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 China Botanic Pharmaceutical Reports Third-Quarter Fiscal Year 2011 Results
 
CreateTime:2011-09-16     Source:prnewswire Editor:lile
Text Size:       
 

Third-Quarter 2011 Highlights and Recent Events

  • Net sales increased 33.6% year-over-year to $12.4 million
  • Gross profit increased 60.8% to $7.5 million from $4.6 million in the third quarter of fiscal year 2010
  • Gross margin increased to 60.3% from 50.1% a year ago
  • Net income rose 73.0% to $2.5 million or $0.07 per diluted share
  • The Company was named "High Integrity Enterprise" by a prominent industry group at the 2nd Session of Heilongjiang Pharmaceutical Integrity Enterprise Selection Committee, which is made up of government and trade association including Heilongjiang Integrity Promotion Association, Heilongjiang Food and Drug Administration, the Heilongjiang Pharmaceutical Industry Association.

"We are pleased to report double digit revenue and net income growth in the third quarter of fiscal year 2011. Our strong growth in sales, profitability, and operating cash flow during the quarter was largely driven by increase in our average selling prices and four new products introduced in the fourth quarter of fiscal year 2010," said Mr. Shaoming Li, Chairman and Chief Executive Officer of China Botanic.  "Our Siberian Ginseng products exhibited strong year-over-year sales growth and accounted for 50% of our total revenue in the third quarter of fiscal year 2011 compared with 44% in the same period of last year.  This reflected our continued commitment to create awareness and promote our premier product, the Siberian Ginseng Series, and it will continue to remain our top priority in the future. In addition, our four new products, namely Qing Re Jie Du Oral Liquid, Compound Schizandra Tablets, Ginseng and Venison Extract, and Badger Oil have established a strong foothold in the market and contributed nearly 19% of the quarter's total sales revenue."

Third Quarter Fiscal Year 2011 Results

During the three months ended July 31, 2011, net sales increased 33.6% to $12.4 million, from $9.3 million during the same period in 2010.  The rise was mainly attributable to year-over-year increase in average selling prices of the Company's products and the growing market acceptance of the Company's new products introduced in the fourth quarter of 2010. Sales declined compared to the first and second quarters fiscal 2011 due to seasonality.  April to August is typically the company's slowest sales period.

Gross profit increased 60.8% to $7.5 million compared to $4.6 million in the third quarter of fiscal 2010. Gross margin increased to 60.3% as compared to 50.1% in the same period of 2010. The growth in gross profit was mainly driven by price increases across all of the Company's products, somewhat mitigated by modest increases in raw material prices. The Company's new high-margin products, Qing Re Jie Du Oral Liquid, Compound Schizandra Tablets, Ginseng and Venison Extract, and Badger Oil also contributed to the gross margin growth.

Operating expenses for the third quarter of fiscal 2011 were $4.5 million, as compared to $3.2 million in the same period last year. Sales and distribution expenses rose 21.4% to $1.6 million from $1.3 million a year ago. The spending increase reflected the Company's efforts to expand its distribution network, market share, and awareness of its premium quality products. General and administrative expenses increased 212.1% to $1.2 million, primarily due to rental expenses of our Ah City Natural and Pharmaceutical Plant, accounting and attorney expenses, and amortization expenses related to exclusive land use rights of YiChun Redstar Forestry and patents. Research and development expenses were $1.7 million, up 10.3% from $1.6 million in the year ago period, reflecting the Company's continued commitment to invest into new product development and other research efforts.

Operating income in the third quarter was $3.0 million, compared to $1.4 million in the third quarter of 2010. Operating margin increased year-over-year to 24.1% from 15.5%.

The Company incurred income tax expenses $0.5 million in the third quarter of fiscal 2011, compared to no taxes paid for the third quarter of 2010, due to the 15% tax rate imposed effective January 1, 2011. For the third quarter ended July 31, 2011, net income increased 73.0% to $2.5 million, or $0.07 per diluted share, from $1.5 million, or $0.04 per diluted share for the same period a year ago.

Nine Month Results

Total revenue for the nine month period ended July 31, 2011 was $53.9 million, an increase of 40.0% from $38.5 million for the first nine months of fiscal 2010. Gross profit in the first nine months of fiscal 2011 rose 59.4% to $32.4 million, representing a gross margin of 60.2% as compared to 52.8% in the first nine months of fiscal 2010. Operating income grew 86.0% year-over-year to $22.7 million. In the first nine months of fiscal 2011, net income was $20.5 million or $0.54 per diluted share, up from $12.2 million or $0.32 per diluted share in the first nine months of fiscal 2010.

Financial Condition

As of July 31, 2011, the Company had cash and cash equivalents of approximately $38.3 million and total current assets of approximately $58.9 million. As of July 31, 2011, China Botanic had working capital of approximately $45.8 million as compared to $47.1 million for the fiscal year ended October 31, 2010.  The Company had no long-term debt on its balance sheet as of July 31, 2011. Shareholders' equity stood at $93.4 million, compared with $69.8 million as of October 31, 2010. Net cash flow from operating activities for the nine months ended July 31, 2011 was $26.4 million compared to $22.9 million for the same period of 2010.

