omniture

China BCT Reports Strong Second Quarter 2010 Results

2010-08-17 06:45 658
-- Second quarter 2010 revenue rose 43% year-over-year to $47.5 million

-- Second quarter 2010 net income rose 35% year-over-year to $7.1 million, or $0.19 per diluted share

    LIUZHOU CITY, China, Aug. 17 /PRNewswire-Asia-FirstCall/ -- China BCT Pharmacy Group, Inc., (OTC Bulletin Board: CNBI), ("China BCT" or the "Company"), a leading pharmaceutical distributor, retail pharmacy, and manufacturer of pharmaceutical products in Guangxi Province, China, today announced strong results for the second quarter ended June 30, 2010.

    Second Quarter 2010 Highlights

    -- Revenue increased 42.8% year-over-year to $47.5 million
    -- Gross profit rose 48.1% year-over-year to $12.6 million
    -- Operating income grew 49.6% year-over-year to $10.3 million
    -- GAAP net income was $7.1 million, or $0.19 per diluted share, compared
       to $5.3 million, or $0.16 per diluted share, in the year ago quarter
    -- Excluding non-cash expenses related to change in the fair value of
       warrant liabilities, non-GAAP adjusted net income was $7.6 million, or
       $0.20 per diluted share
    -- In May 2010, China BCT announced the successful acquisition of 11
       retail pharmacy stores in Laibin City, Xiangzhou County, expanding the
       Company's pharmacy footprint in Guangxi Province
    -- In June 2010, the Company announced further expansion of its retail
       network across Guangxi with the opening of 12 new retail pharmacy
       stores
    -- Signed an exclusive three-year pharmaceutical distribution contract
       with Liujiang County Chinese Medicine Hospital, effective July 1, 2010
    -- Strengthened corporate governance by appointing Mr. Man Wai Chiu, Mr.
       Eng Leong Lee and Mr. Simon Choi to its Board as independent directors
    -- Launched new corporate and investor relations website at 
       http://www.china-bct.com


    "We are very pleased to report strong second quarter financial performance. The expansion of our distribution network in Guangxi Province contributed favorably to our solid 42.8% year-over-year revenue growth this quarter," commented Mr. Hui Tian Tang, Chairman and Chief Executive Officer of China BCT Pharmacy Group, Inc. "Our exclusive three-year pharmaceutical distribution contract with Liujiang County Chinese Medicine Hospital dovetails well with our strategy of growing revenue while maintaining overall profitability levels. In the second half of 2010, as industry consolidation continues, we will pursue additional acquisition opportunities in China's fragmented retail pharmacy market. We have a focused growth strategy and we believe our strategic investments will generate substantial returns over time."

    Second Quarter 2010 Results

    For the second quarter ended June 30, 2010, revenue increased 42.8% to $47.5 million, as compared to $33.3 million in the same quarter of 2009. The increase in revenue was primarily driven by increased sales contributed from the Company's newly acquired retail pharmacy and stronger sales from pharmaceutical distribution segments.

    In the second quarter of 2010, net sales from the Company's pharmaceutical distribution segment increased 37.4% year-over-year to $33.3 million, or 70.2% of total revenue. Higher pharmaceutical distribution sales during the quarter primarily reflects greater sales to hospitals, where a larger quantity and wider range of pharmaceutical products were distributed compared to second quarter 2009.

    Net sales from the Company's retail pharmacy segment grew 68.8% year-over-year to $11.6 million, or 24.5% of total revenue, in the second quarter of 2010. Approximately $3.4 million of incremental sales from 59 new stores added after June 30, 2009, drove this quarter's increase in retail pharmacy revenue. Retail pharmacy same store sales grew 19.3% year-over-year to $8.2 million from $6.8 million in the second quarter of 2009.

    Manufacturing pharmacy net sales were $2.5 million, or 5.3% of total revenue, up 20.2% from $2.1 million, or 6.3% of total revenue, for the three months ended June 30, 2009. This growth reflects the Company's increased marketing efforts to achieve greater sales penetration among its existing distributors.

    Gross profit grew 48.1% year-over-year to $12.6 million, up from $8.5 million for the same period of 2009. Gross margin expanded 1.0 percentage point to 26.6%, as compared to 25.6% in the comparable period last year. The increase in gross margin in the second quarter of 2010 mainly reflects a greater proportion of sales of higher margin products, such as private label products, from the Company's retail pharmacy segment. Retail pharmacy gross margin rose from 28.4% in second quarter 2009 to 32.1% this quarter. Pharmacy distribution gross margin held relatively steady at 21.8% in second quarter 2010, compared to 22.3% in the same period last year. Pharmacy manufacturing gross margin increased 1.9 percentage points from 63.3% in the second quarter of 2009 to 65.2% this quarter, primarily due to a favorable year-over-year change in product mix within the segment.

