CHANGGE and BEIJING, China,
Nov. 8, 2011
/PRNewswire-Asia-FirstCall/ -- Zhongpin Inc. ("Zhongpin" or "the
Company," Nasdaq: HOGS), a leading meat and food processing company
in the People's Republic of China
("China"), today reported higher
revenues and net income for the third quarter ended September 30, 2011 (the "third quarter 2011")
than the third quarter ended September 30,
2010 (the "third quarter 2010").
Third quarter 2011 highlights:
- Revenues increased 65% to $398.1
million in the third quarter 2011 from $241.1 million in the third quarter 2010.
- Gross profit margin was 10.1% in the third quarter 2011
compared with 11.3% in the third quarter 2010.
- Operating profit margin was 6.2% in the third quarter 2011
compared with 6.6% in the third quarter 2010.
- Net profit margin was 4.6% in the third quarter 2011 compared
with 6.1% in the third quarter 2010.
- Net income increased 25% to $18.3
million in the third quarter 2011 from $14.7 million in the third quarter 2010.
- Basic earnings per share were $0.46 in the third quarter 2011, up 9.5% from
$0.42 in the third quarter 2010 on
average basic shares outstanding that were 15% higher in the third
quarter 2011 than in the third quarter 2010.
- Diluted earnings per share were $0.46 in the third quarter 2011, up 9.5% from
$0.42 in the third quarter 2010 on
average diluted shares outstanding that were 13% higher in the
third quarter 2011 than in the third quarter 2010.
- Zhongpin maintained its guidance for the year 2011.
Mr. Xianfu Zhu, Chairman and
Chief Executive Officer of Zhongpin Inc., said, "We continued to
achieve good results in the third quarter 2011 in our operations,
financial results, and geographic and capacity expansions.
"Revenues grew 65% and net income was up 25% from third quarter
2010 as we continued to invest aggressively to expand our
operations and marketing to support higher revenues and net income
for the future. Total tonnage sold of pork and other products was
up 6.8%, with average prices up 54.6%, in third quarter 2011 over
third quarter 2010.
"Given our strong performance in this third quarter, we have
maintained our guidance for the year 2011.
"Our construction projects are on schedule, with three coming
into operation in the fourth quarter. These projects will help
support growth in our current markets and in our geographic market
expansions in northern and eastern China, which we expect will result in higher
sales and a larger market share of the national pork market. These
three projects include two facilities for chilled and frozen pork
and one facility for prepared pork products. The openings of these
production facilities are timed to support the higher demand from
our new markets during the Chinese New
Year from the last week of January through first week of
February 2012.
"We are continuing to increase consumer awareness and purchases
of Zhongpin products through sustained marketing and promotion
programs, especially in the geographic regions where we are
expanding our operations to support the growing demand for pork and
related products.
"Under our Stock Repurchase Program, Zhongpin has purchased a
total of 1,822,438 shares of its common stock for $15.8 million (including sales commissions)
through September 30, 2011. We
believe that these purchases will create additional value for
shareholders.
"We remain on plan to deliver a very good year in 2011."
Capacity and market expansions
Zhongpin began operating its new phase 2 facility in
Tianjin in September 2011, as planned. Phase 2 has a
production capacity of 36,000 metric tons for prepared pork
products. The phase 1 of the same facility began operating in
January 2010 with a production
capacity of 100,000 metric tons for chilled and frozen pork.
Zhongpin is investing about $61.5
million to build a slaughtering and processing plant, low
temperature prepared pork plant, logistics center, and research and
development center in Nong'an county in Changchun, Jilin. This facility will have a production
capacity of about 70,000 metric tons for chilled pork, 25,000
metric tons for frozen pork, and 30,000 metric tons for prepared
pork products. Construction began in September 2010. The Company expects to begin
operating the chilled and frozen pork facility in the fourth
quarter of 2011 and the prepared pork products facility in the
third quarter of 2012.
Zhongpin is investing about $63.0
million to build a production facility, warehouse, and
distribution center in Taizhou, Jiangsu. This facility will have a production
capacity of about 80,000 metric tons for chilled and frozen pork,
including easy-to-cook products, 20,000 metric tons for frozen
pork, and 30,000 metric tons for prepared pork products.
Construction began in September 2010.
The Company expects to begin operating the chilled and frozen pork
facility in the fourth quarter of 2011 and the new facility for
prepared pork products in the third quarter of 2012.
Zhongpin is investing about $58.5
million, excluding the cost of land use rights that it has
already obtained, to build a new production, research and
development, and training complex in Changge, Henan. When complete, this new facility will
have a production capacity of about 100,000 metric tons for
prepared pork products. Adjacent to this new facility, the Company
expects to develop a center for research and development, training,
and quality assurance and control. Construction for the first phase
with an annual production capacity of about 50,000 metric tons for
prepared pork products began in the first quarter of 2011 and
should be completed by the fourth quarter of 2011. The second
phase, with a production capacity of about 50,000 metric tons for
prepared pork products, should be completed by the fourth quarter
of 2012. Zhongpin plans to open the research and development and
training center by the fourth quarter of 2012.
