SOURCE: Tianli Agritech

Tianli Agritech

November 11, 2010 17:00 ET

Tianli Agritech Reports Third Quarter Revenue up 76% to $5.5 Million and Net Income up 106% to $2.2 Million

Company Provides 2010 Guidance

WUHAN CITY, CHINA--(Marketwire - November 11, 2010) - Tianli Agritech, Inc. (NASDAQ: OINK), a leading producer of breeder and meat hogs headquartered in Wuhan City, China, today announced its financial results for the three and nine month periods ended September 30, 2010. The Company anticipates filing its Form 10-Q for the period ended September 30, 2010 before 7:00 am ET on Friday, November 12, in advance of its conference call with investors which will occur at 10:00 am ET the same day.


Third Quarter 2010 Financial Highlights

--  Revenue was $5.5 million, representing an increase of 76% as compared
    to the third quarter of 2009
--  Breeder hog revenue increased 83% and meat hog revenues increased 70%
    over the comparable 2009 period. The higher margin breeder revenue
    comprised 46% of the Company's revenue in the third quarter
--  Gross profit more than doubled to $2.4 million with a gross margin of
    44.2%, up more than six percentage points from last year's level
--  Net income was $2.2 million, up 106% from 2009's third quarter,
    resulting in earnings per share of $0.23


Summarized Third Quarter 2010 Results
(Dollar Figures Rounded - Percentages based on Actual Results)

                              3rd Q 2010      3rd Q 2009       Increase
                            --------------- --------------- --------------
Sales                         $5.5 million    $3.2 million        76%
                            --------------- --------------- --------------
Gross Profit                  $2.4 million    $1.2 million       104%
                            --------------- --------------- --------------
Net Income                    $2.2 million    $1.1 million       106%
                            --------------- --------------- --------------
EPS*                             $0.23            $0.13           77%
                            --------------- --------------- --------------

* EPS calculations are based on the weighted average 9.7 million shares outstanding during the 3rd Quarter of 2010 and 8.1 million shares outstanding during the 3rd Quarter of 2009, reflecting the effect of the Company's July 2010 IPO.

Operating expenses in the quarter ended September 30, 2010 were approximately $352,000 as compared to approximately $107,000 in 2009. This increase is largely attributed to the growth of the capacity of the Company's farms and the additional costs pertaining to the Company's now being a public company. Separately, the Company also benefited from a provincial subsidy of $132,000 received in the third quarter.

As an agricultural company, Tianli is exempt from corporate income taxes (EIT) and valued added tax (VAT). Net income for the period ended September 30, 2010 was $2.2 million and diluted earnings per share was $0.23.

Tianli's Chairwoman and CEO, Ms. Hanying Li, stated, "We continue to witness the strong performance of our business as evidenced by the third quarter results. This strengthens our belief that focusing on the genetic quality of our stock has enabled us to become a preferred source of breeder hogs, resulting in higher margins while reinforcing the quality positioning of the Tianli brand. With the capital provided by our IPO proceeds, we are now preparing to significantly expand the Company's capacity while further enhancing the quality of our products. Tianli is currently in active discussions regarding the potential acquisition of various hog farms, and this expansion would better position the Company to benefit from China's continued growth in its demand for pork."

Operational Overview

Tianli sells breeder hogs, which are purchased by other hog farms to increase their production, and meat hogs, which are sent to pork processing facilities for packaging of fresh, refrigerated or frozen pork products for sale to consumers. Tianli has concentrated on the breeder hog market and continually improving the genetics, nutrition and raising of healthy hogs. The gross margin for breeder hogs is higher than that of meat hogs due to the higher price that quality breeder hogs can generate, as well as the lower feed and other costs as breeder hogs are generally sold at a younger age than meat hogs. One of the methods that Tianli utilizes to improve the health of its hogs is its proprietary probiotic enhanced premix feed. The Company believes that this has enabled it to decrease mortality, incur less veterinary care and medicine costs, and thus increase operating profits.

Sales by Products

(Dollar Figures Rounded - Percentages based on Actual Results)

                 Quarter Ended 9/30/2010     Quarter Ended 9/30/2009
               --------------------------  --------------------------
               No. of Hogs      Sales      No. of Hogs      Sales
Products          Sold         Revenues       Sold         Revenues
--------       -----------  -------------  -----------  -------------
Breeder Hogs       9,977    $ 2.6 million      5,859    $ 1.4 million
Meat Hogs         15,443    $ 3.0 million      9,806    $ 1.8 million
               -----------  -------------  -----------  -------------
Total             25,420    $ 5.5 million     15,665    $ 3.2 million

Breeder hog revenues in the third quarter of 2010 increased by 83% over the comparable 2009 period, and comprised 46% of revenues in the quarter. The Company's sales of 9,977 breeder hogs in the quarter represented a 70% increase year-over-year, while the unit sales of meat hogs increased by approximately 57%, and the increased volume of hogs sold was the major factor in the revenue increase. The gross margin on the sales of breeders increased to 56% from the prior year level of 50% while the meat hog margin increased to 34% from 29%, reflecting the benefit of 7% higher prices.


