Zhongpin Reports Higher Revenues and Lower Net Income for the Year 2012

   Zhongpin Reports Higher Revenues and Lower Net Income for the Year 2012

PR Newswire

BEIJING and CHANGGE, China, March 14, 2013

BEIJING and CHANGGE, China, March 14, 2013 /PRNewswire/ -- Zhongpin Inc.
("Zhongpin" or the "Company," Nasdaq: HOGS), a leading meat and food
processing company in the People's Republic of China, today reported higher
sales revenues and lower net income for the year ended December 31, 2012
compared with the year 2011.

Year 2012 highlights:

  oSales revenues increased 13% to $1,639.6 million in 2012 from $1,456.2
    million in 2011 primarily due to higher sales volume for pork products
    sold at lower average selling prices.
  oNet income decreased 31% to $44.1 million in 2012 from $64.2 million in
    2011 primarily due to a lower gross profit margin, the cost of more
    employees to support expansion, higher salaries, higher promotional
    activities, rising labor and utility costs, and higher interest expenses.
    The higher expenses were mainly due to the higher volume of business and
    intense competitive pressure in the pork market due to the ongoing
    industry consolidation.
  oBasic earnings per share (based on net income attributable to Zhongpin
    shareholders) decreased 29% to $1.18 in 2012 from $1.66 in 2011. Weighted
    average basic shares outstanding decreased 3% to 37,273,652 shares in 2012
    from 38,505,027 shares in 2011.
  oDiluted earnings per share (based on net income attributable to Zhongpin
    shareholders) decreased 29% to $1.18 in 2012 from $1.66 in 2011. Weighted
    average diluted shares outstanding decreased 3% to 37,328,792 shares in
    2012 from 38,539,880 shares in 2011.
  oAs of December 31, 2012, Zhongpin had 40,376,182 shares of common stock
    issued, of which 37,209,344 were outstanding and 3,166,838 were held as
    treasury stock.

Mr. Xianfu Zhu, Chairman and Chief Executive Officer of Zhongpin, said, "In
2012, our sales revenues increased 13 percent on higher tonnage at lower
average prices, compared with 2011, primarily due to the intense competitive
market pressure generated mainly by the continuing pork industry consolidation
in China.

"Our costs continued to increase, mainly in support of our current operations
and planned expansions. As a result, our gross profit margin declined to 9.4%
in 2012 from 10.7% in 2011 and our net profit margin declined to 2.7% in 2012
from 4.4% in 2011.

"We are sustaining our prudent expansions in geographic markets and operations
to gain market share for our long-term success in the face of the ongoing
industry consolidation. We are managing our costs to maintain as much gross
and net profit margin as possible and are aggressively working to further
increase our asset utilization, effectiveness, and efficiency.

"In 2013, we expect that the demand for pork in China should remain strong and
that Zhongpin's revenues from pork and pork products are likely to increase
modestly based on higher tonnage sold at lower average prices, while live hog
prices will remain at current levels, compared with 2012. We anticipate that
our net profit margin in 2013 will decrease due to increased competition in
the industry, the expected increase in labor cost and overheads, and the
expected increase in quality assurance and control costs in response to
increased importance on food safety placed by the government and consumers."

Capacity and market expansions in 2012

Zhongpin is investing approximately $58.5 million to build a new production,
research and development, and training complex in Changge, Henan province,
excluding the cost of land use rights that it has already obtained. When
completed, this new facility is expected to have an annual production capacity
of about 100,000 metric tons for prepared pork products. Adjacent to this new
production facility, Zhongpin plans to develop a center for research and
development, training, and quality assurance and control. Construction for the
first phase with a production capacity of approximately 50,000 metric tons for
prepared pork products started in the second quarter of 2011 and was completed
in the second quarter of 2012. Trial production started in July 2012, and the
plant has been in regular production since the end of the third quarter of
2012.

Zhongpin established a joint venture company in June 2011, of which the
Company owns 65%, with Henan Xinda Animal Husbandry Company Limited. The joint
venture company is financed by capital contributions and bank loans. All
capital contributions to the joint venture company have been made. The joint
venture company is expected to provide 20,000 sire boars annually. Upon the
completion of the building of infrastructures for sire boar breeding in the
third quarter of 2012, we leased the facility to a third party for annual
rental in the amount of RMB 5.0 million.

Zhongpin is investing approximately $18.0 million in a cold-chain logistics
distribution center in Anyang, Henan province. This distribution center will
have a temperature-adjustable warehouse with a floor area of approximately
27,000 square meters, processing capacity, a distribution center, and a
quality control center. The distribution center will be used for third-party
cold-chain logistics service. Zhongpin expects to put this distribution center
into operation in the third quarter of 2013.

Zhongpin is investing approximately $87.5 million in a chilled and frozen food
processing and distribution center in Kunshan, Jiangsu province, which is near
Shanghai. The center will be built in three phases. The first phase will
include a processing center, cold-chain logistics center, and business
complex. Zhongpin invested about $35.0 million on the first phase that was put
into operation in February 2013.

