BEIJING and CHANGGE,
China, March 14, 2013 /PRNewswire/ -- Zhongpin Inc.
("Zhongpin" or the "Company," Nasdaq: HOGS), a leading meat and
food processing company in the People's
Republic of China, today reported higher sales revenues and
lower net income for the year ended December
31, 2012 compared with the year 2011.
Year 2012
highlights:
- Sales revenues increased 13% to $1,639.6
million in 2012 from $1,456.2
million in 2011 primarily due to higher sales volume for
pork products sold at lower average selling prices.
- Net income decreased 31% to $44.1
million in 2012 from $64.2
million in 2011 primarily due to a lower gross profit
margin, the cost of more employees to support expansion, higher
salaries, higher promotional activities, rising labor and utility
costs, and higher interest expenses. The higher expenses were
mainly due to the higher volume of business and intense competitive
pressure in the pork market due to the ongoing industry
consolidation.
- Basic earnings per share (based on net income attributable to
Zhongpin shareholders) decreased 29% to $1.18 in 2012 from $1.66 in 2011. Weighted average basic shares
outstanding decreased 3% to 37,273,652 shares in 2012 from
38,505,027 shares in 2011.
- Diluted earnings per share (based on net income attributable to
Zhongpin shareholders) decreased 29% to $1.18 in 2012 from $1.66 in 2011. Weighted average diluted shares
outstanding decreased 3% to 37,328,792 shares in 2012 from
38,539,880 shares in 2011.
- As of December 31, 2012, Zhongpin
had 40,376,182 shares of common stock issued, of which 37,209,344
were outstanding and 3,166,838 were held as treasury stock.
Mr. Xianfu Zhu, Chairman and
Chief Executive Officer of Zhongpin, said, "In 2012, our sales
revenues increased 13 percent on higher tonnage at lower average
prices, compared with 2011, primarily due to the intense
competitive market pressure generated mainly by the continuing pork
industry consolidation in China.
"Our costs continued to increase, mainly in support of our
current operations and planned expansions. As a result, our gross
profit margin declined to 9.4% in 2012 from 10.7% in 2011 and our
net profit margin declined to 2.7% in 2012 from 4.4% in 2011.
"We are sustaining our prudent expansions in geographic markets
and operations to gain market share for our long-term success in
the face of the ongoing industry consolidation. We are managing our
costs to maintain as much gross and net profit margin as possible
and are aggressively working to further increase our asset
utilization, effectiveness, and efficiency.
"In 2013, we expect that the demand for pork in China should remain strong and that Zhongpin's
revenues from pork and pork products are likely to increase
modestly based on higher tonnage sold at lower average prices,
while live hog prices will remain at current levels, compared with
2012. We anticipate that our net profit margin in 2013 will
decrease due to increased competition in the industry, the expected
increase in labor cost and overheads, and the expected increase in
quality assurance and control costs in response to increased
importance on food safety placed by the government and
consumers."
Capacity and market expansions in 2012
Zhongpin is investing approximately $58.5
million to build a new production, research and development,
and training complex in Changge, Henan province, excluding the cost of land use
rights that it has already obtained. When completed, this new
facility is expected to have an annual production capacity of about
100,000 metric tons for prepared pork products. Adjacent to this
new production facility, Zhongpin plans to develop a center for
research and development, training, and quality assurance and
control. Construction for the first phase with a production
capacity of approximately 50,000 metric tons for prepared pork
products started in the second quarter of 2011 and was completed in
the second quarter of 2012. Trial production started in
July 2012, and the plant has been in
regular production since the end of the third quarter of 2012.
Zhongpin established a joint venture company in June 2011, of which the Company owns 65%, with
Henan Xinda Animal Husbandry Company Limited. The joint venture
company is financed by capital contributions and bank loans. All
capital contributions to the joint venture company have been made.
The joint venture company is expected to provide 20,000 sire boars
annually. Upon the completion of the building of infrastructures
for sire boar breeding in the third quarter of 2012, we leased the
facility to a third party for annual rental in the amount of
RMB 5.0 million.
Zhongpin is investing approximately $18.0
million in a cold-chain logistics distribution center in
Anyang, Henan province. This
distribution center will have a temperature-adjustable warehouse
with a floor area of approximately 27,000 square meters, processing
capacity, a distribution center, and a quality control center. The
distribution center will be used for third-party cold-chain
logistics service. Zhongpin expects to put this distribution center
into operation in the third quarter of 2013.
Zhongpin is investing approximately $87.5
million in a chilled and frozen food processing and
distribution center in Kunshan, Jiangsu province, which is near Shanghai. The center will be built in three
phases. The first phase will include a processing center,
cold-chain logistics center, and business complex. Zhongpin
invested about $35.0 million on the
first phase that was put into operation in February 2013.
Zhongpin put a new by-products production facility in Changge,
Henan province, into operation in
November 2012, eight months after the
construction began in March 2012. The
new plant has an annual production capacity for 100 million meters
of sausage casings and 300 billion units of raw material to make
heparin sodium. Cost was approximately $10.5
million.
Zhongpin will be investing approximately $47.6 million to build a cold-chain logistics
distribution center in Tangshan, Hebei province. This distribution center will
have a 27,000 square meter temperature-adjustable warehouse,
processing capacity, distribution center, and quality control
center. This distribution center will be used for third-party
cold-chain logistics service and is expected to be in operation in
the fourth quarter of 2013.
In November 2012, Zhongpin decided
to stop production in its Deyang Zhongpin facility in Sichuan province because its western location
was inconsistent with Zhongpin's strategy to focus on Central China, North
China, East China, and Northeast
China markets. As a result, Zhongpin's annual capacity for
chilled and frozen pork was reduced by 45,000 metric tons in
2012.