    Operating expenses increased by 41.9% to $2.4 million, compared to $1.7 million in the same period last year. Administrative expenses increased 61.6% to $1.3 million, or 2.8% of revenue, as compared to $0.8 million, or 2.5% of revenue, in the same period of 2009, primarily due to an increase in staff compensation and rental expense for newly opened stores and incremental public company professional fees. Selling expenses rose 31.6% to $1.1 million, compared to $0.8 million in the same period of 2009, due to the Company's increased sales and marketing activities.

    Operating income increased 49.6% to $10.3 million, or 21.6% of revenue, from $6.9 million, or 20.6% of revenue, in the second quarter of 2009.

    GAAP net income increased 35.3% to $7.1 million, or $0.19 per diluted share, as compared to $5.3 million, or $0.16 per diluted share, in the second quarter of 2009. Diluted earnings per share were calculated using weighted average shares of 38,471,274 and 32,000,000 for the quarters ended June 30, 2010 and June 30, 2009, respectively.

    Adjusted net income, excluding the $0.4 million non-cash expense related to change in the fair value of warrant liabilities, was $7.6 million, or $0.20 per diluted share. There were no comparable adjustments to net income in the second quarter of 2009.

    Six Months 2010 Results

    Net revenue was $81.5 million in the first half of 2010, up 24.3% from $65.6 million in the first half of 2009. In terms of revenue mix, pharmacy distribution remained the Company's largest segment in first half 2010 at 69.4% of total sales, compared to 72.8% in the same period last year. Retail pharmacy represented 25.2% of total Company sales in first half 2010, up from 21.0% in the same period last year. Pharmacy manufacturing accounted for 5.4% of total sales during first half 2010, compared to 6.2% in the first half of last year.

    Gross profit was $21.5 million, or 26.4% of revenue, up 23.7% from $17.4 million, or 26.5% of revenue, in the first half of 2009. Operating income was $16.5 million, or 20.2% of revenue, up 18.8% from $13.9 million, or 21.1% of revenue, in the first half of 2009. Net income increased 10.7% to $11.4 million, or $0.30 per diluted share, compared to $10.3 million, or $0.32 per diluted share, in the first half of 2009. Excluding non-cash expense related to change in the fair value of warrant liabilities, adjusted net income was $12.1 million, or $0.32 per diluted share. There were no comparable adjustments to net income in the first half of 2009.

    Financial Condition

    As of June 30, 2010, BCT had $16.5 million in cash and cash equivalents and $42.7 million in working capital and a current ratio of 1.9:1. Long-term bank debt was $3.6 million. Shareholders' equity was $65.2 million on June 30, 2010, up from $53.4 million at the end of 2009.

    The Company generated $6.0 million in cash from operating activities for the quarter ended June 30, 2010, compared to cash from operating activities of $6.1 million in the same period in 2009. Cash used in investing activities was $3.7 million, compared to cash used in investing activities of $0.2 million for the same period last year. For the six months ended June 30, 2010, the Company recorded cash payments of approximately $4.3 million for retail store acquisitions. Inventory levels increased quarter-over-quarter as the Company anticipated and prepared for accelerating revenue growth in future quarters.

    Business Outlook

    "In the first half of 2010, China BCT successfully added 59 pharmaceutical stores to our retail arm and we continue to target acquiring more new pharmacy outlets this year to achieve our goal. In the second half of 2010, we will step up our efforts to establish new exclusive distribution contracts with hospitals in Guangxi. We believe this strategy will help us achieve sustainable growth in profitability over the long term," said Mr. Tang "We will adopt a selective approach to acquire retail chains, or individual stores, in prime locations and with strong financial track records to further develop our retail pharmacy network into rural areas. We also plan to diversify our manufacturing product portfolio to include trial manufacturing of Compound Diphenoxylate Tablet, an effective treatment for diarrhea. Given its attractive margin and China BCT's exclusive license to manufacture both the raw material and the drug, we are confident that our manufacturing segment will play a bigger role in the Company's future revenue and profitability," he added.

    About China BCT

    China BCT is engaged in pharmaceutical distribution, pharmacy retailing, and the manufacture of pharmaceuticals products through its subsidiaries Guangxi Liuzhou Baicaotang Medicine Limited, Hefeng Pharmaceutical Co. Limited, and Guangxi Liuzhou Baicaotang Medicine Retail Limited in Guangxi province, China. It operates a large regional retail network in Guangxi province, consisting of 137 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 http://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 statements related to anticipated revenue and payback period of the new stores. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including those discussed in the Company's periodic reports that are filed with the Securities and Exchange Commission and available on its website (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 and six months ended June 30, 2010 and 2009 include change in fair value of warrant liabilities. To supplement the Company's condensed 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.