Zhongpin put a new by-products production facility in Changge, Henan province,
into operation in November 2012, eight months after the construction began in
March 2012. The new plant has an annual production capacity for 100 million
meters of sausage casings and 300 billion units of raw material to make
heparin sodium. Cost was approximately $10.5 million.

Zhongpin will be investing approximately $47.6 million to build a cold-chain
logistics distribution center in Tangshan, Hebei province. This distribution
center will have a 27,000 square meter temperature-adjustable warehouse,
processing capacity, distribution center, and quality control center. This
distribution center will be used for third-party cold-chain logistics service
and is expected to be in operation in the fourth quarter of 2013.

In November 2012, Zhongpin decided to stop production in its Deyang Zhongpin
facility in Sichuan province because its western location was inconsistent
with Zhongpin's strategy to focus on Central China, North China, East China,
and Northeast China markets. As a result, Zhongpin's annual capacity for
chilled and frozen pork was reduced by 45,000 metric tons in 2012.

As of March 1, 2013, Zhongpin had an annual capacity of 683,760 metric tons
for chilled and frozen pork, 176,000 tons for prepared pork products, 20,000
tons for pork oil, and 30,000 tons for vegetables and fruits, for a combined
total of 909,760 metric tons. In addition, its annual capacity for sausage
casings was 100 million meters and for the raw material to make heparin sodium
was 300 billion units.

Detailed guidance discontinued

In light of the pending going-private transaction, Zhongpin has discontinued
its detailed guidance for the year 2013.

Sales revenues in 2012

Total sales revenues increased $183.4 million or 13% to $1,639.6 million in
2012 from $1,456.2 million in 2011 primarily due to higher sales volume for
pork and pork products sold at lower average selling prices.

The higher revenues resulted mainly from continued increases in the number of
retail outlets, geographic expansion of its distribution network and
processing facilities, and higher sales to food service distributors in China,
which were partially offset by the lower average pork price resulting from
market fluctuations and industry competition. The following table shows
tonnage, sales revenues, and average price per metric ton by product division
for 2012 and 2011.

                Sales by Product Division
                Year ended                    Year ended
                December 31, 2012             December 31, 2011
                                     Average
                Metric   Sales       price    Metric   Sales       Average
                tons     revenues    per      tons     revenues    price per
                         (millions)  metric            (millions)  metric ton
                                     ton
Pork and Pork
Products
 Chilledpork  393,462  $1,018.6    $2,589   309,545  $ 890.1    $2,876
 Frozenpork   137,810  332.3       $2,411   134,537  347.7       $2,584
Prepared      107,996  273.5       $2,533   88,505   202.5       $2,288
porkproducts
Vegetables and  15,427   15.2        $  985  17,668   15.9        $  900
Fruits
Total           654,695  $1,639.6    $2,504   550,255  $1,456.2    $2,646

Chilled pork revenues increased on higher tonnage at lower average prices per
metric ton. Chilled pork revenues increased 14% in 2012 from 2011. Chilled
pork tonnage increased 27% and the average price per metric ton decreased 10%
in 2012 from 2011. The higher revenues from chilled pork were mainly due to
higher tonnage sold as a result of higher capacity, increased sales to
existing customers, and increased volume of sales from new geographic markets,
expanded points of sales, and added new customers, partly offset by the lower
average selling price that resulted from fluctuations in market prices for
chilled pork or chilled pork-related products in a more competitive market.

Frozen pork revenues decreased on higher tonnage at lower average prices.
Frozen pork revenues decreased 4% in 2012 from 2011. Frozen pork tonnage
increased 2% and the average price per metric ton decreased 7% in 2012 from
2011. The lower average selling price of frozen pork products was the result
of fluctuations in market prices for frozen pork or frozen pork-related
products in a more competitive market, which was partly offset by higher
tonnage sold.

Prepared pork revenues increased on higher tonnage at higher average prices.
Revenues from prepared pork products increased 35% in 2012 from 2011. Prepared
pork tonnage increased 22% and the average price per metric ton increased 11%
in 2012 from 2011. Prepared pork products are becoming more important to our
business since customers are increasingly demanding them for their flavor and
convenience and are willing to pay higher average prices for these products.
We plan to gradually increase sales from prepared pork products by increasing
our brand recognition and expanding our capacity for these products.

Pork products totaled 99.1% of total sales revenues in 2012 and 98.9% in 2011.

Geographic coverage and distribution channels

The sales of pork and vegetable products are closely related to the particular
regional markets in which our distribution channels are located. Therefore,
the increase in metric tons sold in 2012 was partly attributable to our
efforts to expand our geographic coverage and broaden our distribution
channels since 2011.

The following table shows sales revenues by distribution channel. In 2012,
sales to wholesalers and distributors accounted for 41% of sales revenues,
restaurants and food services were 28%, retail channels were 29%, and import
and export were 2%.

