LIUZHOU CITY, China, May 17, 2012 /PRNewswire-Asia/ -- China BCT Pharmacy Group, Inc., (OTC BB: CNBI), ("China BCT" or the "Company"), a leading pharmaceutical distributor, retail pharmacy, and manufacturer of pharmaceutical products in Guangxi Province, China, today announced results for the first quarter ending March 31, 2012.
First Quarter 2012 Highlights
"We are pleased to report growth of both revenue and net income for the quarter. The strong performance was primarily driven by a 23.1% growth in sales in our pharmaceutical distribution segment, which benefited from increased coverage by China's national insurance plan coupled with separate distribution agreements with seven government-owned hospitals," said Mr. Huitian Tang, Chief Executive Officer and Chairman of China BCT. "Our retail business continued to grow to diversify our business mix. We have been consolidating our existing pharmacy stores into larger stores with built-in TCM, clinics. Also, our manufacturing operation overcame pricing pressures thanks to enhanced sales efforts. Overall, our profitability remains attractive."
First Quarter 2012 Results
First quarter 2012 revenue increased 21.6% to $71.2 million from $58.6 million in the first quarter of 2011.
Revenue from the Company's pharmaceutical distribution segment increased 23.1% year-over-year to $53.3 million, or 74.8% of total revenue in the first quarter of 2012. The increase in revenue was primarily due to an $11.7 million increase in sales to hospitals as a result of a wider range of products sold, benefiting from increased coverage by the national insurance plan. With separate distribution agreements with seven government-owned hospitals, the Company also managed to increase its share of purchases from these large customers. Sales to clinics and health care centers decreased $3.1 million in the first quarter of 2012, as the Company is still at the early stage of developing these new markets.
Revenue from the Company's retail pharmacy segment grew 12.0% year-over-year to $14.0 million, or 19.6% of total first quarter revenue, primarily due to the opening of 52 new stores since the second quarter of 2011, including 14 stores opened during the three months ended March 31, 2012, offset by 26 store closures, as well as a membership card plan instituted for in-store TCM clinics.
Revenue from the Company's manufacturing segment rose 42.9% year-over-year to $4.0 million, or 5.6% of total first quarter revenue, due to increased penetration to distributors as a result of enhanced sales efforts.
Gross profit grew 21.3% year-over-year to $16.5 million, up from $13.6 million for the same period of 2011. Gross profit margin was stable at 23.2%.
Within pharmaceutical distribution, gross profit margin decreased from 18.0% in the first quarter of 2011 to 17.3% in the first quarter of 2012, reflecting increased sales to hospitals at lower average margins.
Gross profit margin for the retail pharmacy segment increased to 35.8% from 32.2% in the first quarter of 2011, reflecting increased sales of higher margin products, including Chinese herbs, following the roll-out of in-store TCM clinics.
Manufacturing segment gross profit margin was 57.3% and 64.1% during the quarters ending March 31, 2012 and 2011, respectively. The decrease in gross margin was attributable to a higher percentage of sales of lower margin products.
Operating expenses decreased 12.0% and totaled $4.4 million compared to $5.0 million for the same period in 2011. The decrease was mainly driven by lower administrative expenses which decreased 33.3% to $2.0 million, primarily due to a $0.6 million reduction in consulting fees associated with the listing services in prior years and a $0.4 million decrease in share-based compensation, partially offset by a $0.5 million increase in selling expenses to $2.4 million, compared to $1.9 million in the same period of 2011, due to enhanced sales and marketing activities.
Operating income increased 40.6% to $12.1 million, or 17.1% of revenue, from $8.6 million, or 14.7% of revenue, in the first quarter of 2011.
GAAP net income applicable to common stock increased 32.0% to $7.7 million, or $0.20 per diluted share, as compared to $5.9 million, or $0.15 per diluted share, in the first quarter of 2011. Diluted earnings per share were calculated using weighted average shares of 38.2 million for the quarters ended March 31, 2012 and 2011. Excluding a non-cash loss related to change in the fair value of warrant liabilities and excluding share-based compensation expense, first quarter 2012 non-GAAP adjusted net income was $7.9 million, or $0.21 per diluted share, compared to non-GAAP adjusted net income of $6.2 million, or $0.16 per diluted share in the first quarter of 2011.
