Tianli Agritech (NASDAQ:OINK)

Financial results for the first quarter of 2012.

• Gross profit was $1.7 million in the first quarter of 2012, a 29% decrease from the same period last year.
• Selling, general and administrative (SG&A) expenses were $1.1 million in the first quarter of 2012, an increase of approximately $0.3 million from $0.8 million in the first quarter of 2011.
• Net income for the three months ended March 31, 2012 was approximately $0.7 million, down 62% from the same period last year.
• Earnings per fully diluted share were $0.07 compared to$0.18 last year.

Tianli's Chairwoman and CEO, Ms. Hanying Li, stated, "We continue to see strong demand across each of our businesses. In the first quarter of 2012 we sold 34% more market hogs while our breeder hog sales were negatively impacted by a weak market and the contamination that occurred in December 2011, which resulted in a loss of approximately 500 breeder hogs. I am extremely pleased with the progress of our black hog program, which will become a big contributor to our sales later this year. We anticipate further growth by expanding the number of farms that participate in our program with local cooperatives to raise Enshi black hogs."

Fourth quarter Highlights:

• Revenue increased 49% year-over-year to $8.7 million due to higher selling prices, increased unit sales of Tianli market hogs plus retail sales of "Tianli An Puluo" hog meat.
• The retail division contiuted $1.7 millionof revenues in its second quarter of operations for the year.
• Net Income reached $ 8.1 million with $0.80 EPS

Tianli's Chairwoman and CEO, Ms. Hanying Li, began, "We completed another successful year, which included the acquisition of our 11^th hog farm and the launch of our Tianli-branded retail pork products through our partnership with An Puluo Foods. While our fourth quarter results were negatively impacted by complications resulting from contaminated feed at a few of our farms, we responded quickly to contain the impact. Having implemented a series of additional safeguards, we expect the negative drag on our financials to subside in the first half of 2012."

WUHAN CITY, China, Dec. 16, 2011 /PRNewswire-Asia/ -- Tianli Agritech, Inc. (NASDAQ: OINK) ("Tianli" or "the Company"), a leading producer of breeder hogs and market hogs based in Wuhan City, China, provided financial and operational updates.

Full Year 2011 Guidance

Based on sales through December 15, 2011, management expects full year results as follows:

Revenues include the sales of breeder hogs, meat hogs and sales from the Company's on-going retail operations in cooperation with An-Puluo Foods whereby the Company sells refrigerated pork products to 45 supermarkets in greater Wuhan, including Wal-Mart and other major retailers.  

"We have seen our sales trend nicely throughout the year. A combination of higher hog prices and an increase in the number of Tianli breeders and market hogs sold have produced impressive year over year growth for our Company," began Ms. Hanying Li, Chairwoman and CEO of Tianli. "Retail sales and profits have added to our revenue and earnings streams as anticipated and we expect this segment of our business to grow meaningfully in 2012 as we introduce our Black Hog meat into our sales channels.  We are excited at our growth prospects in 2012 and producing continued returns to shareholders."

Tianli expects to report its fourth quarter and full year 2011 results in March 2012. The Company will provide additional details regarding its operations and financial outlook in coordination with the Company's earnings release and conference call.

On November 15, 2011, the Registrant held a conference call to discuss its financial results for the quarter ended September 30, 2011.

Stella Chang, Brean Murray:

Hi, thanks for taking my question and congratulations on the quarter. China government has received an investment program to increase pork supply and bring down current price, not only during the peak season for pork consumption. Could you please comment on the price change? And what is your expectation on it and sales volume for your product metrics in the 4Q? Thank you.

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Third Quarter 2011 Results

• Revenue for the third quarter of 2011 increased $3.7 million, or 65%, to $9.2 million from the prior year.
• Net income for the three months ended September 30, 2011 was approximately $2.9 million, up 33% from $2.2 million last year.
• Earnings per fully diluted share were $0.29 compared to $0.23 the previous year. Share counts were 10.1 million and 9.7 million in the third quarter of 2011 and 2011, respectively.

Tianli's Chairwoman and CEO, Ms. Hanying Li, stated, "Our strong third quarter results were driven by robust underlying demand for pork in China. Despite a shift toward market hogs this quarter, our sales and margins benefited from higher pricing. As we ramp capacity at our 10^th farm, we expect continued growth in units and pricing for the remainder of 2011 and added revenue contributions from our AnPuluo Foods retail program."

Second Quarter 2011 Results

"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."