                              Sales Revenues by Distribution Channel
U.S. $ in millions except %   Year ended
                              December 31,          Net change  Percent change
                              2012       2011
Wholesalersand               $  679.7  $  536.4  $ 143.3    27%
distributors
Restaurants and food          460.1      416.2      43.9        11%
services
Retail channels              469.2      466.5      2.7         1%
Import and export            30.6       37.1       (6.5)       (18)%
Total                         $1,639.6   $1,456.2   $ 183.4    13%

The increase in sales revenues from different distribution channels was mainly
due to the following factors: (a) our production capacity has increased
because we completed the expansion of our chilled and frozen pork processing
facilities in Taizhou, Jiangsu province and in Changchun, Jilin province in
December 2011, and the expansion of our prepared meat processing facilities in
Changge, Henan province in July 2012. To increase the utilization of our new
facilities, we focused our sales efforts on the wholesalers and distributors,
as it is easier to achieve higher volume sales within this channel. As a
result, we had significantly higher sales in the wholesalers and distributors
channel than in other distribution channels, with the overall capacity
utilization rate that was lower in 2012 from 2011 due to the capacity added by
the new production facilities that were put into operation at the end of 2011
and middle of 2012; (b) we have built our brand image and brand recognition
through general advertising, display promotions, and sales campaigns; (c) we
have increased the number of stores and other channels through which we sell
our products; and (d) we believe consumers are placing more importance on food
safety and are willing to pay higher prices for safe food products.

As of December 31, 2012, Zhongpin's customers included 156 international and
domestic fast food companies, 162 processing factories, and 1,389 school
cafeterias, factory canteens, hotels, army bases, hospitals, and government
departments. As of December 31, 2012, Zhongpin also sold directly to consumers
in 3,490 retail outlets, including supermarkets, in China.

The following table shows the retail channels and number of stores and
counters that generated sales volume in 2012 and 2011.

                       Numbers of Retail Stores and Counters
                       (Generating Sales Volume)
                       As of December 31,     Net     Percent
Retail channels        2012         2011      change  change
Showcase stores        158          162       (4)     (2)%
Branded stores        1,476        1,310     166     13%
Supermarket counters  1,856        1,956     (100)   (5)%
Total                  3,490        3,428     62      2%

Geographic expansion and broader channel coverage together have been important
factors in our long-term success, including in 2012. The table below shows the
number of cities, subdivided by the size, in which we distribute our products
through all of our distribution channels at the end of 2012 and 2011.

                             Number of Cities by Tier
                             for All Distribution Channels
                             As of Deceember 31,  Net     Percent
                             2012        2011     change  change
First-tier cities (largest)  29          29       -       0%
Second-tier cities          136         134      2       1%
Third-tier cities           438         432      6       1%
Total cities                 603         595      8       1%

Cost of Sales

Cost of sales primarily includes the costs of raw materials, labor costs, and
overhead. Of the total cost of sales, the cost of raw materials typically
accounts for about 96.0% to 96.4%, overhead typically accounts for 2.1% to
2.6%, and labor costs typically account for 1.4% to 1.5%, with slight
variations from period to period. All of our meat products are derived from
the same raw materials, which are live hogs. Vegetable and fruit products are
purchased from farmers located close to Zhongpin's processing facility in
Changge in Henan province. As a result, the purchasing costs of live hogs and
vegetables and fruits represent substantially all of the costs of raw
materials. The increase in the cost of sales was consistent with but
considerably higher than the increase in sales revenues.

                  Cost of Sales by Product Division
                  Year ended                     Year ended
                  December 31, 2012              December 31, 2011
                                       Average                        Average
                  Metric   Amount     cost per  Metric   Amount      cost per
                  tons     (millions)  metric    tons     (millions)  metric
                                       ton                            ton
Pork and Pork
Products
 Chilled pork   393,462  $  930.1   $2,364    309,545  $  803.1   $2,594
 Frozen pork    137,810  313.1       $2,272    134,537  324.1       $2,409
 Prepared pork   107,996  229.8       $2,128    88,505   164.5       $1,859
products
Vegetables and    15,427   13.2        $  856   17,668   13.2        $  747
Fruits
Total             654,695  $1,486.2    $2,270    550,255  $1,304.9    $2,371

Gross profit margin (gross profit divided by sales revenues) decreased to 9.4%
in 2012 from 10.4% in 2011 primarily due to (a) increased competition in the
market, (b) the increase in write-off of VAT recoverable, (c) increased
promotional activities to grow our market share, (d) the increase in overhead
due to the higher labor costs and utility costs, and (e) higher quality
control costs in response to increased importance placed by the government and
consumers on food safety. As a result, the gross profit margin was lower than
the level Zhongpin would expect to achieve once it fully integrates its new
production facilities and expands into new regional markets for its products.