Financial Condition
As of March 31, 2012, China BCT had $31.6 million in cash and cash equivalents, $118.9 million in working capital and a current ratio of 2.5. Long-term bank debt was $0.2 million. Stockholders' equity was $125.3 million on March 31, 2012, compared to $116.5 million on December 31, 2011.
The Company generated $0.8 million in cash flow from operating activities for the three months ended March 31, 2012, compared to cash flow generated by operating activities of $18.8 million in the prior year, primarily due to an increase in accounts receivable due to a slowdown in payments from customers. Cash used in investing activities was $1.2 million, largely the same as cash used in investing activities in 2011. Cash flow from financing activities totaled $0.3 million, as compared to $25.0 million a year ago, which included $29.5 million from the placement of preferred stock, offset by the net repayment of bank loans of $3.2 million for the quarter ended March 31, 2011.
Business Outlook
"For the quarters ahead in 2012, we continue to expect double digit revenue growth driven by our ability to develop and leverage new wholesale contracts at the supplier and hospital levels, our expansion of the in-store TCM counseling service concept at our retail stores and greater output from our manufacturing operation.
"We expect to focus on winning additional contracts for our distribution business. Since the centralized bidding process for the 2011 contract closed in the second quarter of 2011, we estimate that to date we have won 2,000 to 3,000 more product distribution rights with regard to our hospital and clinic clients, which represents an approximately 50% increase from 2010. In addition, we have increased the number of bids awarded to us for counties and cities under the New Rural Cooperate Medicare from 6 to 22, after being awarded an additional 16 territories in 2011.
"On the retail pharmacy front, we are committed to growing our network by refining and expanding our existing presence in selected markets. We are targeting to add 4 to 5 drug stores with built-in TCM clinics for each larger city and at least one such store for each county in Guangxi Province. We re-opened our first retail pharmacy store with a built-in TCM clinic in December 2011, the second one in March 2012 and we expect to open another 3 to 4 such stores in April 2012. In the next few quarters, we expect to continue to create larger, attractively refurbished retail stores and close some smaller ones to create higher revenue, more profitable stores. We are targeting a 20 to 30 store program that will cost an estimated $12 million by the end of 2012.
"With regard to profitability, we expect top line growth to enhance overall profitability for the remainder of the year. However we expect to face continued margin pressure. This is due to the increasing sales mix in favor of lower margin products sold to hospitals by our wholesale operation. Manufacturing margins will also be under pressure from the capping of drug prices by the Chinese government . We expect to counteract these pressures somewhat should our retail strategy, with its higher margin TCM sales, prove successful. Reducing distribution costs and increasing margins by building our own distribution center is no longer part of our short-term strategy. We believe that the investment is best undertaken when our overall revenues reach $500 million per year, at which point the economies of scale of the center will be sufficient to justify the cost," concluded Mr. Tang.
About China BCT
China BCT is engaged in pharmaceutical distribution, pharmacy retailing, and the manufacture of pharmaceutical products through its subsidiaries Guangxi Liuzhou Baicaotang Medicine Limited, Guangxi Liuzhou Baicaotang Medicine Retail Limited, and Hefeng Pharmaceutical Co. Limited in Guangxi province, China. It operates a large regional retail network in Guangxi province, consisting of 205 directly owned retail stores in Guangxi province and currently over 8,000 products are distributed through the Company's wholesale distribution network. For more information, please visit www.china-bct.com.
Safe Harbor Statement
This press release contains "forward-looking statements" within the meaning of the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements involve known and unknown risks, uncertainties and other factors that could cause the actual results of the Company to differ materially from the results expressed or implied by such statements, including: changes from anticipated levels of sales; future international, national or regional economic and competitive conditions; changes in relationships with customers; access to capital; difficulties in developing and marketing new products and services; marketing existing products and services; customer acceptance of existing and new products and services; and other factors detailed in the Company's periodic filings with the Securities and Exchange Commission (http://www.sec.gov). Accordingly, although the Company believes that the expectations reflected in such forward-looking statements are reasonable, there can be no assurance that such expectations will prove to be correct. The Company has no obligation to update the forward-looking information contained in this presentation.
