Tianli Agritech, Inc. Reports Fourth Quarter and Full Year 2013 Results

WUHAN CITY, China, March 13, 2014 /PRNewswire/ -- Tianli Agritech, Inc. (NASDAQ:OINK) ("Tianli" or the "Company"), a leading producer of breeder hogs, market hogs and black hogs headquartered in Wuhan City, China, today announced its financial results for the fourth quarter and twelve months ended December 31, 2013.

Mrs. Hanying Li, Chairwoman and CEO of Tianli Agritech, Inc. commented, "The hog industry remained challenged in 2013 as pork demand in China was negatively affected by the outbreak of H7N9 avian flu and the government's crackdown on corruption and extravagant government spending. Meanwhile, domestic pork supply continued to grow as a result of preferential government policies such as tax breaks and subsidies, leading to further reductions in pork prices in 2013," said Mrs. Hanying Li, Tianli's Chairwoman and Chief Executive Officer. "Despite a challenging industry environment, we saw solid growth in our business in 2013 with revenues increasing by 25.7% to $33.35 million and the number of hogs sold increasing by 28.9% to 149,181 hogs as our years of investment in the black hog program in Enshi Prefecture started paying dividends. With black hog sales now generating a significant portion of our total revenues and our retail network expanding, we believe Tianli is on a solid footing for future growth."

 Fourth Quarter 2013 Financial Results:    

Revenues for the fourth quarter of 2013 increased by $3.54 million, or 51.6%, to $10.39 million from $6.86 million for the same period of 2012. This increase was primarily attributable to sales of black hogs raised by farmers participating in our cooperative programs, sales of processed black hog products through retail which we resumed in April 2013, offset by the decrease in revenues from our regular market hog sales.  The Company sold a total of 42,588 breeder hogs, regular market hogs, black hogs and market hogs for processed pork products with a blended average selling price of $244 per hog during the fourth quarter of 2013, compared to 30,865 hogs sold and a blended average selling price of $222 per hog for the same period of 2012. Revenues for the fourth quarter of 2013 from breeder hog sales increased 16.1% to $2.14 million with the number of breeder hogs sold increasing by 14.9% to 7,626 hogs and the average selling price of breeder hogs increasing by 1.1% to $281 per hog. Revenues for the fourth quarter of 2013 from regular market hog sales decreased by 15.7% to $4.22 million as the number of regular market hogs sold decreased by 29.7% to 17,031 hogs and the average selling price of regular market hogs increased by 19.8% to $248 per hog. We sold 16,867 black hogs as breeder and market hogs with an average selling price of $221 per hog, generating revenues of $.3.72 million during the fourth quarter of 2013. We also processed 1,064 market hogs for sale as specialty pork products through our retail channel during the fourth quarter of 2013 with an average selling price of $285 per hog, generating $0.30 million in revenues. As of the end of 2013 we were distributing processed black hog products to more than 12 supermarkets and 10 chain restaurants and hotels. We did not sell black hogs or sell processed pork products through retail during the comparable period of 2012.

Gross profit for the fourth quarter of 2013 was $1.59 million, compared to $0.73 million for the same period of last year. Gross margin for the fourth quarter of 2013 was 15.3%, significantly higher than the 10.6% for the same period of last year as a result of decreased revenue contribution from the lower margin regular market hog sales. The gross margins for breeder hogs, regular market hogs, black hogs, and retail sales were 29%, 15%, 7% and 26% respectively, for the fourth quarter of 2013. As a comparison, gross margins for breeder hogs and regular market hogs were 32% and 5%, respectively, for the same period of last year.

Selling, general and administrative expenses increased by $0.74 million, or 99.8%, to $1.48 million for the fourth quarter of 2013. The increase primarily reflects general and administrative expenses associated with our retail efforts. 

Net Loss from continuing operations for the fourth quarter of 2013 was $1.54 million, compared to $0.11 million for the same period of 2012. Net loss for the fourth quarter of 2013 included an impairment charge of $1.49 million from the government-mandated shutdown of Farm 8 and $0.04 million from construction in progress. After allocating net loss attributable to non-controlling interest, net loss attributable to common shareholders for the fourth quarter of 2013 was $1.22 million, or a loss of $0.09 per diluted share. On a normalized basis, after excluding the non-recurring impairment charges mentioned above, net income attributable to common shareholders was $0.31 million, or $0.02 per diluted share, for the fourth quarter of 2013. This compared to net loss attributable to common shareholders of $0.11 million, or a loss of $0.01 per diluted share, for the same period of last year. 

Twelve Months Ended December 31, 2013 Financial Results:

For the twelve months ended December 31, 2013, revenues increased by $6.82 million, or 25.7%, to $33.35 million from $26.53 million for the same period of 2012. This increase was primarily attributable to sales of black hogs raised by farmers participating in our cooperative programs, the initiation of retail sales of processed black hog products, offset by the decrease in revenues from our regular market hog sales. The Company sold and processed to produce pork products a total of 149,181 breeder hogs, regular market hogs and black hogs with a blended average selling price of $224 per hog during the twelve months period ended December 31, 2013, compared to 115,696 hogs sold and a blended average selling price of $229 per hog for the same period of 2012. Revenues for the twelve months ended December 31, 2013 from breeder hog sales increased by 7.1% to $8.37 million with the number of breeder hogs sold increasing by 14.8% to 30,639 hogs and the average selling price of breeder hogs decreasing by 6.8% to $273 per hog. Revenue for the twelve months ended December 31, 2013 from regular market hog sales decreased by 2.6% to $18.23 million as the number of regular market hogs sold decreased by 0.5% to 88,523 hogs and the average selling price of regular market hogs decreased by 1.9% to $206 per hog. The decline in average selling prices of both breeder and regular market hogs was mainly due to (1) an apparent decline in domestic pork demand due to the outbreak of H7N9 avian flu; (2) an increase in domestic hog supply as a result of preferential government policies (e.g., government subsidies); and (3) the central government's new policies that promote frugality, thrift, and forbid extravagance from government spending which further reduced pork consumption. We also sold 28,003 black hogs as breeder and market hogs with an average selling price of $ 222 per hog, generating revenues of $6.21 million for the twelve months ended December 31, 2013. We also sold 2,016 market hogs for processed pork through our retail channel during the year of 2013 with an average selling price of $270 per hog, generating $0.54 million in revenue. As of the end of 2013 we were distributing processed black hog products to more than 12 supermarkets and 10 chain restaurants and hotels. We did not sell black hogs or sell processed pork products through retail in the year of 2012. 

