EMERALD DAIRY INC 
By HARBIN, China, April 18, 2011 /PRNewswire-Asia-FirstCall/ -- Emerald Dairy, Inc. (OTC Bulleting Board: EMDY) ("Emerald Dairy" or "the Company") a leading producer and distributor of infant and children's formula products, today announced financial results for its fourth quarter ended December 31, 2010.
Fourth Quarter 2010 Results
Q4 2010 Q4 2009 CHANGE
Net Sales $14.8 million $13.4 million 10.0%
Gross Profit $7.0 million $6.5 million 8.0%
GAAP Net Income $2.7 million $0.5 million 432%
EPS (Diluted) $0.08 $0.01 458.4%
Adjusted Net Income* $2.5 million $1.9 million 31.6%
Adjusted EPS* $0.06 $0.03 100.0%
* Adjusted Net Income' and 'Adjusted EPS' and non-GAAP calculations
and excludes the non-cash $0.2million gain
and $1.4 million loss related to extinguishment of debt in Q4 2010
and Q4 2009, respectively.
Fourth Quarter 2010 Review
Total revenue for the fourth quarter of 2010 ended December 31, 2010 was 14.8 million, up 10.0% from $13.4 million for the quarter ended December 31, 2009, and was driven by a 207 metric ton increase in production and shipments of Emerald Dairy's Xinganling® products during the quarter. Sales of the mid- and high end price point Xinganling® formulas increased by24.5% over the year ago period and represented 86.3% of fourth quarter sales. The Company has been able maximize production output in on its first9,000 ton line in Bei'an and tap into its new production capacity of 10,000 tons at its Hailun facility which was operational in December of the year. Another contributor to its revenues was higher pricing on some of the Company's subcontracting production runs, leading to sales increasing by 63.4% to $1.1 million in that business segment during the fourth quarter.
Gross profit for the fourth quarter of 2010 was $7.0 million, a 9.4% increase from $6.4 million in the fourth quarter of 2009. Overall gross profit margin was down 80 basis points to 47.2% in the fourth quarter due to large subcontracting orders, which carries lower margins.
Xinganling(R) 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 quarter were 4.0 million, an increase of 1.7%. Operating income totaled $3.0 million in the fourth quarter of 2010, a 17.7% increase from $2.5million in the fourth quarter of the previous year. Adjusted operating income excluding non-cash items was $3.0 million. The Company's adjusted operating margin was 23.6% compared to 11.8% in the fourth 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 fourth quarter of 2010 was 2.7 million, an increase of 432% from $0.5 million in the fourth quarter of 2009. Earnings per share were $0.04 per diluted share in the quarter. Adjusted net income excluding the non-cash value of stock options and warrants expensed was $2.0 million, an increase of 127.3% year over year. Adjusted earnings per share increased 100.0% to $0.06 based on 34.5 million weighted average diluted shares outstanding on December 31, 2010, compared to 30.8 million fully diluted shares in the year ago period.
Full Year 2010 Results
FY 2010 FY 2009 CHANGE
Net Sales $55.3 million $44.7 million 23.6%
Gross Profit $27.1 million $20.7 million 31.0%
GAAP Net Income $3.1 million $4.2 million -26.1%
EPS (Diluted) $0.09 $0.14 -31.5%
Adjusted Net Income* $10.2 million $6.0 million 70.0%
Adjusted EPS* $0.30 $0.19 57.9%
* Adjusted Net Income' and 'Adjusted EPS' are non-GAAP calculations
and excludes $5 million in non-cash liquidating damages during the
twelve months ended December 31, 2010, as a result of the extension
of warrants previously issued by Company to satisfy certain
registration provisions. Adjusted net income and EPS also excludes
the non-cash charge of $0.6 million related to stock options
granted to employees as of December 31st, 2010; $0.3 million related
to the fair value of warrants issued to consultants amortized during
the twelve months ended December 31, 2010 and $1.2million loss
related to extinguishment of debt during the twelve months ended
December 31, 2010. Adjusted net income and EPS in FY 2010 exclude
the total amount of approximately $7 million in non-cash items.