    For more information, please contact: 

    Company Contact:

     Ms. Shelly Zhang, Chief Financial Officer 
     China BCT Pharmacy Group, Inc.
     Email:   z_shelly@hotmail.com
     Tel:     +86-772-363-8318
     Website: http://www.china-bct.com

    Investor Relations Contact:

     Mr. Crocker Coulson, President
     Email:   crocker.coulson@ccgir.com
     Tel:     +1-646-213-1915
     Website: http://www.ccgirasia.com



                         China BCT Pharmacy Group, Inc.
              RECONCILIATION OF NON-GAAP NET INCOME AND DILUTED EPS

                                       Three months Ended  Six months Ended
                                             June 30,        June 30,
    US$ - thousands, except per share      2010    2009     2010     2009

    Net income                            $7,132  $5,271  $11,377  $10,278
    - Non-cash adjustment - Change in
     fair value of warrant liabilities       418      --      707       --
    Adjusted net income excluding non-
     cash item                            $7,550  $5,271  $12,083  $10,278

    Per diluted share
    - Net income per share                 $0.19   $0.16    $0.30    $0.32
    - Non-cash adjustment per share        $0.01      --    $0.02       -- 
    - Adjusted net income per share        $0.20   $0.16    $0.32    $0.32
    Weighted average shares outstanding -
     '000
    - Diluted                             38,471  32,000   38,295   32,000




                         China BCT Pharmacy Group, Inc.
                (Formerly named China Baicaotang Medicine Limited)
          Consolidated Statements of Income and Comprehensive Income
                                     (Unaudited)
                               (Stated in US Dollars)

                              Three months ended         Six months ended
                                   June 30,                  June 30,
                              2010         2009         2010         2009

    Sales revenue          $47,492,718  $33,263,862  $81,521,596  $65,606,254
    Cost of sales           34,879,110   24,745,489   60,046,311   48,239,284

    Gross profit            12,613,608    8,518,373   21,475,285   17,366,970

    Operating expenses
    Administrative
     expenses                1,294,476      800,951    2,936,899    1,797,046
    Research and
     development expenses           --       52,969           --       52,969
    Selling expenses         1,059,916      805,304    2,086,435    1,663,990

    Total operating
     expenses                2,354,392    1,659,224    5,023,334    3,514,005

    Income from operations  10,259,216    6,859,149   16,451,951   13,852,965

    Non-operating income
     (expense)
    Interest income              4,023        8,985        4,142        9,091
    Other income                28,667           --      126,707           -- 
    Change in fair value
     of warrant
     liabilities              (418,027)          --     (706,810)          -- 
    Other expenses              (1,387)      (6,875)     (40,699)      (9,470)
    Finance costs             (264,480)    (262,165)    (477,609)    (558,340)
    Total non-operating
     income (expense)         (651,204)    (260,055)  (1,094,269)    (558,719)

    Income before income
     taxes                   9,608,012    6,599,094   15,357,682   13,294,246
    Income taxes            (2,475,603)  (1,327,867)  (3,981,108)  (3,016,250)

    Net income               7,132,409    5,271,227   11,376,574   10,277,996

    Other comprehensive
     income
    Foreign currency
     translation
    adjustments                (25,872)      14,428       (1,334)     (22,564)

    Total comprehensive
     income                 $7,106,537   $5,285,655  $11,375,240  $10,255,432

    Earnings per share -
     basic                       $0.19        $0.16        $0.30        $0.32

    Earnings per share -
     diluted                     $0.19        $0.16        $0.30        $0.32

    Weighted average
     number of shares
     outstanding - basic    38,119,340   32,000,000   37,942,936   32,000,000

    Weighted average
     number of shares
     outstanding - diluted  38,471,274   32,000,000   38,294,870   32,000,000



                          China BCT Pharmacy Group, Inc.
                (Formerly named China Baicaotang Medicine Limited)
                           Consolidated Balance Sheets
                            (Stated in US Dollars)

                                                 June 30,         December 31,
                                                   2010               2009
                                                (Unaudited)        (Audited)
    Assets
    Current assets
    Cash and cash equivalents                   $16,497,408       $13,304,158
    Restricted cash                                 925,537         1,155,779
    Accounts receivable, net                     47,299,779        35,410,039
    Amounts due from related companies            5,494,140         4,275,586
    Other receivables, prepayments and
     deposits                                     3,864,769         2,526,398
    Inventories                                  13,703,101         8,745,525
    Deferred income taxes                            28,932            60,164
    Total current assets                         87,813,666        65,477,649

