Tianli Agritech Reports Second Quarter 2011 Results

Revenue Increases 41% to $7.7 million

Net Income Increases 17% to a record $2.5 million

15 Aug, 2011, 16:16 ET from Tianli Agritech, Inc.

WUHAN, China, Aug. 15, 2011 /PRNewswire-Asia/ -- Tianli Agritech, Inc. (NASDAQ: OINK), a leading producer of breeder and market hogs headquartered in Wuhan City, China, today announced its financial results for the quarter ended June 30, 2011.

Second Quarter Highlights:

  • Revenue increased 41% year-over-year to $7.7 million due to higher selling prices and volumes.
  • Breeder hog revenue increased by 24% in the quarter, representing 37% of total revenue.  
  • Net income increased 17% to a record $2.5 million.

Summarized Second Quarter 2011 Results

Q2 2011

Q2 2010

Increase (Decrease)

Sales

$7.7 million

$5.4 million

41%

Gross Profit

$3.2 million

$2.4 million

35%

Selling, General and Administrative Expenses

$0.6 million

$0.3 million

141%

Net Income

$2.5 million

$2.1 million

17%

EPS*

$0.24

$0.26

(8%)

* EPS calculations are based on the 10,125,000 shares outstanding during Q2 2011 and 8,125,000 shares outstanding during Q2 2010, reflecting the effect of the Company's July 2010 IPO.

Sales by Products

(Dollar Figures Rounded - Percentages based on Actual Results)

Q2 2011

Q2 2010

Products

No. of Hogs Sold

Sales Revenues

No. of Hogs Sold

Sales Revenues

Breeder Hogs

9,012

$2.8 million

7,046

$2.3 million

Market Hogs

18,577

$4.8 million

18,769

$3.2 million

Total

27,589

$7.7 million

25,815

$5.4 million

Tianli's Chairwoman and CEO, Ms. Hanying Li, stated, "We benefited from steady increases in market hog pricing during the quarter as shortages continue to plague many markets, while demand for breeder hogs accelerated as customers are looking to expand their own market hog raising capacity. Our diversification allows us to service both markets simultaneously, providing us with the flexibility that few operators in our geographic areas have. Our diversified model also helps to diminish revenue and margin fluctuations, which can occur on a quarter by quarter basis. We expect further sales growth for both breeders and market hogs as our new farms come online."

Revenue for the second quarter of 2011 increased $2.3 million, or 41%, to $7.7 million from the prior year. The Company sold a total of 27,589 hogs compared to 25,815 hogs sold in the comparable 2010 period. Sales of breeder hogs increased 24% to $2.8 million, with approximately 28% more breeder hogs sold, as the average price per hog decreased slightly due to a greater mix of lower margin crossbred breeders sold during the second quarter of 2011.

Market hog sales increased 53% to $4.8 million. The number of market hogs was relatively flat at 18,577 while the average price per hog increased 55% year-over-year to $260.00 due to high market demand.

Gross profit in the second quarter of 2011 was $3.2 million, a 35% increase over the same period last year. Gross margin was approximately 42% and 44% for the second quarter of 2011 and 2010, respectively, as increased cost of feed.

Selling, general and administrative expenses were $0.6 million in the second quarter of 2011, an increase of approximately $0.3 million. Approximately $0.2 million of the increase was related to higher public company expenses not present in the year ago period. Expenses were impacted by a $0.1 million increase in bad debt allowance which reflected a more conservative procedure on the Company's accounts receivable aging report.

Net income for the three months ended June 30, 2011 was approximately $2.5 million, up 17% from $2.1 million last year. Earnings per fully diluted share were $0.24 compared to $0.26 last year due to a 25% increase in the shares outstanding associated with the Company's IPO and 2.0 million shares placed with investors in July of 2010.

First Half 2011 Results

Summarized First Half 2011 Results

1H 2011

1H 2010

Increase (Decrease)

Sales

$13.6 million

$9.9 million

37%

Gross Profit

$5.7 million

$4.2 million

34%

Selling, General and Administrative Expenses

$1.4 million

$0.4 million

225%

Net Income

$4.3 million

$3.8 million

14%

EPS*

$0.43

$0.47

(9%)

* EPS calculations are based on the 10,125,000 shares outstanding during 1H 2011 and 8,125,000 shares outstanding during 1H 2010, reflecting the effect of the Company's July 2010 IPO.

