CHANGGE CITY and BEIJING, China, Nov. 9 /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, net income, and
diluted earnings per share for the third quarter of 2009. Zhongpin
also reduced its guidance for the full year 2009 because, even
though Zhongpin's sales volume in the third quarter 2009 achieved a
record high, pork prices in China are currently not increasing.
Third quarter 2009 highlights: -- Revenues increased 26.7 percent
in the third quarter 2009 to $194.9 million from $153.8 million in
the third quarter 2008. -- Net income increased 30.7 percent to
$13.2 million in the third quarter 2009 from $10.1 million in the
third quarter 2008. -- Diluted earnings per share increased 29.4
percent to $0.44 in the third quarter 2009 from $0.34 in the third
quarter 2008. -- The trend for hog and pork prices during the third
quarter 2009 turned upward in July and early August, then
stabilized at those somewhat higher levels through September. --
Prior guidance for the year 2009 has been reduced to account for
stable but not increasing pork prices and for the higher average
number of common shares outstanding because Zhongpin issued
4,600,000 additional common shares on October 15, 2009. -- Zhongpin
announced it has started to construct three cold processing,
storage, and distribution centers adjacent to three of its food
processing plants in Henan province. Each center will add
approximately 20,000 square meters of space and is expected to
begin processing in the second quarter of 2010. Initially, about 40
percent of the capacity will handle Zhongpin's pork and agriculture
products, with the remaining 60 percent used to provide storage,
processing, and allocation services for other food producers. Total
cost for all three centers will be approximately $13.6 million. --
Construction of two new pork processing plants in Tianjin, which
began in April 2009, continued during the quarter. The production
lines for chilled and frozen pork products and prepared meat
products, with a total of 136,000 metric tons of capacity, are
expected to come on line in the first and third quarters of 2010,
respectively. -- Construction of a new pork processing plant in
Changge, with 36,000 metric tons of capacity, continued and is
expected to come on line in the fourth quarter 2009. --
Construction of one premium food oil plant in Changge, with 20,000
tons of capacity, continued and is expected to come on line in the
second quarter 2010. Mr. Xianfu Zhu, Chairman and Chief Executive
Officer of Zhongpin Inc., said, "Our operating and financial
performance in the third quarter was encouraging, with higher
tonnage on somewhat lower average prices compared with the third
quarter of 2008. "Prices for hog and pork products began to
increase in June, continued at higher levels in July and early
August, then stabilized at those somewhat higher prices during the
second half of the third quarter. "In the early part of the fourth
quarter this year, we have seen only modest changes in hog and pork
prices. Because we now believe that pork price increases in the
fourth quarter are likely to be less than our previous
expectations, we have prudently reduced our guidance for the full
year 2009." Pricing and tonnage Based on Zhongpin's results,
average hog and pork prices per metric ton increased sequentially
about 14.8 percent in the third quarter from the second quarter of
2009, primarily due to China's purchases for its national pork
reserves, which helped to bring the price of hogs above the
breakeven point for farmers. The government's purchasing policy is
based on the relationship of the price of hogs to the price of
corn, which is the principal hog feed. The government authorized
certain qualified enterprises, including Zhongpin, to acquire hogs
and to slaughter, process and stock them as frozen pork. Market and
capacity expansions continue Mr. Zhu continued, "This year and next
we are continuing to implement our strategic plan to sustain the
growth we have experienced in the last five years. "Through 2010,
we expect to expand our distribution channels and develop new
markets. Through our aggressive marketing campaign, we also expect
to increase our brand awareness, customer loyalty, and sales. We
are further streamlining our supply chain to create a unified, safe
and efficient cold- chain logistics system." In January 2009, the
Company began operating its new chilled and frozen pork plant in
eastern Henan province. It has an annual capacity of approximately
80,000 metric tons. In April 2009, Zhongpin started processing in
its new vegetable and fruit facility in Changge, which has an
annual capacity of 30,000 metric tons. Zhongpin upgraded its pork
facility in Changge in August 2009 and added an annual production
capacity of 22,000 metric tons for chilled and frozen pork. In
April 2009, it started constructing a new pork production facility
in Tianjin that will increase total annual pork production capacity
by 136,000 metric tons. The facility is designed to process about
100,000 metric tons of chilled and frozen pork products annually,
of which 70% will be chilled pork and 30% frozen pork. The
remaining 36,000 metric tons of annual capacity will create
prepared pork products. Construction of this state-of-the-art