    Property, plant and equipment, net           14,293,662        12,171,689
    Goodwill                                        107,968           107,968
    Other intangible assets, net                    627,466           660,034
    Land use rights, net                         13,171,034        13,979,753
    Deferred income taxes                           696,149           663,699
    Total assets                               $116,709,945       $93,060,792

    Liabilities and Stockholders' Equity
    Liabilities
    Accounts payable                            $30,195,846       $21,398,816
    Other payables and accrued expenses           2,056,151         3,194,612
    Amounts due to directors                        696,294         1,008,111
    Amounts due to related companies                 65,108           128,579
    Income tax payable                            2,586,324           562,603
    Secured bank loans                            9,279,808         7,136,069
    Other loans                                     152,157         2,361,258
    Retirement benefit costs                         46,939            59,158
    Total current liabilities                    45,078,627        35,849,206

    Secured long-term bank loans                  3,603,589         3,631,957
    Warrant liabilities                           2,562,229                -- 
    Retirement benefit costs                        226,515           201,320
    Total liabilities                            51,470,960        39,682,483

    Commitments and contingencies

    Stockholders' Equity
    Common stock: par value $0.001 per
     share; 100,000,000 shares
     authorized; 38,119,340 and
     37,089,370 shares issued and
     outstanding as of June 30, 2010 and
     December 31, 2009, respectively                 38,119            37,089
    Additional paid-in capital                   15,405,305        14,920,899
    Statutory and other reserves                  2,605,901         2,605,901
    Accumulated other comprehensive
     income                                       2,108,936         2,110,270
    Retained earnings                            45,080,724        33,704,150
     Total Stockholders' Equity                  65,238,985        53,378,309
    Total Liabilities and Stockholders'
     Equity                                    $116,709,945       $93,060,792



                         China BCT Pharmacy Group, Inc.
               (Formerly named China Baicaotang Medicine Limited)
                     Consolidated Statements of Cash Flows
                                 (Unaudited)
                           (Stated in US Dollars)

                                                 Six months ended June 30,
                                                   2010              2009
    Cash flows from operating activities:
    Net income                                 $11,376,574       $10,277,996
    Adjustments to reconcile net income
     to net cash provided by operating
     activities:

    Depreciation and amortization                  574,981           561,730
    Deferred income taxes                           (1,218)          (10,383)
    Gain on sale of land use right                 (44,919)               -- 
    Loss on sale of property, plant and
     equipment                                          --               306
    Change in fair value of warrant
     liabilities                                   706,810                -- 
    Share-based compensation expense                25,717                -- 
    Changes in operating assets and
     liabilities, net of effects of
     acquisitions of retail stores:
    Accounts receivable                        (11,889,740)       (5,150,170)
    Bills receivables                                   --           (10,722)
    Other receivables, prepayments and
     deposits                                   (1,338,371)       (1,912,147)
    Inventories                                 (3,116,638)       (2,675,366)
    Accounts payable                             8,797,030         3,455,277
    Other payables and accrued expenses         (1,138,461)        2,034,756
    Retirement benefit costs                        12,976                -- 
    Income tax payable                           2,023,721          (503,341)
    Total adjustments                           (5,388,112)       (4,210,060)
    Net cash flows provided by operating
     activities                                 $5,988,462        $6,067,936

    Cash flows from investing activities:
    Acquisition of property, plant and
     equipment                                    $(70,183)        $(201,509)
    Payments to acquire retail stores           (4,278,998)               -- 
    Proceeds from sale of property, plant
     and equipment                                      --               407
    Proceeds from sale of land use right           697,495                -- 
    Net cash flows used in investing
     activities                                 (3,651,686)         (201,102)

    Cash flows from financing activities:
    Advance/repayment activities with
     related companies, net                     (1,133,858)        1,841,271
    Proceeds received from private
     placement                                   2,315,138                -- 
    Change in restricted cash                      230,242        (4,621,471)
    Repayments to directors                       (311,817)         (161,077)
    Proceeds from bank loans                     6,865,560         8,781,340
    Repayments of bank loans                    (4,750,189)       (7,406,618)
    Proceeds from other loans                       35,208                -- 
    Repayments of other loans                   (2,392,476)         (511,210)
    Net cash flows provided by (used in)
     financing activities                          857,808        (2,077,765)

    Effect of foreign currency
     translation on cash and cash
     equivalents                                    (1,334)           (4,293)

    Net increase in cash and cash
     equivalents                                 3,193,250         3,784,776

    Cash and cash equivalents - beginning
     of period                                  13,304,158         1,265,184

    Cash and cash equivalents - end of
     period                                    $16,497,408        $5,049,960

    Supplemental disclosures for cash
     flow information:
    Cash paid for:
    Interest                                      $485,932          $542,612
    Income taxes                                $1,958,606        $3,530,288
Source: China BCT Pharmacy Group, Inc.
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