As of March 1, 2013, Zhongpin had
an annual capacity of 683,760 metric tons for chilled and frozen
pork, 176,000 tons for prepared pork products, 20,000 tons for pork
oil, and 30,000 tons for vegetables and fruits, for a combined
total of 909,760 metric tons. In addition, its annual capacity for
sausage casings was 100 million meters and for the raw material to
make heparin sodium was 300 billion units.
Detailed guidance discontinued
In light of the pending going-private transaction, Zhongpin has
discontinued its detailed guidance for the year 2013.
Sales revenues in 2012
Total sales revenues increased $183.4
million or 13% to $1,639.6
million in 2012 from $1,456.2
million in 2011 primarily due to higher sales volume for
pork and pork products sold at lower average selling prices.
The higher revenues resulted mainly from continued increases in
the number of retail outlets, geographic expansion of its
distribution network and processing facilities, and higher sales to
food service distributors in China, which were partially offset by the
lower average pork price resulting from market fluctuations and
industry competition. The following table shows tonnage, sales
revenues, and average price per metric ton by product division for
2012 and 2011.
|
|
Sales by Product
Division
|
|
|
Year ended
December 31, 2012
|
|
Year ended
December 31, 2011
|
|
Metric
tons
|
|
Sales revenues
(millions)
|
|
Average price per
metric ton
|
|
Metric
tons
|
|
Sales revenues
(millions)
|
|
Average price per
metric ton
|
Pork and Pork
Products
|
|
|
|
|
|
|
|
|
|
|
|
|
Chilled pork
|
|
393,462
|
|
$1,018.6
|
|
$2,589
|
|
309,545
|
|
$ 890.1
|
|
$2,876
|
Frozen pork
|
|
137,810
|
|
332.3
|
|
$2,411
|
|
134,537
|
|
347.7
|
|
$2,584
|
Prepared
pork products
|
|
107,996
|
|
273.5
|
|
$2,533
|
|
88,505
|
|
202.5
|
|
$2,288
|
Vegetables and
Fruits
|
|
15,427
|
|
15.2
|
|
$ 985
|
|
17,668
|
|
15.9
|
|
$ 900
|
Total
|
|
654,695
|
|
$1,639.6
|
|
$2,504
|
|
550,255
|
|
$1,456.2
|
|
$2,646
|
Chilled pork revenues increased on higher tonnage at lower
average prices per metric ton. Chilled pork revenues increased 14%
in 2012 from 2011. Chilled pork tonnage increased 27% and the
average price per metric ton decreased 10% in 2012 from 2011. The
higher revenues from chilled pork were mainly due to higher tonnage
sold as a result of higher capacity, increased sales to existing
customers, and increased volume of sales from new geographic
markets, expanded points of sales, and added new customers, partly
offset by the lower average selling price that resulted from
fluctuations in market prices for chilled pork or chilled
pork-related products in a more competitive market.
Frozen pork revenues decreased on higher tonnage at lower
average prices. Frozen pork revenues decreased 4% in 2012 from
2011. Frozen pork tonnage increased 2% and the average price per
metric ton decreased 7% in 2012 from 2011. The lower average
selling price of frozen pork products was the result of
fluctuations in market prices for frozen pork or frozen
pork-related products in a more competitive market, which was
partly offset by higher tonnage sold.
Prepared pork revenues increased on higher tonnage at higher
average prices. Revenues from prepared pork products increased 35%
in 2012 from 2011. Prepared pork tonnage increased 22% and the
average price per metric ton increased 11% in 2012 from 2011.
Prepared pork products are becoming more important to our business
since customers are increasingly demanding them for their flavor
and convenience and are willing to pay higher average prices for
these products. We plan to gradually increase sales from prepared
pork products by increasing our brand recognition and expanding our
capacity for these products.
Pork products totaled 99.1% of total sales revenues in 2012 and
98.9% in 2011.
Geographic coverage and distribution channels
The sales of pork 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 in 2012
was partly attributable to our efforts to expand our geographic
coverage and broaden our distribution channels since 2011.
The following table shows sales revenues by distribution
channel. In 2012, sales to wholesalers and distributors accounted
for 41% of sales revenues, restaurants and food services were 28%,
retail channels were 29%, and import and export were 2%.
|
|
Sales Revenues by
Distribution Channel
|
U.S. $ in millions
except %
|
|
Year ended
December 31,
|
|
Net
change
|
|
Percent
change
|
|
|
2012
|
|
2011
|
|
|
Wholesalers and
distributors
|
|
$
679.7
|
|
$
536.4
|
|
$ 143.3
|
|
27%
|
Restaurants and food
services
|
|
460.1
|
|
416.2
|
|
43.9
|
|
11%
|
Retail
channels
|
|
469.2
|
|
466.5
|
|
2.7
|
|
1%
|
Import and
export
|
|
30.6
|
|
37.1
|
|
(6.5)
|
|
(18)%
|
Total
|
|
$1,639.6
|
|
$1,456.2
|
|
$ 183.4
|
|
13%
|
The increase in sales revenues from different distribution
channels was mainly due to the following factors: (a) our
production capacity has increased because we completed the
expansion of our chilled and frozen pork processing facilities in
Taizhou, Jiangsu province and in
Changchun, Jilin province in December 2011, and the expansion of our prepared
meat processing facilities in Changge, Henan province in July
2012. To increase the utilization of our new facilities, we
focused our sales efforts on the wholesalers and distributors, as
it is easier to achieve higher volume sales within this channel. As
a result, we had significantly higher sales in the wholesalers and
distributors channel than in other distribution channels, with the
overall capacity utilization rate that was lower in 2012 from 2011
due to the capacity added by the new production facilities that
were put into operation at the end of 2011 and middle of 2012; (b)
we have built our brand image and brand recognition through general
advertising, display promotions, and sales campaigns; (c) we have
increased the number of stores and other channels through which we
sell our products; and (d) we believe consumers are placing more
importance on food safety and are willing to pay higher prices for
safe food products.