Net sales increased 37% to $13.6 million during the six months ended June 30, 2011. Tianli sold 50,609 hogs at an average sales price of $268 per hog, an increase of 7% and 27%, respectively. Breeder hog sales increased 44% to $5.2 million, accounting for 39% of total sales in the first half of 2011. Market hog sales were $8.3 million, up 33% from $6.3 million in the first half of 2010.

Gross profit increased $1.5 million to $5.7 million. Gross margin percentages were 42% and 43% for the first six months of 2011 and 2010, respectively.

Selling, general and administrative expenses were $1.4 million compared to $0.4 million in the prior year. The Company incurred $0.1 million of non-cash stock compensation expenses and $0.1 million of bad debt provisions in the first six months of 2011. Operating income was $4.3 million and $3.8 million in the first six months of 2011 and 2010, respectively.

Business Updates

Tianli sells breeder hogs, which are used by other hog farms for their hog production, and market hogs, which are sent to pork processing facilities for preparation of fresh, refrigerated or frozen pork products for sale to consumers. Tianli has concentrated on the breeder hog market and is focused on continually improving the genetics and nutrition associated with raising its hogs. The gross margin for breeder hogs is higher than that of market hogs due to generally higher prices, as well as the lower feed and other costs as breeder hogs are generally sold at a younger age than market hogs.  Tianli utilizes its proprietary bio feed premix, which the Company believes enables increased feed absorption, decreases mortality rates and provides savings on veterinary and medicine costs.

Over the past year, Tianli has used capital raised in its IPO in addition to internal cash flow to fund the acquisition of two new farms, expanding its production capabilities. Farm #10 and #11 were acquired in December 2010 and May 2011 respectively. Farm's #10 will contribute to sales of hogs at the end of 2011, and Farm #11 is expected to more significantly contribute to sales of hogs in 2012.

In addition to the sales of breeder and market hogs, Tianli entered into an agreement, subject to negotiation of certain terms, with An Puluo Foods which allows Tianli to manage fresh pork retail counters in Greater Wuhan in supermarkets such as Wal-Mart, Zon100 and RT-Mart. Through the cooperation with An Puluo, Tianli can bring current products and future products including black hog meat, to the retail market more quickly through An Puluo's current retail channel.

On June 22, 2011, the company established a wholly-owned subsidiary Hubei Tianzhili Breeder Hog Co., Ltd. ("Tianzhili") in Enshi Region, where Tianli launched its black hog project. Since inception, the Company has signed agreements with three local cooperatives in the Enshi Autonomous Prefecture in Hubei Province whereby the Company, the relevant governmental agencies, and the cooperatives will assist farmers to breed and raise Enshi black hogs. Thus Tianli will provide highly desired, premium black hogs to the market which should not only result in higher revenues and profits, but also contribute to Tianli's brand recognition.

"We are excited about the growth outlook for our industry and our company," continued Ms. Hanying Li, Chairwoman and CEO of Tianli Agritech.  "Our expanding network of farms will continue to support our core business operations of selling breeders and market hogs. More importantly, our cooperation with AnPuluo Farms and their retail sales points will provide us an established platform from which we can greatly increase our profits through sales of premium black hog meat.  We envision our black hog project being a key growth driver of our business in the coming years and a means to provide additional returns to our global shareholder base."

Financial Position

As of June 30, 2011, the Company had $6.2 million in cash, compared to $8.0 million as of December 31, 2010. The Company generated $4.1 million of cash from operations in the first six months of 2011. Working capital as of June 30, 2011 was $10.7 million, including $7.3 million of inventories and $1.4 million of other receivables.

Tianli invested approximately $8.7 million in capital expenditures and breeding stock during the first six months of 2011 to facilitate its continued growth.

Earnings Conference Call

To attend the Tianli second quarter 2011 conference call, please use either the dial-in or webcast information below.

Ms. Hanying Li, Chairwoman and CEO, Mr. Bihong Zhang, CFO and Mr. Simon Guo, Tianli's VP, will host the conference call. To attend the call, please use the information below for either dial-in access or webcast access. When prompted on dial-in, ask for "Tianli Agritech Second Quarter 2011 Conference Call".

