- Company Named One of China's Most Influential Companies -
- Announces Repurchase of Additional $3.77 Million of Convertible Notes -
BEIJING, Jan. 20 /PRNewswire-FirstCall/ -- American Dairy, Inc. (NYSE Arca: ADY), one of the leading producers and distributors of premium infant formula, milk powder and soybean, rice and walnut products in China, today provided a business update.
The Company continues to increase its production output and customer support to meet consumer demand for reliable, high quality, premium infant formula products. Since the dairy scandal in China broke in September 2008, a series of food-related product inspections have been carried out by China's General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ). With more than 10 tests conducted to date, American Dairy has successfully passed all inspections. As a result, the Company's Feihe branded products continue to sell out in many areas. The Company continues to operate production facilities at full capacity 24 hours a day to keep up with demand, and additional packaging equipment has been installed.
The Company continues its dominate position in second- and third-tier cities and has accelerated its presence in first-tier cities such as Beijing. In an effort to solidify and expand its increased brand recognition, the Company has continued its aggressive nationwide marketing campaigns, with television commercials running on Chinese Central Television Channels (CCTV) 1, 2, 3 and 6, and over six provincial stations that air all across China. In a recent survey by AC Nielsen, the Company was ranked No. 1 fast growing infant formula company after the dairy crisis occurred in September 2008.
The Company also provides training and support to its growing sales and marketing team nationwide. Most recently, American Dairy hosted its annual sales conference in Henan province, where Feihe is the best-selling infant formula brand, and more than 700 people participated in the sales training conducted by leading industry experts.
American Dairy's Feihe operation is the first infant formula company to build its own organic dairy farms that meet international standards, with each of its two farms able to accommodate approximately 10,000 to 12,000 cows. The Company plans to continue to import Australian Holstein cows to its Gannan and Kedong dairy farms in Heilongjiang Province, which currently have over 8,000 Australian Holstein cows. The Company anticipates that each farm will provide approximately 60,000 to 70,000 tons of organic milk a year to be used mainly in the Company's branded products when becoming fully operational.
Mr. Jonathan H. Chou, Chief Financial Officer, states, "Our focus has always been on the pursuit of high quality products for consumers, and the construction of our dairy farms demonstrates the Company's dedication to that vision. An integrated strategy will ensure that our products remain the premiere infant formula manufactured in China."
Since 1962, the Company's Feihe branded products have been recognized for their quality and, in its 47 year history, Feihe has consistently passed all government quality inspections, including the recent inspections for melamine. The Company has always adhered to a quality-first standard. As previously announced, the Company's production facilities exceed consumer goods manufacturing standards and are designed to meet and exceed pharmaceutical standards. American Dairy's facilities are one of the few that have processing areas which meet a 300,000 cleanliness purification standard, which means that there are less than 300,000 dust particles per cubic centimeter of air. In a standard room, dust particles can reach over two million dust particles per cubic centimeter of air. Continuing its commitment to quality, the Company has also added additional testing equipment to its already extensive testing and quality control procedures.
Domestic and International Recognition
American Dairy's Feihe brand was named one of China's 500 most influential brands at The World Brand Summit jointly hosted by World Famous Brands Assembly, the United States China Chamber of Commerce and the Universal City TV Stations Joint Research Center of the World Business on January 1, 2009. The selection committee evaluated more than 3,000 companies in Mainland China, Macau, Hong Kong and Taiwan based on the selection criteria including popularity, reputation, credibility, satisfaction, loyalty, influence, growth and innovation of the brands. American Dairy's Feihe brand is one of the seven dairy enterprises recognized at the conference.
The Company's flagship brand, Feihe, was recently voted as one of the top ten 'Most Trusted Brands' by consumers in an online poll conducted by SINA Corporation. Among products manufactured in China, Feihe was voted the No. 1 most trusted brand. Previously, Feihe was named one of the "Top Ten Best Infant Formula" and the "Most Energetic Brand" at the Annual Baby and Infant Industry Ceremony hosted by SINA.
Mr. Leng You Bin, Chief Executive Officer, states, "I was honored to be interviewed by Cable News Network ('CNN') International recently, and provided CNN with a tour of our first class research, packaging and distribution center in Langfang, China. I believe this demonstrates that Feihe's brand is recognized not only domestically but also internationally. As the most trusted brand manufacturer in China, we will continue our commitment to adhere to international standards and high quality production and to bring our consumers the highest quality products."
