BEIJING and CHANGGE,
China, May
9, 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 first quarter ended March 31,
2013 compared with the first quarter 2012.
First quarter 2013 highlights
- Sales revenues increased 2% to $382.4
million in the first quarter 2013 from $374.1 million in the first quarter 2012
primarily due to higher sales volume of pork products sold at lower
average selling prices.
- Net income decreased 13% to $10.6
million in the first quarter 2013 from $12.2 million in the first quarter 2012 primarily
due to higher operating expenses in support of higher sales, more
employees to support expansion, higher promotional activities, and
higher interest expense, partly offset by higher gross profit. 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 12% to $0.29 in the first quarter 2013 from $0.33 in the first quarter 2012. Weighted average
basic shares outstanding decreased 1% to 37,209,344 shares in the
first quarter 2013 from 37,498,563 shares in the first quarter
2012.
- Diluted earnings per share (based on net income attributable to
Zhongpin shareholders) decreased 15% to $0.28 in the first quarter 2013 from $0.33 in the first quarter 2012. Weighted average
diluted shares outstanding decreased 1% to 37,278,630 shares in the
first quarter 2013 from 37,503,019 shares in the first quarter
2012.
- As of March 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, "Our results for the
first quarter of 2013 clearly illustrate the intense competitive
pressure in the meat industry in China.
"While the demand for all our pork products, measured by our
tonnage sold, was up 10.6% in the first quarter 2013 from last
year's first quarter, the average price per ton for those products
dropped 7.5%. Sequentially, the first quarter 2013 average price
for all our pork products was only 1.0% higher than in the fourth
quarter 2012.
"Both comparisons are substantially different from the normal
seasonal pattern, when the first quarter prices often peak for the
year due to the high demand for pork during the Chinese New Year. Those prices reflect strong
competition to gain market share that is pressuring prices and
financial performance.
"Our gross profit margin increased 0.6 percentage points to
10.1% in the first quarter from 9.5% in the first quarter 2012
primarily due to higher gross profit margins on our prepared pork
products and from an increase in the spread between pork prices and
hog prices, due to lower hog prices.
"Our operating expenses continued to increase to support higher
sales. We added more employees to support expansion and had higher
promotional activities and higher interest expense, all mainly due
to the higher volume of business and expansion, plus the intense
competitive pressure in the pork industry.
"For the year 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 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
customers."
Capacity and market expansions update
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, the joint
venture company leased the facility to a third party for an 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 second 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 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.
As of March 31, 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 its annual capacity for
the raw material to make heparin sodium was 300 billion units.
Sales revenues in the first quarter 2013
Total sales revenues increased $8.3
million or 2% to $382.4
million in the first quarter 2013 from $374.1 million in the first quarter 2012
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
chain restaurants, food service providers, and wholesalers and
distributors in China, which were
partially offset by lower average pork prices resulting from market
fluctuations and industry competition. The following table shows
tonnage, sales revenues, and average selling price per metric ton
by product division for the first quarters of 2013 and
2012.
|
|
Sales
by Product Division (unaudited)
|
|
|
First quarter ended
March 31, 2013
|
|
First quarter ended
March 31, 2012
|
|
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
|
|
92,349
|
|
$
|
243.1
|
|
$
|
2,632
|
|
87,146
|
|
$
|
248.8
|
|
$
|
2,855
|
Frozen pork
|
|
25,282
|
|
|
58.6
|
|
$
|
2,318
|
|
25,523
|
|
|
67.0
|
|
$
|
2,625
|
Prepared pork products
|
|
30,657
|
|
|
78.4
|
|
$
|
2,557
|
|
21,426
|
|
|
55.7
|
|
$
|
2,600
|
Vegetables and Fruits
|
|
2,498
|
|
|
2.3
|
|
$
|
921
|
|
2,906
|
|
|
2.6
|
|
$
|
895
|
Total
|
|
150,786
|
|
$
|
382.4
|
|
$
|
2,536
|
|
137,001
|
|
$
|
374.1
|
|
$
|
2,731
|
Chilled pork revenues decreased on higher tonnage at lower
average prices per metric ton. Chilled pork revenues decreased 2%
in the first quarter 2013 from the first quarter 2012. Chilled pork
tonnage increased 6% and the average price per metric ton decreased
8% in the first quarter 2013 from the first quarter 2012. The lower
revenues from chilled pork were mainly due to lower average selling
prices for chilled pork as a result of fluctuations in market
prices of chilled pork or chilled pork-related products, partly
offset by the higher tonnage sold.
