Anticipates Reporting Full Year 2008 Financial Results by April 15,
2009 BEIJING, and LOS ANGELES, March 26 /PRNewswire-FirstCall/ --
American Dairy, Inc. (NYSE Arca: ADY) ("American Dairy" 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 its 2007
fiscal year and identified adjustments to its previously filed
audited financial statements for its 2005 and 2006 fiscal years.
The announcement of the Company's 2007 results has been delayed for
many months due to the dismissal of the Company's former
independent registered public accountant, as discussed below. The
Company intends to meet ongoing NYSE listing requirements and to
file a Form 10-K for its 2007 fiscal year by March 31, 2009.
Additionally, the Company announced today that it expects to file a
Form 10-K for its 2008 fiscal year by April 15, 2009. Financial
Highlights for the Twelve Months Ended December 31, 2007 Include:
-- Sales, up 44.2% year over year to $166.0 million, from $115.1
million in 2006 -- Gross profit, up 46.3% year over year to $73.0
million, from $49.9 million in 2006 -- Gross profit margin, up 63
basis points year over year to 44.0% in 2007 -- Income from
operations, up 13.5% year over year to $18.5 million, from $16.3
million in 2006 -- Net income attributable to ordinary shareholders
of $8.3 million, or $0.48 per diluted share, in 2007, compared to
$16.4 million, or $0.98 per diluted share, in 2006 Mr. Jonathan H.
Chou, Chief Financial Officer of American Dairy, stated, "We are
pleased with our 2007 accomplishments. We are approaching the end
of the re-audit process and our 2005, 2006 and 2007 results reflect
the significant growth of our high-quality Feihe brand and our
ongoing operational excellence. As we move through the final stages
of the re-audit, we'll continue to forge ahead with our trusted
brand, formidable distribution reach and increased production
capacity so that we capitalize on China's compelling dairy and
infant formula opportunity." Mr. Chou continued, "Although in the
course of our re-audit we have identified material weaknesses and
significant deficiencies in our internal controls, we are actively
working to remediate and improve our internal controls, including
hiring additional accounting, internal audit and finance staff,
engaging consultants to assist with these functions, upgrading our
systems, and implementing additional financial and management
controls, reporting systems and procedures. As we continue
implementing these measures, we believe we have become a much
stronger company with better accounting and finance infrastructure
and that our financial reporting will be more reliable and
effective. We look forward to speaking with investors and
shareholders on a regular quarterly basis once we report our
audited 2008 financial results in the near future." Mr. Leng You
Bin, the Company's Chief Executive Officer, stated, "We plan to
continue expanding our production capabilities, enhancing our
distribution network in the first-tier cities in China, and
strengthening our premium-quality brand awareness. We are confident
that our 2008 results will reflect growth and are excited about our
2009 prospects. We look forward to continuing to deliver consistent
results." Re-Audit and Restatement of 2005 and 2006 Financial
Statements As previously announced, in December 2007 the Company
dismissed Murrell, Hall, McIntosh & Co. PLLP ("MHM") as its
independent registered public accountant following notification of
an informal SEC investigation related to MHM and other individuals
and entities that provided accounting or advisory services to the
Company. The Company has filed a lawsuit against MHM in the United
States District Court for the Western District of Oklahoma alleging
that MHM breached its duties of due care and professional
competence when serving as the Company's independent registered
public accountant. As previously announced, in January 2008, the
Company engaged Grant Thornton, the Hong Kong member firm of Grant
Thornton International ("GT"), as its new independent registered
public accountants and initiated a voluntary re-audit of its
historical financial statements for the 2006 and 2005 fiscal years.
During the course of the re-audit, the Company identified items
that require reclassification and errors that require correction in
certain financial statements line items in its financial statements
as of and for the 2006 and 2005 fiscal years. On March 26, 2009,
management of the Company, in consultation with GT and the Audit
Committee of the Company's board of directors, concluded that the
re-audit was sufficiently complete such that the Company could
evaluate the materiality of these errors and reclassifications on
the Company's previously filed financial statements. Accordingly,
management of the Company, in consultation with GT and the Audit
Committee, concluded that the Company's previously filed financial
statements as of and for the fiscal years ended December 31, 2006
and 2005 should be restated and should no longer be relied upon.