Zhongpin has established a joint venture company, of which the
Company owns 65%, with Henan Xinda Animal Husbandry Company Limited
in June 2011. The joint venture
company is financed by capital contributions, which have been made
to date, and bank loans. The joint venture company is expected to
provide 20,000 sire boars annually. The facility for sire boar
breeding is under construction and should start operations in the
first quarter 2012.
Zhongpin is investing approximately $18.0
million in a cold chain logistics distribution center in
Anyang, Henan. This distribution
center will have processing capacity, a temperature adjustable
warehouse with a floor area of approximately 27,000 square meters,
a distribution center, and a quality control center. The
distribution center will be used for third-party cold chain
logistics service. We expect to put this distribution center into
operation in the third quarter of 2012.
Zhongpin plans to invest approximately $87.5 million in a chilled and frozen food
processing and distribution center in Kunshan, Jiangsu, which is near Shanghai. The whole center will be built in
three phases. The first phase will include a processing center,
cold chain logistics center, and business complex. We expect to
invest about $35.0 million on the
first phase and expect to put it into operation in the fourth
quarter of 2012.
As of September 30, 2011, Zhongpin
had an annual capacity of 563,760 metric tons for chilled and
frozen pork, 126,000 tons for prepared pork products, 20,000 tons
for pork oil, and 30,000 tons for vegetables and fruits, for a
combined total of 739,760 metric tons.
Outlook for pork demand and prices in China
China's economy continues to
expand and pork continues to be China's preferred protein. Zhongpin believes
that the outlook for China's pork
processing industry remains quite positive.
Our purchasing cost of hogs and our selling price of pork both
increased 60% in the third quarter of 2011 compared with the same
period last year, primarily because the supply of hogs was
insufficient to satisfy demand and inflation increased the cost to
raise hogs.
Zhongpin expects hog prices to remain stable in the fourth
quarter 2011 and to increase moderately during the first quarter of
2012 due to the strong demand for pork during the Chinese New Year.
Guidance for the year 2011
Mr. Warren Wang, Zhongpin's Chief
Financial Officer, said, "We are maintaining our guidance for the
year 2011.
"The guidance for 2011 is based on several assumptions and
judgments that include:
- Continuation of China's
policies designed to stimulate domestic consumption and economic
growth.
- Average pork prices in China
are expected to remain relatively high for the rest of 2011,
assuming steady economic growth and the forecast for the supply of
and the cost to raise hogs.
- A higher percentage of sales from our higher-margin chilled
pork and prepared pork products in 2011 than in 2010, while
continuing to increase the sales volume of processed pork products
to optimize our product mix.
- Average capacity utilization for the year of about 75% for pork
products.
- Increasing distribution efficiencies and reduction in the
duration of delivery times by expanding our cold chain logistics
system, networks, and services.
- Continuing to reinforce awareness, recognition, and selection
of Zhongpin brand products nationally and in the major regional
markets and to increase our market share and price premium.
- And continuation of the Chinese government's support and
subsidies for producers of agricultural products, such as Zhongpin.
Total government subsidies for Zhongpin are expected to exceed
$5 million in 2011.
"Given those assumptions, here are our guidance numbers.
"For the year 2011, we expect that Zhongpin's sales revenues
should be within a range of $1.33 billion to
$1.37 billion.
"Gross profit margin is expected to be within the range
of 11.2% to 11.8%.
"Net profit margin is expected to be within the range
of 5.2% to 5.8%.
"Diluted earnings per share for the year 2011 is currently
expected to be within the range of $1.80 to $2.05 per share, assuming average diluted common
shares outstanding of about 38.0 million shares in 2011.
"Zhongpin believes that China's
meat and food industry will continue to consolidate in 2011 at a
more rapid pace than in 2010, which may result in higher market
shares for our main competitors. However, we believe that Zhongpin
is equipped to meet the challenge of increasing competition and
that our guidance for 2011 can be achieved."
Sales revenues
Sales revenues increased $157.0
million or 65% to $398.1
million in the third quarter 2011 from $241.1 million in the third quarter 2010,
primarily due to higher pork prices, higher sales volume in pork
products resulting from the continuing increase in the number of
retail channels, geographic expansion, and higher sales to chain
restaurants, food service providers, and wholesalers and
distributors in China. The
following table presents our sales by product division for the
third quarters of 2011 and 2010.