Frozen pork revenues decreased on lower tonnage at lower average
prices. Frozen pork revenues decreased 13% in the first quarter
2013 from the first quarter 2012. Frozen pork tonnage decreased 1%
and the average price per metric ton decreased 12% in the first
quarter 2013 from the first quarter 2012. The lower tonnage in the
first quarter 2013 was primarily due to Zhongpin's strategic
adjustment of its product mix towards selling less frozen pork,
which has a lower profit margin. The average price per metric ton
for frozen pork decreased due to fluctuations in the market prices
of frozen pork or frozen pork-related products.
Prepared pork revenues increased on higher tonnage at lower
average prices. Revenues from prepared pork products increased 41%
in the first quarter 2013 from the first quarter 2012. Prepared
pork tonnage increased 43% and the average price per metric ton
decreased 2% in the first quarter 2013 from the first quarter 2012.
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 99.4% of total sales revenues in the first
quarter 2013 and 99.3% in the first quarter 2012.
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 the
first quarter 2013 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 the first quarter 2013, sales to wholesalers and
distributors accounted for 41% of sales revenues, restaurants and
food services were 27%, retail channels were 30%, and export and
import were 2%.
|
|
|
Sales
Revenues by Distribution Channel (unaudited)
|
U.S. $ in millions except %
|
|
First
quarter ended
March 31
|
|
Net
change
|
|
Percent
change
|
|
|
2013
|
|
2012
|
|
|
Wholesalers and distributors
|
|
$
|
157.2
|
|
$
|
153.7
|
|
$
|
3.5
|
|
2%
|
Restaurants and food services
|
|
|
104.6
|
|
|
96.1
|
|
|
8.5
|
|
9
%
|
Retail channels
|
|
|
115.3
|
|
|
117.0
|
|
|
(1.7)
|
|
(1)%
|
Export and import
|
|
|
5.3
|
|
|
7.3
|
|
|
(2.0)
|
|
(27)%
|
Total
|
|
$
|
382.4
|
|
$
|
374.1
|
|
$
|
8.3
|
|
2
%
|
The increase in sales revenues from different distribution
channels was mainly due to the following factors: (a) we have built
our brand image and brand recognition through general advertising,
display promotions, and sales campaigns; (b) we have increased the
number of stores and other channels through which we sell our
products; and (c) we believe consumers are placing more importance
on food safety considerations and are willing to pay higher prices
for safe food products.
As of March 31, 2013, Zhongpin's
customers included 158 international and domestic fast food
companies in China, 167 processing
factories, and 1,392 school cafeterias, factory canteens, hotels,
army bases, hospitals, and government departments. As of
March 31, 2013, Zhongpin also sold
directly to consumers in 3,502 retail outlets, including
supermarkets, in China.
The following table shows the retail channels and number of
stores and counters that generated sales volume in the first
quarters of 2013 and 2012.
|
|
Numbers of Retail Stores and
Counters (Generating Sales Volume)
(unaudited)
|
|
|
As of
March 31,
|
|
Net
change
|
|
Percent
change
|
Retail
channels
|
|
2013
|
|
2012
|
|
|
Showcase
stores
|
|
152
|
|
161
|
|
(9)
|
|
(6)%
|
Branded
stores
|
|
1,497
|
|
1,329
|
|
168
|
|
13%
|
Supermarket counters
|
|
1,853
|
|
1,948
|
|
(95)
|
|
(5)%
|
Total
retail
|
|
3,502
|
|
3,438
|
|
64
|
|
2%
|
Geographic expansion and broader channel coverage together have
been important factors in our long-term success, including in the
first quarter 2013. 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 the first quarters
of 2013 and 2012.