The Company currently estimates that the adjustments made during
the re-audit would result in: -- For 2005, an increase in current
assets of approximately $2.1 million, an increase in total assets
approximately $1.4 million, an increase in current liabilities of
approximately $610,000, an increase in total liabilities of
approximately $2.4 million, a decrease in shareholders' equity of
approximately $700,000, an increase in gross profit of
approximately $1.0 million, a decrease in net income attributable
to ordinary shareholders of approximately $320,000, and a decrease
in total comprehensive income of approximately $150,000. -- For
2006, an increase in current assets of approximately $1.6 million,
an increase in total assets approximately $6.5 million, an increase
in current liabilities of approximately $6.6 million, an increase
in total liabilities of approximately $10.0 million, a decrease in
shareholders' equity of approximately $3.6 million, a decrease in
gross profit of approximately $2.7 million, a decrease in net
income attributable to ordinary shareholders of approximately $3.5
million, and a decrease in total comprehensive income of
approximately $2.6 million. Results of 2007 Operations The
following discussion of the Company's 2007 results of operations
compares its unaudited condensed consolidated statements of
operations and comprehensive income for the fiscal year ended
December 31, 2007 to its unaudited, restated condensed consolidated
statements of operations and comprehensive income for the fiscal
year ended December 31, 2006. The unaudited amounts are only
current estimations and investors should only rely on the audited
financial information, which the Company plans to finalize and
present in its 2007 Form 10-K to be filed by March 31, 2009. Sales
increased by approximately $50.9 million, or 44.2%, from
approximately $115.1 million in 2006 to approximately $166.0
million in 2007. This increase was primarily attributable to
expanding the Company's market areas and distribution network
throughout China, increased demand for high quality products and
strong market acceptance of its products, as well as an increase in
sales quantities of several high profit margin products. Gross
profit increased approximately $23.1 million, or 46.3%, from
approximately $49.9 million in 2006 to approximately $73.0 million
in 2007. Gross profit margin in 2007 was 44.0%, an increase of 63
basis points from 43.4% in 2006. The increase in gross profit
margin was primarily attributable to the shift in product mix to
higher end products. Costs of goods sold increased approximately
$27.8 million, or 42.6%, from approximately $65.2 million in 2006
to approximately $92.9 million in 2007. This increase was primarily
attributable to an increase of approximately $13.9 million, or
52.2%, in raw milk cost. Total operating expenses increased by
approximately $20.9 million, or 62.2%, from approximately $33.7
million in 2006 to approximately $54.6 million in 2007. This
increase was primarily attributable to an increase of approximately
$12.7 million, or 45.2%, in sales and marketing expenses, and an
increase of approximately $8.3 million, or 147.6%, in general and
administrative expenses. As a result of the foregoing, income from
operations increased approximately $2.2 million, or 13.5%, from
approximately $16.3 million in the 2006 to approximately $18.5
million in 2007. The Company had other expenses of approximately
$4.3 million in 2007, as compared to other income of approximately
$5.0 million in 2006. This change was primarily attributable to an
increase in interest and finance costs of approximately $11.9
million, associated with the Company's 1% Guaranteed Senior Secured
Convertible Notes due 2012 and 7.75% Convertible Notes due 2009, as
well as various changes in other income and expense accounts. In
2007, net income attributable to ordinary shareholders was
approximately $8.3 million, or $0.48 per diluted share, as compared
to $16.4 million, or $0.98 per diluted share, in 2006. AMERICAN
DAIRY, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE INCOME (UNAUDITED) For the twelve months ended
December 31, 2007 2006 ---- ---- (Amounts in US$, except share
data) (Restated) Sales 165,968,149 115,082,067 Cost of goods sold
92,937,418 65,169,853 Gross profit 73,030,731 49,912,214 Operating
and administrative expenses: Sales and marketing 40,739,403
28,066,399 General and administrative 13,840,318 5,590,246 Total
operating expenses 54,579,721 33,656,645 Income from operations
18,451,010 16,255,569 Other income (expenses): Interest income
374,386 175,986 Interest and finance costs (13,404,171) (1,520,856)
Amortization of deferred charges (369,794) - Registration rights
penalty (2,540,000) - Gain on derivative 3,279,031 - Loss on
extinguishment of debt - (687,578) Refunds of income tax and VAT
taxes 8,140,145 7,491,808 Other income (expenses), net 236,387
(435,318) Income before income tax expenses and minority interests
14,166,994 21,279,611 Income tax expenses 5,879,535 4,857,561 Net
income before minority interests 8,287,459 16,422,050 Minority
interests (3,066) 11,322 Net income attributable to ordinary
shareholders 8,284,393 16,433,372 Other comprehensive income:
Cumulative currency translation adjustments 9,314,690 1,993,117
Total comprehensive income 17,599,083 18,426,489 Earnings per
ordinary share: Basic $0.51 $1.11 Diluted $0.48 $0.98 Weighted
average ordinary shares outstanding: Basic 16,327,616 14,745,930
Diluted 17,696,997 17,651,713 About American Dairy, Inc. American
Dairy, Inc. (NYSE Arca: ADY) is one of the leading producers and
distributors of premium infant formula, milk powder, and soybean,
rice walnut products in the People's Republic of China. American
Dairy conducts operations in China through its wholly owned
subsidiary, Feihe Dairy. Founded in 1962, Feihe Dairy is
headquartered in Beijing, China, and has processing and
distribution facilities in Kedong, Qiqihaer, Baiquan, Gannan,
Shanxi, and Langfang. Using proprietary processing techniques,
American Dairy makes products that are specially formulated for
particular ages, dietary needs and health concerns. American Dairy
has over 200 company-owned milk collection stations, six production
facilities with an aggregate milk powder production capacity of
approximately 1,220 tons per day and an extensive distribution
network that reaches over 50,000 retail outlets throughout China.
For more information about American Dairy, please visit
http://www.americandairyinc.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," "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,
2006, quarterly reports on Form 10-Q for its fiscal quarters in
2007, and in current reports on Form 8-K filed with the United
States Securities and Exchange Commission and available at
http://www.sec.gov/. The Company assumes no obligation to update
any such forward-looking statements. CONTACT: In the U.S.: Ashley
Ammon ICR, Inc. +1 203-682-8200 In China: Wei-Jung Yang ICR, Inc.
+86-10-6599-7968 DATASOURCE: American Dairy, Inc. CONTACT: In the
U.S., Ashley Ammon, +1-203-682-8200, or In China, Wei-Jung Yang
+86-10-6599-7968, both of ICR, Inc., for American Dairy, Inc. Web
Site: http://www.americandairyinc.com/
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