Company Returns to Profitability with First Quarter Net Income of $492,076 on Record Revenues of $10.97 Million
SUZHOU, China, May 16 /Xinhua-PRNewswire-FirstCall/ -- China Biopharmaceuticals Holding, Inc., (OTC Bulletin Board: CHBP), a vertically integrated bio-pharmaceutical company focused on developing, manufacturing and distributing innovative drugs in the People’s Republic of China, today announced fiscal results for its first quarter ended March 31, 2008.
Revenue for the first quarter of 2008 increased 78.1% to approximately $10.97 million compared to approximately $6.16 million for the first quarter of 2007. The significant increase in revenues was due to three reasons. First is the rise in selling price and sales of Erye’s raw material drugs. Second, the reform of medical insurance system in rural areas of China promotes the sales of Erye’s drugs. Third, the selling price of the freeze-dried drugs has increased.
Cost of goods sold for the first quarter was approximately $7.7 million, yielding a gross profit of $3.3 million and gross margins of 29.7%, compared to $1.47 million in gross profit and a gross margin of 23.9% during the first quarter of 2007. Thus, gross profits grew by 124.5% on a year-over-year basis. The increase in gross margin is attributed primarily to the increase of the gross profit of the freeze-dried drugs and raw material drugs.
Operating expenses for the three months ended March 31, 2008 were $1.1 million, up 15.4% compared to the same period in 2007. Selling, general and administration expenses for the period increased to approximately $1.07 million from $0.9 million in the first quarter of 2007, which included increased investment in overall marketing including increased costs in advertisement expenses. Research and development expenses were $17,947 in the three months ended March 31, 2008, versus $43,163. This decrease was primarily attributed to the slowing down of drug approval of the China SFDA and new regulatory policies.
Operating income for the first quarter of 2008 totaled approximately $2.2 million, a 315% increase from the $523,795 reported for the first quarter of 2007. Operating margins were 19.8% and 8.5% for the first quarter of 2008 and 2007, respectively. The increase in the operating margin was due to the Company’s Erye Subsidiary strong performance in sales and increased gross margin.
For the first quarter of 2008, net income was $492,076, an improvement of $669,869, compared to a loss of $177,793 for the first quarter of 2007. Fully diluted earnings per share were $0.013 compared to loss of $0.005 for the first quarter of 2007 respectively, based up on 36.5 million fully diluted shares outstanding. The Company had increased interest expense of $356,584 during the quarter versus $347,485 a year ago. The Company also increased its provision for income taxes from $1,108 to $299,409 during the current quarter, yielding an effective tax rate of 16.5%.
"We are extremely pleased to report a healthy quarterly profit and strong cashflow on record revenues. The success of our overall marketing strategy and focusing on high margin products enabled us to achieve a record revenue quarter. We have made huge strides in overcoming the Enshi problems and getting back to focusing on building a successful business. Going forward we intend to build upon the momentum established during the first quarter of 2008 to have a very strong performance for the rest of the year.” commented Madame Zhang Jian, Chairwoman and CFO of China Biopharmaceuticals.
Balance Sheet and Cash Flow
The Company had $2.5 million in cash and cash equivalents on March 31, 2008, versus $1.77 million at December 31, 2007. The Company had total assets of $35.4 million, an increase of $4.16 million form yearend, versus total liabilities of $30.6 million, representing an increase of only $1.9 million from yearend. Shareholders equity improved $1.2 million in the first quarter of 2008. For the first quarter of 2008, the Company generated $2.3 million in cash from operations versus a loss of $332,580 million for the same period in 2007. Four major customers accounted for approximately 36% of the net revenue for the three months ended March 31, 2008 with each customer individually accounting for 13%, 11%, 6%, and 6%, respectively. At March 31, 2008, the total receivable balance due from these customers was $1,213,581, representing 21% of total accounts receivable. For the three months ended March 31, 2007, two major customers accounted for 10% of the net revenue with each customer individually accounting for 5% and 5%, respectively.
Business Plan
Our main manufacturing unit, Erye, recorded a significant growth of 80% in sales revenue for the three months ended March 31, 2008. The Company is still actively looking for growth and expansion opportunities and still believes in the overall strategy of internal growth and acquisitions. Whereas Erye’s top management, Ms. ZHANG Jian and Mr. SHI Mingsheng joined our China Biopharmaceuticals board of directors and are now playing an active role in our management, the Company believes that they will continue to improve our overall operations, giving play to their industrial and manufacturing and marketing expertise. This was a main factor contributing to the Company’s return to profitability during the 3 months period ended March 31, 2008.
Chris Mao, CEO of China Biopharmaceuticals added, “We anticipate that our internally generated financial resources are sufficient to provide for our organic growth. These are the keys to creating a very valuable enterprise for our shareholders. We are looking forward to new opportunities of growth and opportunities in the pharmaceutical manufacturing and stemcell fields.”