General, administrative, and selling expenses

General and administrative expenses increased $9.6 million or 33% to $38.8
million in 2012 from $29.2 million in 2011. As a percent of revenues, general
and administrative expenses increased to 2.4% in 2012 from 2.0% in 2011. The
higher general and administrative expenses in 2012 were primarily due to a
$2.5 million increase in salary expenses resulted from hiring more employees
required to support the expansion of the business, an increase in the average
salary we paid to our employees, a $1.1 million increase in legal fees due to
the proposed going private transaction, a $1.9 million increase in the bad
debt provision due to increases in revenues and accounts receivable, and a
$1.8 million increase in other taxes due to land and property placed into
service in December 2011 for two new facilities in Taizhou and Changchun on
which the Company started paying land and property taxes in the first quarter
of 2012.

Selling expenses increased $4.0 million or 12% to $37.6 million in 2012 from
$33.6 million in 2011. Selling expenses as a percent of revenues remained at
2.3% in 2012 and 2011. The higher selling expenses were primarily the result
of a $1.4 million increase in salary expenses, a $0.9 million increase in
supermarket management fees, and a $1.0 million increase in promotion
expenses.

Impairment loss

Impairment loss increased $2.4 million or 150% to $4.0 million in 2012 from
$1.6 million in 2011 primarily due to a $2.7 million increase in a provision
for plant and equipment in our Deyang Zhongpin operation. In November 2012, we
decided to stop production in the Deyang facility in Sichuan province in
western China because our strategy is to focus on the Central China, North
China, East China, and Northeast China markets. We will concentrate our
resources on these markets. We evaluated the plant and equipment of Deyang
Zhongpin and decided to accrue an impairment loss based on the difference
between the book value and the estimated fair value of the plant and
equipment.

Interest expense, net

Interest expense, net of interest income, increased $8.9 million or 41% to
$30.4 million in 2012 from $21.5 million in 2011. The increase in interest
expense was primarily the result of an increase of $113.0 million in
short-term bank loans, an increase of $40.7 million in long-term bank loans,
an increase of $41.7 million in bank notes payable, and an increase in the
interest rates published by the People's Bank of China, which increases were
partly offset by an increase in interest income.

Other income and government subsidies

Other income and government subsidies increased $3.3 million or 79% to $7.5
million in 2012 from $4.2 million in 2011 primarily due to an increase in
government subsidies of $1.4 million and an increase in other income of $2.0
million as a result of recognizing the exempted output VAT for fruits and
vegetables as other income and the recognition of rental income from renting
out the sire boar breeding facility in Henan.

Provision for income taxes

The enterprise income tax rate in China on income generated from the sale of
prepared products is 25% and there is no income tax on income generated from
the sale of raw products, including raw meat products and raw vegetable and
fruit products. The provision for income taxes increased $0.9 million in 2012
from 2011 due to higher sales of prepared pork products.

Net income

As a result of the foregoing, net income decreased $20.1 million or 31% to
$44.1 million in 2012 from $64.2 million in 2011. The Company's net profit
margin (net income divided by sales revenues) declined to 2.7% in 2012 from
4.4% in 2011.

Earnings per share

The earnings per share numbers below are based on net income attributable to
Zhongpin Inc. shareholders.

Basic earnings per share decreased 29% to $1.18 in 2012 from $1.66 in 2011.
Weighted average basic shares outstanding decreased 3% to 37,273,652 shares in
2012 from 38,505,027 shares in 2011.

Diluted earnings per share decreased 29% to $1.18 in 2012 from $1.66 in 2011.
Weighted average diluted shares outstanding decreased 3% to 37,328,792 shares
in 2012 from 38,539,880 shares in 2011.

As of December 31, 2012, Zhongpin had 40,376,182 shares of common stock
issued, of which 37,209,344 were outstanding and 3,166,838 were held as
treasury stock.

For a discussion of Zhongpin's results for 2011 compared with 2010, please see
the Form 10-K that Zhongpin will file with the Securities and Exchange
Commission on March 18, 2013.

Liquidity and capital resources

During the year 2012, Zhongpin's cash and cash equivalents increased by $40.6
million. Cash and cash equivalents (excluding restricted cash) totaled $176.4
million as of December 31, 2012 compared with $135.8 million as of December
31, 2011. As of December 31, 2012, working capital (current assets minus
current liabilities) was a negative $41.7 million, which is primarily because
(i) we borrowed more short-term loans in 2012 in light of the proposed going
private transaction, which resulted in more short-term loans outstanding at
December 31, 2012, and (ii) we had a larger balance of the current portion of
long-term loans outstanding at December 31, 2012 as a larger portion of the
long-term loans we borrowed in prior years will mature in twelve months from
December 31, 2012. We do not believe we have material risks to our financial
position or results of operations in connection with our negative working
capital. In 2013, we plan to borrow more long-term loans and use more
operating cash to pay back short-term loans, in order to achieve a positive
working capital balance.