|
|
Number
of Cities by Tier
for All Distribution Channels (unaudited)
|
|
|
As of
March 31,
|
|
Net
change
|
|
Percent
change
|
|
|
2013
|
|
2012
|
|
|
First-tier
cities (largest)
|
|
29
|
|
29
|
|
-
|
|
0%
|
Second-tier cities
|
|
137
|
|
134
|
|
3
|
|
2%
|
Third-tier
cities
|
|
439
|
|
435
|
|
4
|
|
1%
|
Total
cities
|
|
605
|
|
598
|
|
7
|
|
1%
|
Cost of sales and gross profit margin
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 95.5% to 95.8%, overhead
typically accounts for 2.7% to 2.8%, and labor costs typically
account for 1.5% to 1.7%, 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 our cost of sales was consistent
with but considerably lower than our increase in sales
revenues.
|
|
Cost of
Sales by Product Division (unaudited)
|
|
|
First
quarter ended
March 31, 2013
|
|
First
quarter ended
March 31, 2012
|
|
|
Metric
tons
|
|
Cost
of
sales
(millions)
|
|
Average
cost per
metric
ton
|
|
Metric
tons
|
|
Cost
of
sales
(millions)
|
|
Average
cost per
metric
ton
|
Pork and Pork Products
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chilled
pork
|
|
92,349
|
|
$
|
221.3
|
|
$
|
2,396
|
|
87,146
|
|
$
|
227.1
|
|
$
|
2,606
|
Frozen
pork
|
|
25,282
|
|
|
54.8
|
|
$
|
2,168
|
|
25,523
|
|
|
62.8
|
|
$
|
2,461
|
Prepared pork products
|
|
30,657
|
|
|
65.8
|
|
$
|
2,146
|
|
21,426
|
|
|
46.5
|
|
$
|
2,170
|
Vegetables and Fruits
|
|
2,498
|
|
|
2.0
|
|
$
|
801
|
|
2,906
|
|
|
2.3
|
|
$
|
791
|
Total
|
|
150,786
|
|
$
|
343.9
|
|
$
|
2,281
|
|
137,001
|
|
$
|
338.7
|
|
$
|
2,472
|
Gross profit margin (gross profit divided by sales revenues)
increased to 10.1% in the first quarter 2013 from 9.5% in the first
quarter 2012 primarily due to (a) a higher percentage of revenues
from prepared pork products, which contribute a higher margin than
other products, and (b) an increase in the gap between pork prices
over hog prices, with hogs being the bulk of our cost of sales.
General, administrative, and selling expenses
General and administrative expenses increased $1.7 million or 18% to $11.1 million in the first quarter 2013 from
$9.4 million in the first quarter
2012. As a percent of revenues, general and administrative expenses
increased to 2.9% in the first quarter 2013 from 2.5% in the first
quarter 2012. The higher general and administrative expenses in the
first quarter 2013 were primarily the result of a $0.2 million increase in bad debt provision due
to higher accounts receivable on March 31,
2013, a $0.3 million increase
in salary expenses because the average salary paid to employees
increased, and a $0.7 million
increase in administrative expenses due mainly to higher expenses
related to the going private transaction.
Selling expenses increased $2.3
million or 34% to $8.7 million
in the first quarter 2013 from $6.4
million in the first quarter 2012. Selling expenses as a
percent of revenues increased to 2.3% in the first quarter 2013
from 1.7% in the first quarter 2012. The higher selling
expenses were primarily the result of the higher sales of pork and
pork products and were primarily due to a $0.3 million increase in salary expenses because
of an increase in the average salary paid to employees,
$0.8 million increase in promotion
expenses for higher promotional activities to compete more
effectively in the industry, and a $0.6
million increase in super market management fees.
Interest expense, net
Interest expense, net of interest income, increased $0.7 million or 9% to $8.3
million in the first quarter 2013 from $7.6 million in the first quarter 2012. The
increase in interest expense, net of interest income, was primarily
due to higher average outstanding loan balances in the first
quarter 2013 compared with the first quarter 2012.
Other income and government subsidies
Other income and government subsidies decreased $0.3 million or 20% to $1.2 million in the first quarter 2013 from
$1.5 million in the first quarter
2012 primarily due to a $0.2 million
decrease in other income and a $0.1
million decrease in government subsidies.
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 decreased $0.4 million
in the first quarter 2013 from the first quarter 2012 due to higher
sales of prepared pork products at lower gross profit margins.
