American Dairy Reports Second Quarter 2006 Financial Results.BEIJING Beijing (bā-jĭng) or Peking (pē-kĭng, pā–), city (1994 est. urban pop. 6,093,300; 1994 est. total pop. 7,240,700), capital of the People's Republic of China. It is in central Hebei prov. -- American American, river, 30 mi (48 km) long, rising in N central Calif. in the Sierra Nevada and flowing SW into the Sacramento River at Sacramento. The discovery of gold at Sutter's Mill (see Sutter, John Augustus) along the river in 1848 led to the California gold rush of Dairy dairy 1. a retail outlet for milk products. 2. the feeding and milking sheds on a dairy farm. 3. pertaining to or emanating from an animals or other thing concerned in the production of milk, e.g. dairy goat, dairy cleanser. , Inc. (NYSE Arca For other uses of "ARCA", see ARCA. NYSE Arca, previously known as ArcaEx, an abbreviation of Archipelago Exchange, is an entirely online securities exchange on which both stocks and options are traded. : ADY ADY is a three-letter acronym that may refer to:
See 10-Q. today. Financial highlights from the second quarter of 2006 versus the second quarter of 2005 include: --Net income increased 86% to $5.3 million, or $0.31 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share in 2Q06, from $2.8 million, or $0.18 per diluted share in 2Q05 --Revenue increased 72% to $26.1 million in 2Q06 from $15.1 million in 2Q05 --Gross profit grew 75% to $13.2 million in 2Q06 from $7.5 million in 2Q05 --Gross margin increased to 50.7% in 2Q06 from 49.9% in 2Q05 --Income from operations increased 52% to $4.3 million from $2.8 million in 2Q05 Leng You Bin, Chief Executive Officer and President of American Dairy stated, "Our leading infant formula Infant formula is an artificial substitute for human breast milk. Formulas are designed for infant consumption, and are usually based on either cow milk or soy milk. Use of infant formula has been decreasing in industrial countries for over forty years as a result of antenatal and milk powder products continued to drive significant year over year revenue growth in the second quarter, despite the seasonal slowness associated with the hot summer months. We also reinvested in the business with a focus on brand strength and expanding our geographical ge·o·graph·ic also ge·o·graph·i·cal adj. 1. Of or relating to geography. 2. Concerning the topography of a specific region. ge presence, while continuing to deliver improved gross margin and operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. performance." Quarter Ended June June: see month. 30, 2006 Net income increased 86% to $5.3 million in the second quarter of 2006 from $2.8 million in the second quarter of 2005. Earnings per diluted share increased 72% to $0.31 in the second quarter of 2006 from $0.18 in the second quarter of the previous year. During this period, diluted shares outstanding increased to 17.1 million from 15.4 million in the second quarter of 2005. Net income performance reflects continued revenue growth, gross margin improvement, and the continued benefit of Value Added Tax value added tax n (BRIT) → impuesto sobre el valor añadido or agregado (LAM) value added tax n (Brit (VAT VAT See: Value-added tax VAT See value-added tax (VAT). ) rebates received from the Heilongjiang Heilongjiang or Heilungkiang (both: hā`l  ng`jyäng`) [Chin.,=black dragon river (the Amur)], province (1994 est. pop. 35,570,000), c. Province.