facility is expected to cost about $62.0 million. The new Tianjin
facility will include a new warehouse and distribution center and a
research and development center, which should improve the company's
product portfolio, support Zhongpin's cold- chain logistics, and
help accommodate the higher production capacity by facilitating
efficient distribution. The production lines for chilled and frozen
pork products are expected to begin in the first quarter 2010 and
reach target utilization in the third quarter of 2010. The prepared
pork production line, warehouse, and distribution center should
come on line in the third quarter of 2010 and to achieve target
utilization in the fourth quarter of 2010. Without causing any
interruption to its current marketing and distribution program,
Zhongpin will terminate its lease at its existing Tianjin facility
after production at the new facility begins. With the addition of
the new facility and closing of the leased facility in Tianjin,
Zhongpin's annual chilled and frozen pork production capacity will
reach 541,760 metric tons from the current 494,760 metric tons. The
Company has also been constructing a new prepared pork production
facility in Changge, which will cost about $21.0 million and will
increase its annual prepared pork capacity by about 36,000 metric
tons. This facility's advanced equipment and machinery, which will
be imported from top-tier international manufacturers, will produce
quick-freeze sausages and other prepared pork products catering to
varying consumer tastes. Production should start in the fourth
quarter of 2009 and is expected to reach target utilization in the
second quarter of 2010. With the additional prepared pork
production capacity from the new Tianjin and Changge plants,
Zhongpin's annual prepared pork products capacity will increase by
133% to approximately 126,000 metric tons from the current 54,000
metric tons. New cold storage and distribution centers Zhongpin
also announced today that it has started to construct three cold
storage and distribution centers for chilled and fresh pork and
agricultural products. The centers will be located adjacent to
Zhongpin's processing facilities in Zhumadian, Anyang and Luoyang
in China's Henan province, and will begin operating in the second
quarter 2010. Total investment for the centers will be $13.6
million, with an expected payback period of about 6.5 years. Each
center will have more than 20,000 square meters for processing,
storage, and allocation workshops. Adjustable multi-temperature
multi-level cold storage rooms in each center will provide the best
conditions to maintain the highest quality and flavor for a variety
of products. Initially, about 40 percent of the capacity will be
devoted to Zhongpin's chilled and fresh pork, with the remaining 60
percent used to provide storage, processing, and allocation
services for other food producers. We are currently talking with
several of those producers who have shown substantial interest in
using our services. As with Zhongpin's other new facilities, the
centers will have the most modern quality assurance, processing,
logistics, and information technology systems. Government subsidies
During the third quarter of 2009, the Company was notified by
China's National Development and Reform Commission that it would be
granted subsidies to help support the Company's three pork
processing plants under construction in Tianjin and Changge and to
help support the expansion and further improvement of Zhongpin's
integrated production, cold-chain logistics and information
systems. A total of RMB 37.8 million (approximately $5.5 million)
in subsidies has been promised. China's policies in 2009 have been
encouraging meat processing companies to further modernize and
improve their products and processes. Zhongpin applied for the
subsidies earlier this year. Since the Company has not yet received
these subsidies, no portion of the subsidies was recognized in the
Company's results of operations for the third quarter or for the
first nine months of 2009. Outlook for pork demand in the expanding
Chinese economy Mr. Zhu continued, "In a typical fourth quarter,
when cold weather begins and pork consumption increases, we usually
expect higher pork demand and an accompanying upward trend in hog
and pork prices. This year the increase in tonnage is still likely,
but higher hog and pork prices are uncertain, since only modest
changes in pork prices have occurred so far in the fourth quarter
of 2009 and the supply of hogs that should go to market currently
exceeds the demand. China's economy appears to be expanding at a
favorable rate, so the ability of citizens to consume their
preferred protein products remains positive. "Chinese citizens love
pork and use it for their primary source of protein, for extra
nourishment in the winter, and for traditional family celebrations,
especially during the Chinese New Year and Spring Festival that
occurs each year in the January-February period. "We believe the
outlook for the long-term potential of China's pork processing
industry remains very positive. We are continuing to build a
leading brand and higher market share in the pork category and are
continuing to expand our processing and distribution plants to
satisfy the increasing demand for our high quality products."
