-- Fourth quarter revenues climb 111% year-over-year to a record $100.6 million
CHANGGE, Henan, China, March 25 /Xinhua-PRNewswire-FirstCall/ -- Zhongpin Inc. (Nasdaq: HOGS), a leading meat and food processing company in the People's Republic of China ("PRC"), today reported financial results for the fourth quarter and full year ended December 31, 2007.
Q4 2007 Highlights
-- Revenues grew 111% year-over-year to a record $100.6 million
-- Gross profit increased 93.5% to a record $11.9 million
-- Net income was $5.0 million, or $0.17 per fully diluted share
-- Upgraded to Nasdaq Global Select Market
-- Added 37 new retail outlets, bringing the total number of retail
outlets to 2,939
-- Completed private placement financing, raising $46.4 million in net
proceeds to build new production facilities
Full Year 2007 Highlights
-- Revenues doubled year-over-year to a record $291.4 million
-- Gross profit increased 81.9% to $37.5 million
-- Net income was $18.5 million, or $0.80 per fully diluted share
-- Non-GAAP net income grew 41.2% to record $20.8 million, or $0.90 per
fully diluted share
"Our outstanding revenue growth illustrates the strong market demand for Zhongpin's high-quality, fresh and nutritious pork products combined with our ability to effectively expand our production capacity," commented Xianfu Zhu, CEO of Zhongpin. "Production at our new facilities has ramped up more quickly than expected and we are ahead of schedule in bringing our next round of facilities on line, which we believe will result in continued strong organic growth in 2008. Our volumes in 2008 are expected to benefit from two additional facilities in western and eastern Henan that will contribute an additional 150 thousand tons of annual capacity for chilled and frozen pork and a new facility for prepared pork products that will more than double our capacity in our highest margin category."
Zhongpin's strong revenue growth in the fourth quarter of 2007 was the result of Zhongpin's market expansion combined with an increase in the price of pork products in the PRC. Revenues increased $52.9 million, or 110.8%, to a record $100.6 million from $47.7 million in the fourth quarter of 2006; 41% of the increase was from increased sales volume and the other 59% was from higher average selling prices. For the quarter, chilled pork and frozen pork represented 52.3% and 35.1% of total revenue, compared to 51.5% and 35.7% in the same period of 2006, respectively. Chilled pork increased 114.2% to $52.6 million from $24.6 million in the fourth quarter of 2006. Revenue from frozen pork was $35.3 million, up 107.7% from $17.0 million in the fourth quarter of 2006. Processed pork, which represented 10.6% of total revenues, increased 120.2% to $10.7 million from $4.9 million in the same period a year ago. Revenue from fruits and vegetables, which accounted for 1.9% of total revenues, was $2.0 million, up 53.1% from $1.3 million in the fourth quarter of 2006.
Revenue from Zhongpin's retail channels, including showcase stores, network stores and supermarket counters, represented 40.7% of total revenues. Revenue from the retail channels rose 83.5% to $40.9 million, from $22.3 million in the fourth quarter of 2006. During the quarter, Zhongpin added 37 new retail outlets, including 19 new Zhongpin specialty retail stores and 18 new supermarket counters, for a total of 2,939 retail outlets. Revenue from restaurants and non-commercial businesses represented 32.1% of total revenues in the quarter, up 164.5% to $32.3 million from $12.2 million in the same period a year ago. Food services distributors generated 25.0% of total revenues and showed the largest increase in revenue growth year-over-year, up 180.0% to $25.1 million from $9.0 million in the fourth quarter of 2006. Exports decreased 46.3% to $2.3 million from $4.3 million in the comparable period in 2006. Exports represented 2.3% of total revenues.