Revenue for the second quarter was $26.1 million, an increase of $11.0 million or 72% from $15.1 million in the second quarter of 2005. The increased popularity of the Feihe brand in mainland Mainland. 1 Island (1991 pop. 14,150), 178 sq mi (461 sq km), N Scotland. The largest of the Orkney Islands, it is also called Pomona. Kirkwall, the seat of the Orkney Islands council area, is on the island. China continued to drive revenue growth in the second quarter. Sales quantities increased 53% to 6.1 million kilograms in the second quarter of 2006, up from 4.0 million kilograms in the prior year period, driven by increased sales quantities of major products. Specifically, sales volume for the Company's milk power with nucleotides increased 168%, rice powder increased 89%, CPP cpp - C preprocessor. series increased 37%, and the Ca+Zn product increased 25% as compared to the second quarter of 2005. Gross profit increased $5.7 million, or 75%, to $13.2 million from $7.5 million in the second quarter of 2005. Gross margin of 50.7% compared to 49.9% in the prior year's period reflects the successful ramp-up of a new processing facility, which allows the Company to process all whey whey liquid residue from milk after the removal of cheese curds in the manufacture of cheese. An excellent protein supplement but difficult to handle in the liquid form, except to pigs maintained close to the cheese factory. Dried whey is easy to handle but processing costs are high. products in-house In-house In the context of general equities, keeping an activity within the firm. For example, rather than go to the marketplace and sell a security for a client to anyone, an attempt is made to find a buyer to complete the transaction with the firm. . Previously, the Company had to purchase processed whey from other providers in China, which was more expensive. Income from operations increased $1.5 million, or 52% to $4.3 million from $2.8 million in the second quarter of 2005, despite increased distribution and general and administrative expenses. The Company's distribution expenses, which grew 88% during the second quarter on a year over year basis, reflect continued advertising and promotional efforts, as well as transportation costs associated with improving distribution capacity. General and administration expenses, which increased 149% during the second quarter of 2006 compared to the prior year's period, reflect additional administrative and business expansion activities. The Company benefited from $1.2 million of other income in the second quarter of 2006 due to VAT rebates received from the Heilongjiang Province. American Dairy, Inc. recognizes VAT rebates at the time of receipt and these rebates are made from the government on a strictly voluntary basis, as an economic incentive to the Company. Interest and finance costs were $179,000 during the second quarter, related to additional convertible debt issued in 2006. Leng You Bin explained, "In the second quarter, we continued to benefit from VAT rebates, which the local province has consistently provided to us as an economic incentive. The timing and amount of this payment is discretionary, although it is tied to our sales volume by product category. Our goal is to constantly enhance the health of the Chinese people The following is a '''list of famous Chinese-speaking/writing people. Note in Chinese names, the family name is typically placed first (for example, the family name of "Xu Feng" is "Xu"). by expanding our premium brand and delivering mothers and infants Persons who are under the age of legal majority—at Common Law, 21 years, now generally 18 years. According to the sense in which this term is used, it may denote the age of the person, the contractual disabilities that non-age entails, or his or her status with regard to the nutrients they need from our high-quality products. We appreciate the Chinese Chinese, subfamily of the Sino-Tibetan family of languages (see Sino-Tibetan languages), which is also sometimes grouped with the Tai, or Thai, languages in a Sinitic subfamily of the Sino-Tibetan language stock. government's continued support in our mutual efforts." Six Months Ended June 30, 2006 For the six months ended June 30, 2006, revenue increased 78% to $52.0 million from $29.3 million in the first six months of 2005. During this same time period, gross profit improved 86% to $26.8 million from $14.4 million. Income from operations increased 68% to $9.1 million from $5.4 million in the first half of 2005, and net income improved 84% to $10.0 million, or $0.61 per diluted share, from $5.5 million, or $0.36 per diluted share, in the first six months of 2005. Balance Sheet As of June 30, 2006, the Company had $16.2 million of cash, compared to $13.0 million at December December: see month. 31, 2005 and $11.6 million at March 31, 2006. American Dairy had working capital of approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $12.6 million in at June 30, 2006. The Company had long term debt of $5.5 million as of June 30, 2006. Guidance American Dairy is reiterating its previously announced financial expectations for 2006. The Company continues to expect revenue of $120.0 million, up 76% from $68.0 million in 2005, as well as net income of $20.0 million, up 72% from $11.6 million in 2005. Based on a diluted sharecount of 17.1 million shares, the Company expects net income per diluted share of $1.17 in 2006. American Dairy's guidance takes into account the following expectations: --Increased demand for the Company's products in the seasonally strong fourth quarter --Continued marketing and advertising expenditure in the second half of 2006 --Continued VAT rebates in the second half of 2006 About American Dairy, Inc. American Dairy, Inc. conducts operations in The People's Republic People's Republic n. A political organization founded and controlled by a national Communist party. of China ("China") through its wholly owned subsidiary Wholly Owned Subsidiary A subsidiary whose parent company owns 100% of its common stock. Notes: In other words, the parent company owns the company outright and there are no minority owners. , Feihe Dairy. Founded in 1962, Feihe Dairy is one of the leading producers and distributors of milk powder and soybean products in China. Feihe Dairy is located in Kedong County Kedong ( Simplified Chinese: 克东; Traditional Chinese: 克東; Pinyin: Kèdōng , China, and has been in operation since 2001. American Dairy also has a milk powder processing plant, BaiQuan Feihe Dairy in Kedong County, and also has a milk powder processing plant in the city of QiQiHaEr, Heilongjiang Province. http://www.feihe.com/ Certain of the statements made herein constitute forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. within the meaning of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. Such statements typically involve risks and uncertainties and may include financial projections or information regarding our future plans, objectives or performance. Actual results could differ materially from the expectations reflected in such forward-looking statements as a result of a variety of factors, including the risks associated with the effect of changing economic conditions in The People's Republic of China, variations in cash flow, reliance on collaborative col·lab·o·rate intr.v. col·lab·o·rat·ed, col·lab·o·rat·ing, col·lab·o·rates 1. To work together, especially in a joint intellectual effort. 2. retail partners and on new product development, variations in new product development, risks associated with rapid technological change, and the potential of introduced or undetected flaws and defects in products, and other risk factors detailed in reports filed with the Securities and Exchange Commission from time to time.