Guidance and change in common shares outstanding On October 15,
2009, Zhongpin completed its public offering of common stock,
including the exercise of an over-allotment option, by issuing
4,600,000 common shares at $13.25 per share, resulting in gross
proceeds of $60,950,000 and net proceeds of approximately $57.1
million. As a result of the higher number of common shares
outstanding, the Company has reduced its earnings per share
guidance to account for the higher number of average shares
outstanding for the fourth quarter and for the full year 2009. The
shares issued in October 2009, of course, did not affect the
average shares outstanding during the third quarter 2009.
Zhongpin's full year 2009 guidance for revenues is now a range of
$720 million to $730 million, with a gross margin of approximately
12.0 percent, and net profit margin of at least 6.0 percent.
Diluted earnings per share for the full year 2009 has been revised
downward, assuming stable but not increasing pork price in the
fourth quarter and to adjust for the higher average common shares
outstanding. The new diluted earnings per share range for the year
2009 is $1.38 to $1.40, which assumes diluted weighted average
shares outstanding of about 31.1 million shares. Revenues Revenues
in the third quarter of 2009 increased 26.7 percent to $194.9
million from $153.8 million in the third quarter of 2008. The
growth was primarily due to higher volume for pork and pork
products, partly offset by lower average prices for pork and pork
products. The following table shows sales by product division for
the three months ended September 30, 2009 and 2008. Sales by
Division (unaudited) Three Months Ended Three Months Ended
September 30, 2009 September 30, 2008 Metric Sales Average Metric
Sales Average Tons Revenues Price / Tons Revenues Price / (in
Metric (in Metric millions) Ton millions) Ton Pork and Pork
Products Chilled pork 58,182 $107.9 $1,855 38,380 $86.1 $2,243
Frozen pork 34,967 60.6 $1,733 23,043 51.9 $2,252 Prepared pork
products 10,086 22.5 $2,231 6,258 13.8 $2,205 Vegetables and Fruits
5,735 3.9 $680 3,449 2.0 $580 Total 108,970 $194.9 $1,789 71,130
$153.8 $2,162 Chilled pork revenues increased on higher tonnage at
lower average prices. In the third quarter of 2009, our revenues
from chilled pork products increased by 25.3 percent from the third
quarter of 2008. Chilled pork tonnage increased 51.6 percent in the
third quarter of 2009 from the third quarter of 2008. Our average
price per metric ton for chilled pork during the third quarter of
2009 decreased 17.3 percent from the third quarter of 2008. Frozen
pork revenues increased on higher tonnage at lower average prices.
During the third quarter, our revenues from frozen pork products
increased by 16.8 percent from the third quarter of 2008. Frozen
pork tonnage increased 51.7 percent in the third quarter of 2009
from the third quarter of 2008. Our average price per metric ton
for frozen pork during the third quarter of 2009 decreased 23.0
percent from the third quarter of 2008. Prepared pork revenues
increased on higher tonnage at slightly higher average prices. In
the third quarter, our revenues from prepared pork products
increased 63.0 percent from the third quarter of 2008. Prepared
pork tonnage increased 61.2 percent in the third quarter of 2009
from the third quarter of 2008. The average price per metric ton
for prepared pork products during the third quarter of 2009
increased 1.2 percent from the third quarter of 2008. Pork and pork
products totaled 98.0 percent of total revenues in the third
quarter of 2009, compared with 98.7 percent of total revenues in
the third quarter of 2008. Vegetables and fruits revenues increased
on higher tonnage at higher average prices. In the third quarter,
the revenues from vegetables and fruits increased 95.0 percent from
the third quarter of 2008. Tonnage of vegetables and fruits
increased 66.3 percent in the third quarter of 2009 from the third
quarter of 2008. The average price per metric ton for vegetables
and fruits in the third quarter increased 17.2 percent from the
third quarter of 2008. Vegetables and fruits were 2.0 percent of
total revenues in the third quarter of 2009 compared with 1.3
percent in the third quarter of 2008. The increase in metric tons
of pork and pork products sold during the third quarter of 2009 was
partly due to Zhongpin's effort to expand its retail distribution
channels. The following table shows the changes in the Company's
retail distribution channels since September 30, 2008. Numbers of
Stores and Cities Generating Sales Volume (unaudited) September 30,
Net Percentage 2009 2008 Increase Increase STORES AND COUNTERS
Showcase stores 141 123 18 14.6% Branded stores 996 944 52 5.5%
Supermarket counters 2,041 1,928 113 5.9% Total 3,178 2,995 183
6.1% CITIES First-tier cities 29 29 0 0.0% Second-tier cities 117
100 17 17.0% Third-tier cities 368 311 57 18.3% In addition,
expansion in its distribution channels and geographical coverage
has been a significant factor in increasing Zhongpin's sales
volume. The following table shows revenues by distribution channel
for the third quarters of 2009 and 2008. Sales by Distribution
Channel (Dollars in millions) (unaudited) Three months ended Net