Gross profit for the fourth quarter of 2007 was a record $11.9 million, up 93.5% from $6.2 million in the fourth quarter of 2006. Gross margin was 11.8% in the fourth quarter of 2007 compared to 12.9% in the fourth quarter of 2006. The decline in gross margin was due to a combination of increasing sales to food service distributors in order to accelerate market penetration as the new facilities came online; the impact of an initial lower utilization rate as the new factories scaled up production; and the continued increase of live hog prices, which rose slightly faster than prices for pork products. In the fourth quarter of 2007, Zhongpin's northern Henan facility in Anyang City and its leased facility in Tianjin began production, while Zhongpin's southern Henan facility in Zhumadian City began test production. In an effort to rapidly capture market share around the new facilities, Zhongpin focused on developing the market and increased its sales to food service distributors.
For the fourth quarter of 2007, general and administrative ("G&A") expenses were $4.1 million, or 4.0% of total revenues, compared to $0.4 million, or 0.8% of total revenues, for the same quarter last year. The increase in G&A expenses in the fourth quarter of 2007 was due to increased scale of operations and $0.9 million recorded in bad debt expense. G&A expenses in the fourth quarter of 2006 were reduced by $1.3 million in recovery of bad debt recorded as an offset to G&A expenses. The lower than normal G&A expenses in the fourth quarter of 2006 were also the result of several year-end adjustments. Zhongpin reclassified $1.8 million in accrued penalty expenses previously recorded in G&A during in the nine months ended September 30, 2006, and recognized $6.5 million of penalty expenses accrued in the fourth quarter of 2006, as a separate line item. In order to comply with SFAS 123R, the Company reversed $4.1 million in non-cash compensation expense that had previously been recorded during the second quarter of 2007 in connection with the release from escrow to certain employees common stock that had been deposited into escrow by these employees in connection with "make good" performance targets connected with the private placement in January, 2006. Zhongpin has now amortized the $4.5 million non-cash compensation expense mentioned above on a quarterly basis over 2006 and 2007. Adjusting for the penalties and non-cash items discussed above, Zhongpin's pro forma G&A expenses in the fourth quarter of fiscal 2006 would have been a credit of $194,000, as compared to $3.5 million in G&A expenses in fourth quarter of fiscal 2007.
Operating expenses in the fourth quarter of 2007 were $1.7 million, or 1.7% of revenue, compared to $1.1 million, or 2.3% of revenue, for the fourth quarter of 2006. The decline in operating expenses as a percentage of revenue was due to improvements in operating efficiencies.
Income from operations in the fourth quarter of 2007 was $6.1 million compare to a loss of $1.8 million in the fourth quarter of 2006. In December of 2006, Zhongpin settled in full its penalties payable as a result of the delay in having its S-1 registration statement declared effective by the Securities and Exchange Commission. The Company paid a penalty of $8.4 million in cash and stock to the holders of its Series A convertible preferred stock and related stock purchase warrants. Adjusting for the registration penalty in the fourth quarter of 2006, and non-cash compensation expenses in the fourth quarter of 2006 and 2007, respectively, pro forma operating income increased 26.9% to $6.7 million, as compared to pro forma operating income of $5.3 million in the fourth quarter of 2006.
Net income for the fourth quarter of 2007 was $5.0 million, or $0.17 per fully diluted share, compared to net loss of $1.4 million, or loss of $0.07 per fully diluted share, for the fourth quarter of 2006. Adjusting for the registration penalty in the fourth quarter of 2006 and non-cash compensation expenses in the fourth quarter of 2006 and 2007, respectively, pro forma net income was $5.6 million, or $0.19 per diluted share, as compared to $5.6 million, or $0.28 per diluted share, in the same period one year ago.
Full Year 2007 Financial Results
Revenue for the full year 2007 increased 102.6% to $291.4 million, from $143.8 million in 2006. Gross profit increased 81.9% to $37.5 million, from $20.6 million in the comparable period a year ago. Gross margin was 12.9% in 2007 compared to 14.3% in 2006. Income from operations increased 519.6% to $21.9 million from $3.5 million in the same period a year ago.
During the years ended December 31, 2007 and 2006, Zhongpin incurred a non-cash compensation expense in the amount of $2.3 million in connection with the release from escrow to certain employees' common stock that had been deposited into escrow by such employees in connection with the private placement incurred in January 2006. Adjusting for the registration penalty in 2006 mentioned above and non-cash compensation expenses that occurred in 2007 and 2006, pro forma income from operations increased 70.9% to $24.2 million in 2007 from $14.1 million in 2006.
