Company Reaffirms 2011 Guidance of $70.0 Million in Revenues
HARBIN, China, May 26, 2011 /PRNewswire-Asia-FirstCall/ -- Emerald Dairy Inc. (OTC Bulletin Board: EMDY) ("Emerald Dairy" or "the Company"), a producer and distributor of infant and children's formula products in the People's Republic of China (the "PRC"), announced financial results for its first quarter ended March 31, 2011.
First quarter 2011 Results
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Q1 2011 (Unaudited) |
Q1 2010 (Unaudited) |
CHANGE |
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Net Sales |
$ 14.7 million |
$ 14.3 million |
+3% |
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Gross Profit |
$ 7.2 million |
$ 7.1 million |
+1% |
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GAAP Net Income |
$ 2.0 million |
($ 2.3 million) |
N/A |
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EPS (Diluted) |
$0.06 |
($0.07) |
N/A |
|
"While we had begun operations at our Hailun Facility during the fourth quarter, and have found that the equipment is operating to expectations, we were prohibited from shipping product until we received the AQSIQ approval in March of this year," began Yong Shan Yang, Chairman and CEO of Emerald Dairy. "We were essentially operating solely through our existing Bei'an facility during the first quarter, which resulted in minimal year-over-year increase in sales. We are now fully operational, demand appears to be strong, and we are poised to gain additional market share as many smaller producers who cannot secure AQSIQ approval have shut down or suspended production. We remain confident in meeting our target of $70.0 million in revenues for fiscal 2011 and, based on the backlog of orders, we expect robust growth for the balance of this year."
First Quarter 2011 Review
Total revenue for the first quarter of 2011 was $14.7 million, up 3% from $14.3 million for the quarter ended March 31, 2010 due to an 8% increase in the average selling price per ton. Total volumes sold were down approximately 5% to 2,471 due partially to lower subcontracting sales but mostly attributable to shipment delays of Xinganling® infant formula from the Company's Hailun facility while it awaited AQSIQ certification from the government. Sales of Emerald Dairy goods increased by 3.0% as a result of sales of higher priced Xinganling®-branded infant formulas. For the first quarter of the year, sales of infant formula and milk powder accounted for 90% of the sales of Emerald Dairy. The remaining revenue segments in rice and soybean powders and subcontracting sales totaled $1.5 million, or approximately 10% of sales for the period.
Gross profit for the first quarter of 2011 was $7.2 million, 1% higher than the $7.1 million in the first quarter of 2010. Overall gross profit margin was down 80 basis points to 49% in the first quarter due to a reduction in milk powder margins. The cost per ton was up 10% year-over-year due to rising inflation in China. Despite the slight reduction of gross margins in the first quarter of the year, Emerald Dairy expects it will be able to pass along cost increases to customers and maintain its target margins detailed below.
Xinganling® Milk Powders – 45%-55% margins
Rice Powders (for lactose intolerance) – 60%-68% margins
Soybean Powders (for lactose intolerance) – 20%-30% margins
Private Label Contracting – 10%
Operating expenses for the first quarter of 2011 were 4.0 million, an increase of 1.7% versus the first quarter of 2010. Operating income totaled $3.0 million in the first quarter of 2011, a 17.7% increase from $2.5 million in the first quarter of the previous year. The Company's operating margin for the first quarter of 2011 was 23.6%, compared to 11.8% in the first quarter of the prior year, a 1,180 basis point improvement. Operating leverage resulted from prudent expense control coupled with ton line growth.
GAAP net income for the first quarter of 2011 was $2.0 million compared to a $2.3 million loss in the first quarter of 2010. Earnings per share were $0.06 per diluted share in the first quarter of 2011. Earnings per share increased 100.0% to $0.06 based on 34.5 million weighted average diluted shares outstanding on March 31, 2011, compared to 32.9 million fully diluted shares in the same period in the prior year.
Financial Condition
Emerald Dairy had $0.3 million of cash outflows from operations in the first three months of 2011, resulting in a cash balance of approximately $16.3 million at March 31, 2011. Working capital was $26.5 million compared to $24.4 million as of December 31, 2010; accounts receivable were $8.5 million, compared to $8.2 million as of December 31, 2010. The Company had $6.4 million in short term loans as of March 31, 2011. Shareholder's equity was $49.7 million versus $47.2 million reported on December 31, 2010.
2011 Guidance
Management reaffirmed its 2011 financial forecasts of approximately $70.0 million in revenues. The Company currently expects to produce and sell approximately 15,000 tons of products in 2011 compared to 10,050 tons in 2010, although there are no assurances it will do so.
First quarter 2011 Conference Call
To attend the call, please use the dial-in information below. When prompted, ask for the "Emerald Dairy" and/or be prepared to provide the conference ID.