Percentage September 30, Increase Increase 2009 2008 Retail
channels $76.7 $65.6 $11.1 16.9% Wholesalers & distributors
60.2 45.6 14.6 32.0% Restaurants & food services 55.6 41.2 14.4
35.0% Export 2.4 1.4 1.0 71.4% Total $194.9 $153.8 $41.1 26.7% The
increase in sales to different distribution channels was mainly due
to the following factors: (1) our production capacity has increased
because our new Jilin, Tianjin and Yongcheng production facilities
started production in late 2008 or early 2009; (2) we have built up
our brand image and recognition through our advertising, display
promotion, and sales campaign; (3) we have increased the number of
stores and other channels through which we sell our products; and
(4) we believe consumers are placing increased importance on food
safety and are willing to pay higher prices for safe food products.
As presented in the table above, our most significant revenue
increases were generated from our restaurants & food services
and wholesalers & distributors. These two channels together are
higher volume channels, and we increased our efforts to sell more
to these two channels. Cost of sales and gross profit margin Cost
of sales increased 27.5 percent to $171.1 million in the third
quarter of 2009 from $134.2 million in the third quarter of 2008.
Costs of sales primarily include expenses in raw materials, labor
costs, and overhead. Cost of Sales by Division (unaudited) Three
Months Ended Three Months Ended September 30, 2009 September 30,
2008 Metric Cost of Average Metric Cost of Average Tons Sales Price
/ Tons Sales Price / (in Metric (in Metric millions) Ton millions)
Ton Pork and Pork Products Chilled pork 58,182 $95.6 $1,643 38,380
$75.3 $1,962 Frozen pork 34,967 55.1 $1,576 23,043 46.6 $2,022
Prepared pork products 10,086 17.1 $1,695 6,258 10.5 $1,678
Vegetables and Fruits 5,735 3.3 $575 3,449 1.8 $522 Total 108,970
$171.1 $1,570 71,130 $134.2 $1,887 Gross profit margin (gross
profit divided by sales revenue) decreased to 12.2 percent in the
third quarter of 2009 from 12.7 percent in the third quarter of
2008. The decrease in the gross margin was primarily due to higher
labor costs due to implementing the new labor law in China, the
increase in our depreciation expense resulting from the new
production facilities that were put into service over the past
year, and Zhongpin's strategic decision to take steps to increase
its market share and utilization rate. As a result, our gross
profit margin was lower than the level we would expect to achieve
when we fully integrate our new production facilities and open new
regional markets for our products. We intend to adjust our
production levels and product mix and the percentages of our sales
through our different sales channels in the coming quarters to
increase our gross profit margin. General, administrative, and
selling expenses General and administrative expenses amounted to
$4.5 million for each of the three-month periods ended September
30, 2009 and 2008. As a percentage of revenues, general and
administrative expenses decreased to 2.3 percent in the third
quarter of 2009 from 2.9 percent in the third quarter of 2008. The
decrease was primarily due to a $0.4 million decrease in
advertising expenses and a $0.1 million decrease in training fees,
partly offset by a $0.2 million increase in stock option
amortization expense and $0.2 million increase in intangible assets
amortization expenses. Selling expenses increased 26.7 percent to
$3.8 million in the third quarter of 2009 from $3.0 million in the
third quarter of 2008, mainly due to a $0.4 million increase in
promotion fees and a $0.2 million increase in salaries, both in
support of successful selling efforts to achieve higher sales in
pork and pork products. Selling expenses as a percent of revenues
were 1.9 percent in the third quarter of 2009 compared with 2.0
percent in the third quarter of 2008. Interest expense Interest
expense, net of interest income, remained at $1.7 million in the
third quarters of 2009 and 2008, with higher average borrowings at
lower average interest rates plus higher government subsidies in
the third quarter of 2009 resulting in essentially the same
interest expense as in the third quarter 2008. Other income and
government subsidies Other income and government subsidies
decreased to $0.1 million in the third quarter of 2009 from $0.5
million in the third quarter of 2008, primarily due to lower
government subsidies. Income taxes The effective tax rate in China
on income generated from the sale of prepared products is 25
percent. There is no income tax on income generated from the sale
of raw meat, raw vegetables, or raw fruits. The increase of $0.4
million in the provision for income taxes in the third quarter of
2009 from the third quarter of 2008 was due to higher revenues from
prepared pork products. Net income Net income increased 30.7
percent to $13.2 million in the third quarter of 2009 from $10.1
million in the third quarter of 2008 primarily due to higher
revenues from higher tonnage sold at lower average prices,
effective use and control of expenses, and government subsidies for
research and development and interest expenses, partly offset by
higher income taxes on higher-margin prepared pork products.