Net income in 2007 was $18.5 million, or $0.80 per fully diluted share, up 350.9% from $4.1 million, or $0.20 per fully diluted share, in 2006. Non-GAAP net income in 2007 was $20.8 million, or $0.90 per fully diluted share, up 41.2% from non-GAAP net income of $14.7 million, or $0.72 per fully diluted share, in 2006.
Financial Condition
As of December 31, 2007, Zhongpin had $48.7 million in cash and cash equivalents, $1.6 million in long-term debt, excluding the current portion and $73.9 million in total liabilities. Shareholders' equity stood at $143.0 million as of December 31, 2007, up from $52.7 million on December 31, 2006. Net cash from operating activities during 2007 was $0.5 million. During the fourth quarter, Zhongpin made $6 million in purchase deposits to secure live hog supplies. Inventories grew by $16 million to $25.9 million as of December 31, 2007, as compared to the end of 2006, in order to support new facilities and anticipated sales during the Chinese New Year holiday season.
Business Outlook
Zhongpin plans to continue to expand its pork production capacity through both new facility construction and acquisitions. The Company is ahead of schedule in the construction of its western Henan Province facility in Luoyang City which is now expected to begin operations by the end of second quarter of 2008. Zhongpin's eastern Henan Province facility in Shangqiu City is expected to begin operations in the third quarter of 2008. The new western and eastern facilities will add 70,000 metric tons and 80,000 metric tons annual capacity, respectively, of chilled and frozen pork. Once these facilities are completed, Zhongpin will have total capacity of 471,560 metric tons of chilled and frozen pork excluding the outsourcing from OEM.
In March 2008, Zhongpin began construction of a new prepared meat facility at Zhongpin's Industrial Park located in Changge City, Henan Province. The new facility will add 28,800 metric tons in annual capacity of prepared meat for a 114% increase over Zhongpin's current capacity of 25,200 metric tons, bringing total capacity of prepared meat to 54,000 metric tons. The facility is expected to begin production in September 2008. Capital expenditures and working capital for the next twelve months are estimated to be $63 million.
Based on its current expansion plans, Zhongpin expects to achieve revenues for the full year 2008 of between $490 and $520 million, gross margin between 12.6% and 13% and net income of between $30 and $33 million, or between $1.00 and $1.10 per share, assuming a fully diluted share count of 30 million shares outstanding. This guidance excludes the impact of any future acquisitions.
"We have established a solid position as a premier brand in China for quality and nutritious pork products that appeal to the modern Chinese consumer," concluded Mr. Zhu. "Chinese consumers are increasingly shopping at hypermarkets and supermarkets and purchasing more meat products that are processed in large-scale facilities with stringent quality controls. While the transition in consumer shopping habits is happening very rapidly, it is also still in its early stage as only 25% of meat is purchased at modern shopping stores today. This gives us the ability to continue our strong growth for many years as we expand our capacity and broaden our market penetration. In addition, we are actively evaluating additional acquisition targets that have to potential to enhance our organic revenue and earnings growth in the future."
Conference Call Information
Management will conduct a conference call at 9:00 a.m. Eastern Time on Tuesday, March 25, 2008 to discuss its fourth quarter and full year 2007 results. Hosting the call will be Crocker Coulson, President of CCG Elite, joined by Mr. Xianfu Zhu, Chairman and Chief Executive Officer, Mr. Baoke Ben, Board Director and Executive Vice President, and Ms. Yuanmei Ma, Vice President and Chief Financial Officer of Zhongpin. To participate in the live conference call, please dial the following number five to ten minutes prior to the scheduled conference call time: 888-419-5570. International callers should dial 617-896-9871. When prompted by the operator, mention Conference Passcode 117 538 05. If you are unable to participate in the call at this time, a replay will be available on Tuesday, March 25, 2008 at 11:00 a.m. Eastern Time, through Tuesday, April 1, 2008. To access the replay dial 888-286-8010, international callers should dial 617-801-6888, and enter the passcode 68303342. The conference will be broadcast live over the Internet and can be accessed by all interested parties at Zhongpin's website at http://www.zpfood.com . To listen to the call please go to the website at least 15 minutes prior to the start of the call to register, download and install any necessary audio software.