As of December 31, 2012,
Zhongpin's customers included 156 international and domestic fast
food companies, 162 processing factories, and 1,389 school
cafeterias, factory canteens, hotels, army bases, hospitals, and
government departments. As of December 31,
2012, Zhongpin also sold directly to consumers in 3,490
retail outlets, including supermarkets, in China.
The following table shows the retail channels and number of
stores and counters that generated sales volume in 2012 and
2011.
|
|
Numbers of
Retail Stores and Counters
(Generating Sales Volume)
|
|
|
As of December
31,
|
|
Net
change
|
|
Percent
change
|
Retail
channels
|
|
2012
|
|
2011
|
|
|
Showcase
stores
|
|
158
|
|
162
|
|
(4)
|
|
(2)%
|
Branded
stores
|
|
1,476
|
|
1,310
|
|
166
|
|
13%
|
Supermarket
counters
|
|
1,856
|
|
1,956
|
|
(100)
|
|
(5)%
|
Total
|
|
3,490
|
|
3,428
|
|
62
|
|
2%
|
Geographic expansion and broader channel coverage together have
been important factors in our long-term success, including in 2012.
The table below shows the number of cities, subdivided by the size,
in which we distribute our products through all of our distribution
channels at the end of 2012 and 2011.
|
|
Number of Cities by
Tier
for All Distribution Channels
|
|
|
As of Deceember
31,
|
|
Net
change
|
|
Percent
change
|
|
|
2012
|
|
2011
|
|
|
First-tier cities
(largest)
|
|
29
|
|
29
|
|
-
|
|
0%
|
Second-tier
cities
|
|
136
|
|
134
|
|
2
|
|
1%
|
Third-tier
cities
|
|
438
|
|
432
|
|
6
|
|
1%
|
Total cities
|
|
603
|
|
595
|
|
8
|
|
1%
|
Cost of Sales
Cost of sales primarily includes the costs of raw materials,
labor costs, and overhead. Of the total cost of sales, the cost of
raw materials typically accounts for about 96.0% to 96.4%, overhead
typically accounts for 2.1% to 2.6%, and labor costs typically
account for 1.4% to 1.5%, with slight variations from period to
period. All of our meat products are derived from the same raw
materials, which are live hogs. Vegetable and fruit products are
purchased from farmers located close to Zhongpin's processing
facility in Changge in Henan
province. As a result, the purchasing costs of live hogs and
vegetables and fruits represent substantially all of the costs of
raw materials. The increase in the cost of sales was consistent
with but considerably higher than the increase in sales
revenues.
|
|
Cost of Sales by
Product Division
|
|
|
Year ended
December 31, 2012
|
|
Year ended
December 31, 2011
|
|
|
Metric
tons
|
|
Amount
(millions)
|
|
Average
cost per
metric
ton
|
|
Metric
tons
|
|
Amount
(millions)
|
|
Average
cost per
metric
ton
|
Pork and Pork
Products
|
|
|
|
|
|
|
|
|
|
|
|
|
Chilled
pork
|
|
393,462
|
|
$
930.1
|
|
$2,364
|
|
309,545
|
|
$
803.1
|
|
$2,594
|
Frozen
pork
|
|
137,810
|
|
313.1
|
|
$2,272
|
|
134,537
|
|
324.1
|
|
$2,409
|
Prepared pork
products
|
|
107,996
|
|
229.8
|
|
$2,128
|
|
88,505
|
|
164.5
|
|
$1,859
|
Vegetables and
Fruits
|
|
15,427
|
|
13.2
|
|
$ 856
|
|
17,668
|
|
13.2
|
|
$ 747
|
Total
|
|
654,695
|
|
$1,486.2
|
|
$2,270
|
|
550,255
|
|
$1,304.9
|
|
$2,371
|
Gross profit margin (gross profit divided by sales revenues)
decreased to 9.4% in 2012 from 10.4% in 2011 primarily due to (a)
increased competition in the market, (b) the increase in write-off
of VAT recoverable, (c) increased promotional activities to grow
our market share, (d) the increase in overhead due to the higher
labor costs and utility costs, and (e) higher quality control costs
in response to increased importance placed by the government and
consumers on food safety. As a result, the gross profit margin was
lower than the level Zhongpin would expect to achieve once it fully
integrates its new production facilities and expands into new
regional markets for its products.
General, administrative, and selling expenses
General and administrative expenses increased $9.6 million or 33% to $38.8 million in 2012 from $29.2 million in 2011. As a percent of revenues,
general and administrative expenses increased to 2.4% in 2012 from
2.0% in 2011. The higher general and administrative expenses in
2012 were primarily due to a $2.5
million increase in salary expenses resulted from hiring
more employees required to support the expansion of the business,
an increase in the average salary we paid to our employees, a
$1.1 million increase in legal fees
due to the proposed going private transaction, a $1.9 million increase in the bad debt provision
due to increases in revenues and accounts receivable, and a
$1.8 million increase in other taxes
due to land and property placed into service in December 2011 for two new facilities in Taizhou
and Changchun on which the Company
started paying land and property taxes in the first quarter of
2012.
Selling expenses increased $4.0
million or 12% to $37.6
million in 2012 from $33.6
million in 2011. Selling expenses as a percent of revenues
remained at 2.3% in 2012 and 2011. The higher selling expenses were
primarily the result of a $1.4
million increase in salary expenses, a $0.9 million increase in supermarket management
fees, and a $1.0 million increase in
promotion expenses.