The Company was also recently invited by the Chinese government to attend a meeting to discuss the fate of the company at the center of the tainted milk scandal. While the Company has no plans to acquire that company, American Dairy was honored to be one of the five nationally recognized dairy companies invited to participate in the discussions.
Mr. Liu Hua, Vice Chairman, stated, "The invitation is a testament to the fact that the Chinese government recognizes our Company as a key player in the dairy industry. We remain committed to this responsibility and will continue to produce high quality, premium products for consumers in China and worldwide."
American Dairy's products are already one of China's most recognizable brands and have won awards including China's "Top Brands" and "Well Known Trademarks." In July 2007, Feihe Dairy was named "National Leading Enterprise of Agricultural Industrialization" by China's Ministry of Agriculture, National Development and Reform Commission, Ministry of Finance, Ministry of Commerce, The People's Bank of China, State Administration of Taxation, China Securities Regulatory Commission and the China Supply and Marketing Cooperative for specializing in agricultural production and processing. Only 580 enterprises in China have been awarded this certificate to date. The Company was awarded the certificate as a result of its influences on and contribution to China's agricultural industry.
Repurchase of an Additional $3.77 Million of Convertible Notes
The Company also announced that, as part of the restructuring of the Company's outstanding 1% Guaranteed Senior Secured Convertible Notes due 2012 (the "2012 Notes"), the Company completed the second phase in the repurchase of its outstanding 2012 Notes. As previously announced, in November 2008 the Company reached agreement with the holders of 100% of the $80 million in outstanding principal amount of the 2012 Notes to repurchase the Notes at 115% of the principal amount thereof, in a series of installments payable by October 15, 2009. In accordance with the terms of the agreement with those noteholders, on January 15, 2009 the Company repurchased an additional $3.77 million in principal amount of the 2012 Notes for an aggregate repurchase price of $4.33 million. The Company funded the repurchase using proceeds from operations. After giving effect to the completion of the first and second tranches of the repurchases, the Company now has approximately $66.1 million in principal amount of the 2012 Notes outstanding.
Under the terms of the restructuring, the Company has the right to repurchase the remaining 2012 Notes for an aggregate repurchase price of approximately $76.6 million, payable in installments of $15.33 million by each of April 15 and July 15, 2009, and the remaining $46.0 million by October 15, 2009. The 2012 Notes ceased accruing interest, and the right to convert the notes into shares of the Company's common stock was suspended, as of November 13, 2008, the date that the restructuring took effect, provided that the Company completes the repurchase of the 2012 Notes by the specified deadlines in accordance with the terms of the restructuring agreement. In the event that the Company does not make any of the payments due on April 15, July 15 or October 15, 2009, certain of the waivers granted as part of the restructuring by the holders of the 2012 Notes with respect to provisions of the notes would terminate, interest would begin to accrue again and would be subject to increases if certain requirements are not met, and the holders would again have the right to convert the 2012 Notes into shares of common stock.
Pending Re-audit of Historical Financial Statements
As previously announced, the Company engaged Grant Thornton, the Hong Kong member firm of Grant Thornton International, as its independent registered public accounting firm in 2008, and proactively initiated voluntary re-audits of the Company's financial statements for certain prior years (the "Re-audits"). The Re-audits are continuing, and when they are completed, the Company expects to file reports with the SEC that will include financial statements for the periods that are the subject of the Re-audits, the 2007 fiscal year, and the 2008 fiscal year.
About American Dairy, Inc.
American Dairy, Inc. conducts operations in The People's Republic of China ("China") through its wholly owned subsidiary, Feihe Dairy. Founded in 1962, Feihe Dairy is one of the leading producers and distributors of premium infant formula, milk powder and soybean, rice and walnut products in China. Feihe Dairy is headquartered in Beijing, China, and has processing and distribution facilities in Kedong, Qiqihaer, Baiquan, Gannan, Shanxi, and Langfang. http://www.americandairyinc.com / http://www.feihe.com
Certain of the statements made herein constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act 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 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.
|SOURCE American Dairy, Inc.|
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