Use of Non-GAAP Financial Information
GAAP results for the three months ended March 31, 2012 and 2011 include change in fair value of warrant liabilities and share-based compensation expense. To supplement the Company's consolidated financial statements presented on a GAAP basis, the Company has provided non-GAAP financial information excluding the impact of these items in this release, which are non-GAAP net income and non-GAAP diluted earnings per share. The Company's management believes that these non-GAAP measures provide investors with a better understanding of how the results related to the Company's historical performance. The additional adjusted information is not meant to be considered in isolation or as a substitute for GAAP financials. The adjusted financial information that the Company provides also may differ from the adjusted information provided by other companies. Management believes that these adjusted financial measures are useful to investors because they exclude non-cash expenses that management excludes when it internally evaluates the performance of the Company's business and makes operating decisions, including internal budgeting, and performance measurement, as these measures provide a consistent method of comparison to historical periods. As a result, the provision of these adjusted measures allows investors to evaluate the Company's performance using the same methodology and information as that used by the Company's management. Adjusted measures are subject to inherent limitations because they do not include all of the expenses included under GAAP and because they involve the exercise of judgment of which charges are excluded from the adjusted financial measure. However, the Company's management compensates for these limitations by providing the relevant disclosure of the items excluded. A reconciliation of each adjusted measures to the nearest GAAP measure appears in the table below.
Company Contact: Investor Relations Contact:
Ms. Shelly Zhang, Chief Financial Officer CCG Investor Relations
China BCT Pharmacy Group, Inc. Mr. Mark Collinson, Partner
Email: shelly.zhang@china-bct.com Email: mark.collinson@ccgir.com
Tel: +86-772-363-8318 Tel: +1-310-954-1343
Website: www.china-bct.com
-Financial Tables Follow-
China BCT Pharmacy Group, Inc. | ||||
RECONCILIATION OF NON-GAAP NET INCOME AND DILUTED EPS | ||||
Three months Ended | ||||
March 31, | ||||
2012 | 2011 | |||
US$ - thousands, except per share | ||||
Net income (GAAP) | $ 7,738 | $ 5,860 | ||
- Share-based compensation expense | 139 | 569 | ||
- Change in fair value of warrant liabilities | 43 | (275) | ||
Adjusted net income (non-GAAP) | $ 7,920 | $ 6,154 | ||
Per diluted share | ||||
Net income (GAAP) | $ 0.20 | $ 0.15 | ||
- Share-based compensation expense | 0.01 | 0.02 | ||
- Change in fair value of warrant liabilities | - | (0.01) | ||
Adjusted net income (non-GAAP) | $ 0.21 | $ 0.16 | ||
Weighted average shares outstanding - '000 | ||||
-diluted | 38,154 | 38,154 | ||
China BCT Pharmacy Group, Inc. | ||||||||||
Consolidated Statements of Income and Comprehensive Income (Unaudited) | ||||||||||
(Stated in US Dollars) | ||||||||||
Three months ended | ||||||||||
March 31, | ||||||||||
2012 | 2011 | |||||||||
Sales revenue | $ | 71,245,359 | $ | 58,603,240 | ||||||
Cost of sales | 54,733,383 | 44,996,039 | ||||||||
Gross profit | 16,511,976 | 13,607,201 | ||||||||
Operating expenses | ||||||||||
Administrative expenses | 1,997,298 | 3,030,695 | ||||||||