Impairment loss
Impairment loss increased $2.4
million or 150% to $4.0
million in 2012 from $1.6
million in 2011 primarily due to a $2.7 million increase in a provision for plant
and equipment in our Deyang Zhongpin operation. In November 2012, we decided to stop production in
the Deyang facility in Sichuan
province in western China because
our strategy is to focus on the Central
China, North China, East
China, and Northeast China
markets. We will concentrate our resources on these markets. We
evaluated the plant and equipment of Deyang Zhongpin and decided to
accrue an impairment loss based on the difference between the book
value and the estimated fair value of the plant and equipment.
Interest expense, net
Interest expense, net of interest income, increased $8.9 million or 41% to $30.4 million in 2012 from $21.5 million in 2011. The increase in interest
expense was primarily the result of an increase of $113.0 million in short-term bank loans, an
increase of $40.7 million in
long-term bank loans, an increase of $41.7
million in bank notes payable, and an increase in the
interest rates published by the People's Bank of China, which increases were partly offset by
an increase in interest income.
Other income and government subsidies
Other income and government subsidies increased $3.3 million or 79% to $7.5 million in 2012 from $4.2 million in 2011 primarily due to an increase
in government subsidies of $1.4
million and an increase in other income of $2.0 million as a result of recognizing the
exempted output VAT for fruits and vegetables as other income and
the recognition of rental income from renting out the sire boar
breeding facility in Henan.
Provision for income taxes
The enterprise income tax rate in China on income generated from the sale of
prepared products is 25% and 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 provision for
income taxes increased $0.9 million
in 2012 from 2011 due to higher sales of prepared pork
products.
Net income
As a result of the foregoing, net income decreased $20.1 million or 31% to $44.1 million in 2012 from $64.2 million in 2011. The Company's net profit
margin (net income divided by sales revenues) declined to 2.7% in
2012 from 4.4% in 2011.
Earnings per share
The earnings per share numbers below are based on net income
attributable to Zhongpin Inc. shareholders.
Basic earnings per share decreased 29% to $1.18 in 2012 from $1.66 in 2011. Weighted average basic shares
outstanding decreased 3% to 37,273,652 shares in 2012 from
38,505,027 shares in 2011.
Diluted earnings per share decreased 29% to $1.18 in 2012 from $1.66 in 2011. Weighted average diluted shares
outstanding decreased 3% to 37,328,792 shares in 2012 from
38,539,880 shares in 2011.
As of December 31, 2012, Zhongpin
had 40,376,182 shares of common stock issued, of which 37,209,344
were outstanding and 3,166,838 were held as treasury stock.
For a discussion of Zhongpin's results for 2011 compared with
2010, please see the Form 10-K that Zhongpin will file with the
Securities and Exchange Commission on March
18, 2013.
Liquidity and capital resources
During the year 2012, Zhongpin's cash and cash equivalents
increased by $40.6 million. Cash and
cash equivalents (excluding restricted cash) totaled $176.4 million as of December 31, 2012 compared with $135.8 million as of December 31, 2011. As of December 31, 2012, working capital (current
assets minus current liabilities) was a negative $41.7 million, which is primarily because (i) we
borrowed more short-term loans in 2012 in light of the proposed
going private transaction, which resulted in more short-term loans
outstanding at December 31, 2012, and
(ii) we had a larger balance of the current portion of long-term
loans outstanding at December 31,
2012 as a larger portion of the long-term loans we borrowed
in prior years will mature in twelve months from December 31, 2012. We do not believe we have
material risks to our financial position or results of operations
in connection with our negative working capital. In 2013, we plan
to borrow more long-term loans and use more operating cash to pay
back short-term loans, in order to achieve a positive working
capital balance.
Net cash provided by operating activities in 2012 was
$35.4 million, primarily from net
income that provided $44.1 million,
depreciation and amortization that provided $25.8 million, a provision for allowance for bad
debts that provided $2.5 million, an
impairment loss that provided $4.0
million, accounts receivable and accounts payable that used
a total of $50.9 million, purchase
deposits that provided $7.5 million,
inventories that provided $4.1
million, VAT tax refund receivable that used $3.5 million, and other items that provided
$1.8 million, net.
Net cash used in investing activities in 2012 was $119.4 million, primarily for construction in
progress, additions to land use rights, and prepayment and
additions to property, plant, and equipment that together used
$122.4 million.
Net cash provided by financing activities in 2012 was
$124.0 million, primarily from the
proceeds from loans and notes, net of repayments, that provided
$134.2 million, repayment of a
capital lease obligation that used $5.8
million, repurchases of common stock that used $2.8 million, and another item that provided
$0.2 million.
As a result, including the effect from foreign currency exchange
rate changes on cash, Zhongpin increased its cash and cash
equivalents in 2012 by $40.6 million.
Cash and cash equivalents on December 31,
2012 totaled $176.4 million
compared with $135.8 million as of
December 31, 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 $102.0 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
over the maturing loans into new short-term loans with the same
lenders as the Company has done in the past.
Conference call and webcast
Zhongpin will host its year 2012 earnings conference call and
live webcast at 8:00 a.m. Eastern Daylight
Time (New York) on
Friday, March 15, 2012, which is also
8:00 p.m. in China and Hong
Kong on the same day.
The dial-in details for the live conference call are:
1 866 978
9970
|
U.S. toll
free
|
1 800 033 457
|
Australia toll
free
|
1 855 790
8866
|
Canada toll
free
|
800 803 6103
|
China mainland toll free
land line
|
400 681 6405
|
China mainland (small
access fee) mobile
|
400 658 8165
|
China mainland (small
access fee) mobile
|
8025 0180
|
Denmark toll
free
|
0805 631 899
|
France toll
free
|
3027 5500
|
Hong Kong
local
|
180 940 6949
|
Israel toll
free
|
005 3112 2600
|
Japan toll
free
|
8002 8922
|
Luxembourg toll
free
|
0800 022 7874
|
Netherlands toll
free
|
800 120 6122
|
Singapore
local
|
800 600 667
|
Spain toll
free
|
0800 279 7785
|
United Kingdom toll
free
|
1 866 978
9970
|
United States toll
free
|
+852 3027
5500
|
International dial-in
toll call
|
|
|
326
957#
|
Live call -- participant
access code
|
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 playback of the call will be available after the
conclusion of the conference call through 8:00 a.m. Eastern Daylight Time, March 29, 2013.