Use of Non-GAAP Financial Measures
To supplement Zhongpin's condensed consolidated financial statements presented on a GAAP basis, Zhongpin is providing certain income statement information that is not calculated according to GAAP. Zhongpin believes that its non-GAAP disclosures are useful in evaluating its operating results as this information supplies the user with another view of the matching of costs and expenses. A reconciliation of the adjustments to GAAP results for the three and 12 month periods ended December 31, 2007 and December 31, 2006 is included below. The non-GAAP information presented is supplemental and is not purported to be a substitute for information prepared in accordance with GAAP.
Non-GAAP financial results for the three and 12 month periods ended December 31, 2006 and 2007 discussed in this release reflect operating results excluding a non-cash compensation expense in the amount of $2,250,116, respectively for each year, in connection with the release from escrow to certain employees' common stock that had been deposited into escrow by such employees in connection with the private placement incurred in January 2006. Non-GAAP financial results for the three and 12 month periods ended December 31, 2006 discussed in this release also reflect operating results excluding the impact of the non-recurring penalty payments of $8,354,205 million paid by Zhongpin in December 2006 in connection with Zhongpin's inability to have its registration statement declared effective by the SEC in a timely manner.
About Zhongpin
Zhongpin is a meat and food processing company that specializes in pork and pork products, and fruits and vegetables, in the PRC. Its distribution network in the PRC spans more than 20 provinces and includes over 2,900 retail outlets. Zhongpin's export markets include the European Union, Eastern Europe, Russia, Hong Kong, Japan and South Korea. For more information, contact CCG Elite directly or go to Zhongpin's website at http://www.zpfood.com .
Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995: Certain statements in this press release and oral statements made by Zhongpin on its conference call in relation to this release constitute forward-looking statements for purposes of the safe harbor provisions under The Private Securities Litigation Reform Act of 1995. These statements include, without limitation, statements regarding our ability to prepare the Company for growth, the Company's planned manufacturing capacity expansion in 2008 and predictions and guidance relating to the Company's future financial performance. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs, but these projections also 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, unanticipated changes in product demand, interruptions in the supply of live pigs/raw pork, downturns in the Chinese economy, delivery delays, freezer facility malfunctions, poor performance of the retail distribution network, changes in applicable regulations, and other information detailed from time to time in the Company's filings and future filings with the United States Securities and Exchange Commission. You are urged to consider these factors carefully in evaluating the forward-looking statements herein and are cautioned not to place undue reliance on such forward-looking statements, which are qualified in their entirety by this cautionary statement. The forward-looking statements made herein speak only as of the date of this press release and the Company undertakes no duty to update any forward-looking statement to conform the statement to actual results or changes in the company's expectations.
