SOURCE: Feihe International, Inc.

May 15, 2013 10:09 ET

Feihe International, Inc. Reports First Quarter 2013 Financial Results

BEIJING--(Marketwired - May 15, 2013) - Feihe International, Inc. (NYSE: ADY) ("Feihe International," the "Company," "we," "us" and "our"), one of the leading producers and distributors of premium infant formula, milk powder, packed milk, and soybean, rice and walnut products in China, today announced financial results for the first quarter of 2013.

First Quarter 2013 Financial Highlights:

  • Revenue was $79.8 million in 1Q 2013, an increase of $16.9 million or 26.9% from $62.9 million in 1Q 2012, and a sequential increase of $4.3 million or 5.7% from $75.5 million in 4Q 2012.
    • Sales from branded milk powder products were $76.4 million in 1Q 2013 vs. $59.4 million in 1Q 2012.
    • Sales from packed milk products were $0.7 million in 1Q 2013 vs. $0.5 million in 1Q 2012.

  • Gross profit was $45.3 million, up $11.3 million or 33.2% from $34.0 million in 1Q 2012, and sequentially up $12.1 million or 36.4% from $33.2 million in 4Q 2012.

  • Gross profit margin was 56.8% vs. 54.0% in 1Q 2012.

  • Income from operations increased $11.5 million to $9.7 million in 1Q 2013 from a loss from operations of $1.8 million in 4Q 2012.

  • Net income was $10.6 million in 1Q 2013, increased $2.3 million or 27.7% from $8.3 million in 1Q 2012, and increased $11.0 million from net loss of $0.4 million in 4Q 2012.

  • Diluted net income per share of common stock ("EPS") was $0.53 in 1Q 2013 vs. $0.40 in 1Q 2012 and a loss per share of $0.02 in 4Q 2012.

Mr. Leng You Bin, the Company's Chairman and Chief Executive Officer, stated, "We are pleased to issue our first quarter 2013 financial results today. The increased sales of Feihe branded milk powder, our higher margin products, demonstrate better market recognition and brand awareness. This is a good start for the next fifty years for Feihe International, Inc. We will continue to concentrate on producing premium quality milk powder from secured raw milk sources."

The Company's revenue was $79.8 million in the first quarter of 2013, an increase of approximately $16.9 million, or 26.9%, from approximately $62.9 million in the first quarter of 2012. This increase was primarily due to an increase in sales of milk powder of approximately $17.0 million and sales of packed milk of approximately $0.3 million, offset by a decrease in sales of raw milk powder of approximately $0.3 million and rice cereal of $0.4 million.

The Company's gross profit was $45.3 million in the first quarter of 2013, up $11.3 million, or 33.2%, from $34.0 million in the first quarter of 2012, and sequentially up $12.1 million, or 36.4%, from $33.2 million in the last quarter of 2012. Gross margin for the first quarter of 2013 was 56.8% compared to 54.0% in the first quarter of 2012. This increase was primarily attributable to a general increase in the gross profits of all of our milk powders. 

Sales and marketing expenses increased approximately $11.7 million, or 62.2%, from approximately $18.8 million for the first quarter of 2012 to approximately $30.5 million for the first quarter of 2013. This increase was primarily related to increases in advertisement fees of approximately $3.1 million, or 114.8%, from approximately $2.7 million for the first quarter of 2012 to approximately $5.8 million in the first quarter of 2013. Marketing promotion expenses increased approximately $2.3 million, or 29.1%, from approximately $7.9 million for the first quarter of 2012 to approximately $10.2 million in the first quarter of 2013. Staff cost of promoters and marketing staff increased approximately $4.6 million, or 82.1%, from approximately $5.6 million for the first quarter of 2012 to approximately $10.2 million in the first quarter of 2013.

The Company had income from operations of approximately $9.74 million in the three month period ended March 31, 2013, representing an increase of approximately $0.03 million, or 0.31%, from approximately $9.71 million in the three month period ended March 31, 2012.

The Company's net income attributable to the Company for the first quarter of 2013 was $10.6 million, or diluted EPS of $0.53, up $2.4 million, or 29.3%, from the net income of $8.2 million or diluted EPS of $0.40 in the first quarter of 2012, and a significant increase from a net loss of $446,000 or diluted loss per share of $(0.02) in the fourth quarter of 2012.

As of March 31, 2013, the Company had cash and cash equivalents of approximately $14.9 million and total current assets of approximately $221.6 million, compared to cash and cash equivalents of $9.8 million and total current assets of $194.8 million as of March 31, 2012. The Company had a working capital of approximately $46.6 million as of March 31, 2013 compared with $18.6 million as of March 31, 2012.

Mr. Liu Hua, the Company's Vice Chairman and Chief Financial Officer, stated, "We are pleased with our first quarter financial results. Our net income and EPS demonstrate our efforts to expand sales of higher margin products and improve the efficiency of our distribution network. In particular, sales of milk powder was $76.4 million compared to $59.4 million in the same period of last year and sales of our Feifan series was $49.3 million compared to $38.0 million in the first quarter of 2012. We will continue to focus our efforts on the sales of higher margin products."

About Feihe International, Inc.

Feihe International, Inc. (NYSE: ADY) is one of the leading producers and distributors of premium infant formula, milk powder, packed milk 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 International is headquartered in Beijing, China, and has processing and distribution facilities in Kedong, Qiqihaer, Gannan, Longjiang, Shanxi. 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, five production facilities with an aggregate milk powder production capacity of approximately 2,020 tons per day and an extensive distribution network that reaches over 105,000 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, 2012, 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.