The dial-in details for the telephone playback are:
1 866 753
0743
|
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|
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|
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|
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|
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|
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|
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|
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|
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|
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|
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|
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|
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|
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|
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|
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|
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International toll
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145
136#
|
Playback -- conference
reference
|
About Zhongpin
Zhongpin Inc. is a leading 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 3,490 retail outlets as
of December 31, 2012. 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, the impacts of the proposed going
private transaction, 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)
Director of Investor Relations
Telephone +86 10 8455 4188 extension 106 in Beijing
ir@zhongpin.com
Mr. Warren (Feng) Wang (English
and Chinese)
Chief Financial Officer
Telephone +86 10 8455 4388 in Beijing
warren.wang@zhongpin.com
Christensen
Mr. Victor Kuo (English and
Chinese)
Telephone +86 10 5826 4939 in Beijing
vkuo@christensenir.com
Mr. Tom Myers (English)
Mobile +86 139 1141 3520 in Beijing
tmyers@christensenir.com
www.zpfood.com
Financial statements follow.
ZHONGPIN
INC.
|
CONSOLIDATED
STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
|
(Amounts in U.S.
dollars)
|
|
|
|
|
|
|
|
|
|
|
Years Ended
December 31,
|
|
2012
|
|
2011
|
|
2010
|
Revenues
|
|
|
|
|
|
|
|
|
Sales
revenues
|
$
|
1,639,603,334
|
|
$
|
1,456,208,266
|
|
$
|
946,720,275
|
Cost of
sales
|
|
(1,486,217,828)
|
|
|
(1,304,879,663)
|
|
|
(835,990,804)
|
Gross profit
|
|
153,385,506
|
|
|
151,328,603
|
|
|
110,729,471
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
General and administrative expenses
|
|
(38,828,805)
|
|
|
(29,232,976)
|
|
|
(24,062,697)
|
Selling expenses
|
|
(37,553,595)
|
|
|
(33,581,604)
|
|
|
(20,726,564)
|
Research and development expenses
|
|
(573,508)
|
|
|
(495,815)
|
|
|
(638,899)
|
Impairment loss
|
|
(4,048,453)
|
|
|
(1,614,167)
|
|
|
(1,015,780)
|
Total operating expenses
|
|
(81,004,361)
|
|
|
(64,924,562)
|
|
|
(46,443,940)
|
|
|
|
|
|
|
|
|
|
Income from
operations
|
|
72,381,145
|
|
|
86,404,041
|
|
|
64,285,531
|
|
|
|
|
|
|
|
|
|
Other income
(expense)
|
|
|
|
|
|
|
|
|
Interest expenses, net
|
|
(30,426,753)
|
|
|
(21,547,864)
|
|
|
(7,910,006)
|
Other
income, net
|
|
2,223,272
|
|
|
233,075
|
|
|
1,953,667
|
Gain
on disposal of a subsidiary
|
|
285,159
|
|
|
-
|
|
|
-
|
Government subsidies
|
|
5,310,979
|
|
|
3,933,821
|
|
|
4,184,302
|
Total other expense
|
|
(22,607,343)
|
|
|
(17,380,968)
|
|
|
(1,772,037)
|
|
|
|
|
|
|
|
|
|
Net income before
taxes
|
|
49,773,802
|
|
|
69,023,073
|
|
|
62,513,494
|
Provision for income taxes
|
|
(5,658,623)
|
|
|
(4,808,041)
|
|
|
(4,233,525)
|
|
|
|
|
|
|
|
|
|
Net income after
taxes
|
|
44,115,179
|
|
|
64,215,032
|
|
|
58,279,969
|
Net income
(loss) attributable to non-controlling interests
|
|
(46,502)
|
|
|
5,695
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Net income attributable
to Zhongpin Inc. shareholders
|
|
44,068,677
|
|
|
64,220,727
|
|
|
58,279,969
|
|
|
|
|
|
|
|
|
|
Foreign currency
translation adjustment
|
|
1,511,134
|
|
|
23,361,288
|
|
|
10,638,236
|
Foreign currency
translation adjustment attributable to non-controlling
interests
|
|
(2,227)
|
|
|
(33,388)
|
|
|
-
|
Foreign currency
translation adjustment attributable to Zhongpin Inc.
shareholders
|
|
1,508,907
|
|
|
23,327,900
|
|
|
10,638,236
|
|
|
|
|
|
|
|
|
|
Comprehensive
income
|
$
|
45,626,313
|
|
$
|
87,576,320
|
|
$
|
68,918,205
|
Comprehensive income
attributable to noncontrolling interests
|
|
(48,729)
|
|
|
(27,693)
|
|
|
-
|
Comprehensive income
attributable to Zhongpin Inc. shareholders
|
$
|
45,577,584
|
|
$
|
87,548,627
|
|
$
|
68,918,205
|
|
|
|
|
|
|
|
|
|
Basic earnings per
common share
|
$
|
1.18
|
|
$
|
1.66
|
|
$
|
1.67
|
Diluted earnings per
common share
|
$
|
1.18
|
|
$
|
1.66
|
|
$
|
1.65
|
Basic weighted average
shares outstanding
|
|
37,273,652
|
|
|
38,505,027
|
|
|
34,837,656
|
Diluted weighted average
shares outstanding
|
|
37,328,792
|
|
|
38,539,880
|
|
|
35,270,410
|
ZHONGPIN
INC.
|
CONSOLIDATED
BALANCE SHEETS
|
(Amounts in U.S.
