First is Warren Wang, our CFO, who will cover our financial results. Warren, please.Warren Wang Thank you, Sterling. First, I will briefly cover our financial results for the second quarter of 2012. First, cash flow for the first half of 2012. In the first six months of 2012, our net cash flow increased cash and equivalents by $7.5 million, bringing total to cash and equivalents as of June 30, to a $143.3 million. Working capital at June 30, was a negative $21.3 million. Net cash used in operating activities in the first six months was $23.6 million, primarily from net income that provided $23.2 million, depreciation that provided $11.2 million, purchase deposits that provided $7.1 million, accounts receivable and accounts payable that used a net of $38.3 million, inventories that used $22.4 million. Net cash used in investing activities in the first six months was $57 million, primarily for construction in progress, deposits for the purchase of land use rights, and additions to land use rights, and property and equipment that together used $57 million. Net cash provided by financing activities in the first half of 2012 was $88.7 million, primarily from the proceeds from loans and notes, net of repayments, that provided $101.5 million, an increase in restricted cash that used $7.0 million, a repayment of a capital lease obligation that used $3 million, and repurchases of common stock that used $2.8 million. As a result, including the effect from foreign currency exchange rate changes on cash, Zhongpin increased its cash and cash equivalents by $7.5 million in the first half of 2012. Cash and cash equivalents on June 30, 2012 totaled $143.3 million compared with $135.8 million as of December 31, 2011. We believe our existing cash and cash equivalents, together with our ability to secure bank borrowings, will be sufficient to finance our investment in new facilities, with budgeted capital expenditures of about $125.2 million over the next 12 months, and to satisfy our working capital needs. We intends to satisfy our 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.
Our debt to total capital at June 30 was 50.5%. Our net debt to total capital was 42.7%, subtracting cash and cash equivalents from both total debt and total capital. Interest coverage for the second quarter 2012 was 3 times on net interest expense, and interest coverage for the six months of 2012 was 2.9 times on net interest expense.We are nearly at the limit of our debt leverage and interest coverage, so we have a little financial flexibility remaining should we need it. It’s important to understand that we intentionally adapt that to be sure that we can finance the Company’s expansion in the next 12 months, even if the credit markets tighten. So our financial flexibility is in tact. Next is an update on our stock repurchase program. In the third quarter of 2011, the Board of Directors increased the authorized amount of our stock repurchase program to $40 million under the repurchase program through March 31, 2012. Zhongpin has purchased a total of 3.2 million of its shares in the open market for $36.2 million, including sales commissions. After Chairman Zhu issued this Non-binding Going Private Proposal on March 27, 2012 the Company’s Board of Directors suspended the repurchase program. So there were no shares repurchased in the second quarter of 2012. Next is our guidance for the year 2012. We are maintaining our previous guidance. Our guidance for 2012 is based on several assumptions that include Continuation of China's policies designed to stimulate domestic consumption and economic growth. Average hog prices in China are expected to decrease about 15% to 20% in 2012 from 2011, based on the assumed forecasted trend for the supply of live hogs and the increasing cost to raise hogs. Read the rest of this transcript for free on seekingalpha.com