Net cash provided by operating activities in 2012 was $35.4 million, primarily
from net income that provided $44.1 million, depreciation and amortization
that provided $25.8 million, a provision for allowance for bad debts that
provided $2.5 million, an impairment loss that provided $4.0 million, accounts
receivable and accounts payable that used a total of $50.9 million, purchase
deposits that provided $7.5 million, inventories that provided $4.1 million,
VAT tax refund receivable that used $3.5 million, and other items that
provided $1.8 million, net.

Net cash used in investing activities in 2012 was $119.4 million, primarily
for construction in progress, additions to land use rights, and prepayment and
additions to property, plant, and equipment that together used $122.4 million.

Net cash provided by financing activities in 2012 was $124.0 million,
primarily from the proceeds from loans and notes, net of repayments, that
provided $134.2 million, repayment of a capital lease obligation that used
$5.8 million, repurchases of common stock that used $2.8 million, and another
item that provided $0.2 million.

As a result, including the effect from foreign currency exchange rate changes
on cash, Zhongpin increased its cash and cash equivalents in 2012 by $40.6
million. Cash and cash equivalents on December 31, 2012 totaled $176.4 million
compared with $135.8 million as of December 31, 2011.

Zhongpin believes its existing cash and cash equivalents, together with its
ability to secure bank borrowings, will be sufficient to finance its
investment in new facilities, with budgeted capital expenditures of about
$102.0 million over the next 12 months, and to satisfy its working capital
needs. It intends to satisfy its short-term debt obligations that mature over
the next 12 months through additional short-term bank loans, in most cases by
rolling over the maturing loans into new short-term loans with the same
lenders as the Company has done in the past.

Conference call and webcast

Zhongpin will host its year 2012 earnings conference call and live webcast at
8:00 a.m. Eastern Daylight Time (New York) on Friday, March 15, 2012, which is
also 8:00 p.m. in China and Hong Kong on the same day.

The dial-in details for the live conference call are:

1 866 978 9970 U.S. toll free
1 800 033 457  Australia toll free
1 855 790 8866 Canada toll free
800 803 6103   China mainland toll free land line
400 681 6405   China mainland (small access fee) mobile
400 658 8165   China mainland (small access fee) mobile
8025 0180      Denmark toll free
0805 631 899   France toll free
3027 5500      Hong Kong local
180 940 6949   Israel toll free
005 3112 2600  Japan toll free
8002 8922      Luxembourg toll free
0800 022 7874  Netherlands toll free
800 120 6122   Singapore local
800 600 667    Spain toll free
0800 279 7785  United Kingdom toll free
1 866 978 9970 United States toll free
+852 3027 5500 International dial-in toll call
326 957#     Live call -- participant access code

The live webcast and archive of the conference call will be available on the
Investor Relations section of Zhongpin's website at http://www.zpfood.com.

A telephone playback of the call will be available after the conclusion of the
conference call through 8:00 a.m. Eastern Daylight Time, March 29, 2013.

The dial-in details for the telephone playback are:

1 866 753 0743 U.S. 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 3,490 retail outlets as of December 31, 2012.
Zhongpin's export markets include Europe, Hong Kong, and other countries in
Asia.

For more information about Zhongpin, please visit Zhongpin's website at
http://www.zpfood.com.

Safe harbor statement

Certain statements in this news release may be forward-looking statements made
under the safe harbor provisions of the Private Securities Litigation Reform
Act of 1995. Zhongpin has based its forward-looking statements largely on its
current expectations and projections about future events and trends that it
believes may affect its business strategy, results of operations, financial
condition, and financing needs.

These projections involve risks and uncertainties that could cause actual
results to differ materially from those in the forward-looking statements,
which may include but are not limited to such factors as downturns in the
Chinese economy, unanticipated changes in product demand, interruptions in the
supply of live pigs and or raw pork, the effects of weather on hog feed
production, poor performance of the retail distribution network, delivery
delays, freezer facility malfunctions, Zhongpin's ability to build and
commence new production facilities according to intended timelines, the
ability to prepare Zhongpin for growth, the ability to predict Zhongpin's
future financial performance and financing ability, changes in regulations,
the impacts of the proposed going private transaction, and other information
detailed in Zhongpin's filings with the United States Securities and Exchange
Commission. These filings are available fromwww.sec.govor from Zhongpin's
website atwww.zpfood.com.

You are urged to consider these factors carefully in evaluating Zhongpin's
forward-looking statements and are cautioned not to place undue reliance on
those forward-looking statements, which are qualified in their entirety by
this cautionary statement. All information provided in this news release is as
of the date of this release. Zhongpin does not undertake any obligation to
update any forward-looking statement as a result of new information, future
events, or otherwise, except as required by law.

For more information, please contact:

Zhongpin Inc.