dollars)
|
|
|
|
|
|
|
|
December 31,
2012
|
|
December 31,
2011
|
ASSETS
|
|
|
|
|
|
Current
assets
|
|
|
|
|
|
Cash and cash
equivalents
|
$
|
176,441,332
|
|
$
|
135,845,095
|
Restricted
cash
|
|
109,954,161
|
|
|
91,444,216
|
Bank notes
receivable
|
|
72,369,700
|
|
|
29,171,060
|
Accounts receivable, net
of allowance for doubtful accounts of $4,775,526 and
$2,323,920
|
|
85,167,801
|
|
|
40,161,898
|
Other receivables, net
of allowance for doubtful accounts of $493,484 and
$449,048
|
|
865,060
|
|
|
1,081,311
|
Purchase
deposits
|
|
6,798,356
|
|
|
14,320,357
|
Inventories
|
|
37,979,226
|
|
|
41,944,020
|
Prepaid
expenses
|
|
449,127
|
|
|
379,633
|
Allowance
receivables
|
|
956,166
|
|
|
3,116,108
|
VAT recoverable
(net)
|
|
32,719,543
|
|
|
30,472,864
|
Deferred tax
assets
|
|
800,179
|
|
|
572,791
|
Other current
assets
|
|
73,413
|
|
|
1,545,534
|
Total current
assets
|
|
524,574,064
|
|
|
390,054,887
|
|
|
|
|
|
|
Long-term
investment
|
|
477,289
|
|
|
476,122
|
Property, plant and
equipment (net)
|
|
470,447,775
|
|
|
427,929,871
|
Deposits for purchase of
land usage rights
|
|
17,285,461
|
|
|
27,930,404
|
Construction in
progress
|
|
86,509,865
|
|
|
47,887,224
|
Land usage
rights
|
|
116,785,769
|
|
|
96,981,393
|
Deferred
charges
|
|
-
|
|
|
8,665
|
Other non-current
assets
|
|
2,554,680
|
|
|
-
|
Total assets
|
$
|
1,218,634,903
|
|
$
|
991,268,566
|
|
|
|
|
|
|
LIABILITIES
AND EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities
|
|
|
|
|
|
Short-term
loans
|
$
|
228,632,849
|
|
$
|
115,653,574
|
Bank notes
payable
|
|
219,333,386
|
|
|
177,627,006
|
Long-term loans -
current portion
|
|
52,183,597
|
|
|
16,016,419
|
Capital lease obligation
- current portion
|
|
-
|
|
|
5,769,600
|
Accounts
payable
|
|
11,918,351
|
|
|
15,693,948
|
Other
payables
|
|
24,053,321
|
|
|
26,873,586
|
Accrued
liabilities
|
|
18,353,887
|
|
|
12,596,651
|
Deposits from
customers
|
|
9,935,877
|
|
|
12,550,096
|
Tax payable
|
|
1,778,724
|
|
|
1,822,812
|
Deferred subsidy -
current portion
|
|
84,852
|
|
|
68,773
|
Total current
liabilities
|
|
566,274,844
|
|
|
384,672,465
|
|
|
|
|
|
|
Deferred tax
liabilities
|
|
743,869
|
|
|
524,399
|
Deposits from customers
- long-term portion
|
|
-
|
|
|
2,615,449
|
Long-term
loans
|
|
101,792,652
|
|
|
97,261,330
|
Deferred subsidy -
long-term portion
|
|
2,386,002
|
|
|
1,988,693
|
Total
liabilities
|
|
671,197,367
|
|
|
487,062,336
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
Common stock:par value
$0.001; 100,000,000 authorized; 40,376,182 and 40,355,502
shares issued as of December 31, 2012 and 2011; and 37,209,344 and
37,556,964 shares outstanding as of December 31, 2012 and
2011
|
|
40,376
|
|
|
40,355
|
Additional paid-in
capital
|
|
240,063,993
|
|
|
239,364,449
|
Retained
earnings
|
|
278,268,748
|
|
|
234,200,071
|
Treasury stock, at cost:
3,166,838 and 2,798,538 shares as of December 31, 2012 and
2011
|
|
(26,225,646)
|
|
|
(23,131,074)
|
Accumulated other
comprehensive income
|
|
54,413,960
|
|
|
52,905,053
|
Total Zhongpin Inc.
shareholders' equity
|
|
546,561,431
|
|
|
503,378,854
|
Non-controlling
interests
|
|
876,105
|
|
|
827,376
|
Total shareholders'
equity
|
|
547,437,536
|
|
|
504,206,230
|
Total liabilities and
shareholders' equity
|
$
|
1,218,634,903
|
|
$
|
991,268,566
|
ZHONGPIN
INC.
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
(Amounts in U.S.