Nine Month 2010 Financial Highlights

--  Revenue was $15.5 million, an increase of 69% as compared to the first
    nine months of 2009
--  Breeder hog revenue increased over 150% while meat hog revenue
    increased 38% over the comparable 2009 period. As a result, breeder
    revenue comprised 40% of the Company's total revenue during the first
    nine months
--  Gross profit more than doubled to $6.7 million with a gross margin of
    43.3%, up more than seven percentage points from last year's level
--  Net income was $6.0 million, up 91% from 2009's first nine months


Summarized Nine Months 2010 Results
(Dollar Figures Rounded - Percentages based on Actual Results)

                              Nine Months     Nine Months
                                 2010            2009          Increase
                            --------------- --------------- --------------
Sales                        $15.5 million    $9.2 million        69%
                            --------------- --------------- --------------
Gross Profit                  $6.7 million    $3.3 million       103%
                            --------------- --------------- --------------
Net Income                    $6.0 million    $3.1 million        91%
                            --------------- --------------- --------------
EPS*                              $0.69          $0.39            77%
                            --------------- --------------- --------------

* EPS calculations are based on the weighted average 8.7 million shares outstanding during the first nine months of 2010 and 8.1 million outstanding during the first nine months of 2009.

Revenues from breeder hogs for the nine months ended September 30, 2010 increased by approximately 153% while the revenues for the sale of meat hogs increased by 38%. The revenue increase was largely the result of the hogs sold increasing from 47,202 in the 2009 period to 72,536 in 2010, a 54% gain. The higher proportion of the more profitable breeder hog sales significantly benefited the Company's gross profit margins for the nine month period, which increased by over seven percentage points to 43.3%.

2010 Guidance

The Company expects to report full year 2010 revenues of approximately $21 million, net income of $8.1 million to $8.3 million, and EPS of $0.90 to $0.92.

Financial Position

As of September 30, 2010, the Company had $10.9 million in cash, which included net proceeds from its IPO financing secured in July 2010, compared to $2.0 million as of December 31, 2009. Working capital was $13.7 million, up from $2.1 million as of December 31, 2009. The Company conducts its sales on cash on delivery basis and thus has no accounts receivable. Inventories were $3.7 million, compared to $3.3 million as of December 31, 2009, and the Company had a $400,000 refundable deposit for a potential acquisition being held in escrow. Stockholders' equity increased 125% to $28.5 million during the nine month period ended September 30, 2010. Cash flow from operations during the first nine months of 2010 was $6.4 million. Stockholders' equity increased 125% to $28.5 million during the nine month period ended September 30.

Third Quarter Earnings Conference Call

To attend the Tianli third quarter 2010 conference call, please use either the dial-in or webcast information below.

Ms. Hanying Li, Chairwoman and CEO, Mr. Bihong Zhang, CFO, and Ms. Zoe Guo, Tianli's VP and US Representative, 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 the "Tianli Agritech, Inc. call" and/or be prepared to provide the conference ID.

Date:                              Friday, November 12, 2010
Time:                              10:00 am Eastern Time US
Conference Line Dial-In (U.S.):    1-877-941-4778
International Dial-In:             1-480-629-9763
Conference ID:                     4382894 "Tianli Agritech"
Webcast:                           http://viavid.net/dce.aspx?sid=00007D7B

Please dial in at least 10-minutes before the call to ensure timely participation.

A playback of the call will be available from 12:00 Noon Eastern Time on November 12 until 11:59 pm Eastern Time on November 19, 2010. To listen, call 1-877-870-5176 within the United States or 1-858-384-5517 when calling internationally. Please use the replay pin number 4382894.

This call is also being webcast by ViaVid Broadcasting and can be accessed by clicking on this link http://viavid.net/dce.aspx?sid=00007D7B or at ViaVid's website at http://www.viavid.net, where the webcast can be accessed through November 12, 2011.

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 healthy, hearty hogs for sale for breeding and meat purposes. It currently has an annual production capability of approximately 110,000 hogs and is working to increase its capacity to 130,000 hogs. 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. Specifically, there can be no guaranty that the offering mentioned herein will close. 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.