Mr. Sterling Song (English and Chinese)
Director of Investor Relations
Telephone +86 10 8455 4188 extension 106 in Beijing
ir@zhongpin.com

Mr. Warren (Feng) Wang (English and Chinese)
Chief Financial Officer
Telephone +86 10 8455 4388 in Beijing
warren.wang@zhongpin.com

Christensen

Mr. Victor Kuo (English and Chinese)
Telephone +86 10 5826 4939 in Beijing
vkuo@christensenir.com

Mr. Tom Myers (English)
Mobile +86 139 1141 3520 in Beijing
tmyers@christensenir.com
www.zpfood.com

Financial statements follow.



ZHONGPIN INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(Amounts in U.S. dollars)
                         Years Ended December 31,
                         2012               2011               2010
Revenues
 Sales revenues        $ 1,639,603,334    $ 1,456,208,266    $ 946,720,275
 Cost of sales           (1,486,217,828)    (1,304,879,663)    (835,990,804)
 Gross profit        153,385,506        151,328,603        110,729,471
Operating expenses
 General and            (38,828,805)       (29,232,976)       (24,062,697)
administrative expenses
 Selling expenses       (37,553,595)       (33,581,604)       (20,726,564)
 Research and           (573,508)          (495,815)          (638,899)
development expenses
 Impairment loss       (4,048,453)        (1,614,167)        (1,015,780)
 Total operating    (81,004,361)       (64,924,562)       (46,443,940)
expenses
Income from operations     72,381,145         86,404,041         64,285,531
Other income (expense)
 Interest expenses,     (30,426,753)       (21,547,864)       (7,910,006)
net
 Other income, net      2,223,272          233,075            1,953,667
 Gain on disposal of    285,159            -                  -
a subsidiary
 Government             5,310,979          3,933,821          4,184,302
subsidies
 Total other         (22,607,343)       (17,380,968)       (1,772,037)
expense
Net income before taxes    49,773,802         69,023,073         62,513,494
 Provision for income   (5,658,623)        (4,808,041)        (4,233,525)
taxes
Net income after taxes    44,115,179         64,215,032         58,279,969
 Net income (loss)
attributable to            (46,502)           5,695              -
non-controlling
interests
Net income attributable
to Zhongpin Inc.           44,068,677         64,220,727         58,279,969
shareholders
Foreign currency           1,511,134          23,361,288         10,638,236
translation adjustment
Foreign currency
translation adjustment
attributable to            (2,227)            (33,388)           -
non-controlling
interests
Foreign currency
translation adjustment     1,508,907          23,327,900         10,638,236
attributable to Zhongpin
Inc. shareholders
Comprehensive income    $ 45,626,313       $ 87,576,320       $ 68,918,205
Comprehensive income
attributable to            (48,729)           (27,693)           -
noncontrolling interests
Comprehensive income
attributable to Zhongpin $ 45,577,584       $ 87,548,627       $ 68,918,205
Inc. shareholders
Basic earnings per       $ 1.18             $ 1.66             $ 1.67
common share
Diluted earnings per     $ 1.18             $ 1.66             $ 1.65
common share
Basic weighted average     37,273,652         38,505,027         34,837,656
shares outstanding
Diluted weighted average   37,328,792         38,539,880         35,270,410
shares outstanding



ZHONGPIN INC.
CONSOLIDATED BALANCE SHEETS
(Amounts in U.S. dollars)
                                          December 31, 2012  December 31, 2011
ASSETS
Current assets
Cash and cash equivalents                 $  176,441,332     $   135,845,095
Restricted cash                              109,954,161         91,444,216
Bank notes receivable                        72,369,700          29,171,060
Accounts receivable, net of allowance for
doubtful accounts of $4,775,526 and          85,167,801          40,161,898
$2,323,920
Other receivables, net of allowance for
doubtful accounts of $493,484 and           865,060             1,081,311
$449,048
Purchase deposits                            6,798,356           14,320,357
Inventories                                  37,979,226          41,944,020
Prepaid expenses                            449,127             379,633
Allowance receivables                        956,166             3,116,108
VAT recoverable (net)                        32,719,543          30,472,864
Deferred tax assets                          800,179             572,791
Other current assets                         73,413              1,545,534
Total current assets                         524,574,064         390,054,887
Long-term investment                         477,289             476,122
Property, plant and equipment (net)          470,447,775         427,929,871
Deposits for purchase of land usage          17,285,461          27,930,404
rights
Construction in progress                     86,509,865          47,887,224
Land usage rights                           116,785,769         96,981,393
Deferred charges                             -                   8,665
Other non-current assets                     2,554,680           -
Total assets                              $  1,218,634,903   $   991,268,566
LIABILITIES AND EQUITY
Current liabilities
Short-term loans                         $  228,632,849     $   115,653,574
Bank notes payable                           219,333,386         177,627,006
Long-term loans - current portion            52,183,597          16,016,419
Capital lease obligation - current           -                   5,769,600
portion
Accounts payable                             11,918,351          15,693,948
Other payables                               24,053,321          26,873,586
Accrued liabilities                          18,353,887          12,596,651
Deposits from customers                      9,935,877           12,550,096
Tax payable                                  1,778,724           1,822,812
Deferred subsidy - current portion           84,852              68,773
Total current liabilities                    566,274,844         384,672,465
Deferred tax liabilities                     743,869             524,399
Deposits from customers - long-term          -                   2,615,449
portion
Long-term loans                             101,792,652         97,261,330
Deferred subsidy - long-term portion         2,386,002           1,988,693
Total liabilities                            671,197,367         487,062,336
Equity
Common stock:par value $0.001;
100,000,000 authorized; 40,376,182 and
40,355,502 shares issued as of December      40,376              40,355
31, 2012 and 2011; and 37,209,344 and
37,556,964 shares outstanding as of
December 31, 2012 and 2011
Additional paid-in capital                   240,063,993         239,364,449
Retained earnings                            278,268,748         234,200,071
Treasury stock, at cost: 3,166,838 and
2,798,538 shares as of December 31, 2012     (26,225,646)        (23,131,074)
and 2011
Accumulated other comprehensive income       54,413,960          52,905,053
Total Zhongpin Inc. shareholders' equity     546,561,431         503,378,854
Non-controlling interests                   876,105             827,376
Total shareholders' equity                   547,437,536         504,206,230
Total liabilities and shareholders'       $  1,218,634,903   $   991,268,566
equity