-- financial tables below --
ZHONGPIN INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(Amount in U.S. dollars)
Three months ended Year ended
December 31, December 31,
2007 2006 2007 2006
(unaudited)
(unaudited) (restated) (Restated)
Revenues
Sales revenues $100,590,194 $47,711,832 $291,373,424 $143,812,212
Cost of sales 88,676,875 41,554,113 253,869,543 123,195,870
Gross profit 11,913,319 6,157,719 37,503,881 20,616,342
Operating expenses
General and
administrative
expenses 4,060,289 368,522 10,549,083 5,239,274
Operating expenses 1,726,080 1,081,465 5,037,489 3,485,397
Penalty -- 6,529,845 -- 8,354,205
Total operating
expenses 5,786,369 7,979,832 15,586,572 17,078,876
Income from
operations 6,126,950 (1,822,113) 21,917,309 3,537,466
Other income (expense)
Interest income 167,737 47,810 337,593 316,604
Other income
(expenses) 64,163 15,077 273,583 50,589
Allowances income 160,016 1,131,294 200,005 2,364,803
Exchange gain (loss) (1,331) (54,425) 27,564 (21,377)
Interest expense (1,026,237) (647,001) (2,799,194) (1,555,671)
Total other income
(expense) (635,652) 492,755 (1,960,449) 1,154,948
Net income before
taxes 5,491,298 (1,329,358) 19,956,860 4,692,414
Provision for income
taxes 448,677 126,618 1,431,579 568,433
Net income after
taxes 5,042,621 (1,455,976) 18,525,281 4,123,981
Less: minority
interest in gain -- (6,638) -- 15,047
Net income $5,042,621 $(1,449,338) $18,525,281 $4,108,934
Foreign currency
translation
adjustment 3,805,773 634,539 6,503,190 1,379,019
Comprehensive
income $8,848,394 $(814,779) $25,028,471 $5,487,953
Basic earnings per
common share $0.18 ($ 0.08) $0.84 $0.23
Diluted earnings per
common share $0.17 ($ 0.07) $0.80 $0.20
Basic weighted
average shares
outstanding 25,232,693 11,789,717 18,000,437 11,761,932
Diluted weighted
average shares
outstanding 29,748,583 20,506,772 23,077,864 20,334,260
ZHONGPIN INC. AND SUBSIDIARIES
NON-GAAP CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(Amount in U.S. dollars) (Unaudited)
Three months ended Year ended
December 31, December 31,
2007 2006 2007 2006
Revenues
Sales revenues
$100,590,194 $47,711,832 $291,373,424 $143,812,212
Cost of sales
88,676,875 41,554,113 253,869,543 123,195,870
Gross profit 11,913,319 6,157,719 37,503,881 20,616,342
Operating expenses
General and
administrative 3,497,760 (194,007) 8,298,967 2,989,158
expenses
Operating expenses 1,726,080 1,081,465 5,037,489 3,485,397
Total operating
expenses 5,223,840 887,458 13,336,456 6,474,555
Income from
operations 6,689,479 5,270,261 24,167,425 14,141,787
Other income
(expense)
Interest income 167,737 47,810 337,593 316,604
Other income 64,163 15,077 273,583 50,589
(expenses)
Allowances income 160,016 1,131,294 200,005 2,364,803
Exchange gain
(loss) (1,331) (54,425) 27,564 (21,377)
Interest expense (1,026,237) (647,001) (2,799,194) (1,555,671)
Total other
income (expense) (635,652) 492,755 (1,960,449) 1,154,948
Net income before
taxes 6,053,827 5,763,016 22,206,976 15,296,735
Provision for income
taxes 448,677 126,618 1,431,579 568,433
Net income after
taxes 5,605,150 5,636,398 20,775,397 14,728,302
Less: minority
interest in gain -- (6,638) -- 15,047
Net income $5,605,150 $5,643,036 $20,775,397 $14,713,255
Foreign currency
translation
adjustment 3,805,773 634,539 6,503,190 1,379,019
Comprehensive
income $9,410,923 $6,277,575 $27,278,587 $16,092,274
Basic earnings
per common share $0.20 $0.30 $0.94 $0.81
Diluted earnings
per common share $0.19 $0.28 $0.90 $0.72
Basic weighted
average shares
outstanding 25,232,693 11,789,717 18,000,437 11,761,932
Diluted weighted
average shares
outstanding 29,748,583 20,506,772 23,077,864 20,334,260
ZHONGPIN INC. AND SUBSIDIARIES
RECONCILIATION OF NON- GAAP FINANCIAL MEASURES
FOR THE THREE MONTHS AND FULL YEAR ENDED DECEMBER 31, 2007 & 2006
Adjusted Net income FY 2007 FY 2006
Net Income (Loss) Diluted
EPS Net Income Diluted EPS Net Income Diluted EPS
Adjusted Amount - Non GAAP $20,775,397 $0.90 $14,713,255 $0.72
Non-cash compensation
adjustment (1) $2,250,116 $0.10 $2,250,116 $0.11
Penalty payment (2) $8,354,205 $0.41
Amount per consolidated
statement of operations $18,525,281 $0.80 $4,108,934 $0.20
Three Months Ended Three Months Ended
Dec 31, Dec 31,
Adjusted Net income 2007 2006
Net Income (Loss) Diluted
EPS Net Income Diluted EPS Net Income Diluted EPS
Adjusted Amount - Non GAAP $5,605,150 $0.19 $5,643,036 $0.28
Non-cash compensation
adjustment (1) $562,529 $0.02 $562,529 $0.03
Penalty payment (2) -- $6,529,845 $0.32
Amount per consolidated
statement of
operations $5,042,621 $0.17 ($1,449,338) ($ 0.07)
(1) Non-cash compensation expense of $2,250,116 in connection with the
release from escrow to certain employees of shares of common stock
that had been deposited into escrow to certain Zhongpin employees in
connection with the Company's private placement in January 2006.