Net income
As a result of the foregoing, net income decreased $1.6 million or 13% to $10.6 million in the first quarter 2013 from
$12.2 million in the first quarter
2012. The net profit margin (net income divided by sales revenues)
declined to 2.8% in the first quarter 2013 from 3.3% in the first
quarter 2012.
Earnings per share
The earnings per share numbers below are based on net income
attributable to Zhongpin Inc. shareholders.
Basic earnings per share decreased 12% to $0.29 in the first quarter 2013 from $0.33 in the first quarter 2012. Weighted average
basic shares outstanding decreased 1% to 37,209,344 shares in the
first quarter 2013 from 37,498,563 shares in the first quarter
2012.
Diluted earnings per share decreased 15% to $0.28 in the first quarter 2013 from $0.33 in the first quarter 2012. Weighted average
diluted shares outstanding decreased 1% to 37,278,630 shares in the
first quarter 2013 from 37,503,019 shares in the first quarter
2012.
As of March 31, 2013, 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.
Liquidity and capital resources
During the first quarter 2013, Zhongpin's cash and cash
equivalents increased by $117.9
million. Cash and cash equivalents (excluding restricted
cash) totaled $294.3 million as of
March 31, 2013 compared with
$176.4 million as of December 31, 2012. As of March 31, 2013, working capital (current assets
minus current liabilities) was $31.6
million.
Net cash used in operating activities in the first quarter 2013
was $16.6 million, primarily from net
income that provided $10.6 million,
depreciation and amortization that provided $6.5 million, a provision for allowance for bad
debts that provided $1.9 million,
accounts receivable and accounts payable that used a net total of
$35.7 million, inventories that
provided $3.5 million, deposits from
customers that used $2.6 million, and
other items that used $0.8 million,
net.
Net cash used in investing activities in the first quarter 2013
was $7.7 million for construction in
progress, additions to land use rights, and additions to property
and equipment.
Net cash provided by financing activities in the first quarter
2013 was $141.4 million, primarily
from the proceeds from loans, notes, and bonds, net of repayments,
that provided $107.5 million,
proceeds from a capital lease obligation that provided $29.5 million, and an increase in restricted cash
that provided $4.4 million.
As a result, including the effect from foreign currency exchange
rate changes on cash, Zhongpin increased its cash and cash
equivalents in the first quarter 2013 by $117.9 million. Cash and cash equivalents on
March 31, 2013 totaled $294.3 million compared with $176.4 million as of December 31, 2012.
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 $103.5 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 first quarter 2013 earnings conference
call and live webcast at 8:00 a.m. Eastern
Daylight Time (New York) on
Friday, May 10, 2013, 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
|
United
States 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, June 8, 2013.
The dial-in details for the telephone playback are:
1 866 753
0743
|
United
States toll free
|
1 800 792
965
|
Australia
toll free
|
1 866 518
1652
|
Canada
toll free
|
800 876
5016
|
China
mainland toll free land line
|
8088
6774
|
Denmark
toll free
|
0800 901
585
|
France
toll free
|
3027
5520
|
Hong Kong
local
|
0053 1121
925
|
Japan toll
free
|
800 852
3586
|
Singapore
toll free
|
0808 234
7126
|
United
Kingdom toll free
|
1 866 753
0743
|
United
States toll free
|
+852 3027
5520
|
International toll call
|
|
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 3,502 retail outlets as
of March 31, 2013. 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.