Earnings per share Basic earnings per share increased 29.4 percent
to $0.44 in the third quarter of 2009 from $0.34 in the third
quarter of 2008. Diluted earnings per share increased 29.4 percent
to $0.44 in the third quarter of 2009 from $0.34 in the third
quarter of 2008. Liquidity and Capital Resources Warren Wang,
Zhongpin's Chief Financial Officer, said "At September 30, 2009 we
had cash and cash equivalents of $26.8 million and working capital
of $(25.7) million. Working capital is defined as current assets
minus current liabilities. Considering our available lines of
credit, which totaled approximately $213.5 million at September 30,
2009, we do not anticipate any cash shortage in the next twelve
months. In addition, in October 2009, we completed a registered
offering of our common stock and received net proceeds of
approximately $57.1 million, which enables us to pay off any
short-term debt as needed." For the nine months ended September 30,
2009, net cash provided by operating activities was $22.2 million,
net cash used in investing activities was $83.6 million, and net
cash provided from financing activities was $46.4 million. As a
result, cash and cash equivalents decreased by $15.1 million in the
nine months ended September 30, 2009. Mr. Wang continued, "We
believe our existing cash and cash equivalents, together with our
available lines of credit will be sufficient to finance our
investment in new facilities, operating requirements, and
anticipated capital expenditures of approximately $53.3 million
over the next 12 months, which will expand our capacity, construct
supporting facilities, and supplement our working capital to enable
us to strengthen our market position and accelerate our growth."
Conference call and webcast Zhongpin will host its quarterly
conference call and live webcast at 8:00 a.m. Eastern Standard Time
in New York on Tuesday, November 10, 2009, which is 9:00 p.m. in
Beijing on the same day. The live event on November 10, 2009 will
be available at 11:00 a.m. in London and at 12:00 noon in West
Europe. Speaking on the call will be Mr. Xianfu Zhu, Chairman and
CEO, Mr. Baoke Ben, Board Director and EVP, Mr. Warren (Feng) Wang,
VP and CFO, and Mr. Sterling Song, Investor Relations Manager. To
participate in the live conference call, please dial one of the
following numbers five to ten minutes prior to the scheduled
starting time. When prompted by the operator, please enter the
participant PIN code shown below to be connected to the call. U.S.
toll-free number 1-866-549-1292 International dial-in number
+852-3005-2050 Mainland China toll-free number 400-681-6949
Participant PIN code 326957# A simultaneous live webcast of the
conference call will be available on the Investor Relations section
of Zhongpin's website at http://www.zpfood.com/ . To listen to the
call, please go to the website at least 15 minutes before the
call's start to register and to download and install any necessary
audio software. An archive of the webcast will be available shortly
after the conference call and can be reached in the Investor
Relations section of Zhongpin's website. A telephone replay of the
call will be available after the conclusion of the conference call
through 9:00 a.m. Eastern Standard Time on December 9, 2009. The
number for the toll-free telephone replay in the U.S. is 1-866-753-
0743, with the conference reference number of 145136#. The
international telephone dial-in replay number is +852-3005-2020,
with the conference reference number of 145136#. 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 the China covers 20 provinces
plus Beijing, Shanghai, Tianjin and Chongqing and includes more
than 3,000 retail outlets. Zhongpin's export markets include the
European Union and Southeast 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 are
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, any
effect from the A(H1N1) virus on Zhongpin's market or sales,
interruptions in the supply of live pigs and or raw pork, 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 risks detailed in Zhongpin's
filings with the United States Securities and Exchange Commission.