Conference Call

Date:

Tuesday, August 16, 2011

Time:

8:00 am Eastern Time, US

Conference Line Dial-In (U.S.):

+1-877-317-6776

International Dial-In:

+1-412-317-6776

Asia Dial-In:

Northern China: 10-800-712-2304 Southern China: 10-800-120-2304 Hong Kong: 800-962475

Conference ID:

Tianli Agritech Second Quarter 2011 Conference Call

Webcast link:

http://webcast.mz-ir.com/publico.aspx?codplataforma=3093

Please dial in at least 10 minutes before the call to ensure timely participation. A playback will be available through August 24, 2011. To listen, please call +1-877-344-7529 within the United States or +1-412-317-0088 if calling internationally. Utilize the pass code 10003233 for the replay.

This call is being webcast by MZ Technologies and can be accessed by clicking on the following link: http://webcast.mz-ir.com/publico.aspx?codplataforma=3093.

About Tianli Agritech, Inc.

Tianli Agritech, Inc. is in the business of breeding, raising and selling hogs in the People's Republic of China. The Company is focused on growing high quality hogs for sale for breeding and meat purposes. The Company conducts genetic, breeding and nutrition research to steadily improve its production capabilities.

Forward-Looking Statements

This news release contains forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements that are other than statements of historical facts. These statements are subject to uncertainties and risks including, but not limited to, product and service demand and acceptance, changes in technology, economic conditions, the impact of competition and pricing, government regulation, and other risks contained in reports filed by the company with the Securities and Exchange Commission. All such forward-looking statements, whether written or oral, and whether made by or on behalf of the company, are expressly qualified by the cautionary statements and any other cautionary statements which may accompany the forward-looking statements. In addition, the company disclaims any obligation to update any forward-looking statements to reflect events or circumstances after the date hereof.

For more information, please contact:

Tianli Agritech, Inc.

Mr. Kuni Qiao

Executive Assistant

Phone: 86-151-0113-7061

Email: executiveassistant01@tianli-china.com

Web: http://www.tianli-china.com

Investor Relations

John Mattio, SVP

HC International, Inc.

Phone: (212) 301-7130

Email: john.mattio@hcinternational.net

Web: http://www.hcinternational.net

TIANLI AGRITECH, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(AMOUNTS EXPRESSED IN US DOLLARS)

June 30, 2011

December 31, 2010

(Unaudited)

ASSETS

Current Assets:

Cash and cash equivalents

$

6,249,514

$

7,983,793

Restricted cash

309,043

-

Accounts receivable

68,519

-

Inventories

7,258,060

4,819,805

Advances

147,525

1,036,765

Acquisition deposits

-

530,303

Prepaid expenses

4,814

83,832

Other receivables

1,382,582

330,744

Total Current Assets

15,420,057

14,785,242

Plant and equipment, net

15,147,037

13,354,379

Construction advance

-

272,727

Construction in progress

2,222,542

-

Biological assets, net

4,511,895

3,440,253

Long-term prepaid expenses

1,806,271

-

Intangible assets, net

1,252,089

742,954

Total Assets

$

40,359,891

$

32,595,555

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:

Short-term loans

$

3,832,128

$

728,266

Accounts payable and accrued liabilities

390,998

136,536

Acquisition payables

417,207

921,212

Due to related party

121,291

-

Total Liabilities

4,761,624

1,786,014

Stockholders' Equity:

Common stock ($0.001 par value, 50,000,000 shares

   authorized, 10,125,000 issued and outstanding on

   June 30, 2011 and December 31, 2010)

10,125

10,125

Additional paid in capital

13,456,399

13,445,712

Statutory surplus reserves

2,002,849

1,510,423

Retained earnings

18,429,356

14,605,162

Accumulated other comprehensive income

1,699,538

1,238,119

   Total Stockholders' Equity

35,598,267

30,809,541

       Total Liabilities and Stockholders' Equity

$

40,359,891

$

32,595,555

TIANLI AGRITECH, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(AMOUNTS EXPRESSED IN US DOLLARS)

(Unaudited)