Although China’s strongest earthquake in 58 years hit Sichuan Province on May 12, the Company’s production was not affected and no one from the Company was injured by the disaster.
About China Biopharmaceuticals
China Biopharmaceuticals Holdings, Inc (Symbol: CHBP) is a vertically integrated pharmaceutical company dedicated to the discovery, development, manufacturing and marketing of small and large molecule pharmaceutical products, including medicines, vaccines, and active pharmaceutical ingredients for various categories of diseases. CHBP is a U.S.-listed public company with operating subsidiaries and senior management based in China. For further information, please visit our website at http://www.cbioinc.com .
Safe Harbor Statement
The statements contained herein that are not historical facts are "forward looking statements" within the meaning of Section 21E of the Securities and Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. Such forward-looking statements may be identified by, among other things, the use of forward-looking terminology such as "believes," "expects," "may," "will," "should," or "anticipates" or the negative thereof or other variations thereon or comparable terminology, or by discussions of strategy that involve risks and uncertainties. For example, when we say that going forward we intend to build upon the momentum established during the first quarter of 2008 to have a very strong performance for the rest of the year or that we anticipate that our internally generated financial resources are sufficient to provide for our organic growth, or that we are looking forward to new opportunities of growth and opportunities in the pharmaceutical manufacturing and stemcell fields, we are using forward looking statements. The forward-looking statements include risks and uncertainties, including but not limited to, general economic conditions and regulatory developments, not within our control. The factors discussed herein and expressed from time to time in our filings with the Securities and Exchange Commission could cause actual results and developments to be materially different from those expressed or implied by such statements. The forward looking statements are made only as of the date of this filing, and we undertake no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances.
-- FINANCIAL TABLES FOLLOW --
CHINA BIOPHARMACEUTICALS HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 2008 AND DECEMBER 31, 2007
A S S E T S
March 31, December 31,
2008 2007
Unaudited
CURRENT ASSETS:
Cash $ 1,764,561 $ 669,699
Short term investment 714,000 1,096,800
Accounts receivable, trade, net of
allowance for doubtful accounts of
$1,313,177 and $1,260,760 at March 31,
2008 and December 31, 2007,
respectively 4,361,377 3,551,483
Accounts receivable, related parties 122,270 41,932
Notes receivables 71,400 --
Other receivables 148,259 863,627
Other receivables - related parties 924,326 819,621
Advances to suppliers 426,080 797,302
Advances to suppliers - related
parties 237,139 --
Prepaid expenses 591,122 363,819
Inventories 9,581,567 8,962,055
Loan to shareholders 47,124 45,243
Total current assets 18,989,225 17,211,581
PLANT AND EQUIPMENT, net 6,230,739 4,122,169
OTHER ASSETS:
Intangible asset, net 7,548,052 7,398,189
Long term notes receivable 571,200 640,518
Long term other receivables - related
parties 224,928 267,768
Restricted cash 755,421 518,589
Advance on patent and right purchase 999,600 959,700
Other assets 43,254 81,484
Other assets 10,142,455 9,866,248
Total assets $ 35,362,419 $ 31,199,998
L I A B I L I T I E S A N D S H A R E H O L D E R S’ E Q U I T Y
CURRENT LIABILITIES:
Accounts payable $ 6,292,705 $ 5,988,289
Short-term loans 2,184,840 2,371,830
Other payables 698,299 1,381,462
Other payables - related parties 672,208 689,338
Customer deposits 3,206,837 2,129,318
Notes payable 2,516,850 1,727,460
Taxes payable 1,743,818 1,488,964
Redeemable series B preferred stock 12,897,497 12,585,641
Other accrued liabilities 341,759 281,390
Total current liabilities 30,554,813 28,643,692
LONG TERM LIABILITIES: 63,284 65,114
Total liabilities 30,618,097 28,708,806
COMMITMENTS AND CONTINGENCIES -- --
MINORITY INTEREST 6,577,603 5,508,061
SHAREHOLDERS’ EQUITY:
Preferred stock, $0.01 par value,
10,000,000 shares authorized; 50,000
and 50,000 shares
Issued and outstanding at March 31,
2008 and December 31, 2007,
respectively 500 500
Common stock, $0.01 par value, 200,000,000
shares authorized; 36,490,312