|
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME
|
(In
U.S.dollars) (Unaudited)
|
|
|
|
|
|
|
|
|
|
Three
Months Ended March 31,
|
|
|
2013
|
|
2012
|
Revenues
|
|
|
|
|
|
|
Sales
revenues
|
|
$
|
382,358,018
|
|
$
|
374,127,384
|
Cost of
sales
|
|
|
(343,913,400)
|
|
|
(338,651,649)
|
Gross
profit
|
|
|
38,444,618
|
|
|
35,475,735
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
|
|
|
|
General
and administrative expenses
|
|
|
(11,117,768)
|
|
|
(9,416,975)
|
Selling
expenses
|
|
|
(8,650,157)
|
|
|
(6,437,120)
|
Research
and development expenses
|
|
|
(132,331)
|
|
|
(86,628)
|
Total
operating expenses
|
|
|
(19,900,256)
|
|
|
(15,940,723)
|
|
|
|
|
|
|
|
Income
from operations
|
|
|
18,544,362
|
|
|
19,535,012
|
|
|
|
|
|
|
|
Other
income (expense)
|
|
|
|
|
|
|
Interest
expenses, net
|
|
|
(8,289,066)
|
|
|
(7,625,481)
|
Other
income, net
|
|
|
400,325
|
|
|
563,605
|
Government
subsidies
|
|
|
776,718
|
|
|
915,348
|
Total
other expenses
|
|
|
(7,112,023)
|
|
|
(6,146,528)
|
|
|
|
|
|
|
|
Net income
before taxes
|
|
|
11,432,339
|
|
|
13,388,484
|
Provision
for income taxes
|
|
|
(811,687)
|
|
|
(1,193,329)
|
|
|
|
|
|
|
|
Net income
after taxes
|
|
|
10,620,652
|
|
|
12,195,155
|
Net
(income) loss attributable to non-controlling interests
|
|
|
(10,938)
|
|
|
2,160
|
|
|
|
|
|
|
|
Net income
attributable to Zhongpin Inc. shareholders
|
|
|
10,609,714
|
|
|
12,197,315
|
|
|
|
|
|
|
|
Foreign
currency translation adjustment
|
|
|
1,555,861
|
|
|
582,654
|
Foreign
currency translation adjustment attributable to
|
|
|
(2,337)
|
|
|
(863)
|
non-controlling interests
|
Foreign
currency translation adjustment attributable to
|
|
|
1,553,524
|
|
|
581,791
|
Zhongpin
Inc. shareholders
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
12,176,513
|
|
|
12,777,809
|
Comprehensive (income) loss attributable to
non-
|
|
|
(13,275)
|
|
|
1,297
|
controlling interests
|
Comprehensive income attributable to Zhongpin
Inc.
|
|
$
|
12,163,238
|
|
$
|
12,779,106
|
shareholders
|
|
|
|
|
|
|
|
Basic
earnings per common share
|
|
$
|
0.29
|
|
$
|
0.33
|
Diluted
earnings per common share
|
|
$
|
0.28
|
|
$
|
0.33
|
|
|
|
|
|
|
|
Basic
weighted average shares outstanding
|
|
|
37,209,344
|
|
|
37,498,563
|
Diluted
weighted average shares outstanding
|
|
|
37,278,630
|
|
|
37,503,019
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these condensed
consolidated financial statements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ZHONGPIN INC.
|
CONDENSED CONSOLIDATED BALANCE
SHEETS
|
(In
U.S.dollars)
|
|
|
|
|
|
|
|
|
|
March 31, 2013
|
|
December 31, 2012
|
ASSETS
|
|
(Unaudited)
|
|
|
|
Current
assets
|
|
|
|
|
|
|
Cash and
cash equivalents
|
|
$
|
294,315,174
|
|
$
|
176,441,332
|
Restricted
cash
|
|
|
105,866,898
|
|
|
109,954,161
|
Bank notes
receivable
|
|
|
102,110,143
|
|
|
72,369,700
|
Accounts receivable, net of allowance for doubtful accounts of
|
|
|
120,800,332
|
|
|
85,167,801
|
$6,666,258
and $4,775,526
|
Other
receivables, net of allowance for doubtful accounts
of
|
|
|
977,803
|
|
|
865,060
|
$509,084
and $493,484
|
Purchase