|
|
Sales by
Division
|
|
|
|
Three months
ended
September 30,
2011
|
|
Three months
ended
September 30,
2010
|
|
|
Metric
Tons
|
|
Revenues
(millions)
|
|
Average
Price /
Metric
Ton
|
|
Metric
Tons
|
|
Revenues
(millions)
|
|
Average
Price /
Metric
Ton
|
|
Pork and Pork
Products
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chilled pork
|
|
73,771
|
|
$
247.7
|
|
$3,358
|
|
61,897
|
|
$
130.6
|
|
$2,110
|
|
Frozen pork
|
|
33,045
|
|
93.0
|
|
$2,814
|
|
38,431
|
|
67.4
|
|
$1,754
|
|
Prepared pork
products
|
|
21,600
|
|
52.4
|
|
$2,426
|
|
19,052
|
|
38.6
|
|
$2,026
|
|
Vegetables and Fruits
|
|
6,034
|
|
5.0
|
|
$829
|
|
6,495
|
|
4.5
|
|
$693
|
|
Total
|
|
134,450
|
|
$
398.1
|
|
$2,961
|
|
125,875
|
|
$
241.1
|
|
$1,915
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chilled pork revenues increased on higher tonnage at higher
average prices. Revenues from chilled pork products increased 90%
in the third quarter 2011 from third quarter 2010. Chilled pork
tonnage increased 19% in the third quarter 2011 from the prior
third quarter. The average price per metric ton for chilled pork
increased 59% in the third quarter 2011 from the third quarter
2010.
Frozen pork revenues increased on lower tonnage at higher
average prices. Revenues from frozen pork products increased 38% in
the third quarter 2011 from the third quarter 2010. Frozen pork
tonnage decreased 14% in the third quarter 2011 from the third
quarter 2010. The average price per metric ton for frozen pork
increased 60% in the third quarter 2011 from the third quarter
2010.
Prepared pork products revenues increased on higher tonnage at
higher average prices. Revenues from prepared pork products
increased 36% in the third quarter 2011 from the third quarter
2010. Prepared pork tonnage increased 13% in the third quarter 2011
from the third quarter 2010. The average price per metric ton for
prepared pork products increased 20% in the third quarter 2011 from
the third quarter 2010.
Pork and pork products totaled 98.7% of total revenues in the
third quarter 2011 and 98.1% in the third quarter 2010.
Vegetables and fruits revenues increased on lower tonnage at
higher average prices. Vegetables and fruits revenues increased 11%
in the third quarter 2011 from the third quarter 2010. Tonnage of
vegetables and fruits decreased 7% in the third quarter 2011 from
the third quarter 2010. Average price per metric ton for vegetables
and fruits increased 20% in the third quarter 2011 from the third
quarter 2010. Vegetables and fruits were 1.3% of total revenues in
the third quarter 2011 and 1.9% in the third quarter 2010.
Distribution channels
The sales of meat and vegetable products are closely related to
the particular regional markets in which our distribution channels
are located. Therefore, the increase in metric tons sold for the
third quarter of 2011 was partly attributable to our efforts to
expand our distribution channels. The following table shows the
changes in our distribution channels.
|
|
Numbers of
Store and Cities Generating Sales Volume
(unaudited)
|
|
|
|
As of September 30,
|
|
|
|
|
|
|
|
2011
|
|
2010
|
|
Net Change
|
|
% Change
|
|
|
|
|
|
|
|
|
|
|
|
Showcase stores
|
|
164
|
|
154
|
|
10
|
|
6%
|
|
Branded stores
|
|
1,239
|
|
1,057
|
|
182
|
|
17%
|
|
Supermarket
counters
|
|
2,016
|
|
2,074
|
|
(58)
|
|
-3%
|
|
Total
|
|
3,419
|
|
3,285
|
|
134
|
|
4%
|
|
|
|
|
|
|
|
|
|
|
|
First-tier
cities
|
|
29
|
|
29
|
|
--
|
|
--
|
|
Second-tier
cities
|
|
133
|
|
128
|
|
5
|
|
4%
|
|
Third-tier
cities
|
|
429
|
|
415
|
|
14
|
|
3%
|
|
Total
|
|
591
|
|
572
|
|
19
|
|
3%
|
|
|
|
|
|
|
|
|
|
|
The expansion of Zhongpin's distribution channels and
geographical coverage has been a significant factor in the increase
in its sales volume. The following table shows revenues by
distribution channel.
|
|
Sales by
Distribution Channel
(unaudited)
|
|
|
(U.S.
dollars in millions)
|
|
|
|
Third quarter
|
|
|
|
|
|
|
|
2011
|
|
2010
|
|
Net
Change
|
|
% Change
|
|
Retail channels
|
|
$120.2
|
|
$92.1
|
|
$28.1
|
|
31%
|
|
Wholesalers and
distributors
|
|
152.9
|
|
79.1
|
|
73.8
|
|
93%
|
|
Restaurants and food
service
|
|
113.9
|
|
66.1
|
|
47.8
|
|
72%
|
|
Export
|
|
11.1
|
|
3.8
|
|
7.3
|
|
192%
|
|
Total
|
|
$398.1
|
|
$241.1
|
|
$157.0
|
|
65%
|
|
|
|
|
|
|
|
|
|
|
The increase in sales to different distribution channels was
primarily due to the following factors:
- the Company has built up its brand image and brand recognition
through general advertising display promotions and sales
campaigns;
- the Company has increased the number of stores and other
channels through which it sells its products;
- Zhongpin believes that consumers are placing increased
importance on food safety and are willing to pay higher prices for
safe food products; and
- pork prices began increasing in the middle of 2010 and peaked
in the third quarter 2011.