Selling expenses | 2,380,949 | 1,944,585 | ||||||||
Total operating expenses | 4,378,247 | 4,975,280 | ||||||||
Income from operations | 12,133,729 | 8,631,921 | ||||||||
Non-operating income (expense) | ||||||||||
Interest income | 5,349 | 1,827 | ||||||||
Other income | 164,440 | 22,196 | ||||||||
Change in fair value of warrant liabilities | (42,724) | 275,382 | ||||||||
Other expenses | (1,208) | - | ||||||||
Finance costs | (221,908) | (194,058) | ||||||||
Total non-operating income (expense) | (96,051) | 105,347 | ||||||||
Income before income taxes | 12,037,678 | 8,737,268 | ||||||||
Income taxes | (3,132,557) | (2,487,797) | ||||||||
Net income | 8,905,121 | 6,249,471 | ||||||||
Other comprehensive income | ||||||||||
Foreign currency translation adjustments | 887,498 | 353,910 | ||||||||
Total comprehensive income | $ | 9,792,619 | $ | 6,603,381 | ||||||
Earnings per share : Basic and diluted | $ | 0.20 | $ | 0.15 | ||||||
Weighted average number of shares outstanding : | ||||||||||
Basic and diluted | 38,154,340 | 38,154,340 | ||||||||
Reconciliation of net income to applicable income to common stock: | ||||||||||
Net income | $ | 8,905,121 | $ | 6,249,471 | ||||||
Less: dividends and accretion on preferred stock | 1,167,011 | 389,004 | ||||||||
Income applicable to common stock | $ | 7,738,110 | $ | 5,860,467 | ||||||
China BCT Pharmacy Group, Inc. | ||||||||
Consolidated Balance Sheets | ||||||||
(Stated in US Dollars) | ||||||||
March 31, | December 31, | |||||||
2012 | 2011 | |||||||
(Unaudited) | (*) | |||||||
Assets | ||||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 31,590,786 | $ | 31,479,528 | ||||
Restricted cash | 702,836 | 1,052,096 | ||||||
Accounts receivable, net | 137,626,354 | 118,406,001 | ||||||
Bills receivable | 167,170 | 33,052 | ||||||
Amounts due from related companies | 256,574 | 255,169 | ||||||
Other receivables, prepayments and deposits | 8,803,837 | 5,750,056 | ||||||
Inventories | 19,724,650 | 14,183,052 | ||||||
Deferred income taxes | 913,110 | 927,860 | ||||||
Total current assets | 199,785,317 | 172,086,814 | ||||||
Property, plant and equipment, net | 18,968,321 | 18,097,062 | ||||||
Land use rights, net | 13,584,030 | 13,584,135 | ||||||
Long-term deposits | 7,273,060 | 7,070,400 | ||||||
Goodwill | 542,881 | 540,157 | ||||||
Other intangible assets, net | 483,459 | 504,948 | ||||||
Deferred income taxes | 677,071 | 667,509 | ||||||
Other investment | 31,622 | 31,424 | ||||||
Total assets | $ | 241,345,761 | $ | 212,582,449 | ||||
Liabilities and stockholders' equity | ||||||||
Liabilities | ||||||||
Current liabilities | ||||||||
Accounts payable | $ | 62,733,066 | $ | 42,290,191 | ||||
Bills payable | 1,405,672 | 2,104,192 | ||||||
Other payables and accrued expenses | 4,138,729 | 5,490,237 | ||||||
Amounts due to directors | 172,247 | 168,246 | ||||||
Amounts due to related companies | 34,146 | 37,604 | ||||||
Income taxes payable | 3,087,507 | 2,726,869 | ||||||
Secured bank loans | 9,093,996 | 9,036,060 | ||||||
Other loans | 193,052 | 200,956 | ||||||
Retirement benefit costs | 55,089 | 46,854 | ||||||
Total current liabilities | 80,913,504 | 62,101,209 | ||||||
Secured long-term bank loans | 187,637 | 206,767 | ||||||
Warrant liabilities | 233,715 | 190,991 | ||||||
Retirement benefit costs | 172,732 | 177,368 | ||||||
Total liabilities | 81,507,588 | 62,676,335 | ||||||
Commitments and contingencies | ||||||||
Convertible, redeemable preferred stock | ||||||||
Series A convertible redeemable preferred stock; | ||||||||