dollars)
|
|
|
|
Years Ended December
31,
|
|
|
2012
|
|
|
2011
|
|
|
2010
|
Cash flows from
operating activities:
|
|
|
|
|
|
|
|
|
|
Net income
|
$
|
44,115,179
|
|
$
|
64,215,032
|
|
$
|
58,279,969
|
|
Adjustments to reconcile
net income to net cash provided by (used in) operations:
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
23,364,078
|
|
|
17,415,069
|
|
|
13,613,922
|
|
|
Amortization of land use
rights
|
|
2,390,501
|
|
|
1,886,475
|
|
|
1,422,251
|
|
|
Staff welfare
amortization
|
|
-
|
|
|
-
|
|
|
(356,074)
|
|
|
Provision for allowance
for bad debt
|
|
2,478,601
|
|
|
714,685
|
|
|
464,311
|
|
|
Impairment
loss
|
|
4,048,453
|
|
|
1,614,167
|
|
|
1,015,780
|
|
|
Other
income
|
|
(148,961)
|
|
|
(43,123)
|
|
|
(1,139,783)
|
|
|
Deferred
subsidy
|
|
(68,647)
|
|
|
-
|
|
|
-
|
|
|
Stock-based
compensation
|
|
515,566
|
|
|
1,610,815
|
|
|
2,343,771
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in operating
assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
(47,150,874)
|
|
|
(8,129,664)
|
|
|
(10,049,304)
|
|
|
Other
receivables
|
|
(107,773)
|
|
|
(193,590)
|
|
|
(289,947)
|
|
|
Purchase
deposits
|
|
7,524,762
|
|
|
(6,366,517)
|
|
|
(1,552,498)
|
|
|
Prepaid
expenses
|
|
(68,486)
|
|
|
29,478
|
|
|
(195,997)
|
|
|
Inventories
|
|
4,050,162
|
|
|
(13,711,256)
|
|
|
8,194,171
|
|
|
Allowance
receivables
|
|
2,158,305
|
|
|
(499,119)
|
|
|
(2,424,121)
|
|
|
VAT
receivable
|
|
(3,498,272)
|
|
|
(9,611,116)
|
|
|
(7,150,913)
|
|
|
Deferred tax
asset/liability, net
|
|
(7,765)
|
|
|
(10,696)
|
|
|
(26,560)
|
|
|
Other current
assets
|
|
1,469,594
|
|
|
29,527
|
|
|
60,677
|
|
|
Long-term deferred
charges
|
|
8,650
|
|
|
13,782
|
|
|
18,984
|
|
|
Accounts
payable
|
|
(3,797,735)
|
|
|
6,542,278
|
|
|
(975,453)
|
|
|
Other
payables
|
|
(2,745,655)
|
|
|
10,003,595
|
|
|
1,637,437
|
|
|
Deferred
subsidy
|
|
475,248
|
|
|
2,007,167
|
|
|
-
|
|
|
Accrued
liabilities
|
|
5,704,541
|
|
|
1,835,646
|
|
|
3,506,546
|
|
|
Taxes payable
|
|
(48,347)
|
|
|
132,678
|
|
|
(364,633)
|
|
|
Deposits from
customers
|
|
(2,633,655)
|
|
|
3,778,601
|
|
|
2,693,920
|
|
|
Deposits from customers
- long-term portion
|
|
(2,610,642)
|
|
|
542,973
|
|
|
(88,463)
|
Net cash provided by
operating activities
|
|
35,416,828
|
|
|
73,806,887
|
|
|
68,637,993
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from
investing activities:
|
|
|
|
|
|
|
|
|
|
|
Prepayment on property,
plant, and equipment
|
|
(2,543,754)
|
|
|
-
|
|
|
-
|
|
|
Deposits for purchase of
land use rights
|
|
(1,722,313)
|
|
|
(17,581,832)
|
|
|
(7,895,121)
|
|
|
Construction in
progress
|
|
(98,675,648)
|
|
|
(134,970,620)
|
|
|
(55,719,217)
|
|
|
Additions to property
and equipment
|
|
(9,416,974)
|
|
|
(16,504,812)
|
|
|
(10,925,116)
|
|
|
Additions to land use
rights
|
|
(10,138,124)
|
|
|
-
|
|
|
(23,282,316)
|
|
|
Proceeds from sale of
fixed assets
|
|
326,300
|
|
|
91,298
|
|
|
-
|
|
|
Increase in restricted
cash
|
|
-
|
|
|
(71,236,828)
|
|
|
(2,530,627)
|
|
|
Long term
investment
|
|
-
|
|
|
-
|
|
|
(443,151)
|
|
|
Proceeds from disposal
of a subsidiary
|
|
2,740,042
|
|
|
-
|
|
|
-
|
Net cash used in
investing activities
|
|
(119,430,471)
|
|
|
(240,202,794)
|
|
|
(100,795,548)
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from
financing activities:
|
|
|
|
|
|
|
|
|
|
|
Proceeds from (repayment
of) bank notes, net
|
|
(1,848,050)
|
|
|
145,479,016
|
|
|
(2,199,139)
|
|
|
Proceeds from short-term
loans
|
|
296,364,990
|
|
|
159,472,347
|
|
|
107,559,768
|
|
|
Repayment of short-term
loans
|
|
(184,151,102)
|
|
|
(140,749,090)
|
|
|
(103,171,859)
|
|
|
Proceeds from long-term
loans
|
|
48,325,615
|
|
|
24,772,404
|
|
|
66,681,885
|
|
|
Repayment of long-term
loans
|
|
(8,077,545)
|
|
|
(15,382,141)
|
|
|
(20,086,899)
|
|
|
Repayment of capital
lease obligation
|
|
(5,758,997)
|
|
|
(6,576,095)
|
|
|
(6,729,655)
|
|
|
Proceeds from common
stock issuance
|
|
-
|
|
|
66,356,662
|
|
|
-
|
|
|
Repurchase of common
stock
|
|
(2,812,322)
|
|
|
(23,131,074)
|
|
|
-
|
|
|
Proceeds from exercised
warrants and options
|
|
184,000
|
|
|
-
|
|
|
2,888,992
|
|
|
Capital contribution by
non-controlling interest
|
|
-
|
|
|
799,953
|
|
|
-
|
|
|
Increase in restricted
cash
|
|
(18,207,686)
|
|
|
-
|
|
|
-
|
Net cash provided by
financing activities
|
|
124,018,903
|
|
|
211,041,982
|
|
|
44,943,093
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of rate changes
on cash
|
|
590,977
|
|
|
7,026,834
|
|
|
2,404,389
|
|
Increase in cash and
cash equivalents
|
$
|
40,596,237
|
|
$
|
51,672,909
|
|
$
|
15,189,927
|
|
Cash and cash
equivalents, beginning of year
|
|
135,845,095
|
|
|
84,172,186
|
|
|
68,982,259
|
|
Cash and cash
equivalents, end of year
|
$
|
176,441,332
|
|
$
|
135,845,095
|
|
$
|
84,172,186
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures
of cash flow information:
|
|
|
|
|
|
|
|
|
|
Cash paid for
interest
|
$
|
33,002,672
|
|
$
|
22,387,434
|
|
$
|
8,717,320
|
|
Cash paid for income
taxes
|
$
|
5,714,735
|
|
$
|
4,675,144
|
|
$
|
3,880,679
|
ZHONGPIN
INC.