First Quarter Results:

• Revenue increased to $5.9 million, up 32% from $4.5 million in the first quarter of 2010, reflecting higher pricing and an increase in the number of hogs sold. Revenue growth was slightly impacted by modifications to facilitate housing of new breeding stock.
• Breeder hog revenue increased by 79% in the quarter, and breeder hog revenue comprised 41% of the Company's revenue, up from 30% in the first quarter of 2010.
• Gross profit increased by 32% to $2.5 million.
• EPS was $0.18 in the first quarter of 2011 as compared to $0.21 in the first quarter of 2010, reflecting the higher share count resulting from the Company's IPO in 2010.

Tianli's Chairwoman and CEO, Ms. Hanying Li, stated, "We continue to see good demand for our hogs, as reflected by strong pricing in the first quarter and our growth will benefit from the recent acquisitions of the Hengdian and the An Puluo farms. We will also be upgrading our stock this month with the arrival of French Yorkshire purebred breeders. We are equally excited about the significant opportunities stemming from Tianli's recently announced role in managing the breeding and sales of the Enshi Black Hogs. These hogs are prized for their prime quality meat, which is sold at premium prices at retail outlets. We are confident that our ongoing farm acquisitions, the opening of the retail sales channels per our recent agreement with An Puluo and the improvements to our product line provides our company with a strong foundation for growth for the balance of the year and future years."

WUHAN CITY, CHINA--(Marketwire - May 12, 2011) - Tianli Agritech, Inc. today announced that on May 12, 2011 it successfully completed the acquisition of the assets of the AnPuluo Farm, a 20,000 annual head production hog farm in Enshi Tujia and Miao Autonomous Prefecture, which is located within the Hubei province.

The Company will pay an aggregate of approximately $2.2 million for rights to the land and equipment. Deposits aggregating $1.5 million will be retained by the seller, with the balance of the purchase price, $0.7 million, to be paid by July 15th, 2011. The Company expects to invest approximately $0.3 million in facility upgrades and approximately $0.4 to $0.6 million in breeding stock to bring the farm to full production and fully stocked by the second half of 2012.

"This acquisition is a significant milestone for our Company, making us one of the largest hog producers in Hubei province," said Tianli's Chairwoman and CEO, Ms. Hanying Li. "We estimate the payback period to be less than two years once the farm is fully stocked and shipping Tianli breeders and market hogs to our customers. We believe the AnPuluo Farm will be a strong addition to our growing portfolio of farms as we continue our expansion strategy and seek out further potential candidates to add to our growing network of farms."

We are actively pursuing the acquisition of additional hog farms. While we do not have any firm agreement, or commitment, we are in discussions to acquire such facilities. We believe that the average purchase price for a hog farm with an annual production capacity of 20,000 hogs is approximately $2 million. We expect to continue to make purchases of purebred breeding stock.

GeoTeam® Note: The company comments regarding liquidity needs are much less detailed in the 2010 10Q than in the 2010 third quarter report.  This could open the door for a dilutive event.

Fourth Quarter Highlights:

• Sales of $5.8m vs. $3.4m a year ago.
• Gross profits of $2.5m vs. $1.5m a year ago.
• Net income of $2.2m vs. $1.4m a year ago.
• Diluted EPS of $0.22 vs. $0.17 a year ago.

Tianli's Chairwoman and CEO, Ms. Hanying Li, stated, "I am pleased that Tianli finished its first year as a public company with such strong results. We look forward to the Company's continued growth in 2011 as we are now benefiting from the production of our ninth farm and we are in the process of stocking our tenth farm, acquired in late December of 2010, with breeding sows. Our recent announcement of the pending acquisition of the AnPuluo farm, which would be our eleventh farm, illustrates how we are utilizing the funds provided by our IPO to seek out very attractive expansion opportunities, thus positioning the Company to benefit from China's strong demand for pork products."

WUHAN CITY, CHINA--(Marketwire - January 7, 2011) - Tianli Agritech, Inc. today announced its preliminary 2011 financial guidance as follows:

(1) Excludes any potential acquisitions that have not been announced. 
(2) Reflects weighted average outstanding shares of 9 million shares and 10.1 million shares for 2010 and 2011, respectively, reflecting the effect of the July 2010 IPO.

"We expect to benefit from additional production in 2011 as our newly constructed 9^th farm ramps up to capacity," explained Tianli's Chairwoman and CEO, Ms. Hanying Li. "The demand for market and breeder hogs is being supported by China's strong economic growth. And with a solid cash balance and ongoing positive cash flows, Tianli continues to pursue the acquisition of additional farms in support of our growth objective."