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. Financial
Statements Follow ZHONGPIN INC. AND SUBSIDIARIES CONSOLIDATED
STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (Unaudited) Three
Months Ended Nine Months Ended September 30, September 30, In U.S.
dollars 2009 2008 2009 2008 Revenues Sales revenues $194,851,183
$153,752,841 $510,547,733 $400,007,165 Cost of sales (171,143,879)
(134,166,298) (448,729,105) (349,125,172) Gross profit 23,707,304
19,586,543 61,818,628 50,881,993 Operating expenses General and
administrative expenses (4,481,072) (4,486,746) (13,329,063)
(13,906,208) Selling expenses (3,768,061) (3,032,930) (9,348,419)
(7,348,563) Research & development expenses 22,383 (712,620)
(2,968) (1,138,030) Gain on disposal of a subsidiary 57 -- 654,143
-- Amortization of loss from sale-leaseback transaction (16,669) --
(49,998) -- Total operating expenses (8,243,362) (8,232,296)
(22,076,305) (22,392,801) Income from operations 15,463,942
11,354,247 39,742,323 28,489,192 Other income (expense) Interest
income (expense), net (1,740,306) (1,650,110) (4,503,801)
(2,453,138) Other income (expense), net 106,236 64,440 397,585
(36,883) Government Subsidies 6,981 482,801 229,389 1,054,684 Total
other income (expense) (1,627,089) (1,102,869) (3,876,827)
(1,435,337) Net income before taxes 13,836,853 10,251,378
35,865,496 27,053,856 Provision for income taxes (602,142)
(200,986) (2,166,038) (1,193,893) Net income $13,234,711
$10,050,392 $33,699,458 $25,859,963 Foreign currency translation
adjustment 95,942 1,875,399 (167,205) 11,645,902 Comprehensive
income $13,330,653 $11,925,791 $33,532,253 $37,505,865 Basic
earnings per common share $0.44 $0.34 $1.13 $0.90 Diluted earnings
per common share $0.44 $0.34 $1.12 $0.89 Basic weighted average
shares outstanding 29,744,291 29,543,640 29,711,018 28,587,297
Diluted weighted average shares outstanding 30,217,697 29,905,010
30,026,153 29,019,128 The accompanying notes are an integral part
of these financial statements. ZHONGPIN INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS September 30, December 31, In U.S.
dollars 2009 2008 (Unaudited) ASSETS Current assets Cash and cash
equivalents $26,802,325 $41,857,166 Restricted cash 25,559,875
17,040,201 Bank notes receivable 5,323,181 1,268,890 Accounts
receivable 26,272,416 20,432,752 Other receivables 1,106,285
1,907,243 Purchase deposits 7,461,129 4,308,852 Inventories
31,940,372 16,724,217 Prepaid expenses 241,124 360,265 Value added
tax recoverable 12,737,825 7,432,365 Assets held for sale --
623,871 Deferred tax assets 310,759 311,055 Other current assets
130,745 96,402 Total current assets 137,886,036 112,363,279
Property and equipment, net 187,908,499 133,684,051 Deposits for
purchase of land usage rights 8,717,719 6,429,295 Construction in
progress 32,589,566 40,773,039 Land usage rights 61,440,278
35,983,947 Deferred charges 176,889 231,769 Other noncurrent assets
412,110 412,503 Total assets $429,131,097 $329,877,883 LIABILITIES
AND EQUITY Current liabilities Short-term loans $96,805,828
$67,893,001 Bank notes payable 19,859,423 13,252,180 Long-term
loans, current portion 4,538,700 145,671 Accounts payable
11,022,371 9,528,937 Other payables 18,117,760 7,130,384 Accrued
liabilities 6,038,090 5,055,660 Deposits from customers 5,919,773
4,331,774 Tax payable 1,233,591 1,382,589 Deferred tax liabilities
94,722 94,812 Total current liabilities 163,630,258 108,815,008
Deposits from customers, long-term portion 1,638,159 2,420,967
Capital lease obligation 3,166,935 4,252,743 Long-term loans
33,631,815 23,475,174 Total liabilities 202,067,167 138,963,892
Equity Preferred stock 644 2,129 Common stock 29,233 27,505
Additional paid-in capital 108,298,215 105,680,772 Retained
earnings 99,808,453 66,108,995 Accumulated other comprehensive