"Our focus on our higher margin Xinganling®-branded products has significantly improved our revenues, margins and earnings for the year," began Yongshan Yong, CEO and Chairman of Emerald Dairy. "The results of the ongoing certification of dairy companies in China and our belief that many smaller players will simply not be recertified for operation will provide us an excellent platform to continue our growth especially in Tier 3 and Tier 4 cities in China. Preference for domestic infant formula brands remains strong in China and our efforts to both enhance our product line with new products like organics and expand our Xinganling® line capacity is testament to our confidence in 2011. We hope to exceed our guidance for the year and have made a commitment to update our investors on our sales and marketing successes on a more frequent basis throughout the year."
Revenue for the first twelve months of 2010 was $55.3 million, up 23.6% from $44.7 million in the prior year's period, driven by an 18.6% increase in sales volume and a 4.2% increase in average selling prices. 2010 full year performance was less than initial guidance of$60.0 - $65.0 million due to a four month delay in the installation of the Company's new 10,000 production line ("Line B") at the Hailun facility.
Milk powder sales increased 22.5%and represented85.5% of revenues due to higher demand and increased fourth quarter production from the Hailun facility. Rice powder, soybean powder, and subcontracting accounted for approximately 3.0%, 2.6% and 8.7% of total sales in 2010.
Gross profits were $27.1 million, an increase of 31.0% for the period. Gross profit margin increased by 280basis points to 49.0% in the first twelve months ended December 31, 2010, with margin improvement in milk powder, soybean powder and subcontracting.
GAAP operating expenses for 2010 was $21.1 million, including a number of non-cash charges. Selling expenses increased by $2.6 million, or 26.2%, due to higher advertising and promotion expenses and increased sales expenses as the Company added sales staff. Advertising expenses were $2.2 million, a 54.3% increase due to higher brand and marketing investments, representing 8% of sales. Emerald Dairy estimates marketing and advertising costs of 8-10% of revenues for print, radio and TV advertising designed to build brand recognition and market share. The Company expanded distribution to over 6,500 retail locations in 20provinces, up approximately 8% from December 31, 2009.
Emerald Dairy recorded four non-cash charges in the twelve months of 2010; (i) $5.0 million in liquidated damages as a result of the extension of warrants previously issued by the Company to satisfy certain registration rights provisions (ii) $0.6 million in non-cash stock options for employees (iii)$0.3million related to the fair value of warrants issued to consultants amortized during the twelve months ended December 31, 2010 and (iv) $1.2related to the fair value of warrants issued for loan costs amortized during the twelve months ended December 31, 2010. Excluding these non-cash expenses of approximately $7.0million, total operating expenses were $14.1 million in the first twelve months of 2010 compared to $11.7 million in the twelve months of 2009.
Operating income for the first twelve months of 2010 was down 16.1% year-over-year to $6.0 million. Adjusted operating income, excluding $7.0million of non-cash expenses, was $13 million in the first twelve months of 2010 compared to $9 million in the first twelve months of 2009, a 44.4% increase year over year.
GAAP net income for the twelve months of fiscal year 2010 was $3.1 million, compared to $4.2 million in the prior year's corresponding period. Adjusted net income for the twelve months of 2010 was $10.2 million, an increase of 70%over 2010. Adjusted earnings per share were$0.30 versus$0.19 in the year ago period, based on 34.2 million and 31.0 million diluted shares outstanding for each respective period.
Financial Condition
The Company generated $11.9 million of cash from operations in 2010, ending the year with approximately $17.1 million in cash and equivalents. Working capital was $24.4 million, up from $17.3 million as of December 31, 2009; accounts receivable were $8.2 million, compared to $7.2 million as of December 31, 2009. The Company had $6.4 million in short term loans as of December 31, 2010. Shareholder's equity was $47.2 million, a 41.3% increase from $33.4 million reported on December 31, 2009.
2011 Guidance
Emerald Dairy has a total of 19,000 tons of capacity in 2011 versus 9,000 tons in 2010.The Company will focus its sales efforts on its high-margin, Xinganling® infant formulas which include infant formula milk powder, soybean milk powder and rice powder products. Revenue for 2011 is forecast to approximately $70.0 million, a 27% increase over 2010. The Company expects to produce and sell approximately 15,000 tons of products in 2011 compared to 10,050 tons in 2010. Adjusted net income is forecast to be approximately $12.9million.
Fourth Quarter and Fiscal 2010 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.
Date: Friday, April 18, 2011
Time: 10:00 a.m. Eastern Time, US.