|
CONSOLIDATED
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
|
(Amounts in U.S.
dollars)
|
|
|
|
|
|
|
Additional
|
|
Common
Stock
|
Treasury
stock
|
paid-in
|
Part 1
|
Shares
|
Par
value
|
Shares
|
Total
cost
|
capital
|
Balance as of December
31, 2009
|
34,662,314
|
34,662
|
-
|
-
|
166,169,902
|
Warrants exercised
(cashless)
|
135,057
|
135
|
-
|
-
|
(135)
|
Warrants exercised
(cash)
|
497,789
|
498
|
-
|
-
|
2,503,454
|
Option
exercised
|
43,000
|
43
|
-
|
-
|
384,997
|
Compensation expense for
stock option granted
|
-
|
-
|
-
|
-
|
2,343,771
|
Net income for the
year
|
-
|
-
|
-
|
-
|
-
|
Translation
adjustment
|
-
|
-
|
-
|
-
|
-
|
Balance as of December
31, 2010
|
35,338,160
|
35,338
|
-
|
-
|
171,401,989
|
Warrants exercised
(cashless)
|
17,342
|
17
|
-
|
-
|
(17)
|
Compensation expense for
stock option granted
|
-
|
-
|
-
|
-
|
1,610,815
|
Common shares
offering
|
5,000,000
|
5,000
|
-
|
-
|
66,351,662
|
Common share
repurchase
|
-
|
-
|
(2,798,538)
|
(23,131,074)
|
-
|
Net income for the
year
|
-
|
-
|
-
|
-
|
-
|
Translation
adjustment
|
-
|
-
|
-
|
-
|
-
|
Capital contribution
from non-controlling interests
|
-
|
-
|
-
|
-
|
-
|
Balance as of December
31, 2011
|
40,355,502
|
40,355
|
(2,798,538)
|
(23,131,074)
|
239,364,449
|
Warrants exercised
(cashless)
|
680
|
1
|
-
|
-
|
(1)
|
Option
exercised
|
20,000
|
20
|
-
|
-
|
183,980
|
Compensation expense for
stock option granted
|
-
|
-
|
-
|
-
|
515,565
|
Common share
repurchase
|
-
|
-
|
(368,300)
|
(3,094,572)
|
-
|
Net income for the
year
|
-
|
-
|
-
|
-
|
-
|
Translation
adjustment
|
-
|
-
|
-
|
-
|
-
|
Balance as of December
31, 2012
|
40,376,182
|
40,376
|
(3,166,838)
|
(26,225,646)
|
240,063,993
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retained
|
Accumulated
other
comprehensive
|
Total
Zhongpin
Inc.
shareholders'
|
Non-controlling
|
Total
shareholders'
|
Part 2
|
earnings
|
income
|
equity
|
interest
|
equity
|
Balance as of December
31, 2009
|
111,699,375
|
18,938,917
|
296,842,856
|
-
|
296,842,856
|
Warrants exercised
(cashless)
|
-
|
-
|
-
|
-
|
-
|
Warrants exercised
(cash)
|
-
|
-
|
2,503,952
|
-
|
2,503,952
|
Option
exercised
|
-
|
-
|
385,040
|
-
|
385,040
|
Compensation expense for
stock option granted
|
-
|
-
|
2,343,771
|
-
|
2,343,771
|
Net income for the
year
|
58,279,969
|
-
|
58,279,969
|
-
|
58,279,969
|
Translation
adjustment
|
-
|
10,638,236
|
10,638,236
|
-
|
10,638,236
|
Balance as of December
31, 2010
|
169,979,344
|
29,577,153
|
370,993,824
|
-
|
370,993,824
|
Warrants exercised
(cashless)
|
-
|
-
|
-
|
-
|
-
|
Compensation expense for
stock option granted
|
-
|
-
|
1,610,815
|
-
|
1,610,815
|
Common shares
offering
|
-
|
-
|
66,356,662
|
-
|
66,356,662
|
Common share
repurchase
|
-
|
-
|
(23,131,074)
|
-
|
(23,131,074)
|
Net income for the
year
|
64,220,727
|
-
|
64,220,727
|
(5,695)
|
64,215,032
|
Translation
adjustment
|
-
|
23,327,900
|
23,327,900
|
33,388
|
23,361,288
|
Capital contribution
from non-controlling interests
|
-
|
-
|
-
|
799,683
|
799,683
|
Balance as of December
31, 2011
|
234,200,071
|
52,905,053
|
503,378,854
|
827,376
|
504,206,230
|
Warrants exercised
(cashless)
|
-
|
-
|
-
|
-
|
-
|
Option
exercised
|
-
|
-
|
184,000
|
-
|
184,000
|
Compensation expense for
stock option granted
|
-
|
-
|
515,565
|
-
|
515,565
|
Common share
repurchase
|
-
|
-
|
(3,094,572)
|
-
|
(3,094,572)
|
Net income for the
year
|
44,068,677
|
-
|
44,068,677
|
46,502
|
44,115,179
|
Translation
adjustment
|
-
|
1,508,907
|
1,508,907
|
2,227
|
1,511,134
|
Balance as of December
31, 2012
|
278,268,748
|
54,413,960
|
546,561,431
|
876,105
|
547,437,536
|
SOURCE Zhongpin Inc.