AMERICAN DAIRY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended June 30, Six Months Ended June 30,
------------------------- -------------------------
2006 2005 2006 2005
------------ ------------ ------------ ------------
SALES $26,110,028 $15,143,413 $52,003,246 $29,264,329
COST OF GOODS SOLD 12,880,859 7,593,697 25,245,965 14,891,055
------------ ------------ ------------ ------------
Gross Profit 13,229,169 7,549,716 26,757,281 14,373,274
------------ ------------ ------------ ------------
OPERATING AND
ADMINISTRATIVE
EXPENSES:
Distribution
expenses 7,575,358 4,023,034 15,130,920 7,914,636
General and
administrative
expenses 1,268,021 509,820 2,336,021 779,975
Depreciation 117,133 201,645 167,784 238,608
------------ ------------ ------------ ------------
8,960,512 4,734,499 17,634,725 8,933,219
------------ ------------ ------------ ------------
Income from
operations 4,268,657 2,815,217 9,122,556 5,440,055
------------ ------------ ------------ ------------
OTHER INCOME
(EXPENSE):
Other income
(expenses) 1,154,848 51,789 1,286,240 62,135
Interest and
finance costs (179,345) (43,756) (402,937) (45,613)
------------ ------------ ------------ ------------
975,503 8,033 883,303 16,522
------------ ------------ ------------ ------------
MINORITY INTEREST 17,807 - 20,608 -
------------ ------------ ------------ ------------
INCOME BEFORE
INCOME TAXES 5,261,967 2,823,250 10,026,467 5,456,577
(PROVISION FOR)
BENEFIT FROM
INCOME TAXES - - - -
------------ ------------ ------------ ------------
NET INCOME 5,261,967 2,823,250 10,026,467 5,456,577
OTHER
COMPREHENSIVE
INCOME (LOSS):
FOREIGN CURRENCY
TRANSLATION
ADJUSTMENT (65,606) - 469,354 -
------------ ------------ ------------ ------------
TOTAL
COMPREHENSIVE
INCOME $5,196,361 $2,823,250 $10,495,821 $5,456,577
============ ============ ============ ============
BASIC NET INCOME
PER COMMON SHARE $0.36 $0.21 $0.70 $0.40
============ ============ ============ ============
WEIGHTED AVERAGE
BASIC SHARES
OUTSTANDING 14,579,828 13,756,377 14,373,202 13,656,918
============ ============ ============ ============
DILUTED NET INCOME
PER COMMON SHARE $0.31 $0.18 $0.61 $0.36
============ ============ ============ ============
WEIGHTED AVERAGE
DILUTED SHARES
OUTSTANDING 17,113,560 15,409,938 16,860,107 15,310,479
============ ============ ============ ============
See accompanying notes to the condensed consolidated financial
statements.
