrued expenses 4,144,269 6,943,370
Income tax payable 2,515,408 734,389
Advances from
customers 11,626,363 17,899,560
Due to related parties 104,111 86,213
Advances from
employees 362,538 415,253
Employee benefits and
salary payable 7,211,662 9,777,537
Other payable 33,163,914 39,561,388
Current portion of
long term bank loans 5,941,474 5,945,439
Current portion of
capital lease
obligation 181,296 288,066
Accrued interest - 395,783
Redeemable common
stock (US$0.001 par
value, 16,379,092 32,696,658
656,250 and 1,312,500
shares issued and
outstanding
as of March 31, 2012
and December 31,
2011)
Total current
liabilities 176,138,665 208,437,530
Long term bank loans,
net of current
portion 5,939,762 5,943,726
Capital lease
obligation, net of
current portion 278,512 430,180
Other long term loans 49,829,495 32,803,289
Accrued interest - 170,555
Unrecognized tax
benefits - non-
current 14,608,179 14,806,768
Deferred income 4,904,508 3,711,033
Total liabilities 251,699,121 266,303,081
----------- -----------
Commitments and
contingencies (see
Note 23)
Equity
Feihe International,
Inc. shareholders'
equity:
Common stock (US$0.001
par value, 50,000,000
shares 19,714 19,714
authorized; 19,714,291
shares issued and
outstanding as
of March 31, 2012 and
December 31, 2011)
Additional paid-in
capital 60,019,602 58,920,283
Common stock warrants 1,774,151 1,774,151
Statutory reserves 11,341,427 11,341,427
Accumulated other
comprehensive income 42,603,017 42,730,802
Retained earnings 68,939,218 60,696,815
Total Feihe
International, Inc.
shareholders' equity 184,697,129 175,483,192
Noncontrolling
interests 42,159 17,943
------ ------
Total equity 184,739,288 175,501,135
Total liabilities and
equity 436,438,409 441,804,216
----------- -----------
FEIHE INTERNATIONAL, INC
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(unaudited)
Three months ended
March 31,
---------
2012 2011
---- ----
US$ US$
Sales 62,936,077 67,678,513
Cost of goods sold (28,957,473) (43,241,942)
----------- -----------
Gross profit 33,978,604 24,436,571
Operating and administrative expenses:
Sales and marketing (18,768,178) (15,944,336)
General and administrative (5,590,235) (5,720,233)
Total operating expenses (24,358,413) (21,664,569)
----------- -----------
Other operating income, net 90,454 2,220,451
Income from operations 9,710,645 4,992,453
Other income (expenses):
Interest income 23,473 20,904
Interest and finance costs (1,145,953) (1,017,725)
Government subsidy 1,561,348 1,520,150
Income from continuing operations before 10,149,513 5,515,782
income tax expenses and noncontrolling interests
Income tax expenses (1,882,901) (1,341,683)
---------- ----------
Net income from continuing operations 8,266,612 4,174,099
Income from discontinuing operations, net of tax - 565,444
Net income 8,266,612 4,739,543
Net income attributable to noncontrolling interests (24,209) (42,867)
Net income attributable to common stockholders 8,242,403 4,696,676
of Feihe International, Inc.
Net income 8,266,612 4,739,543
Other comprehensive income, net of tax
Foreign currency translation adjustments (130,439) 2,299,451
Change in fair value of available for sale investments 2,661 (1,350)
----- ------
Other comprehensive income (127,778) 2,298,101
-------- ---------
Comprehensive income 8,138,834 7,037,644
Less: comprehensive income attributable to the (24,216) (24,432)
noncontrolling interest
Comprehensive income attributable to common stockholders 8,114,618 7,013,212
of Feihe International, Inc.
Net income from continuing operations per share of
common stock
Basic 0.40 0.23
Diluted 0.40 0.23
Net income from continuing operations per share of
redeemable common stock
Basic 0.40 0.18
Diluted 0.40 0.18
Net income from discontinued operations, net of tax per
share of common stock
Basic - 0.03
Diluted - 0.03
Net income from discontinued operations, net of tax
per share of redeemable common stock
Basic - 0.03
Diluted - 0.03
Weighted average shares used in calculating net income
per share of common stock
Basic 19,714,291 19,671,291
Diluted 19,714,291 19,689,849
Weighted average shares used in calculating net income
per share of redeemable common stock
Basic 879,809 2,625,000
Diluted 879,809 2,625,000
SOURCE Feihe International, Inc.