income 18,927,385 19,094,590 Total equity 227,063,930 190,913,991
Total liabilities and equity $429,131,097 $329,877,883 The
accompanying notes are an integral part of these financial
statements. ZHONGPIN INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS
OF CASH FLOWS (Unaudited) In U.S. dollars Nine Months Ended
September 30, 2009 2008 Cash flows from operating activities: Net
income $33,699,459 $25,859,963 Adjustments to reconcile net income
to net cash provided by (used in) operations: Depreciation
6,031,646 3,194,119 Amortization 700,336 321,975 Allowance for
doubtful account (159,649) 876,515 Other income (105,734) -- Gain
on disposal of a subsidiary (649,726) -- Non-cash compensation
expense 1,206,486 1,172,465 Changes in operating assets and
liabilities: Accounts receivable (6,087,329) 2,026,268 Other
receivables 1,109,764 3,106,460 Purchase deposits (3,353,892)
(1,247,842) Prepaid expense 118,728 (26,296) Inventories
(15,233,775) 4,900,962 Tax refunds receivable (5,310,123)
(3,131,223) Other current assets (34,419) -- Deferred charges
54,635 -- Accounts payable 1,520,789 1,523,517 Other payables
6,787,710 2,432,317 Accrued liabilities 1,083,418 2,756,036 Taxes
payable (147,615) 1,300,681 Deposits from customers 943,127
2,608,668 Net cash provided (used) by operating activities
22,173,836 47,674,585 Cash flows from investing activities:
Deposits for purchase of land usage rights (7,128,875) (28,654)
Construction in progress (43,576,794) (57,838,392) Additions to
property and equipment (8,610,134) (10,691,673) Additions to land
usage rights (17,093,428) (370,161) Proceeds on disposal of fixed
assets 111,548 75,669 Increase in restricted cash (8,532,020)
(1,480,708) Proceeds from disposal of a subsidiary 1,226,289 -- Net
cash used in investing activities (83,603,414) (70,333,919) Cash
flows from financing activities: Proceeds from (repayment of) bank
notes, net 2,563,194 (6,293,518) Proceeds from (repayment of)
short- term loans 28,964,439 17,757,665 Proceeds from long-term
loans 14,641,258 15,752,767 Repayment of long-term loans (75,855)
(195,111) Proceeds from capital lease obligations (1,081,270) --
Proceeds from exercise of warrants 1,411,200 1,236,923 Net cash
provided by financing activities 46,422,966 28,258,726 Effects of
rate changes on cash (48,229) 3,436,331 Increase (decrease) in cash
and cash equivalents (15,054,841) 9,035,723 Cash and cash
equivalents, beginning of period 41,857,166 45,142,135 Cash and
cash equivalents, end of period $26,802,325 $54,177,858
Supplemental disclosures of cash flow information: Cash paid for
interest $5,311,058 $3,691,752 Cash paid for income taxes
$2,663,578 $436,073 The accompanying notes are an integral part of
these financial statements. For more information, please contact:
Zhongpin Inc. Mr. Sterling Song (English and Chinese) Investor
Relations Manager Tel: +86-10-8286-1788 x101 in Beijing Email: Mr.
Warren (Feng) Wang (English and Chinese) Chief Financial Officer
Tel: +86-10-8286-1788 x104 in Beijing Email: Christensen Mr.
Yuanyuan Chen (English and Chinese) Mobile: +86-139-2337-7882 in
Beijing Email: Mr. Tom Myers (English) Mobile: +86-139-1141-3520 in
Beijing Email: Ms. Kathy Li (English and Chinese) Tel:
+1-212-618-1978 in the USA Email: DATASOURCE: Zhongpin Inc.
CONTACT: Zhongpin Inc., Mr. Sterling Song (English and Chinese),
Investor Relations Manager, +86-10-8286-1788 x101 in Beijing, or ;
Or Mr. Warren (Feng) Wang (English and Chinese), Chief Financial
Officer, +86-10-8286-1788 x104 in Beijing, or ; Or Christensen, Mr.
Yuanyuan Chen (English and Chinese), +86-139-2337-7882 in Beijing,
or ; Or Mr. Tom Myers (English), +86-139-1141-3520 in Beijing, or ;
Or Ms. Kathy Li (English and Chinese), +1-212-618-1978 in the USA,
or Web site: http://www.zpfood.com/
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