AMERICAN DAIRY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
JUNE 30, 2006 AND DECEMBER 31, 2005
ASSETS
June 30, December 31,
2006 2005
(unaudited)
------------ ------------
Current assets:
Cash $16,179,321 $12,958,435
Accounts receivable
Trade-net of allowance for bad debts of
$315,264 and $309,461, respectively 5,684,331 4,132,931
Employees 519,283 488,413
Other 481,888 1,516,105
Inventories 10,828,787 9,622,347
Prepaid expenses 347,080 875,031
Advances to suppliers 1,553,303 1,216,172
Other tax refundable - 500,892
------------ ------------
Total current assets 35,593,993 31,310,326
------------ ------------
Property and equipment:
Fixed assets, net of accumulated
depreciation 36,231,916 34,685,898
Construction in progress 2,161,093 3,373,833
------------ ------------
38,393,009 38,059,731
------------ ------------
Total assets $73,987,002 $69,370,057
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
June 30, December 31,
2006 2005
(unaudited)
------------ ------------
Current liabilities:
Accounts payable and accrued expenses $11,964,466 $11,855,430
Current portion of long term debt 102,375 102,466
Advances from related parties 964,367 932,942
Advances from employees 709,125 947,596
Deferred income 3,761,371 12,073,781
Short-term notes and loans payable 5,508,853 7,323,801
------------ ------------
Total current liabilities 23,010,557 33,236,016
------------ ------------
Long term debt, net of current portion
shown above 5,488,907 5,543,517
------------ ------------
Minority interest 442,916 493,500
------------ ------------
Stockholders' equity:
Common stock, $.001 par value; 50,000,000
shares authorized; 14,793,210 and
14,132,824 issued and outstanding at June
30, 2006 and December 31, 2005,
respectively 14,793 14,133
Additional paid-in capital 13,659,955 9,208,837
Retained earnings 30,295,259 20,268,793
Accumulated other comprehensive income 1,074,615 605,261
------------ ------------
Total stockholders' equity 45,044,622 30,097,024
------------ ------------
Total liabilities and stockholders' equity $73,987,002 $69,370,057
============ ============
See accompanying notes to the condensed consolidated financial
statements.
AMERICAN DAIRY INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended June 30,
2006 2005
------------ -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $10,026,467 $5,456,577
Adjustments to reconcile net income to
operating activities -
Depreciation 790,235 238,608
Compensation expense for stock issued 910,930 642,850
Changes in assets and liabilities:
(Increase) decrease in -
Accounts and notes receivable (1,551,400) (3,362,730)
Other receivables 1,034,217 (778,623)
Employees receivables (30,870) -
Inventories (1,206,440) (469,734)
Prepaid expenses 527,951 (301,943)
Advances to suppliers (337,131) (657,339)
Other tax refundable 500,892 (21,324)
Increase (decrease) in -
Accounts payable and accrued expenses 304,036 (1,073,211)
Other liabilities-fixed asset purchases
obligations - 5,300,000
Advances from related parties 31,425 (4,415)
Advances from employees (238,471) 550,466
Deferred income (8,312,410) (7,434,065)
------------ -----------
Net cash provided by (used in) operating
activities 2,449,429 (1,914,883)
------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets (2,336,161) (7,315,504)
Payments received on note receivable - 217,391
Minority interest (50,584) 305,285
Construction in progress 1,212,740 (555,073)
------------ -----------
Net cash used in investing activities (1,174,005) (7,347,901)
------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short-term loan 3,875,000 6,993,482
Proceeds from long-term loan 391,630 -
Repayment of short-term loans (3,082,614) -
Proceeds from long-term debt - 2,520,542
Repayment of long-term loans (53,347) (49,902)
Issuance of common stock 345,848 550,000
------------ -----------
Net cash provided by financing activities 1,476,517 10,014,122
------------ -----------
Effect of exchange rate change on cash and
cash equivalents 468,945 -
------------ -----------
NET DECREASE IN CASH AND EQUIVALENTS 3,220,886 751,338
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 12,958,435 6,645,197
------------ -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $16,179,321 $7,396,535
============ ===========
AMERICAN DAIRY INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Page 2 of 2
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid, net of capitalized amounts $156,807 $10,017
============ ===========
Income taxes paid $- $-
============ ===========
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING
ACTIVITIES:
During February, 2006, 49,000 shares of the Company's common stock
was issued to various directors and service providers. The shares
were valued at $434,000.
During April 2006, holders of $3,000,000 in convertible debt
elected to convert their notes plus accrued interest thereon into
399,375 shares of the Company's common stock. The conversion price
was $8.00 per share.
During June, 2006, 39,250 shares of the Company's common stock was
issued to various directors and service providers. The shares were
valued at $477,000.
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