Record Revenues Increased Year-over-year 92% to $5 Million;
Gross Margin Increased to 50%
HAIKOU CITY, Hainan Province, China, Nov. 14 /Xinhua-PRNewswire-
FirstCall/ -- China Pharma Holdings, Inc. (“China Pharma”) (OTC Bulletin
Board: CPHI) today announced its operating results for the third quarter
ended September 30, 2006.
Q3 Highlights
-- Revenues increased 92% year-over-year to $5 million
-- Gross margin increased to 50% from 37.8% in the third quarter 2005
-- Net income increased 231% year-over-year to $1.7 million
Revenues for the third quarter 2006 were $5.0 million, an increase of
92.8% from $2.6 million in the third quarter of 2005, and up 26.2% from $4.0
million in the previous quarter. Operating income for the quarter increased
to $2.1 million, up 198.6% from $0.7 million in the third quarter 2005 and up
53.3% from $1.4 million in the second quarter of 2006. Net income increased
231.4% to $1.7 million from $0.5 million in the same quarter a year ago and
declined 6.8% from $1.8 million in the second quarter of 2006. Fully diluted
earnings per share for the quarter was $0.05 compared to $0.11 for the third
quarter of 2005 and $0.05 for the second quarter of 2006. Earnings per share
in fiscal 2006 reflect an increase in China Pharma’s weighted average shares
outstanding from 4.7 million in the third quarter of 2005 to 34.7 million in
the third quarter of 2006.
“We are pleased with the record revenues and strong net income growth we
achieved in the third quarter. We have made some significant strides this
year in expanding our portfolio, with approvals for four new products. We
have already started manufacturing and selling ozagrel sodium injection and
gastrodin injection, both of which have contributed to our top line growth as
well as the significant increase in gross margin to 50%,” commented Ms.
Zhi-Lin Li, China Pharma’s President and CEO.
Revenue growth in the third quarter was driven by increased sales of
China Pharma’s PuSenOK, the Company’s first OTC drug and anti-flu medicine,
which represented about 18% of revenue for the quarter. The Company’s
revenue growth was also positively impacted from the newly launched ozagrel
sodium injection, a prescription anti-coagulant drug, and gastrodin
injection, a prescription drug used to treat the central nervous system.
Gastrodin injection is now the company’s fifth largest revenue generator
with
year-to-date revenue of $1.3 million. Sales of roxithromycin and rhaAFGA
continued to do well, as each represented about 15% of total revenue for the
quarter.
Gross profit for the third quarter 2006 was $2.5 million, up 153.5% from
gross profit in the third quarter 2005 of $1.0 million, and up 33.3% from
gross profit in the previous quarter of $1.9 million. Gross profit was
favorably impacted by increased sales of higher margin products such as
PuSenOK, hepatocyte growth-promoting factor and ozagrel, each of which have
gross margins greater than 50%. Gross margin was 49.7% for the quarter, up
from 37.8% from the same quarter a year ago and 47.0% from the previous
quarter.
Selling expenses were $42,966 in the third quarter of 2006 compared to
$43,098 in the third quarter of 2005 and down from $82,133 in the second of
quarter 2006.
Research and development expenses were $125,000 in the third quarter of
2006. Research and development expenses were added as a separate line item
on the income statement this quarter which represents payment for clinical
trials for R&D performed at other institutes.
For the quarter, general and administrative (G&A) expenses were $100,650,
or 2.0% of revenue, compared to $77,346 in the third quarter of 2005, or 3.0%
of revenue. China Pharma intends to keep G&A expenses under $1.0 million in
fiscal 2006.
Operating income for the third quarter of 2006 increased to $2.1 million,
up 198.6% from $0.7 million in the third quarter of 2005 and up 53.3% from
$1.4 million in the previous quarter. Operating margin for the quarter was
41.3%, up from 26.7% in the third quarter 2005 and up from 34.0% in the
second quarter of 2006. Operating margin was favorably impacted by the
increase in gross margin and the decrease in operating expenses.
Net income for the quarter increased to $1.7 million for an increase of
231.4% from net income of $0.5 million in the third quarter 2005 and down
6.8% from the second quarter 2006. The decrease in sequential net income for
the quarter is attributed to the recognition of bad debt recovery of
$627,861, which favorably impacted results in the second quarter of 2006.
Revenue for the first nine months of 2006 was $13.7 million, gross profit
was $6.6 million and net income was $5.1 million.
Financial Condition
As of September 30, 2006, China Pharma had $193,390 in cash and cash
equivalents, $14.1 million in working capital and total debt of $8.4
million. Inventories increased by $1.8 million from $6.8 million as of June
30, 2006 to $8.6 million in advance of anticipated brisk fourth quarter
sales. Days sales outstanding (DSO) were 207 during the third quarter 2006,
a modest reduction from 209 days at the end of the second quarter of 2006.