Conference Line Dial-
In: +1-877-941-8416
International Dial-In: +1-480-629-9808
Conference ID: 4433623 "Emerald Dairy Call"
http://viavid.net/
Webcast link: dce.aspx?sid=0000846F
Please dial in at least 10 minutes before the call to ensure timely participation. A playback will be available through April 25, 2011. To listen, please call + 1-877-870-5176 within the United States or + 1-858-384-5517 when calling internationally. Utilize the pass code 4466623 for the replay.
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=0000846F
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 People's Republic of China. 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/
About Non-GAAP Financial Measures
To supplement the Company's consolidated financial statements, which statements are prepared and presented in accordance with GAAP, we use the following non-GAAP financial measures: non-GAAP adjusted net income, and non-GAAP adjusted EPS. The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. The Company uses these non-GAAP financial measures for financial and operational decision making and as a means to evaluate period-to-period comparisons. Management believes that these non-GAAP financial measures provide meaningful supplemental information regarding the Company's performance and liquidity by excluding certain expenses and expenditures that may not be indicative of "recurring core business operating results", meaning operating performance excluding non-cash amortization charges for intangibles. The Company believes that both management and investors benefit from referring to these non-GAAP financial measures in assessing performance and when planning, forecasting and analyzing future periods. These non-GAAP financial measures also facilitate management's internal comparisons to historical performance and liquidity as well as comparisons to competitors' operating results. The Company believes these non-GAAP financial measures are useful to investors both because (1) they allow for greater transparency with respect to key metrics used by management in its financial and operational decision-making and (2) they are used by our institutional investors and the analyst community to help them analyze the health of the business.
Forward-Looking Statements
This press release contains certain "forward-looking statements" that involve a number of risks and uncertainties. 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 -
Emerald Dairy Inc. and Subsidiaries
Consolidated Balance Sheet
December 31, 2010
2010 2009
---- ----
ASSETS
Current Assets
Cash and cash equivalents $17,131,274 $13,486,429
Trade accounts receivable, net 8,220,622 7,223,016
Inventory, net 1,052,594 1,298,488
Advances to equipment supplier 10,154,264 3,710,707
Advances to suppliers and other
receivables 2,607,069 1,221,151
Deposits 90,877 71,598
------ ------
Total current assets 39,256,700 27,011,389
---------- ----------
Property, plant and equipment
Property, plant and equipment,
net 23,039,183 5,946,330
Construction in progress 875,934 8,772,931
------- ---------
23,915,117 14,719,261
---------- ----------
Intangible assets, net 1,348,161 1,341,534
--------- ---------
$64,519,978 $43,072,184
=========== ===========
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current Liabilities
Accounts payable $5,523,712 $2,308,866
Accrued expenses 1,072,655 608,932
Notes payable, net of debt
discount of $38,116 and
$729,830 at December 31, 2010 6,358,295 5,843,472
and 2009, respectively
Taxes payable 539,332 704,056
Current portion of long-term
lease 1,171,566 -
Loan from shareholder 217,294 210,142
------- -------
Total current liabilities 14,882,854 9,675,468
---------- ---------
Long-term lease payable 2,468,984 -
Commitments and Contingencies
Stockholders' Equity
Preferred stock ($0.001 par
value, 10,000,000 shares
authorized, none issued and - -
outstanding at December 31,
2010 and 2009)
Common stock ($0.001 par value,
100,000,000 shares authorized,
35,976,575 and 35,977 34,890
34,890,267 issued and
outstanding at December 31,
2010 and 2009, respectively)
Treasury Stock (1,944,444
shares at December 31, 2010
and 2009, respectively) (1,944) (1,944)
Additional paid-in capital 26,007,743 17,003,093
Retained earnings (of which
$3,191,614 and $1,834,742 are
restricted at December 31, 17,431,350 14,318,425
2010 and 2009, respectively,
for common welfare reserves)
Accumulated other comprehensive