(2) Penalty payment of $8,354,205 to the holders of its Series A
convertible preferred stock and related stock purchase warrants.
ZHONGPIN INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(US dollars)
Nine months ended Nine months ended
September 30, 2006 September 30, 2006
Unaudited Unaudited
Restated Original
Revenues
Sales revenues $96,100,380 $96,100,380
Cost of sales 81,641,757 81,641,757
Gross profit 14,458,623 14,458,623
Operating expenses
General and
administrative expenses 4,870,752 5,007,525
Operating expenses 2,403,932 2,403,932
Penalty 1,824,360
Total operating
expenses 9,099,044 7,411,457
Income from operations 5,359,579 7,047,166
Other income (expense)
Interest income 268,794 268,794
Other income
(expenses) 35,512 35,512
Allowances income 1,233,509 1,233,509
Exchange gain(loss) 33,048 33,048
Interest expense (908,670) (908,670)
Total other income
(expense) 662,193 662,193
Net income before taxes 6,021,772 7,709,359
Provision for income taxes 441,815 441,815
Net income after taxes 5,579,957 7,267,544
Less: minority interest in
gain 21,685 21,685
Net income $5,558,272 $7,245,859
Foreign currency
translation adjustment 744,480 744,480
Comprehensive income $6,302,752 $7,990,339
Basic earnings per
common share $0.31 $0.41
Diluted earnings per
common share $0.25 $0.33
Basic weighted average
shares outstanding 11,752,568 11,752,568
Diluted weighted average
shares outstanding 21,911,457 21,911,457
ZHONGPIN INC.
AUDITED CONSOLIDATED BALANCE SHEETS
(Amount in U.S. dollars)
December 31, December 31,
2007 2006
(Restated)
ASSETS
Current assets
Cash and cash equivalents $48,701,536 $21,692,814
Accounts receivable 18,982,312 13,471,450
Purchase deposits 6,059,782 --
Prepaid expenses and deferred
charges 1,680,679 200,436
Inventories 25,922,125 10,077,479
Tax refund receivables 4,148,119 1,079,002
Total current assets 105,494,553 46,521,181
Property and equipment (net) 66,429,654 32,597,150
Other receivable 4,826,279 2,056,642
Construction in progress 16,811,740 12,016,823
Intangible assets (net) 23,339,142 9,030,077
Total assets $216,901,368 $102,221,873
LIABILITIES AND EQUITY
Current liabilities
Accounts payable $10,306,344 $15,969,520
Other payables 8,746,845 4,743,274
Accrued liabilities 3,014,600 1,597,557
Short term loans payable 47,668,592 23,845,198
Taxes payable -- 378,705
Deposits from clients 1,876,665 683,814
Research and development grants
payable 490,288 248,572
Long-term loans payable - current
portion 145,671 145,671
Total current liabilities 72,249,005 47,612,311
Long term loans payable 1,634,769 1,912,343
Total liabilities 73,883,774 49,524,654
Equity
Preferred stock par value $0.001;
25,000,000 authorized; 3,125,000 and
6,900,000 shares issued and outstanding 3,125 6,900
Common stock par value $0.001;
100,000,000 authorized; 25,891,567 and
18,382,311 shares issued and
outstanding 25,892 12,133
Additional paid in capital 100,070,571 34,788,651
Retained earnings 34,732,049 16,206,768
Accumulated other comprehensive
income 8,185,957 1,682,767
Total equity 143,017,594 52,697,219
Total liabilities and equity $216,901,368 $102,221,873
Sales by Segment
(U.S. dollars in millions)
Years Ended Percentage
December 31, Net Change Change