shares issued and outstanding at March
31, 2008 and December 31, 2007,
respectively 364,903 364,903
Paid-in capital 13,199,476 13,199,476
Capital receivable (252,471) (252,471)
Deferred compensation (12,000) (21,375)
Statutory reserves 1,186,025 976,439
Accumulated deficit (17,776,742) (18,059,232)
Accumulated other comprehensive income 1,457,028 774,891
Total shareholders’ equity (1,833,281) (3,016,869)
Total liabilities and
shareholders’ equity $ 35,362,419 $ 31,199,998
CHINA BIOPHARMACEUTICALS HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007
UNAUDITED
2008 2007
Restated
REVENUES $ 10,973,241 $ 6,155,560
COST OF GOODS SOLD 7,711,162 4,685,102
GROSS PROFIT 3,262,079 1,470,458
OPERATING EXPENSES
Research and development 17,947 43,163
Selling, general and administrative 1,074,797 903,500
Total Operating Expenses 1,092,744 946,663
INCOME FROM OPERATIONS 2,169,335 523,795
OTHER INCOME (EXPENSE)
Interest income (expense), net (356,584) (347,485)
Total other expense, net (356,584) (347,485)
INCOME BEFORE INCOME TAXES AND MINORITY
INTEREST 1,812,751 176,310
PROVISION FOR INCOME TAXES 299,409 1,108
INCOME BEFORE MINORITY INTEREST 1,513,342 175,202
MINORITY INTEREST 1,021,266 352,995
INCOME (LOSS) FROM CONTINUING OPERATIONS 492,076 (177,793)
INCOME ON DISCONTINUED OPERATIONS
Income from discontinued operations, net of
tax effect -- 89,525
NET INCOME (LOSS) 492,076 (88,268)
Foreign currency translation adjustment 682,137 34,954
COMPREHENSIVE INCOME (LOSS) $ 1,174,213 $ (53,314)
EARNING (LOSS) PER SHARE OF COMMON STOCK
Continuing operations
Basic $ 0.013 $ (0.005)
Diluted 0.013 (0.005)
Discontinued operations
Basic -- (0.002)
Diluted -- (0.002)
WEIGHTED AVERAGED NUMBER OF SHARES
OUTSTANDING - BASIC 36,490,312 36,027,615
WEIGHTED AVERAGED NUMBER OF SHARES
OUTSTANDING - DILUTED 36,540,312 36,027,615
CHINA BIOPHARMACEUTICALS HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007
UNAUDITED
2008 2007
Restated
CASH FLOWS FROM CONTINUING OPERATING ACTIVITIES:
Net income (loss) $ 492,076 $ (88,268)
Net income from discontinued
operations -- (89,525)
Net loss from continuing
operations 492,076 (177,793)
Adjustments to reconcile net
loss from continuing operations
to cash provided by (used in)
continuing operating activities:
Amortization of shares
issued for service 9,375 --
Depreciation 143,805 121,156
Amortization 61,597 25,360
Bad debt expense -- 78,444
Minority interest 1,021,266 516,243
Interest charge on
redeemable stock 311,856 --
Change in operating assets and
liabilities:
Accounts receivable, trade (648,188) (236,020)
Accounts receivable, related
parties 110 (38,311)
Other receivables and
prepayments 509,400 (348,909)
Notes receivables (69,885) (814,452)
Advances to suppliers 395,790 (147,610)
Advances to suppliers
- related parties (232,107) --
Other assets 38,908 88,051
Inventories (241,671) (770,223)
Accounts payable 54,273 1,009,641
Accounts payable -
related parties (77,037) 43,795
Other payables and accrued
liabilities (647,743) (354,588)
Customer deposits 968,007 741,529
Taxes payable 188,855 (68,893)
Net cash provided by
(used in) continuing
operating activities 2,278,687 (332,580)
CASH FLOWS FROM CONTINUING OPERATION
INVESTING ACTIVITIES:
Repayment received from long term notes
receivables -- 67,224
Purchase of equipment (43,066) (59,524)
Additions to construction in
progress (2,000,563) --
Increase in other receivables -
related parties (316,866) --
Decrease in short term investment 419,310 --
Repayment of loan to related party 134,958 --
Net cash (used in) provided
by continuing operation
investing activities (1,806,227) 7,700
CASH FLOWS FROM CONTINUING OPERATION
FINANCING ACTIVITIES:
Increase in restricted cash (210,704) (125,784)
Payments on bank loan (279,540) --
Proceeds (payments) on long term debts
- related parties 202,275 (659)
Increase in notes payables 702,344 --
Net cash provided by
(used in) continuing operation
financing activities 414,375 (126,443)
Net increase (decrease) in cash from
continuing operations 886,835 (451,323)
Cash provided by discontinued operating
activities -- 11,945
Net cash provided by discontinued
operations -- 11,945
Effect of exchange rate on cash 208,027 (35,119)
INCREASE (DECREASE) IN CASH 1,094,862 (474,497)
Cash, beginning of period 669,699 2,958,556
Cash, end of period $ 1,764,561 $ 2,484,059
For more information, please contact:
Investors Contact:
HCI Emerging Growth
Alan Sheinwald
Tel: +1-914-669-0222 (U.S.)
Email: Alan.Sheinwald@hcinternational.net