                   TIANLI AGRITECH, INC. AND SUBSIDIARIES

                        CONSOLIDATED BALANCE SHEETS


                                                September 30,  December 31,
                                                    2010          2009
                                                ------------- -------------
                                                 (Unaudited)
                      ASSETS
Current Assets:
     Cash and cash equivalents                  $  10,919,523 $   2,022,295
     Inventories                                    3,719,826     3,272,438
     Advances to suppliers                            108,412        84,951
     Purchase deposit                                 400,000             -
     Other current assets                              92,425        24,147
                                                ------------- -------------
        Total Current Assets                       15,240,186     5,403,831
Plant and equipment                                11,533,913     7,780,342
Construction in progress                                    -     1,346,903
Biological assets                                   2,503,104       742,060
Intangible assets, net                                735,029       731,699
                                                ------------- -------------
        Total Assets                            $  30,012,232 $  16,004,835
                                                ============= =============

         LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
     Short-term bank loans                      $     671,832 $     658,164
     Accounts payable                                 127,583       318,488
     Acquisition payables                             109,130     1,793,921
     Accrued payroll                                   15,185        13,034
     Due to related parties                           603,543       564,306
                                                ------------- -------------
        Total Current Liabilities                   1,527,273     3,347,913
                                                ------------- -------------
Total Stockholders' Equity                         28,484,959    12,656,922
                                                ------------- -------------
Total Liabilities and Stockholders' Equity      $  30,012,232 $  16,004,835
                                                ============= =============




                     TIANLI AGRITECH, INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF OPERATIONS

                                   (unaudited)


                        For the Three Months        For the Nine Months
                        Ended September 30,         Ended September 30,
                        2010          2009          2010          2009
                    ------------  ------------  ------------  ------------
Sales               $  5,544,643  $  3,158,414  $ 15,462,902  $  9,162,469
Cost of goods sold     3,095,571     1,957,235     8,764,143     5,855,348
                    ------------  ------------  ------------  ------------
     Gross profit      2,449,072     1,201,179     6,698,759     3,307,121
Total operating
 expenses                351,874       106,971       795,906       330,125
                    ------------  ------------  ------------  ------------
Income from
 operations            2,097,198     1,094,208     5,902,853     2,976,996
     Interest
      expense            (15,488)      (20,829)      (44,711)      (42,531)
     Subsidy and
      other income       131,278         1,865       140,379       205,926
                    ------------  ------------  ------------  ------------
Income before
 income taxes          2,212,988     1,075,244     5,998,521     3,140,391
Income taxes                  --            --            --            --
                    ------------  ------------  ------------  ------------
Net income          $  2,212,988  $  1,075,244  $  5,998,521  $  3,140,391
                    ============  ============  ============  ============


Basic & Diluted
 Weighted Average
 Shares                9,733,696     8,125,000     8,667,125     8,125,000
Basic & Diluted
 Earnings Per Share $       0.23  $       0.13  $       0.69  $       0.39
                    ============  ============  ============  ============




                     TIANLI AGRITECH, INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

                                   (unaudited)


                                              For the Nine Months Ended
                                                    September 30,
                                            ------------------------------
                                                 2010            2009
                                            --------------  --------------
CASH FLOWS FROM OPERATING ACTIVITIES
     Net income                             $    5,998,521  $    3,140,391
     Adjustments to reconcile net income
      to net cash provided by operating
      activities:
     Depreciation and amortization                 758,181         830,171
     Inventory shrinkage allowance                 101,010         128,430
     Changes in operating assets and
      liabilities:

        Advances to suppliers                      (21,667)        (46,766)
        Inventories                               (190,178)       (850,535)
        Other current assets                       (53,652)          5,115
        Accounts payable                          (194,090)        161,915
        Accrued payroll                              1,847         (14,967)
                                            --------------  --------------

            Total adjustments                      401,451         213,363
                                            --------------  --------------

Net cash provided by operating activities        6,399,972       3,353,754
                                            --------------  --------------

CASH FLOWS USED IN INVESTING ACTIVITIES
     Purchase deposit                             (400,000)              -
     Purchase of biological assets              (2,246,493)       (357,963)
     Purchase of plant and equipment            (4,369,845)     (2,354,460)
                                            --------------  --------------

Net cash used in investing activities           (7,016,338)     (2,712,423)
                                            --------------  --------------


CASH FLOWS USED IN FINANCING ACTIVITIES
     Net proceeds from IPO                      10,592,344
     Expenses incurred for IPO                  (1,180,784)
     Due to related parties                         26,715        (248,135)
                                            --------------  --------------

Net cash used in financing activities            9,438,275        (248,135)
                                            --------------  --------------

NET INCREASE IN CASH                             8,821,909         393,196
EFFECT OF EXCHANGE RATE CHANGES ON CASH             75,319             793
CASH, BEGINNING OF PERIOD                        2,022,295         210,311
                                            --------------  --------------

CASH, END OF PERIOD                         $   10,919,523  $      604,300
                                            ==============  ==============

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