income 3,695,014 2,042,252
--------- ---------
Total stockholders' equity 47,168,140 33,396,716
---------- ----------
$64,519,978 $43,072,184
=========== ===========
Emerald Dairy Inc. and Subsidiaries
Consolidated Statements of Operations
For the Years Ended December 31, 2010 and 2009
2010 2009
---- ----
Sales $55,269,755 $44,729,276
Cost of Goods Sold 28,181,754 24,056,601
---------- ----------
Gross Profit 27,088,001 20,672,675
Operating Expenses
Selling expenses 12,683,225 10,047,861
Administrative expenses 3,141,843 3,271,892
Liquidated damages 5,021,669 -
Depreciation and amortization 288,267 178,281
------- -------
Total operating expenses 21,135,004 13,498,034
---------- ----------
Other Income (Expense)
Interest income 4,698 6,187
Interest expense (1,157,923) (236,226)
Loss on extinguishment of
debt - (1,405,052)
--- ----------
Total other income (expense) (1,153,225) (1,635,091)
Net Income Before Provision
for Income Tax 4,799,772 5,539,550
Provision for Income Taxes
Current 1,686,847 1,327,527
--------- ---------
1,686,847 1,327,527
--------- ---------
Net Income $3,112,925 $4,212,023
========== ==========
Basic Earnings Per Share $0.09 $0.14
===== =====
Basic Weighted Average
Shares Outstanding 33,741,628 30,661,333
========== ==========
Diluted Earnings Per Share $0.09 $0.14
===== =====
Diluted Weighted Average
Shares Outstanding 34,179,615 31,001,248
========== ==========
The Components of Other
Comprehensive Income (Loss)
Net Income $3,112,925 $4,212,023
Foreign currency translation
adjustment 2,504,185 (26,236)
Income tax related to other
comprehensive income (851,423) 8,920
-------- -----
Comprehensive Income $4,765,687 $4,194,707
========== ==========
Emerald Dairy Inc. and Subsidiaries
Consolidated Statements of Cash Flows
For the Years Ended December 31, 2010 and 2009
2010 2009
---- ----
Cash flows from operating
activities
Net Income $3,112,925 $4,212,023
Adjustments to reconcile net
cash provided by operating
activities
Depreciation and amortization 657,508 538,626
Amortization of loan discount 734,864 102,159
Loss on extinquishment of debt - 1,405,052
Capitalized interest (1,502,391) (552,683)
Stock issued for services 34,657 66,304
Warrants modified for
liquidated damages 5,021,669 -
Warrants modified for services - 3,975
Warrants issued for services 809,379 -
Warrants issued for loan costs 79,991 302,083
Incentive stock options 637,133 265,825
Net change in assets and
liabilities
Trade accounts receivable (759,872) (1,080,391)
Inventory 288,632 (415,773)
Advances to suppliers and other
receivables (861,530) (311,638)
Deposits (16,922) 2,972
Accounts payable 3,389,053 (953,286)
Accrued expenses 443,681 920,053
Advances from employees - (248,278)
Taxes payable (187,897) 223,903
-------- -------
Net cash provided by operating
activities 11,880,880 4,480,926
---------- ---------
Cash flows from investing
activities
Deposit on equipment and
construction (6,805,621) -
Construction in progress (7,786,931) (5,739,364)
Purchases of fixed assets and
intangibles (41,509) (349,244)
------- --------
Net cash used in investing
activities (14,634,061) (6,088,608)
----------- ----------
Cash flows from financing
activities
Advances on notes payable 1,180,000 3,325,000
Repayments of notes payable (520,614) -
Advances on sale-leaseback 5,648,881 -
Repayments of sale-leaseback (1,011,458) -
Exercise of warrants 296,408 4,433,591
------- ---------
Net cash provided by financing
activities 5,593,217 7,758,591
--------- ---------
Effect of exchange rate 804,809 (8,068)
------- ------
Net increase in cash 3,644,845 6,142,841
Cash and cash equivalents at
beginning of period 13,486,429 7,343,588
---------- ---------
Cash and cash equivalents at
end of period $17,131,274 $13,486,429
=========== ===========
Supplemental disclosure of cash
flow information
Interest paid $638,819 $ -
======== === ===
Enterprise income taxes paid $ - $ -
=== === === ===
Supplemental disclosure of
noncash investing and
financing activities
Warrants issued as loan
discount $996,873 $569,100
======== ========
Warrants issued as loan
issuance costs $79,991 $302,083
======= ========
Warrants issued on
extinguishment of debt $ - $1,405,052
=== === ==========
Warrants issued for services $809,379 $ -
======== === ===
Stock issued for services $34,657 $426,304
======= ========
For more information, please contact:
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.netSOURCE Emerald Dairy, Inc.