The Company expects to sell between 120,000 to 124,000 hogs in 2011, with Tianli's 9^th farm, which commenced operations in May 2010, projected to provide approximately 14,000 hogs in 2011.

WUHAN CITY, CHINA--(Marketwire - December 16, 2010) - Tianli Agritech, Inc. today announced that it has entered into an agreement to purchase the assets of Hengdian Farm, a 20,000 head annual production capacity hog farm located in Wuhan City, China and owned by Wuhan Taida Breeding Co. Ltd. The agreement calls for payment of approximately $1.4 to $1.6 million to the seller to be finalized upon the transfer of equipment. The Company expects to close the transaction by the end of December 2010.

"We are very excited about this acquisition, which will become our tenth farm," began Tianli's Chairwoman and CEO, Ms. Hanying Li. "We identified this farm as an acquisition candidate in September and upon making a $400,000 deposit, our team began an extensive due diligence process. We have acquired and integrated multiple farms over the past four years, and we are confident in our ability to successfully equip this farm to produce the high quality breeding and market hog stock for which Tianli is well known," Ms. Li continued. "After we upgrade the farm equipment and complete the cleansing process, we will populate the farm with high-quality breeding stock. We expect these breeders will arrive in February, enabling the initial production to be brought to market in the fourth quarter of 2011. While this farm will have a minimal impact on the Company's 2011 financials, once it reaches full operating capacity in 2012, it will generate annual revenue of approximately $4.5 million at current market prices, with a targeted operating margin of approximately $1.8 million."

Hengdian Farm is located in Wuhan City. The facilities are in good condition as the farm was constructed in 2008 and only operated for a few months after completion. The Company will acquire the rights to 462 acres of land, 30 buildings and a variety of associated equipment. Tianli plans to invest approximately $500,000 to upgrade the farm's facilities and transfer its breeding stock to the Hengdian Farm.

Ms. Li concluded, "We expect our ninth farm, which we completed the construction in summer of 2010 and is currently selling breeder hogs, will reach its full annual hog production capacity of 20,000 by next summer. Including the 20,000 production capacity we expect from the Hengdian Farm, our total annual hog production capacity would increase by approximately 36% to 150,000 hogs. We continue to actively pursue additional asset purchases like Hengdian, which we anticipate will generate a very attractive return on invested capital, resulting in a short payback period. Our existing cash balances plus strong cash flow provide us with the ability to fund continued growth."

"We would like to provide our shareholders with our understanding of the potential effect on Tianli Agritech as a result of the China State Council's recently announced policies intended to stabilize consumer pork prices and facilitate adequate supplies of pork products to consumers," stated Tianli's Chairwoman and CEO, Ms. Hanying Li. "The policies include various provisions intended to reduce the costs of bringing agricultural products to market and to assist consumers to pay for these staples. After reviewing these policies and based on our current understanding, we do not see that these policies will have a direct impact on how Tianli conducts business and how the prices for our breeder hogs and our market hogs are established." Ms. Li continued by saying, "Our revenue projection for the fourth quarter assumed price levels consistent with those we had experienced in the third quarter. The prices that we have realized during the first two months of the current quarter are slightly better than the third quarter levels and we expect that will be the case for the full fourth quarter. The number of breeder and market hogs sold during the current period is meeting our expectations."

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.

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."

2010 Guidance

• Revenues of approximately $21 million.
• Net income of $8.1 million to $8.3 million.
• EPS of $0.90 to $0.92.

Commitments for Capital Expenditures We are considering acquiring additional hog farms. While we do not have any firm agreement, understanding or commitment to acquire such a facility, we are in negotiations for such facilities. The average selling price for a hog farm with an annual capacity of 20,000 hogs is approximately $2 million to $2.5 million. While we do not have any commitments to do so, we expect to purchase additional purebred hogs over the next 15 months for approximately $1.0 million to $1.5 million, in part for use in any new farms acquired. We are also investigating a plan to open retail shops to sell our pork products at a premium price so that we can further benefit from our reputation for producing high-quality, low-pollution and low-additive pork products. We expect that the total cost for opening such retail locations would be less than $400,000.

Our Chief Executive Officer, Ms. Hanying Li, has loaned funds to our Company to complete the construction of our ninth farm, which commenced operations in May 2010. While the loan from Ms. Li is payable on demand, we do not believe the repayment of the loan is likely to affect our liquidity during the rest of 2010 as Ms. Li has agreed not to request repayment of the loan during 2010.