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Date: |
Thursday, May 26, 2011 |
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Time: |
10:00am ET |
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Conference Line Dial-In |
1-877-941-8416 |
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International Dial-In: |
1-480-629-9808 |
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Conference ID: |
4444627 |
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Webcast link: |
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This call is being web cast by ViaVid Broadcasting and can be accessed at ViaVid's website at http://www.viavid.net or at the following link: http://viavid.net/dce.aspx?sid=00008752
About Emerald Dairy
Through its wholly-owned operating subsidiaries, Emerald Dairy Inc. is a producer and distributor of infant and children's formula, milk powder and soybean products in the PRC. The Company's products are sold under two brand names -- "Xing An Ling," designed for middle and high-end customers, and "Yi Bai," designed for low-end customers. Emerald Dairy's products are distributed throughout 20 provinces in mainland China and sold in over 6,500 retail points. For further information about Emerald Dairy Inc., please visit the Company's website at http://www.emeralddairy.com/
Forward-Looking Statements
This press release contains certain "forward-looking statements" that involve a number of risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. You can identify such statements by forward looking words such as "may," "expect," "plans," "intends," "anticipate," "believe," "estimate," and "continue" or similar words. There can be no assurance that such statements will prove to be accurate and the actual results and future events could differ materially from management's current expectations. Such factors include, but are not limited to, the Company's ability to obtain the necessary financing to continue and expand operations, to market its products in new markets and to offer products at competitive pricing, to attract and retain management, and to integrate and maintain technical information and management information systems, political and economic factors in the PRC, compliance requirement of laws and regulations of the PRC, the effects of currency policies and fluctuations, general economic conditions and other factors detailed from time to time in the Company's filings with the United States Securities and Exchange Commission and other regulatory authorities. The Company undertakes no obligation to publicly update or revise any forward- looking statements, whether as a result of new information, future events or otherwise.
- Financial Statements Follow -
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Emerald Dairy Inc. and Subsidiaries |
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March 31, |
December 31, |
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2011 |
2010 |
||||||
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(Unaudited) |
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ASSETS |
|||||||
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Current Assets |
|||||||
|
Cash and cash equivalents |
$ |
16,327,220 |
$ |
17,131,274 |
|||
|
Trade accounts receivable, net |
8,525,802 |
8,220,622 |
|||||
|
Inventory, net |
1,254,903 |
1,052,594 |
|||||
|
Advances to equipment supplier |
10,663,324 |
10,154,264 |
|||||
|
Other current assets |
3,462,104 |
2,697,946 |
|||||
|
Total current assets |
40,233,353 |
39,256,700 |
|||||
|
Property, plant and equipment |
|||||||
|
Property, plant and equipment, net |
23,147,446 |
23,039,183 |
|||||
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Construction in progress |
895,527 |
875,934 |
|||||
|
24,042,973 |
23,915,117 |
||||||
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Intangible assets, net |
1,349,379 |
1,348,161 |
|||||
|
$ |
65,625,705 |
$ |
64,519,978 |
||||
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LIABILITIES AND STOCKHOLDERS' EQUITY |
|||||||
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Current Liabilities |
|||||||
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Accounts payable and accrued expenses |
$ |
5,260,254 |
$ |
6,596,367 |
|||
|
Notes payable, net of debt discount of $0 and $729,830 at March 31, 2011 and December 31, 2010, respectively |
6,396,411 |
6,358,295 |
|||||
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Other current liabilities |
630,190 |
539,332 |
|||||
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Current portion of long-term lease |
1,263,336 |
1,171,566 |
|||||
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Loan from shareholder |
219,076 |
217,294 |
|||||
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Total current liabilities |
13,769,267 |
14,882,854 |
|||||
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Long-term lease payable |
2,140,860 |
2,468,984 |
|||||
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Commitments and Contingencies |
|||||||
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Stockholders' Equity |
|||||||
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Preferred stock ($0.001 par value, 10,000,000 shares authorized, none issued and outstanding at March 31, 2011 and December 31, 2010) |
- |
- |
|||||
|
Common stock ($0.001 par value, 100,000,000 shares authorized, 36,151,823 and 35,976,575 issued and outstanding at March 31, 2011 and December 31, 2010, respectively) |
36,152 |
35,977 |
|||||
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Treasury Stock (1,944,444 shares at March 31, 2011 and December 31, 2010, respectively) |
(1,944) |
(1,944) |
|||||
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Additional paid-in capital |
26,116,359 |
26,007,743 |
|||||
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Retained earnings (of which $4,603,066 and $3,191,614 are restricted at March 31, 2011 and December 31, 2010, respectively, for common welfare reserves) |
19,409,427 |
17,431,350 |
|||||
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Accumulated other comprehensive income |