Revenues from export sales increased $7.3
million or 192% to $11.1
million in the third quarter 2011 from $3.8 million the third quarter 2010.
Cost of sales
As discussed above, the raw material for all of our meat
products are live hogs. Vegetable and fruit products are purchased
from farmers located close to the Company's processing facility in
Changge, Henan. As a result, the
purchasing costs of live hogs and vegetables and fruits represent
substantially all the costs of raw materials.
Costs of sales primarily include costs of raw materials, labor
costs, and overhead. Of the total costs of sales, the costs of raw
materials typically account for about 95% to 97%, overhead
typically accounts for 2% to 3.5%, and labor costs typically
account for 1.4% to 1.7%, with slight variations from period to
period.
|
|
Costs of
Sales by Division
(unaudited)
|
|
|
|
Three months ended
|
|
Three months ended
|
|
|
|
September 30, 2011
|
|
September 30, 2010
|
|
|
|
Metric
Tons
|
|
Amount
(millions)
|
|
Average
Cost per
Metric
Ton
|
|
Metric
Tons
|
|
Amount
(millions)
|
|
Average
Cost per
Metric
Ton
|
|
Pork and Pork
Products
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chilled pork
|
|
73,771
|
|
$223.6
|
|
$3,031
|
|
61,897
|
|
$117.0
|
|
$1,890
|
|
Frozen pork
|
|
33,045
|
|
86.4
|
|
$2,615
|
|
38,431
|
|
62.0
|
|
$1,613
|
|
Prepared pork
products
|
|
21,600
|
|
43.9
|
|
$2,032
|
|
19,052
|
|
31.2
|
|
$1,638
|
|
Vegetables and Fruits
|
|
6,034
|
|
4.1
|
|
$679
|
|
6,495
|
|
3.6
|
|
$554
|
|
Total
|
|
134,450
|
|
$358.0
|
|
$2,663
|
|
125,875
|
|
$213.8
|
|
$1,699
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit margin (gross profit divided by revenue) decreased
to 10.1% in the third quarter 2011 from 11.3% in the third quarter
2010 primarily due to (a) competition in the market, (b) the
percent increase in pork prices being less than the percent
increase in hog prices, which is the main component of cost of
sales, and (c) increased promotional activities to grow our market
share.
General, administrative, and selling expenses
General and administrative expenses increased $1.3 million or 21% to $7.4 million in the third quarter 2011 from
$6.1 million in the third quarter
2010 primarily due to a $1.2 million
increase in salary and welfare expense, which was higher due to the
hiring of additional employees to support the Company's growth and
higher salaries aimed to partly offset inflation in China. As a percent of revenues, general and
administrative expenses decreased to 1.9% in the third quarter 2011
from 2.5% for the third quarter 2010.
Selling expenses increased $2.5
million or 46% to $7.9 million
in the third quarter 2011 from $5.4
million in the third quarter 2010. The increase was
primarily due to higher sales of pork and pork products, which were
supported by a $1.5 million increase
in transportation fees and a $0.7
million increase in salaries. As a percent of revenues,
selling expenses decreased to 2.0% in the third quarter 2011 from
2.2% in the third quarter 2010.
Interest expense, net
Interest expense increased $4.6
million or 192% to $7.0
million in the third quarter 2011 from $2.4 million in the third quarter 2010 primarily
due to higher bank borrowings that included an increase of
$26.7 million in long-term bank loans
and an increase of $5.2 million in
short-term bank loans, the fact that more bank notes have been
cashed before maturity in the third quarter of 2011, and higher
interest rates set by the People's Bank of China. The increase was partly offset by an
increase in interest income due to increased bank deposits.
Other income and government subsidies
Other income decreased 67% to $0.4
million in the third quarter 2011 from $1.2 million in the third quarter 2010.
Government subsidies increased 18% to $1.1
million in the third quarter 2011 from $1.0 million in the third quarter 2010.
Provision for income taxes
The effective tax rate in China
on income generated from the sale of prepared products is 25%.
There is no income tax on income generated from the sale of raw
products, including raw meat products and raw vegetable and fruit
products. The decrease of $0.1
million in the provision for income taxes in the third
quarter 2011 from the third quarter 2010 resulted from a change in
product mix, the increased sales of prepared meat products, and
increased allocation of cost and expenses to the prepared pork
segment
Net income
Net income increased 24% to $18.3
million in the third quarter 2011 from $14.7 million in the third quarter 2010 primarily
due to higher revenues from more tonnage sold at higher average
prices, effective use and control of expenses, lower income taxes,
and higher government subsidies, partly offset by higher net
interest expense.
The net profit margin (net income divided by revenues) declined
to 4.6% in the third quarter 2011 from 6.1% in the third quarter
2010, primarily due to higher interest on higher bank borrowings
and lower gross margin in the third quarter 2011.