deposits
|
|
|
7,034,952
|
|
|
6,798,356
|
Inventories
|
|
|
34,600,019
|
|
|
37,979,226
|
Prepaid
expenses
|
|
|
389,955
|
|
|
449,127
|
Allowance
receivables
|
|
|
958,698
|
|
|
956,166
|
VAT
recoverable
|
|
|
33,410,038
|
|
|
32,719,543
|
Deferred
tax assets
|
|
|
802,297
|
|
|
800,179
|
Other
current assets
|
|
|
699,311
|
|
|
73,413
|
Total
current assets
|
|
|
701,965,620
|
|
|
524,574,064
|
|
|
|
|
|
|
|
Long-term
investment
|
|
|
478,553
|
|
|
477,289
|
Property,
plant and equipment, net
|
|
|
514,193,986
|
|
|
470,447,775
|
Deposits
for purchase of land use rights
|
|
|
15,389,482
|
|
|
17,285,461
|
Construction in progress
|
|
|
46,193,135
|
|
|
86,509,865
|
Land use
rights
|
|
|
118,412,570
|
|
|
116,785,769
|
Other
non-current assets
|
|
|
4,452,434
|
|
|
2,554,680
|
Total
assets
|
|
$
|
1,401,085,780
|
|
$
|
1,218,634,903
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS'
EQUITY
|
|
|
|
|
|
|
Current
liabilities
|
|
|
|
|
|
|
Short-term
loans
|
|
$
|
246,785,205
|
|
$
|
228,632,849
|
Bank notes
payable
|
|
|
209,955,495
|
|
|
219,333,386
|
Long-term
loans - current portion
|
|
|
45,303,004
|
|
|
52,183,597
|
Short-term
financial bonds
|
|
|
95,710,571
|
|
|
-
|
Capital
lease obligation - current portion
|
|
|
7,298,023
|
|
|
-
|
Accounts
payable
|
|
|
13,498,479
|
|
|
11,918,351
|
Other
payables
|
|
|
23,663,592
|
|
|
24,053,321
|
Accrued
liabilities
|
|
|
19,335,514
|
|
|
18,353,887
|
Deposits
from customers
|
|
|
7,343,501
|
|
|
9,935,877
|
Tax
payable
|
|
|
1,396,404
|
|
|
1,778,724
|
Deferred
subsidy - current portion
|
|
|
84,943
|
|
|
84,852
|
Total
current liabilities
|
|
|
670,374,731
|
|
|
566,274,844
|
|
|
|
|
|
|
|
Long-term
liabilities
|
|
|
|
|
|
|
Deferred
tax liabilities
|
|
|
745,839
|
|
|
743,869
|
Long-term
loans
|
|
|
143,374,475
|
|
|
101,792,652
|
Capital
lease obligation
|
|
|
24,605,501
|
|
|
-
|
Deferred
subsidy - long-term portion
|
|
|
2,371,185
|
|
|
2,386,002
|
Total
liabilities
|
|
|
841,471,731
|
|
|
671,197,367
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
Common
stock: par value $0.001; 100,000,000 authorized;
|
|
|
40,376
|
|
|
40,376
|
40,376,182 and 40,376,182 shares issued as of March 31, 2013
|
and December 31, 2012; and 37,209,344 and 37,209,344 shares
|
outstanding as of March 31, 2013 and December 31,
2012
|
Additional
paid-in capital
|
|
|
240,063,993
|
|
|
240,063,993
|
Retained
earnings
|
|
|
288,878,462
|
|
|
278,268,748
|
Treasury
stock, at cost: 3,166,838 and 3,166,838 shares as
of
|
|
|
(26,225,646)
|
|
|
(26,225,646)
|
March 31,
2013 and December 31, 2012
|
Accumulated other comprehensive income
|
|
|
55,967,484
|
|
|
54,413,960
|
Total
Zhongpin Inc. Shareholders' equity
|
|
|
558,724,669
|
|
|
546,561,431
|
Non-controlling interests
|
|
|
889,380
|
|
|
876,105
|
Total
shareholders' equity
|
|
|
559,614,049
|
|
|
547,437,536
|
Total
liabilities and shareholders' equity
|
|
$
|
1,401,085,780
|
|
$
|
1,218,634,903
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these condensed
consolidated financial statements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ZHONGPIN INC.