4,155,584 |
3,695,014 |
|||||
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Total stockholders' equity |
49,715,578 |
47,168,140 |
|||||
|
$ |
65,625,705 |
$ |
64,519,978 |
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Emerald Dairy Inc. and Subsidiaries |
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2011 |
2010 |
||||||
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Sales |
$ |
14,679,052 |
$ |
14,252,856 |
|||
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Cost of Goods Sold |
7,489,607 |
7,153,772 |
|||||
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Gross Profit |
7,189,445 |
7,099,084 |
|||||
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Operating Expenses |
|||||||
|
Selling expenses and administrative expenses |
3,825,619 |
3,902,390 |
|||||
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Liquidated damages |
- |
5,021,669 |
|||||
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Depreciation and amortization |
244,537 |
51,228 |
|||||
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Total operating expenses |
4,070,156 |
8,975,287 |
|||||
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Other Income (Expense) |
|||||||
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Interest income |
1,087 |
1,058 |
|||||
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Interest expense |
(184,263) |
- |
|||||
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Total other income (expense) |
(183,176) |
1,058 |
|||||
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Net Income (Loss) Before Provision for Income Tax |
2,936,113 |
(1,875,145) |
|||||
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Provision for Income Taxes |
|||||||
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Current |
958,036 |
421,499 |
|||||
|
958,036 |
421,499 |
||||||
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Net Income (Loss) |
$ |
1,978,077 |
$ |
(2,296,644) |
|||
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Basic Earnings Per Share |
$ |
0.06 |
$ |
(0.07) |
|||
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Basic Weighted Average Shares Outstanding |
34,059,392 |
32,945,823 |
|||||
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Diluted Earnings Per Share |
$ |
0.06 |
$ |
(0.07) |
|||
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Diluted Weighted Average Shares Outstanding |
34,447,114 |
32,945,823 |
|||||
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The Components of Other Comprehensive Income (Loss) |
|||||||
|
Net Income (Loss) |
$ |
1,978,077 |
$ |
(2,296,644) |
|||
|
Foreign currency translation adjustment |
697,833 |
10,295 |
|||||
|
Income tax related to other comprehensive income |
(237,263) |
(3,500) |
|||||
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Comprehensive Income (Loss) |
$ |
2,438,647 |
$ |
(2,289,849) |
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Emerald Dairy Inc. and Subsidiaries |
||||||
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2011 |
2010 |
|||||
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Cash flows from operating activities |
||||||
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Net Income (Loss) |
$ |
1,978,077 |
$ |
(2,296,644) |
||
|
Adjustments to reconcile net cash provided by operating activities |
||||||
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Depreciation and amortization |
320,829 |
141,255 |
||||
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Amortization of loan discount |
38,116 |
186,025 |
||||
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Capitalized interest |
(243,669) |
(630,918) |
||||
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Warrants issued for services |
27,245 |
- |
||||
|
Warrants modified for liquidated damages |
- |
5,021,669 |
||||
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Incentive stock options |
81,546 |
213,361 |
||||
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Net change in assets and liabilities |
||||||
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Trade accounts receivable |
(238,317) |
298,933 |
||||
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Inventory |
(193,748) |
(622,331) |
||||
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Other current assets |
(742,214) |
171,145 |
||||
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Accounts payable and accrued expenses |
(1,389,765) |
358,770 |
||||
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Other current liabilities |
86,471 |
(280,844) |
||||
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Net cash (used in) provided by operating activities |
(275,429) |
2,560,421 |
||||
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Cash flows from investing activities |
||||||
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Deposit on equipment and construction |
(426,470) |
(9,411,275) |
||||
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Construction in progress |
- |
(113,874) |
||||
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Purchases of fixed assets and intangibles |
(713) |
(44,548) |
||||
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Net cash used in investing activities |
(427,183) |
(9,569,697) |
||||
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Cash flows from financing activities |
||||||
|
Repayments of sale-leaseback |
(236,354) |
- |
||||
|
Net cash used in financing activities |
(236,354) |
- |
||||
|
Effect of exchange rate |
134,912 |
5,440 |
||||
|
Net decrease in cash |
(804,054) |
(7,003,836) |
||||
|
Cash and cash equivalents at beginning of period |
17,131,274 |
13,486,429 |
||||
|
Cash and cash equivalents at end of period |
$ |
16,327,220 |
$ |
6,482,593 |
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COMPANY:
Mr. Shu Kaneko, CFO
Emerald Dairy Inc.
Email: shu.kaneko@amnutriadairy.com
Web: http://www.emeralddairy.com/
INVESTOR RELATIONS:
John Mattio, SVP
HC International, Inc.
Tel: US +1-212-301-7130
Email: john.mattio@hcinternational.net
Web: http://www.hcinternational.net