The Company has targeted reducing DSOs to 180 days in 2007. Shareholder
equity stood at $17.1 million, up from $11.7 million at year-end 2005.
Business Outlook
The fourth quarter historically is the strongest quarter for China
Pharma. The Company expects to see continued increased demand based on
seasonality of several of its drugs and increased market penetration for
drugs introduced earlier in 2006. In addition to ozagrel sodium injection
and gastrodin injection, the Company launched hepatocyte growth promoting
factor, a prescription drug for the treatment of hepatitis, earlier this year
and is experiencing solid demand. China Pharma is maintaining its guidance
for
year-end revenue of $20.0 million and net income of $8.0 million.
Ms. Li concluded, “We anticipate a strong year-end as the fourth quarter
is typically the strongest selling season for many of our pharmaceutical
products. We are also now seeing traction in the market from drugs launched
in the fist half of 2006 -- hepatocyte growth promoting factor, gastrodin
injection and ozagrel sodium -- all of which generate attractive gross
margins. We are continuing to focus on expanding our portfolio with high
margin therapeutics which provide diverse revenue base and minimize overall
portfolio risk.”
Conference Call
China Pharma will host a conference call on Tuesday, November 14th at
10:00 am ET to discuss results for the third quarter of 2006. Joining Ms.
Zhilin Li, President and CEO of China Pharma, will be Mr. Xinhua Wu, Chief
Financial Officer, and Mr. Donald Xu, Vice President, Strategic Planning and
Business Development. To participate in the conference call, please dial the
following number five to ten minutes prior to the scheduled conference call
time (888) 419.5570. International callers should dial (617) 896.9871. The
conference passcode is 66962583.
If you are unable to participate in the call at this time, a replay will
be available on Tuesday, November 14 at 12:00 am EST, through Tuesday,
November 21 at 12:00 am EST. To access the replay, dial (888) 286-8010.
International callers should dial (617) 801-6888. The conference passcode is
84660865.
This conference call will be broadcast live over the Internet and can be
accessed by all interested parties by clicking on http://phx.corporate-
ir.net/playerlink.zhtml?c=145098&s=wm&e=1414793 . Please access the link at
least fifteen minutes prior to the start of the call to register, download,
and install any necessary audio software. For those unable to participate
during the live broadcast, a 90-day replay will be available shortly after
the call by accessing the same link.
Comparative Period Results
Onny Investment Limited ("Onny") was incorporated in the British Virgin
Islands on January 12, 2005. On June 16, 2005, Onny acquired all of the
outstanding shares of Hainan Helpson Medical & Biotechnology Co., Ltd
("Helpson"). On October 19, 2005, Onny was reorganized as a wholly-owned
subsidiary of China Pharma. The reorganization was accomplished through a
share exchange between Onny and China Pharma, plus China Pharma’s commitment
to issue additional shares upon amending its articles of incorporation. The
reorganization of Onny into China Pharma was recognized as a stock split of
the common stock of Onny and the effective issuance by Onny of approximately
2.5 million shares of common stock to the China Pharma’s pre-reorganization
shareholders and the assumption of certain liabilities. The reverse
acquisition of the Company was recognized as a non-monetary exchange. China
Pharma was formerly known as TS Electronics, Inc. On May 4, 2006, TS
Electronics, Inc. filed an 8-K with the Securities and Exchange Commission,
reporting its name change to “China Pharma Holdings, Inc.” For more
information, refer to the company’s filings with the Securities and Exchange
Commission.
About China Pharma Holdings, Inc.
China Pharma Holdings, Inc. develops, manufactures, and markets generic
and brand bio-pharmaceutical products in China that treat a wide range of
conditions, including infections, hepatitis, vascular, CNS and other
prevailing diseases. Helpson Bio-pharmaceutical Co., Ltd (Helpson), a
specialty bio-pharmaceutical company headquartered in Haikou City, Hainan
province in China, is a wholly owned subsidiary of China Pharma Holdings.
Safe Harbor Statement Under the Private Securities Litigation Reform Act
of 1995: Any statements set forth above that are not historical facts are
forward-looking statements that involve risks and uncertainties that could
cause actual results to differ materially from those in the forward-looking
statements, which may include, but are not limited to, such factors as
unanticipated changes in product demand, increased competition, failure to
obtain or maintain intellectual property protection, downturns in the Chinese
economy, uncompetitive levels of research and development, failure to obtain
regulatory approvals, and other information detailed from time to time in the
Company’s filings and future filings with the United States Securities and
Exchange Commission.