Gross profit for the twelve months ended December 31, 2013 was $3.02 million, compared to $3.46 million for the same period of last year. Gross margin was 9.1% and 13.0% for the twelve months ended December 31, 2013 and 2012, respectively. The impact of increased feed costs and animal medicines, as well as reduced hog prices caused the significant decrease in gross margin. The gross margins for breeder hogs, regular market hogs, black market hogs, and processed black pork products sold through retail were approximately 28%, 1%, 5% and 24% respectively. As a comparison, gross margins for breeder hogs and regular market hogs were approximately 31% and 5%, respectively, for the same period of last year.

Selling, general and administrative expenses increased by $0.38 million, or 11.1%, to $3.80 million for the twelve months ended December 31, 2013 from $3.42 million for the same period of last year. The increase was primarily a result of $1.0 million of general and administrative expense from our retail segment, partially offset by the $0.6 million reduction in overall selling expenses.

Net loss from continuing operations for the twelve months ended December 31, 2013 was $2.68 million, compared to $0.25 million for the same period of 2012. Net loss for the twelve months ended December 31, 2013 reflected an impairment charge of $1.49 million related to the government-mandated shutdown of Farm 8 in the fourth quarter of 2013. After allocating net loss attributable to non-controlling interest, net loss attributable to common shareholders for the twelve months ended December 31, 2013 was $2.04 million, or a loss of $0.18 per diluted share. On a normalized basis, after excluding the non-recurring impairment charges incurred in the fourth quarter of 2013, net loss attributable to common shareholders was $0.51 million, or a loss of $0.04 per diluted share, for the twelve months ended December 31, 2013. This compared to net loss attributable to common shareholders of $0.21 million, or a loss of $0.02 per diluted share, for the same period of last year. 

Financial Position  

As of December 31, 2013, the Company had cash and cash equivalents of $10.09 million, compared to $7.48 million for the same period of last year. Working capital as of December 31, 2013 was $14.95 million as compared to $8.98 million at December 31, 2012. Net cash used in operating activities was $0.11 million for the twelve months ended December 31, 2013, compared to net cash provided by operating activities of $5.61 million for the same period of last year.

Recent Developments 

On November 6, 2013, the Animal Husbandry and Veterinary Bureau of Caidian District, Wuhan City, directed us to close our farm located in the Caidian District (the "8^th Farm") by the end of 2013.  We were advised that all agricultural and manufacturing activities in the area of Dacha Lake in the Caidian District are being ordered to close as part of the government's effort to restore the lake to its natural condition.  We have obtained a 3-month grace period to evacuate our portable assets and personnel. Established in 2005, the 8^th Farm is situated on approximately 13.18 acres of leased land with 24 buildings dedicated to hog rearing and 1 building for administration and employee housing.

On November 6, 2013, Mr. Yang Chen resigned from the Board of Directors of the Company.

On October 28, 2013, the Company issued and sold an additional 522,000 common shares at $1.16 per share for a total consideration of $605,520 to Mr. Wei Gong, a PRC citizen and a member of the Board of Directors. This was the balance of a previously announced Private Placement that raised an aggregate of $3.2 million for the Company. Mr. Wei Gong now owns a total of 2.76 million shares, or 19.77% of total shares outstanding.  

On October 15, 2013, the Company received written notification from the NASDAQ Stock Market confirming that the Company regained compliance with the minimum bid price requirement of $1.00 per share for continued listing of our common stock on the Nasdaq Capital Market.

On October 3, 2013, the Company announced that its operating subsidiary, Hubei Tianzhili Breeder Hog Co. Ltd., had signed one-year sales contracts with eight hotels and restaurants in Wuhan City, Hubei Province. Among the eight new customers for the Company's Tianli-Xiduhei™ black hog meat cuts are three hotels - WuLingNianDai, DongXin, and Citizen and five restaurants - NongJiaXiaoYuan, ChuYuWang, ShuiMoRenJia, CuiZhuYuan, and XiaXingTianXia.  

Earnings Conference Call

Tianli will host an earnings conference call and live webcast covering its fourth quarter and full year 2013 financial results at 8:00 a.m. EDT on March 14, 2014, which is also 8:00 p.m. in Beijing on March 14, 2014. 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".

For those unable to participate, an audio replay of the call will be available beginning approximately one hour after the end of the live call through March 31, 2014. The audio replay can be accessed by dialing +1-877-344-7529 within the United States or +1-412-317-0088 internationally, and entering access ID No. 10042610.

About Tianli Agritech, Inc.

Tianli Agritech, Inc. is in the business of breeding, raising and selling breeder and market hogs in China and is developing a retail channel for its pork products including high-value, black hog meat. 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 this cautionary statement 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:

Tina Xiao
Weitian Group LLC
Phone: +1-917-609-0333
Email: [email protected]  
Web: http://www.weitian-ir.com

SOURCE Tianli Agritech, Inc.

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