Business Outlook

"We will continue to focus on our botanical anti depression and nerve regulations products, and continue to invest in research and development of these products," said Mr. Li. "We remain confident that we will meet our fiscal year 2011 guidance for revenue in the range of $70.6 million and $71.7 million and net income of $25.5 million. We have completed the architectural design of our Ah City phase two project and are in the process of obtaining approval from relevant government authorities. and expect to begin construction following receipt of approval documents. The Ah City phase two project is expected to be completed in the end of 2012. In the longer term, we expect Ah City natural and pharmaceutical plant expansion and new products which are currently in our R&D pipeline will provide sizeable contribution to our future revenue and net income growth."

Conference Call

China Botanic will host a conference call at 9:00 a.m. Eastern Time on Thursday, September 15, 2011, to discuss financial results for the third quarter of fiscal year 2011, ended July 31, 2011. To participate in the conference call, please dial the following number five to ten minutes prior to the scheduled conference call time: 866-394-2209. International callers should dial +1 706-758-1481. The conference ID number for the call is 97912567.

If you are unable to participate in the call at this time, a replay will be available on Thursday, September 15, 2011 at 12:00 noon Eastern Time, through Thursday, September 29, 2011. To access the replay, dial 855-859-2056. International callers should dial +1 404-537-3406. The conference ID number for the replay is 97912567.

ABOUT CHINA BOTANIC PHARMACEUTICAL INC.

China Botanic Pharmaceutical Inc. is engaged in the research, development, manufacturing, and distribution of botanical products, bio-pharmaceutical products, and traditional Chinese medicines ("TCM"), in the People's Republic of China. All of the Company's products are produced at its three GMP-certified production facilities in Ah City, Dongfanghong and Qingyang. The Company distributes its botanical anti-depression and nerve-regulation products, biopharmaceutical products, and botanical antibiotic and OTC TCMs through its network of over 3,000 distributors and over 70 sales centers across 24 provinces in China. For more information, please visit www.renhuang.com.

Safe Harbor Statement

This press release contains certain statements that may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are based upon management's beliefs, assumptions and expectations of the Company's future operations and financial performance, taking into account the information currently available to management. These statements are not statements of historical fact. Forward-looking statements involve risks and uncertainties, some of which are not currently known that may cause actual results, performance or financial condition to be materially different from the expectations of future results, performance or financial condition expressed or implied in any forward-looking statements. These forward-looking statements are based on current plans and expectations and are subject to a number of uncertainties including, but not limited to, the Company's ability to manage expansion of its operations effectively, and other factors detailed in the Company's annual report on Form 10-K and other filings with the Securities and Exchange Commission.  The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. You are cautioned not to unduly rely on such forward-looking statements when evaluating the information presented herein.

                                                                        - Financial Tables Follow-                                      

 

CHINA BOTANIC PHARMACEUTICAL INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

 
   

July 31, 2011

 

October 31, 2010

 
   

(Unaudited)

 

(Audited)

 

ASSETS

         

Current assets:

         

Cash and cash equivalents

 

$

38,321,244

 

$

27,826,142

 

Trade receivables, net

   

13,529,292

   

19,814,438

 

Due from related parties

   

129,880

   

28,877

 

Inventory, net

   

6,633,294

   

2,645,616

 

Other receivables, net

   

325,880

   

200,994

 

Total current assets

 

$

58,939,590

 

$

50,516,067

 
               

Property and equipment, net

   

1,860,724

   

2,069,460

 

Intangible Assets

   

17,197,871

   

1,953,617

 

Construction in progress

   

1,920,087

       

Deposits for properties

   

26,491,447

   

18,605,935

 

Deferred tax assets

   

138,003

       
               

Total assets

 

$

106,547,722

 

$

73,145,079

 
               

LIABILITIES AND SHAREHOLDERS' EQUITY

             

Liabilities

             

Accounts payable

   

7,956,716

   

333,555

 

Tax payable

   

3,038,802

   

1,064,066

 

Accrued employee benefits

   

2,105,148

   

1,645,192

 

Warrant Liabilities

   

36,973

   

342,770

 

Total liabilities

 

$

13,137,639

 

$

3,385,583

 
               

Shareholders' equity

             

Preferred stock (no par value, 1,000,000 shares authorized; none issued and outstanding as of July 31, 2011 and October 31, 2010, respectively)

             

Common stock ($0.001 par value, 100,000,000 shares, authorized; 37,239,536 issued and outstanding as of July 31, 2011 and October 31, 2010, respectively)

   

37,240

   

37,240

 

Additional paid-in capital

   

7,724,967

   

7,627,987

 

Common stock warrants

   

496,732

   

496,732

 

Reserves

   

3,372,697

   

3,372,697

 