Earnings per share
Basic earnings per share were $0.46 in the third quarter 2011, up 9.5% from
$0.42 in the third quarter 2010 on
average basic shares outstanding that were 15% higher in the third
quarter 2011 than in the third quarter 2010. Average basic shares
outstanding were 39,918,816 shares in the third quarter 2011 and
34,725,104 shares in the third quarter 2010.
Diluted earnings per share were $0.46 in the third quarter 2011, up 9.5% from
$0.42 in the third quarter 2010 on
average diluted shares outstanding that were 13% higher in the
third quarter 2011 than in the third quarter 2010. Average diluted
shares outstanding were 39,918,816 shares in the third quarter 2011
and 35,328,199 shares in the third quarter 2010.
Liquidity and capital resources
As of September 30, 2011, Zhongpin
had cash and cash equivalents of $116.6
million and working capital of $46.5
million. Working capital is defined as current assets minus
current liabilities.
Net cash provided by operating activities in the first nine
months of 2011 was $60.3 million,
derived primarily from net income of $54.5
million, depreciation of $12.5
million, and other items.
Net cash used in investing activities in the first nine months
of 2011 was $159.0 million, mainly
used for construction in progress of $102.2
million, an increase in restricted cash of $35.7 million, deposits for the purchase of land
use rights of $16.5 million, and
additions to property and equipment of $4.6
million.
Net cash provided by financing activities in the nine months of
2011 was $126.0 million, mainly from
$66.4 million in proceeds from
issuing new shares of common stock, net proceeds of $93.6 million from bank notes and short-term and
long-term loans, less the repayment of long-term loans of
$13.8 million, repayment of capital
lease obligations of $5.1 million,
and repurchases of Zhongpin's common stock of $15.8 million.
As a result, including the effects of currency exchange rate
changes, cash and cash equivalents increased $32.4 million in the first nine months of 2011 to
$116.6 million on September 30, 2011.
Zhongpin believes its existing cash and cash equivalents,
together with its ability to secure bank borrowings, will be
sufficient to finance its investment in new facilities, with
budgeted capital expenditures of about $157.4 million over the next 12 months, and to
satisfy its working capital needs. It intends to satisfy its
short-term debt obligations that mature over the next 12 months
through additional short-term bank loans, in most cases by rolling
the maturing loans into new short-term loans with the same lenders
as it has done in the past.
Conference call and webcast
Zhongpin will host its quarterly conference call and live
webcast on November 9, 2011 at
8:00 a.m. Eastern Standard Time
(New York), which is also
9:00 p.m. in Beijing on the same day.
The dial-in details for the live conference call are:
U.S. toll-free number
|
1 866 549
1292
|
|
International dial-in
number
|
+852 3005 2050
|
|
Mainland China toll-free
number
|
800 876
8626
|
|
Hong Kong local
access
|
3005
2050
|
|
Participant PIN code
|
326 957#
|
|
|
|
The live webcast and archive of the conference call will be
available on the Investor Relations section of Zhongpin's website
at http://www.zpfood.com.
A telephone replay of the call will be available after the
conclusion of the conference call through 8:00 a.m. EST on
November 16, 2011. The dial-in
details for the telephone replay are:
U.S. toll-free number
|
1 866 753
0743
|
|
International dial-in
number
|
+852 3005 2020
|
|
Conference reference
|
145 136#
|
|
|
|
About Zhongpin
Zhongpin Inc. is a meat and food processing company that
specializes in pork and pork products, vegetables, and fruits in
China. Its distribution network in
China covers 20 provinces plus
Beijing, Shanghai, Tianjin, and Chongqing and includes 3,419 retail outlets as
of September 30, 2011. Zhongpin's
export markets include Europe,
Hong Kong, and other countries in
Asia. For more information about
Zhongpin, please visit Zhongpin's website at
http://www.zpfood.com.
Safe harbor statement
Certain statements in this news release may be forward-looking
statements made under the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. Zhongpin has based its
forward-looking statements largely on its current expectations and
projections about future events and trends that it believes may
affect its business strategy, results of operations, financial
condition, and financing needs.
These projections involve risks and uncertainties that could
cause actual results to differ materially from those in the
forward-looking statements, which may include but are not limited
to such factors as downturns in the Chinese economy, unanticipated
changes in product demand, interruptions in the supply of live pigs
and or raw pork, the effects of weather on hog feed production,
poor performance of the retail distribution network, delivery
delays, freezer facility malfunctions, Zhongpin's ability to build
and commence new production facilities according to intended
timelines, the ability to prepare Zhongpin for growth, the ability
to predict Zhongpin's future financial performance and financing
ability, changes in regulations, and other information detailed in
Zhongpin's filings with the United States Securities and Exchange
Commission. These filings are available from www.sec.gov or from
Zhongpin's website at www.zpfood.com.
You are urged to consider these factors carefully in evaluating
Zhongpin's forward-looking statements and are cautioned not to
place undue reliance on those forward-looking statements, which are
qualified in their entirety by this cautionary statement. All
information provided in this news release is as of the date of this
release. Zhongpin does not undertake any obligation to update any
forward-looking statement as a result of new information, future
events, or otherwise, except as required by law.