CHINA PHARMA HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
For the period
For the from January
12,
nine 2005 (Date of
For the three months months Inception)
ended September 30, ended through
September September
30,
30,
2006 2005 2006 2005
Revenue 5,015,272 2,601,294 13,721,587 3,093,824
Cost of revenue 2,521,205 1,617,399 7,151,898 1,942,393
Gross profit 2,494,067 983,895 6,569,689 1,151,431
Operating expenses:
Selling expenses 42,966 43,098 213,350 47,588
Research and development 125,359 -- 124,715 --
General and administrative 100,650 77,346 333,654 35,772
Bad debt expense
(recovery) 152,142 169,229 (28,349) 230,881
Total operating expenses 421,117 289,673 643,370 314,241
Income from operations 2,072,950 694,222 5,926,319 837,190
Non-operating income
(expenses):
Interest income 408 266 588 266
Interest expense (39,872) (124,734) (87,690) (153,629)
Total non-operating income
(expense) (39,464) (124,468) (87,102) (153,363)
Income before taxes 2,033,486 569,754 5,839,217 683,827
Income tax expense (326,621) (54,726) (730,560) (64,247)
Net income 1,706,865 515,028 5,108,657 619,580
Comprehensive income -
Foreign currency
Translation adjustments 25,307 -- 137,964 --
Comprehensive income 1,732,172 515,028 5,246,621 619,580
Basic and diluted earnings
per common share $0.05 $0.11 $0.15 $0.07
Weighted-average common
shares outstanding 34,723,056 4,731,413 34,723,056 9,377,713
CHINA PHARMA HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
September 30, December
31,
2006 2005
ASSETS (unaudited)
Current assets
Cash and cash equivalents 193,390 461,220
Trade accounts receivables 11,297,389 5,709,762
Other non-trade receivables 494,473 385,957
Advances to suppliers 2,011,603 2,123,729
Inventory 8,552,037 5,785,196
Total current assets 22,548,892 14,465,864
Property and equipment, net of accumulated
depreciation 2,771,944 2,808,342
Intangible assets, net of accumulated
amortization 70,104 96,406
Deferred tax asset 124,908 130,458
Total non-current assets 2,966,956 3,035,206
Total assets $25,515,848 $17,501,070
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Trade accounts payable 1,051,080 679,104
Accrued expenses 347,371 15,625
Taxes payable 376,174 565,236
Other accounts payable 69,158 250,317
Advances from customers 83,749 50,755
Dividend payable 4,209,889
Short-term notes payable 2,147,335 --
Short-term notes payable to former
shareholders 4,304,371
Total current liabilities $8,379,238 $5,770,926
Long-term liability
Research and development commitment 31,578 30,966
Total liabilities 8,410,816 5,801,892
Shareholders’ equity
Common shares, 1.00 ($0.12) par value;
23,000,000, 23,000,000, 28,000,000
shares authorized, issued and
outstanding 34,722 34,723
Additional paid-in capital 7,764,979 7,764,979
Statutory reserves 397,124 99,926
Retained earnings 8,908,207 3,799,550
Total shareholders’ equity 17,105,032 11,699,178
Total liabilities and shareholders’ equity $25,515,848 $17,501,070
CHINA PHARMA HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
For the period
from January 12,
2005 (Date of
For the nine Inception)
months ended through
September 30, September 30,
2006 2005
Cash Flows from Operating
Activities:
Net income $5,108,657 $619,580
Depreciation and amortization 288,142 77,841
Loss on disposal of property and
equipment -- --
Accretion of discount on notes
payable -- 86,505
Deferred tax assets 8,029 (12,721)
Changes in assets and liabilities:
Trade accounts receivable (5,405,382) (1,523,777)
Non-trade receivables (99,868) (433,383)
Advances to suppliers 152,181 1,148,183
Inventory (2,618,835) (1,433,501)
Trade accounts payable 354,002 1,725,177
Accounts payable related parties -- 109,959
Accrued expenses 11,071 55,912
Taxes payable (197,707) 28,751
Other payables 144,450 (475,013)
Advances from customers 31,586 14,933
Net Cash Used in Operating
Activities (2,223,674) (11,554)
Cash Flows from Investing
Activities:
Capital expenditures (169,508) (14,597)
Net cash received in purchase of
Subsidiary -- 132,016
Proceeds from note receivable -- 11,336
Net Cash (Used) Provided by (169,508) 128,755
Investing
Activities
Cash Flows from Financing
Activities:
Payment of dividend payable -- (65,818)
Proceeds from notes payable 2,120,150 --
Proceeds from issuance of common
stock -- 3,509,698
Net Cash Proceeds from Financing
Activities 2,120,150 3,443,880
Effect of Exchange Rate Changes in
Cash 5,199 --
Net Change in Cash (267,833) 3,561,081
Cash and Cash Equivalents at 461,220 1
Beginning of
Period
Cash and Cash Equivalents at End of
Period $193,387 $3,561,082
Supplemental Cash Flow Disclosures:
Cash paid for interest $87,690 --
Cash paid for income taxes $851,335 --
Non-cash Financing Activities:
Interest accrued on dividends
payable $11,212 --