For the Three Months Ended June 30,

For the Six Months Ended

June 30,

2011

2010

2011

2010

Revenue

$

7,670,429

$

5,448,315

$

13,577,395

$

9,918,259

Cost of goods sold

4,452,623

3,064,619

7,896,443

5,668,572

   Gross profit

3,217,806

2,383,696

5,680,952

4,249,687

General and administrative expenses

610,983

250,921

1,380,957

419,267

Selling expenses

25,128

13,026

62,310

24,765

Income from operations

2,581,695

2,119,749

4,237,685

3,805,655

Other income (expense):

Interest and bank charges

(98,700)

(11,642)

(108,973)

(29,223)

Subsidy income

22,970

-

213,267

-

Other income (expense)

(26,814)

3,748

(25,359)

9,101

Total other income (expense)

(102,544)

(7,894)

78,935

(20,122)

Income before income taxes

2,479,151

2,111,855

4,316,620

3,785,533

Income taxes

-

-

-

-

Net income

$

2,479,151

$

2,111,855

$

4,316,620

$

3,785,533

Basic and diluted weighted average shares

10,125,000

8,125,000

10,125,000

8,125,000

Basic and diluted earnings per share

$

0.24

$

0.26

$

0.43

$

0.47

Comprehensive income:

Net income

$

2,479,151

$

2,111,855

$

4,316,620

$

3,785,533

Unrealized foreign currency

 translation adjustment

273,638

65,219

461,419

67,221

Comprehensive income

$

2,752,789

$

2,177,074

$

4,778,039

$

3,852,754

TIANLI AGRITECH, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(AMOUNTS EXPRESSED IN US DOLLARS)

(Unaudited)

For the Six Months Ended June 30,

2011

2010

CASH FLOWS FROM OPERATING ACTIVITIES

Net income

$

4,316,620

$

3,785,533

Adjustments to reconcile net income to net cash

provided by operating activities:

Depreciation and amortization

979,443

487,301

Gain on disposal of biological assets

(168,710)

-

Impairment on other receivables

104,245

-

Impairment on inventories

-

59,303

Stock-based compensation

173,581

-

Changes in operating assets and liabilities:

Accounts receivable

(67,791)

-

Inventories

(2,324,369)

117,578

Advances

707,637

1,849

Prepaid expenses

79,307

(169,522)

Other receivables

(1,088,237)

9,459

Accounts payable and accrued liabilities

42,602

(13,039)

Net cash provided by operating activities

2,754,328

4,278,462

CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of plant and equipment

(1,693,392)

-

Addition to construction in progress

(2,198,927)

(1,517,980)

Purchase of biological assets

(1,515,063)

(1,485,366)

Proceeds from disposal of biological assets

267,732

-

Payments for long-term prepaid expenses

(85,171)

-

Purchase of farms

(2,152,543)

(1,218,024)

Net cash used in investing activities

(7,377,894)

(4,221,370)

CASH FLOWS FROM FINANCING ACTIVITIES

Increase in restricted cash

(305,759)

-

Proceeds from short-term loans

3,057,590

-

Net cash provided by financing activities

2,751,831

-

NET (DECREASE) INCREASE IN CASH

(1,871,735)

57,092

EFFECT OF EXCHANGE RATE CHANGES ON CASH

137,456

15,494

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD

7,983,793

2,022,295

CASH AND CASH EQUIVALENTS, END OF PERIOD

$

6,249,514

$

2,094,881

SUPPLEMENTAL DISCLOSURES:

Cash paid during the period for:

Interest expense paid

$

36,075

$

18,261

Income tax paid

$

-

$

-

NON-CASH INVESTING AND FINANCING TRANSACTIONS

The Company purchased from assets in 2010 and 2011 and with these acquisitions, the Company is obligated to make payments to sellers for these assets as follows:

Fair value of assets acquired

$

3,660,678

$

-

Cash paid in 2010

(1,080,303)

-

Cash paid in 2011

(2,152,543)

-

Exchange realignment

10,625

-

Acquisition payable as of period end

$

417,207

$

-

SOURCE Tianli Agritech, Inc.



RELATED LINKS

http://www.hcinternational.net


http://www.tianli-china.com


http://webcast.mz-ir.com/publico.aspx?codplataforma=3093