For more information, please contact:
Zhongpin Inc.
Mr. Sterling Song (English and
Chinese)
Investor Relations Director
Telephone +86 10 8286 1788 extension 101 in Beijing
ir@zhongpin.com
Mr. Warren (Feng) Wang (English and
Chinese)
Chief Financial Officer
Telephone +86 10 8286 1788 extension 104 in Beijing
warren.wang@zhongpin.com
Christensen
Mr. Christian Arnell (English and
Chinese)
Telephone +86 10 5826 4939 in Beijing
carnell@christensenir.com
Mr. Tom Myers (English)
Mobile +86 139 1141 3520 in Beijing
tmyers@christensenir.com
Financial statements follow.
|
|
ZHONGPIN
INC.
|
|
CONSOLIDATED
BALANCE SHEETS
|
|
(Amount in
U.S. dollars)
|
|
|
|
|
|
|
|
|
September
30,
|
|
December
31,
|
|
|
|
2011
|
|
2010
|
|
|
ASSETS
|
(Unaudited)
|
|
|
|
|
Current assets
|
|
|
|
|
|
Cash and cash equivalents
|
116,619,216
|
|
84,172,186
|
|
|
Restricted cash
|
54,732,689
|
|
17,527,056
|
|
|
Bank notes receivable
|
49,226,849
|
|
19,282,740
|
|
|
Accounts receivable, net of allowance for doubtful accounts of $2,447,408 and $1,708,479
|
43,773,083
|
|
30,784,463
|
|
|
Other receivables, net of allowance for doubtful accounts of $373,460 and $232,751
|
3,471,352
|
|
1,035,850
|
|
|
Purchase deposits
|
23,383,067
|
|
7,415,567
|
|
|
Inventories
|
37,141,773
|
|
26,534,014
|
|
|
Prepaid expenses
|
392,413
|
|
391,386
|
|
|
VAT recoverable
|
34,942,499
|
|
20,771,902
|
|
|
Allowance receivables
|
2,889,846
|
|
2,477,928
|
|
|
Deferred tax assets
|
414,505
|
|
397,744
|
|
|
Other current assets
|
408,368
|
|
442,080
|
|
|
Total current assets
|
367,395,660
|
|
211,232,916
|
|
|
|
|
|
|
|
|
Long term investment
|
472,077
|
|
452,987
|
|
|
Property and equipment (net)
|
320,205,335
|
|
291,567,396
|
|
|
Deposits for purchase of land usage rights
|
34,601,296
|
|
17,059,644
|
|
|
Construction in progress
|
111,787,042
|
|
30,433,905
|
|
|
Land usage rights
|
88,702,126
|
|
86,475,708
|
|
|
Deferred charges
|
10,433
|
|
21,686
|
|
|
Other noncurrent assets
|
1,118,114
|
|
1,436,726
|
|
|
|
|
|
|
|
|
Total assets
|
924,292,083
|
|
638,680,968
|
|
|
|
|
|
|
|
|
LIABILITIES AND EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
Short-term loans
|
105,249,729
|
|
91,774,025
|
|
|
Bank notes payable
|
109,474,579
|
|
18,646,473
|
|
|
Long-term loans - current portion
|
11,003,434
|
|
14,943,260
|
|
|
Capital lease obligation-current portion
|
6,008,323
|
|
7,282,720
|
|
|
Accounts payable
|
39,891,335
|
|
8,551,003
|
|
|
Other payables
|
17,611,620
|
|
15,842,331
|
|
|
Accrued liabilities
|
11,907,207
|
|
9,794,474
|
|
|
Deposits from customers
|
17,525,349
|
|
8,255,194
|
|
|
Tax payable
|
1,441,724
|
|
1,604,847
|
|
|
Grant payable
|
786,794
|
|
-
|
|
|
Total current liabilities
|
320,900,094
|
|
176,694,327
|
|
|
|
|
|
|
|
|
Deferred tax liabilities
|
377,395
|
|
362,135
|
|
|
Deposits from customers-Long term portion
|
1,921,683
|
|
1,958,827
|
|
|
Capital lease obligation
|
1,183,697
|
|
4,999,454
|
|
|
Long-term loans
|
102,810,994
|
|
83,672,401
|
|
|
|
|
|
|
|
|
Total liabilities
|
427,193,863
|
|
267,687,144
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
Common stock: par value $0.001; 100,000,000 authorized; 40,355,502 and 35,338,160 shares
issued and 38,533,064 and 35,338,160 outstanding