$0.001 par value; 20,000,000 shares authorized; | ||||||||
9,375,000 shares issued and outstanding | 34,552,914 | 33,385,903 | ||||||
Stockholders' equity | ||||||||
Common stock: par value $0.001 per share | ||||||||
150,000,000 shares authorized and 38,154,340 shares | ||||||||
issued and outstanding | 38,154 | 38,154 | ||||||
Additional paid-in capital | 18,413,206 | 18,273,766 | ||||||
Statutory and other reserves | 6,851,002 | 6,851,002 | ||||||
Accumulated other comprehensive income | 9,796,653 | 8,909,155 | ||||||
Retained earnings | 90,186,244 | 82,448,134 | ||||||
Total stockholders' equity | 125,285,259 | 116,520,211 | ||||||
Total liabilities and stockholders' equity | $ | 241,345,761 | $ | 212,582,449 | ||||
(*) Derived from audited financial statements. | ||||||||
China BCT Pharmacy Group, Inc. | |||||||
Consolidated Statements of Cash Flows (Unaudited) | |||||||
(Stated in US Dollars) | |||||||
Three months ended March 31, | |||||||
2012 | 2011 | ||||||
Cash flows from operating activities | |||||||
Net income | $ | 8,905,121 | $ | 6,249,471 | |||
Adjustments to reconcile net income to net cash | |||||||
provided by operating activities: | |||||||
Depreciation and amortization | 403,214 | 364,481 | |||||
Deferred taxes | 14,985 | (1,360) | |||||
Share-based compensation expense | 139,440 | 568,523 | |||||
Change in fair value of warrant liabilities | 42,724 | (275,382) | |||||
Changes in operating assets and liabilities: | |||||||
Accounts receivable | (18,488,308) | 13,847,009 | |||||
Bills receivable | (134,011) | - | |||||
Other receivables, prepayments and deposits | (3,019,841) | (444,695) | |||||
Inventories | (5,456,370) | 1,126,770 | |||||
Accounts payable | 20,191,721) | (2,528,003) | |||||
Bills payable | (712,319) | (305,401) | |||||
Other payables and accrued expenses | (1,396,331) | 264,661 | |||||
Retirement benefit costs | 2,188 | (5,985) | |||||
Income taxes payable | 343,717 | (33,875) | |||||
Total adjustments | (8,069,191) | 12,576,743 | |||||
Net cash flows provided by operating activities | $ | 835,930 | $ | 18,826,214 | |||
Cash flows from investing activities | |||||||
Additions to property, plant and equipment | $ | (1,053,384) | $ | (15,045) | |||
Payments to acquire intangible assets | (334) | - | |||||
Change in long-term deposits | (158,230) | (1,214,080) | |||||
Net cash flows used in investing activities | (1,211,948) | (1,229,125) | |||||
Cash flows from financing activities | |||||||
Repayments to related companies | (3,495) | (1,495,952) | |||||
Change in restricted cash | 356,159 | 152,692 | |||||
Repayments from directors | 2,943 | 2,559 | |||||
Net proceeds received from placement of preferred stock | - | 29,495,866 | |||||
Repayments of bank loans | (19,447) | (3,174,005) | |||||
Net cash flows provided by financing activities | 336,160 | 24,981,160 | |||||
Effect of foreign currency translation on cash and cash equivalents | 151,116 | 37,192 | |||||
Net increase in cash and cash equivalents | 111,258 | 42,615,441 | |||||
Cash and cash equivalents - beginning of period | 31,479,528 | 20,157,112 | |||||
Cash and cash equivalents - end of period | $ | 31,590,786 | $ | 62,772,553 | |||
Supplemental disclosures for cash flow information: | |||||||
Cash paid for: | |||||||
Interest | $ | 125,497 | $ | 175,386 | |||
Income taxes | $ | 2,773,856 | $ | 2,523,032 | |||
Non-cash financing and investing activities | |||||||
Dividends and accretion on preferred stock | $ | 1,167,011 | $ | 389,004 | |||