ZHONGPIN INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in U.S. dollars)
                               Years Ended December 31,
                               2012             2011             2010
Cash flows from operating
activities:
 Net income                  $ 44,115,179     $ 64,215,032     $ 58,279,969
 Adjustments to reconcile
 net income to net cash
 provided by (used in)
 operations:
     Depreciation              23,364,078       17,415,069       13,613,922
     Amortization of land      2,390,501        1,886,475        1,422,251
     use rights
     Staff welfare             -                -                (356,074)
     amortization
     Provision for allowance   2,478,601        714,685          464,311
     for bad debt
     Impairment loss          4,048,453        1,614,167        1,015,780
     Other income             (148,961)        (43,123)         (1,139,783)
     Deferred subsidy          (68,647)         -                -
     Stock-based               515,566          1,610,815        2,343,771
     compensation
 Changes in operating assets
 and liabilities:
     Accounts receivable      (47,150,874)     (8,129,664)      (10,049,304)
     Other receivables         (107,773)        (193,590)        (289,947)
     Purchase deposits         7,524,762        (6,366,517)      (1,552,498)
     Prepaid expenses         (68,486)         29,478           (195,997)
     Inventories               4,050,162        (13,711,256)     8,194,171
     Allowance receivables     2,158,305        (499,119)        (2,424,121)
     VAT receivable           (3,498,272)      (9,611,116)      (7,150,913)
     Deferred tax              (7,765)          (10,696)         (26,560)
     asset/liability, net
     Other current assets      1,469,594        29,527           60,677
     Long-term deferred        8,650            13,782           18,984
     charges
     Accounts payable          (3,797,735)      6,542,278        (975,453)
     Other payables            (2,745,655)      10,003,595       1,637,437
     Deferred subsidy          475,248          2,007,167        -
     Accrued liabilities       5,704,541        1,835,646        3,506,546
     Taxes payable             (48,347)         132,678          (364,633)
     Deposits from customers   (2,633,655)      3,778,601        2,693,920
     Deposits from customers   (2,610,642)      542,973          (88,463)
     - long-term portion
Net cash provided by           35,416,828       73,806,887       68,637,993
operating activities
Cash flows from investing
activities:
     Prepayment on property,   (2,543,754)      -                -
     plant, and equipment
     Deposits for purchase     (1,722,313)      (17,581,832)     (7,895,121)
     of land use rights
     Construction in           (98,675,648)     (134,970,620)    (55,719,217)
     progress
     Additions to property     (9,416,974)      (16,504,812)     (10,925,116)
     and equipment
     Additions to land use     (10,138,124)     -                (23,282,316)
     rights
     Proceeds from sale of     326,300          91,298           -
     fixed assets
     Increase in restricted    -                (71,236,828)     (2,530,627)
     cash
     Long term investment      -                -                (443,151)
     Proceeds from disposal    2,740,042        -                -
     of a subsidiary
Net cash used in investing     (119,430,471)    (240,202,794)    (100,795,548)
activities
Cash flows from financing
activities:
     Proceeds from
     (repayment of) bank       (1,848,050)      145,479,016      (2,199,139)
     notes, net
     Proceeds from             296,364,990      159,472,347      107,559,768
     short-term loans
     Repayment of short-term   (184,151,102)    (140,749,090)    (103,171,859)
     loans
     Proceeds from long-term   48,325,615       24,772,404       66,681,885
     loans
     Repayment of long-term    (8,077,545)      (15,382,141)     (20,086,899)
     loans
     Repayment of capital      (5,758,997)      (6,576,095)      (6,729,655)
     lease obligation
     Proceeds from common      -                66,356,662       -
     stock issuance
     Repurchase of common      (2,812,322)      (23,131,074)     -
     stock
     Proceeds from exercised   184,000          -                2,888,992
     warrants and options
     Capital contribution by
     non-controlling           -                799,953          -
     interest
     Increase in restricted    (18,207,686)     -                -
     cash
Net cash provided by           124,018,903      211,041,982      44,943,093
financing activities
 Effect of rate changes on     590,977          7,026,834        2,404,389
 cash
 Increase in cash and cash   $ 40,596,237     $ 51,672,909     $ 15,189,927
 equivalents
 Cash and cash equivalents,    135,845,095      84,172,186       68,982,259
 beginning of year
 Cash and cash equivalents,  $ 176,441,332    $ 135,845,095    $ 84,172,186
 end of year
Supplemental disclosures of
cash flow information:
 Cash paid for interest      $ 33,002,672     $ 22,387,434     $ 8,717,320
 Cash paid for income taxes  $ 5,714,735      $ 4,675,144      $ 3,880,679