2007 2006 2007/2006 2007/2006
Pork and Pork Products
Chilled Pork $150.99 $71.76 $79.23 110%
Frozen Pork 102.60 50.88 51.72 102%
Prepared Pork Products 29.23 15.44 13.79 89%
Vegetables and Fruits 8.55 5.73 2.82 49%
Total $291.37 $143.81 $147.56 103%
Operating Income by Segment
(U.S. dollars in millions)
Operating Margin
Years Ended Years Ended
December 31, Change December 31,
2007 2006 2007/2006 2007 2006
Pork and Pork Products
Chilled Pork $10.36 $1.49 $8.87 6.86% 2.08%
Frozen Pork 6.45 0.72 5.72 6.28% 1.42%
Prepared Pork Product 4.20 1.03 3.17 14.36% 6.67%
Vegetables and Fruits 0.92 0.30 0.62 10.70% 5.18%
Total $21.93 $3.54 $18.38 7.52% 2.46%
ZHONGPIN INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amount in U.S. dollars)
Year ended December 31,
2007 2006
(Restated)
Cash flows from operating activities:
Net income $18,525,281 $4,108,934
Adjustments to reconcile net income to
Net cash provided by (used in)
operations:
Minority interest -- 15,047
Acquisition gain -- 1,066
Depreciation 2,087,551 973,618
Amortization 397,975 127,449
Provision for allowance for bad debt 865,487 (1,304,589)
Liquidated damages -- 7,309,848
Warrant expenses 15,950 22,330
Non-cash compensation adjustment 2,447,194 2,250,116
Changes in operating assets and
liabilities:
Accounts receivable (4,938,690) (3,425,421)
Other receivables (2,849,234) 104,556
Purchase deposits (5,818,276) 220,836
Prepaid expense and deferred charges (1,412,937) (101,427)
Inventories (14,545,432) (7,730,167)
Tax refunds receivable (2,875,306) (434,770)
Accounts payable 2,836,895 9,766,497
Other receivables 3,555,551 668,899
Research and development grants
payable 215,612 (2,188,232)
Accrued liabilities 1,265,329 838,137
Taxes payable (388,705) (1,677,220)
Deposits from clients 1,100,001 (85,584)
Net cash provided by (used in) operating
activities $484,246 $9,459,923
Cash flows from investing activities:
Construction in progress (29,429,905) (17,051,855)
Additions to property and equipment (6,861,585) (1,820,630)
Additions to intangible assets (13,538,428) (7,404,402)
Proceeds on sale of fixed assets 72,134 --
Net cash used in investing activities $(49,757,784) $(26,276,887)
Cash flows from financing activities:
Repayment of bank overdraft -- (619,579)
Repayments bank notes (9,332,527) --
Proceeds from short-term loans 49,680,043 30,081,418
Repayment of short-term loans (28,391,914) (25,232,072)
Repayment of long-term loans (397,072) (352,105)
Proceeds from preferred stock -- 23,110,703
Proceeds from common stock 62,828,760 --
Capital paid in at acquisition -- --
Advances to related parties -- --
Investment in sub by minority holder -- --
Net cash provided by financing
activities $74,387,290 $26,988,365
Effect of rate changes on cash 1,894,970 1,379,019
Increase (decrease) in cash and cash
equivalents 27,008,722 11,550,420
Cash and cash equivalents, beginning of
period 21,692,814 10,142,394
Cash and cash equivalents, end of period $48,701,536 $21,692,814
For more information, please contact:
Crocker Coulson, President
Leslie Richardson, Financial Writer
CCG Elite
Tel: +1-646-213-1915
Email: crocker.coulson@ccgir.com
Yuanmei Ma, Chief Financial Officer
Zhongpin Inc.
Tel: +86-10-8286-1788