Accumulated other comprehensive income

   

7,773,204

   

4,768,793

 

Retained earnings

   

74,005,243

   

53,456,047

 

Total shareholders' equity

   

93,410,083

   

69,759,496

 
               

Total liabilities and shareholders' equity

 

$

106,547,722

 

$

73,145,079

 
   

 

CHINA BOTANIC PHARMACEUTICAL INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

 
   
   

For the three months

 

For the nine months

 
   

ended July 31,

 

ended July 31,

 
   

2011

 

2010

 

2011

 

2010

 
   

(Unaudited)

 

(Unaudited)

 

(Unaudited)

 

(Unaudited)

 

Sales, net

 

$

12,376,352

 

$

9,263,892

 

$

53,875,101

 

$

38,489,012

 
                           

Cost of goods sold

   

4,908,939

   

4,620,568

   

21,450,356

   

18,151,062

 
                           

Gross profit

   

7,467,413

   

4,643,324

   

32,424,745

   

20,337,950

 
                           

Operating and administrative expenses:

                         

Sales and distribution

   

1,559,863

   

1,284,990

   

4,430,053

   

3,689,290

 

General and administrative

   

1,233,288

   

395,131

   

2,744,932

   

2,208,965

 

Research and development

   

1,686,677

   

1,528,933

   

2,585,863

   

2,251,854

 

Total operating expenses

   

4,479,828

   

3,209,054

   

9,760,848

   

8,150,109

 
                           

Income from operations

   

2,987,585

   

1,434,270

   

22,663,897

   

12,187,841

 
                           

Other income:

                         

Interest income

   

34,144

   

22,039

   

81,286

   

49,206

 

Income before income tax expenses

   

3,021,729

   

1,456,309

   

22,745,183

   

12,237,047

 
                           

Income tax expenses

   

501,884

         

2,195,987

       

Net income

 

$

2,519,845

 

$

1,456,309

 

$

20,549,196

 

$

12,237,047

 
                           

Other comprehensive income:

                         

Cumulative currency translation adjustments

   

828,537

   

461,820

   

3,004,411

   

301,931

 
                           

Total comprehensive income

 

$

3,348,382

 

$

1,918,129

 

$

23,553,607

 

$

12,538,978

 
                           

Earnings per common stock- Basic

 

$

0.07

 

$

0.04

 

$

0.55

 

$

0.33

 

Earnings per common stock - Diluted

 

$

0.07

 

$

0.04

 

$

0.54

 

$

0.32

 
                           

Weighted average common stock outstanding

                         

Basic

   

37,239,536

   

37,239,536

   

37,239,536

   

37,239,536

 

Diluted

   

37,473,911

   

37,901,089

   

37,749,587

   

37,793,370

 

 

CHINA BOTANIC PHARMACEUTICAL INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 
   

For the nine months ended July 31,

 
   

2011

 

2010

 
   

US$

 

US$

 
   

(Unaudited)

 

(Unaudited)

 

Cash flows from operating activities:

         

Net income

 

$

20,549,196

 

$

12,237,047

 

Adjustments to reconcile net income to operating activities:

             

Depreciation

   

286,379

   

261,572

 

Amortization

   

368,782

       

Warrants issued for service

   

(305,797)

   

342,770

 

Share Compensation

   

96,981

   

42,759

 

Noncash rental expenses

   

572,065

       

Deferred tax assets

   

(135,409)

       

Changes in assets and liabilities:

             

Decrease in trade receivables

   

6,891,867

   

12,385,586

 

(Increase)Decrease in due from related parties

   

(98,049)

   

130,199

 

(Increase) in inventory, net

   

(3,815,951)

   

(549,333)

 

(Increase) in prepayments

         

(1,425,913)

 

(Decrease) in other receivables, net

   

(115,187)

       

(Decrease) in accounts payable

   

(159,845)

   

(112,336)

 

Increase(Decrease) in tax payable

   

1,898,697

   

(715,360)

 

Increase in accrued employee benefits

   

391,128

   

285,739

 

Net cash provided by operating activities

   

26,424,857

   

22,882,730

 
               

Cash flows from investing activities:

             

Deposits for land use right and properties

   

(15,255,064)

   

(2,558,870)

 

Increase in construction in progress

   

(1,884,000)

       

Purchase of property and equipment

   

(5,862)

       

Net cash used in investing activities

   

(17,144,926)

   

(2,558,870)

 
               

Cash flows from financing activities:

             
               

Net cash provided by financing activities

             
               

Effect of exchange rate changes on cash

   

1,215,171

   

314,106

 
               

Net increase (decrease) in cash and cash equivalents

   

10,495,102

   

20,637,966

 

Cash and cash equivalents, beginning of year

   

27,826,142

   

8,111,514

 

Cash and cash equivalents, end of year

 

$

38,321,244

 

$

28,749,480

 
               

Supplemental disclosure of cash flow information:

             

Cash paid during the year for income taxes

             

Interest paid during the year

 


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