|
CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS
|
(In
U.S.dollars) (Unaudited)
|
|
|
|
|
|
|
|
|
|
Three
Months Ended March 31,
|
|
|
2013
|
|
2012
|
Cash flows
from operating activities:
|
|
|
|
|
|
|
Net
income
|
|
$
|
10,620,652
|
|
$
|
12,195,155
|
Adjustments to reconcile net income to net cash used
in operations:
|
|
|
|
|
|
Depreciation
|
|
|
5,899,289
|
|
|
5,537,984
|
Amortization of land use rights
|
|
|
644,802
|
|
|
516,966
|
Provision
for allowance for bad debts
|
|
|
1,889,563
|
|
|
1,657,949
|
Other
income
|
|
|
(88,790)
|
|
|
(129,699)
|
Deferred
subsidy
|
|
|
(21,236)
|
|
|
-
|
Stock-based compensation expense
|
|
|
-
|
|
|
417,749
|
|
|
|
|
|
|
|
Changes in
operating assets and liabilities:
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
(37,228,084)
|
|
|
(31,521,161)
|
Other
receivables
|
|
|
(124,907)
|
|
|
(950,981)
|
Purchase
deposits
|
|
|
(218,259)
|
|
|
1,489,444
|
Prepaid
expenses
|
|
|
60,153
|
|
|
75,128
|
Inventories
|
|
|
3,474,455
|
|
|
(13,251,435)
|
Allowance
receivables
|
|
|
-
|
|
|
2,160,068
|
VAT
recoverable
|
|
|
(602,931)
|
|
|
(5,225,549)
|
Other
current assets
|
|
|
(2,023)
|
|
|
(118,029)
|
Deferred
charges
|
|
|
-
|
|
|
1,855
|
Accounts
payable
|
|
|
1,546,201
|
|
|
28,643,061
|
Other
payables
|
|
|
(318,966)
|
|
|
(2,035,430)
|
Accrued
liabilities
|
|
|
933,980
|
|
|
388,216
|
Taxes
payable
|
|
|
(400,248)
|
|
|
373,669
|
Deposits
from customers
|
|
|
(2,614,682)
|
|
|
(3,541,776)
|
Deposits
from customers - long-term portion
|
|
|
-
|
|
|
(338,991)
|
Net cash
used in operating activities
|
|
|
(16,551,031)
|
|
|
(3,655,807)
|
|
|
|
|
|
|
|
Cash flows
from investing activities:
|
|
|
|
|
|
|
Deposits
for purchase of land use rights
|
|
|
-
|
|
|
(10,555,624)
|
Construction in progress
|
|
|
(5,413,842)
|
|
|
(11,461,585)
|
Additions
to property and equipment
|
|
|
(2,267,416)
|
|
|
(2,585,772)
|
Additions
to land use rights
|
|
|
(21,559)
|
|
|
-
|
Proceeds
on sale of fixed assets
|
|
|
-
|
|
|
5,905
|
Net cash
used in investing activities
|
|
|
(7,702,817)
|
|
|
(24,597,076)
|
|
|
|
|
|
|
|
Cash flows
from financing activities:
|
|
|
|
|
|
|
Proceeds
from (repayment of) bank notes, net
|
|
|
(39,447,085)
|
|
|
9,806,307
|
Proceeds
from short-term bank loans
|
|
|
60,524,010
|
|
|
88,785,573
|
Repayment
of short-term bank loans
|
|
|
(43,003,902)
|
|
|
(49,538,008)
|
Proceeds
from long-term loans
|
|
|
54,790,156
|
|
|
7,926,069
|
Repayment
of long-term loans
|
|
|
(20,549,090)
|
|
|
-
|
Proceeds
from short-term financial bonds, net of issuance costs
|
|
|
95,181,970
|
|
|
-
|
Proceeds
from capital lease obligation, net of issuance costs
|
|
|
29,529,346
|
|
|
-
|
Repayment
of capital lease obligation
|
|
|
-
|
|
|
(1,498,250)
|
Repurchases of common stock
|
|
|
-
|
|
|
(2,812,322)
|
Increase
in restricted cash
|
|
|
4,371,725
|
|
|
-
|
Net cash
provided by financing activities
|
|
|
141,397,130
|
|
|
52,669,369
|
|
|
|
|
|
|
|
Effects of
rate changes on cash
|
|
|
730,560
|
|
|
226,450
|
Increase
in cash and cash equivalents
|
|
|
117,873,842
|
|
|
24,642,936
|
Cash and
cash equivalents, beginning of period
|
|
|
176,441,332
|
|
|
135,845,095
|
Cash and
cash equivalents, end of period
|
|
$
|
294,315,174
|
|
$
|
160,488,031
|
|
|
|
|
|
|
|
Supplemental disclosures of cash flow
information:
|
|
|
|
|
|
|
Cash paid
for interest
|
|
$
|
9,596,014
|
|
$
|
8,122,027
|
Cash paid
for income taxes
|
|
$
|
1,199,986
|
|
$
|
819,660
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these condensed
consolidated financial statements.
|
|
|
|
|
|
|
SOURCE Zhongpin Inc.