|
40,356
|
|
35,338
|
|
|
Additional paid-in capital
|
238,946,701
|
|
171,401,989
|
|
|
Retained earnings
|
224,500,373
|
|
169,979,344
|
|
|
Less: Treasury stock, at cost: 1,822,438 and 0 shares in 2011 and 2010
|
(15,797,352)
|
|
-
|
|
|
Accumulated other comprehensive income
|
48,582,031
|
|
29,577,153
|
|
|
Total Zhongpin Inc. Shareholders' Equity
|
496,272,109
|
|
370,993,824
|
|
|
Noncontrolling interest
|
826,111
|
|
-
|
|
|
|
|
|
|
|
|
Total shareholders' equity
|
497,098,220
|
|
370,993,824
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders' equity
|
924,292,083
|
|
638,680,968
|
|
|
|
|
|
|
|
|
|
|
|
ZHONGPIN
INC. AND SUBSIDIARIES
|
|
CONSOLIDATED
STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
|
|
(Amount in
U.S. dollars)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
|
|
September 30,
|
|
September 30,
|
|
|
|
|
2011
|
|
2010
|
|
2011
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
Sales
revenues
|
$
|
398,086,490
|
|
241,076,067
|
|
1,050,322,271
|
|
660,433,565
|
|
|
Cost of
sales
|
|
(358,049,826)
|
|
(213,796,787)
|
|
(935,223,736)
|
|
(582,901,503)
|
|
|
Gross
profit
|
|
40,036,664
|
|
27,279,280
|
|
115,098,535
|
|
77,532,062
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
|
|
General and
administrative expenses
|
|
(7,423,392)
|
|
(6,072,211)
|
|
(20,873,595)
|
|
(17,821,820)
|
|
|
Selling
expenses
|
|
(7,866,984)
|
|
(5,384,108)
|
|
(22,597,879)
|
|
(14,359,608)
|
|
|
Research &
development expenses
|
|
(20,127)
|
|
(20,581)
|
|
(475,437)
|
|
(97,304)
|
|
|
Impairment
loss
|
|
-
|
|
(2,745)
|
|
-
|
|
(1,010,192)
|
|
|
Total
operating expenses
|
|
(15,310,503)
|
|
(11,479,645)
|
|
(43,946,911)
|
|
(33,288,924)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from
operations
|
|
24,726,161
|
|
15,799,635
|
|
71,151,624
|
|
44,243,138
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income
(expense)
|
|
|
|
|
|
|
|
|
|
|
Interest
income(expenses),net
|
|
(7,017,272)
|
|
(2,400,733)
|
|
(15,828,655)
|
|
(5,736,583)
|
|
|
Other income
(expenses),net
|
|
410,105
|
|
1,236,809
|
|
378,111
|
|
1,906,336
|
|
|
Exchange gain
(loss)
|
|
(140,527)
|
|
-
|
|
(220,755)
|
|
|
|
|
Government
subsidies
|
|
1,142,388
|
|
966,771
|
|
2,594,295
|
|
2,836,852
|
|
|
Total other
income (expense)
|
|
(5,605,307)
|
|
(197,153)
|
|
(13,077,004)
|
|
(993,395)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income before
taxes
|
|
19,120,854
|
|
15,602,482
|
|
58,074,620
|
|
43,249,743
|
|
|
Provision for
income taxes
|
|
(799,129)
|
|
(921,691)
|
|
(3,553,613)
|
|
(2,953,044)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income after
taxes
|
|
18,321,725
|
|
14,680,791
|
|
54,521,007
|
|
40,296,699
|
|
|
Net income attributable
to noncontrolling interest
|
|
1,167
|
|
0
|
|
22
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to
Zhongpin Inc. shareholders
|
|
18,322,892
|
|
14,680,791
|
|
54,521,029
|
|
40,296,699
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation
adjustment
|
|
9,098,658
|
|
4,563,655
|
|
19,031,328
|
|
6,341,925
|
|
|
Foreign currency
translation adjustment attributable to noncontrolling
interest
|
|
(14,885)
|
|
-
|
|
(26,450)
|
|
-
|
|
|
Foreign currency translation
adjustment attributable to Zhongpin Inc.