On July 19, 2010, we closed our IPO. We sold 2,000,000 common shares at a price of $6.00 per share and the shares commenced trading on the NASDAQ Global Market on July 20, 2010. Net proceeds from the offering were approximately $10,600,000, and these funds were placed in our bank account in Hong Kong. We are not able to utilize these net proceeds within China until we have completed certain remittance procedures. On August 2, 2010 we received $2,775,127 of these funds. We expect to utilize these net proceeds to construct and/or acquire additional hog farms, purchase additional breeding stock, possibly establish retail shops in Wuhan City as well as for our working capital needs and professional fees including Sarbanes-Oxley compliance costs.

The GeoTeam® has been accumulating OINK since its precipitous fall from its IPO price of $6.00 to eventually trade as low as $3.60. On October 5, 2010 we issued a short-term trade alert. Aided by a small float, a delayed reaction to its second quarter strong earnings and a unique make good arrangement that is very shareholder friendly, we think the stock could at the very least reach its IPO price, just as China New Borun Adr (NYSE:BORN) did after it traded below its IPO price of $7.00 for several weeks.

OINK has rebounded from its lows on the heels of Zhongpin (NASDAQ:HOGS) recent impressive price move from around $11.00 per share in early June to above $19.00 as of October 8, 2010.  This is a stock we have also been trading.

Can OINK trade past $6.00? We are not ready to make that definitive call at this time. According to its 2010 EPS make good target of $0.74 ($0.56 tax adjusted), the company will report EPS of $0.27 ($0.20 tax adjusted) for the back half of 2010 vs. $0.31 ($0.23 tax adjusted) for the 2009 comparable period. Keep in mind that make goods are often conservative. If the company could pull a more impressive EPS growth rate in the last half of 2010, we think there is a chance that the stock could eclipse $8.00. We plan to methodically sell shares if they rise.

Please note:

• OINK's SAIC files do not match SEC files. However, OINK is a variable interest entity (VIE).
• OINK does not retain a top auditor. (Sherb & Co).
• We don't consider OINK's underwriter as a top tier firm.

We have asked GeoInvesting Contributor Dan France to take a look at the OINK story and provide us with his feedback.

Second Quarter Financial Highlights:

• Revenue for the second quarter increased 88% to $5.4 million, up from $2.9 million recorded in the second quarter of 2009.
• Average price per hog was up 25% for the quarter, assisted by a greater proportion of sales coming from breeder hogs.
• Gross profit increased 152% to $2.4 million as the gross profit margin rose to 44% from 33%.
• Net income in the second quarter rose nearly 150% to $2.1 million, compared to $0.9 million in the second quarter of 2009.
• Earnings per share in the second quarter of 2010 was $0.26 compared to $0.11 per share in the second quarter of 2009.

Tianli's CEO Ms. Hanying Li said, "The second quarter of 2010 was an exciting period for Tianli Agritech. We achieved excellent sales levels of both breeder hogs and meat hogs. Revenues attributable to breeder hogs increased by approximately 370%, while meat hog revenue rose 31% with a total of 25,815 hogs sold in the quarter. Significantly more hogs were sold in the quarter because we have expanded the capacity of the company's existing farms. Another major factor is our success in maintaining high standards of health as a result of the use of our proprietary premix feed. We have increased revenues by having more hogs available for sale without incurring higher costs of medical care.

"Our net income grew even more quickly than our revenues. This reflects a higher growth rate for sales of breeder hogs, which have better margins than meat hogs and increased prices for all hogs as compared to last year. Our efficient control and management of production and administrative expenses also contributed to the strong profit improvement."

Ms. Li continued, "We completed our IPO in late July enabling us to take further steps to build Tianli into one of China's largest hog and pork producers. We expect to use the $10.6 million of net proceeds from the IPO to further expand our capacity by acquiring additional hog farms and purchasing more breeding stock to respond to the strong demand for hogs in China. In the meantime, we anticipate that our ninth farm, acquired in May, will lift our total annual capacity from the current level of 110,000 hogs to 130,000 by the end of 2010. Based on the results of the first half of 2010 and our expectations for the second half of 2010, we are reaffirming our guidance for the full year 2010 of $7.5 million of net income."

Tianli Agritech Announces Pricing of Initial Public Offering

"OINK" To Trade on Nasdaq Global Market

Wuhan City, China – July 14, 2010 – Tianli Agritech, Inc.(Nasdaq: OINK), a leading hog breeding company headquartered in Wuhan, China, announced today the pricing of its initial public offering of a minimum of 1,667,000 and a maximum of 2,000,000 common shares at $6.00 per share.