 
FEIHE INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
    March 31,
2013
  December 31,
2012
    US$   US$
Assets        
Current assets:        
  Cash and cash equivalents   14,892,735   40,425,310
  Restricted cash   1,465,359   8,081,061
  Trade receivables, net of allowance for doubtful accounts of $1,459,309 and $1,454,741, as of March 31, 2013 and December 31, 2012, respectively   18,952,195   24,535,601
  Notes and loans receivable, net of allowance for doubtful accounts of $3,350,056, as of March 31, 2013 and December 31, 2012, respectively   -   -
  Due from related parties   24,075   20,191
  Advances to suppliers   12,956,338   14,805,607
  Inventories, net   29,137,477   30,838,292
  Prepayments and other current assets   37,352   43,779
  Recoverable value-added taxes   1,393,997   1,269,443
  Loans and advances to third parties   60,879,155   30,473,435
  Consideration receivable   75,907,867   78,274,528
  Deferred tax assets   3,425,598   3,425,598
  Investment in mutual funds - available-for-sale   119,483   117,210
  Assets held for sale   2,416,333   2,408,770
Total current assets   221,607,964   234,718,825
         
Investments:        
  Investment at cost   289,821   288,914
    289,821   288,914
Property, plant and equipment:        
  Property, plant and equipment, net   113,265,430   114,990,808
  Construction in progress   21,021,622   17,996,885
    134,287,052   132,987,693
Other assets:        
  Advances to suppliers - non-current   11,989,369   10,149,090
  Long term loan receivables   79,266,427   79,018,330
  Deferred tax assets - non-current   730,163   2,568,642
  Prepaid leases for land use rights   16,429,133   16,524,390
Total assets   464,599,929   476,255,884
         
Liabilities and shareholders' equity        
Current liabilities:        
  Notes payable   -   7,996,533
  Short term bank loans   61,828,779   63,240,345
  Accounts payable   41,237,423   41,115,131
  Accrued expenses   10,779,092   14,193,225
  Income tax payable   2,393,860   2,128,545
  Advances from customers   16,225,424   15,092,328
  Due to related parties   138,524   55,276
  Advances from employees   80,023   225,835
  Employee benefits and salary payable   10,668,699   9,758,312
  Other payables   25,464,200   38,683,732
  Current portion of long term bank loans   6,023,349   6,004,497
  Current portion of capital lease obligation   139,973   137,722
Total current liabilities   174,979,346   198,631,481
         
Capital lease obligation, net of current portion   301,756   296,856
Other long term loans   59,222,577   59,222,577
Unrecognized tax benefits - non-current   12,193,729   12,026,563
Deferred income   4,254,460   4,320,779
Total liabilities   250,951,868   274,498,256
         
Commitments and contingencies (see Note 21)        
         
Equity        
  Common stock (US$0.001 par value, 50,000,000 shares authorized; 19,784,291 shares issued and outstanding as of March 31, 2013 and December 31, 2012)   19,784   19,784
  Additional paid-in capital   61,762,731   61,284,217
  Common stock warrants   1,774,151   1,774,151
  Statutory reserves   13,450,739   13,450,739
  Accumulated other comprehensive income   46,343,337   45,487,528
  Retained earnings   90,297,319   79,741,209
Total shareholders' equity   213,648,061   201,757,628
Total liabilities and equity   464,599,929   476,255,884
         
   
FEIHE INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited)
 
             
    Three months ended
March 31,
 
    2013     2012  
    US$     US$  
Sales   79,753,773     62,936,077  
             
Cost of goods sold   (34,418,752 )   (28,957,473 )
             
Gross profit   45,335,021     33,978,604  
             
Operating expenses:            
  Sales and marketing   (30,497,803 )   (18,768,178 )
  General and administrative   (5,251,069 )   (5,590,235 )
  Total operating expenses   (35,748,872 )   (24,358,413 )
             
Other operating income, net   158,262     90,454  
             
Income from operations   9,744,411     9,710,645  
             
Other income (expenses):            
  Interest income   44,365     23,473  
  Interest and finance costs   (828,942 )   (1,145,953 )
  Government subsidy   5,146,154     1,561,348  
Income before income tax expenses and noncontrolling interests   14,105,988     10,149,513  
             
Income tax expenses   (3,549,878 )   (1,882,901 )
Net income   10,556,110     8,266,612  
Net income attributable to noncontrolling interests   -     (24,209 )
Net income attributable to common shareholders of Feihe International, Inc.   10,556,110     8,242,403  
             
Net income   10,556,110     8,266,612  
Other comprehensive income, net of tax            
  Foreign currency translation adjustments   853,909     (130,439 )
  Change in fair value of available for sale investments   1,900     2,661  
Other comprehensive income   855,809     (127,778 )
             
  Less: comprehensive income attributable to the noncontrolling interest   -     (24,216 )
Comprehensive income attributable to common shareholders of Feihe International, Inc.   11,411,919     8,114,618  
             
Net income per share of common stock            
  Basic   0.53     0.40  
  Diluted   0.53     0.40  
             
Net income per share of redeemable common stock            
  Basic   -     0.40  
  Diluted   -     0.40  
             
Weighted average shares used in calculating net income per share of common stock            
  Basic   19,784,291     19,714,291  
  Diluted   19,784,291     19,714,291  
             
Weighted average shares used in calculating net income per share of redeemable common stock            
  Basic   -     879,809  
  Diluted   -     879,809  
               

Contact Information

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    In China:
    Renee Ren
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