shareholders
|
|
9,083,773
|
|
4,563,655
|
|
19,004,878
|
|
6,341,925
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive
income
|
|
27,420,383
|
|
19,244,446
|
|
73,552,335
|
|
46,638,624
|
|
|
Comprehensive income
attributable to noncontrolling interest
|
|
(13,718)
|
|
-
|
|
(26,428)
|
|
-
|
|
|
Comprehensive income
attributable to Zhongpin Inc. shareholders
|
$
|
27,406,666
|
|
19,244,446
|
|
73,525,907
|
|
46,638,624
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per common
share
|
|
$0.46
|
|
$0.42
|
|
$1.41
|
|
$1.16
|
|
|
Diluted earnings per common
share
|
|
$0.46
|
|
$0.42
|
|
$1.41
|
|
$1.14
|
|
|
Basic weighted average shares
outstanding
|
|
39,918,816
|
|
34,725,104
|
|
38,723,299
|
|
34,751,158
|
|
|
Diluted weighted average shares
outstanding
|
|
39,918,816
|
|
35,328,199
|
|
38,781,507
|
|
35,262,433
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ZHONGPIN
INC. AND SUBSIDIARIES
|
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
(Amount in
U.S. dollars)
(Unaudited)
|
|
|
Nine Months Ended September 30,
|
|
|
2011
|
|
2010
|
|
Cash flows from operating
activities:
|
|
|
|
|
Net
income
|
$
54,521,007
|
|
$ 40,296,699
|
|
Adjustments
to reconcile net income to
|
|
|
|
|
net cash provided by (used
in) operating activities:
|
|
|
|
|
Depreciation
|
12,542,855
|
|
9,812,528
|
|
Amortization of intangible
assets
|
1,386,615
|
|
973,253
|
|
Provision for allowance for bad
debt
|
780,323
|
|
724,816
|
|
Staff welfare
amortization
|
-
|
|
(276,501)
|
|
Impairment loss
|
-
|
|
1,010,199
|
|
Other income
|
(15,174)
|
|
(1,091,875)
|
|
Gain on disposal of a
subsidiary
|
-
|
|
-
|
|
Stock-based compensation
expense
|
1,193,067
|
|
1,739,238
|
|
|
|
|
|
|
Changes in operating assets and
liabilities:
|
|
|
|
|
Accounts receivable
|
(12,087,046)
|
|
(16,397,025)
|
|
Other receivables
|
(2,467,660)
|
|
(210,161)
|
|
Purchase deposits
|
(15,311,424)
|
|
(133,747)
|
|
Prepaid expenses
|
12,906
|
|
(493,142)
|
|
Inventories
|
(9,281,330)
|
|
(8,764,421)
|
|
Allowance receivables
|
(300,748)
|
|
(4,426,220)
|
|
Tax refunds
receivable
|
(13,003,464)
|
|
(5,928,053)
|
|
Other current assets
|
35,141
|
|
18,554
|
|
Deferred charges
|
11,899
|
|
15,721
|
|
Accounts payable
|
30,300,071
|
|
(287,734)
|
|
Other payables
|
1,104,339
|
|
2,069,661
|
|
Grants payable
|
769,527
|
|
-
|
|
Accrued liabilities
|
1,680,231
|
|
1,445,644
|
|
Taxes payable
|
(225,688)
|
|
(685,278)
|
|
Deposits from clients
|
8,726,458
|
|
1,234,965
|
|
Deposits from
clients-Long term
portion
|
(117,064)
|
|
(50,880)
|
|
Net cash
provided (used) by operating activities
|
60,254,841
|
|
20,596,241
|
|
|
|
|
|
|
Cash flows from investing
activities:
|
|
|
|
|
Deposits for
purchase of land usage rights
|
(16,453,540)
|
|
(23,130,206)
|
|
Construction
in progress
|
(102,225,007)
|
|
(40,765,205)
|
|
Additions to
property and equipment
|
(4,645,211)
|
|
(9,750,903)
|
|
Additions to
land usage rights
|
-
|
|
(479,304)
|
|
Proceeds on
sale of fixed assets
|
36,983
|
|
131,028
|
|
Increase in
restricted cash
|
(35,666,692)
|
|
(21,478,265)
|
|
Investment
in a non-controlling entity
|
-
|
|
(440,716)
|
|
Net cash used in investing
activities
|
(158,953,467)
|
|
(95,913,571)
|
|
|
|
|
|
|
Cash flows from financing
activities:
|
|
|
|
|
Proceeds
from (repayment of) bank notes, net
|
59,574,005
|
|
22,590,704
|
|
Proceeds
from(repayment of) short-term loans, net
|
9,397,410
|
|
10,318,909
|
|
Proceeds
from long-term loans
|
24,607,716
|
|
49,733,983
|
|
Repayment of
long-term loans
|
(13,807,043)
|
|
(10,356,569)
|
|
Repayment of
capital lease obligation
|
(5,097,774)
|
|
(4,987,359)
|
|
Proceeds
from common stock
|
66,356,662
|
|
-
|
|
Repurchase
of common stock
|
(15,797,352)
|
|
-
|
|
Proceeds
from exercised warrants and option
|
-
|
|
213,350
|
|
Investment
in a subsidiary by minority holder
|
808,003
|
|
-
|
|
Net cash provided by financing
activities
|
126,041,627
|
|
67,513,018
|
|
|
|
|
|
|
|
|
|
|
|
Effect of
rate changes on cash
|
5,104,029
|
|
1,207,989
|
|
|
|
|
|
|
Increase
(decrease) in cash and cash equivalents
|
32,447,030
|
|
(6,596,323)
|
|
|
|
|
|
|
Cash and
cash equivalents, beginning of period
|
84,172,186
|
|
68,982,259
|
|
Cash and
cash equivalents, end of period
|
$ 116,619,216
|
|
$ 62,385,936
|
|
|
|
|
|
|
Supplemental disclosures of cash
flow information:
|
|
|
|
|
Cash paid
for interest
|
$
16,292,479
|
|
$ 6,443,505
|
|
Cash paid
for income taxes
|
$
3,768,455
|
|
$ 2,898,394
|
|
|
|
|
|
|
|
SOURCE Zhongpin Inc.