Tianli Agritech expects its common shares to begin trading on the Nasdaq Global Market on Tuesday, July 20, 2010 under the ticker symbol "OINK." The CUSIP for the issue is G8883T 104.

All of the shares to be issued in the offering are being sold by Tianli Agritech, Inc.

Anderson & Strudwick, Inc. is acting as the lead placement agent for the offering.

Company Snapshot:

Research and development, raising, breeding and selling hogs in the People's Republic of China.

Industry Snapshot

• China is also the world’s largest hog producing and pork consuming country. China has accounted for nearly half of both the world’s pork production and consumption for more than five years. According to the U.S. Department of Agriculture, China is again expected to be the driving force behind global pork production in 2010. Not only does China consume a significant amount of pork in the aggregate; Chinese per-capita pork consumption is among the highest in the world, as pork is China’s most popular meat. China consumes over 600 million pigs a year.
  
• China’s hog industry is in the midst of a transition from a large number of small household farms to larger, more commercial farms. Meat hog production in the PRC is currently dominated by backyard farms (those that sell 5-10 hogs annually) and small farms (those that sell less than 100 hogs annually). Farms that sell less than 100 hogs per year comprise approximately 75% of the hog farms in China and account for approximately one-third of the hogs sold annually in China. These farms sell their products to local rural markets. Farms that sell between 100 and 500 hogs a year account for 21% of China’s hog farms and approximately one-third of the hogs sold annually in China. Farms that sell between 500 and 3,000 hogs represent less than 3% of China’s hog farms but account for approximately 19% of the hogs sold in China. Those that sell more than 3,000 hogs annually account for less than one-half of a percent of all hog farms but sell more than 15% of China’s hogs annually.

Post Merger Share Calculation:

• 8,125,000: Pre IPO outstanding shares
• 1,667,000 to 2,000,000: Newly issued shares of Common Stock
• 200,000: Shares from placement agent warrants with an assumed exercise price of $7.20

GeoTeam® best effort calculation of total post reverse merger shares assuming full conversions: 9,992,000 to 10,325,000

Financial Snapshot: see note

Note that Tianli has undertaken some shareholder friendly moves:

• No significant amount of warrants issued in the IPO
  
  "In connection with this offering, we will, for a nominal amount, sell our placement agent warrants exercisable at a rate of one warrant per share to purchase up to ten percent of the shares sold in the offering. These warrants are exercisable for a period of five years from the date of issuance at a price equal to 120% of the price of the shares in this offering."
  
  
• Make-Good arrangement is attractive (see note)

The company has yet to provide details on its 6 months 2010 financials.

"Certain shareholders of our company [Tianli Agritech Inc], Hanying Li and Bihong Zhang, have agreed to place, on a prorated basis, that number of beneficially owned common shares into escrow that is equal to 50% of the maximum number of shares to be sold in this offering .  To the extent our audited after-tax earnings per share for the year ending December 31, 2010 are less than $0.7407, our company will redeem and cancel to the extent necessary to cause our audited after-tax earnings per share to be equal to $0.7407:"

Source: SEC Filing

^a Tianli Agritech Inc. is paying no taxes.  The GeoTeam® applies a 25% and 36% tax rate for Chinese and United States companies respectively.

This is the first Make-Good agreement that we have come by that ensures the attainment of an EPS target by canceling escrow shares necessary to attain a target. In most cases the escrow shares transfer to investors of an IPO or merger transaction if a target is not met.

We view this as very shareholder friendly move and one we hope more firms will follow.  We are also impressed by the following statement Tianli made in the filing:

"We believe the Make-Good Escrow arrangement benefits the shareholders of our company (other than those who may forfeit shares without consideration) because it is designed to increase the likelihood that our company will achieve the after-tax earnings per share upon which our valuation is based. To the extent Make-Good Shares are redeemed without cost, the after-tax per-share earnings will increase for all remaining outstanding shares."

We will track this story.

1) We have presented earnings per share in OINK after giving retroactive effect to the reorganization of our company that was completed January 27, 2010.

(2) We have presented these pro forma earnings per share after (a) giving retroactive effect to the reorganization of our company that was completed January 27, 2010 and (b) assuming the redemption of all shares placed into escrow as described in the section entitled “Related Party Transactions – Make-Good Shares Subject to Redemption.” The number of escrowed shares is based on 50% of an assumed maximum of 2,000,000 common shares.