ZHONGPIN INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(Amounts in U.S. dollars)
                                                                           Additional
                Common Stock             Treasury stock                paid-in
Part 1          Shares    Par value    Shares      Total cost      capital
Balance as of
December 31,    34,662,314  34,662         -             -                 166,169,902
2009
Warrants
exercised       135,057     135            -             -                 (135)
(cashless)
Warrants
exercised       497,789     498            -             -                 2,503,454
(cash)
Option          43,000      43             -             -                 384,997
exercised
Compensation
expense for     -           -              -             -                 2,343,771
stock option
granted
Net income for  -           -              -             -                 -
the year
Translation     -           -              -             -                 -
adjustment
Balance as of
December 31,    35,338,160  35,338         -             -                 171,401,989
2010
Warrants
exercised       17,342      17             -             -                 (17)
(cashless)
Compensation
expense for     -           -              -             -                 1,610,815
stock option
granted
Common shares   5,000,000   5,000          -             -                 66,351,662
offering
Common share    -           -              (2,798,538)   (23,131,074)      -
repurchase
Net income for  -           -              -             -                 -
the year
Translation     -           -              -             -                 -
adjustment
Capital
contribution
from            -           -              -             -                 -
non-controlling
interests
Balance as of
December 31,    40,355,502  40,355         (2,798,538)   (23,131,074)      239,364,449
2011
Warrants
exercised       680         1              -             -                 (1)
(cashless)
Option          20,000      20             -             -                 183,980
exercised
Compensation
expense for     -           -              -             -                 515,565
stock option
granted
Common share    -           -              (368,300)     (3,094,572)       -
repurchase
Net income for  -           -              -             -                 -
the year
Translation     -           -              -             -                 -
adjustment
Balance as of
December 31,    40,376,182  40,376         (3,166,838)   (26,225,646)      240,063,993
2012
                                           Total
                            Accumulated
                                           Zhongpin                        Total
                Retained other                        Non-controlling
                                           Inc.                            shareholders'
                            comprehensive
                                           shareholders'
Part 2          earnings  income       equity      interest        equity
Balance as of
December 31,    111,699,375 18,938,917     296,842,856   -                 296,842,856
2009
Warrants
exercised       -           -              -             -                 -
(cashless)
Warrants
exercised       -           -              2,503,952     -                 2,503,952
(cash)
Option          -           -              385,040       -                 385,040
exercised
Compensation
expense for     -           -              2,343,771     -                 2,343,771
stock option
granted
Net income for  58,279,969  -              58,279,969    -                 58,279,969
the year
Translation     -           10,638,236     10,638,236    -                 10,638,236
adjustment
Balance as of
December 31,    169,979,344 29,577,153     370,993,824   -                 370,993,824
2010
Warrants
exercised       -           -              -             -                 -
(cashless)
Compensation
expense for     -           -              1,610,815     -                 1,610,815
stock option
granted
Common shares   -           -              66,356,662    -                 66,356,662
offering
Common share    -           -              (23,131,074)  -                 (23,131,074)
repurchase
Net income for  64,220,727  -              64,220,727    (5,695)           64,215,032
the year
Translation     -           23,327,900     23,327,900    33,388            23,361,288
adjustment
Capital
contribution
from            -           -              -             799,683           799,683
non-controlling
interests
Balance as of
December 31,    234,200,071 52,905,053     503,378,854   827,376           504,206,230
2011
Warrants
exercised       -           -              -             -                 -
(cashless)
Option          -           -              184,000       -                 184,000
exercised
Compensation
expense for     -           -              515,565       -                 515,565
stock option
granted
Common share    -           -              (3,094,572)   -                 (3,094,572)
repurchase
Net income for  44,068,677  -              44,068,677    46,502            44,115,179
the year
Translation     -           1,508,907      1,508,907     2,227             1,511,134
adjustment
Balance as of
December 31,    278,268,748 54,413,960     546,561,431   876,105           547,437,536
2012

SOURCE Zhongpin Inc.

Website: http://www.zpfood.com
 
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