omniture

China BCT Reports Strong Second Quarter 2011 Results

2011-08-15 18:46 1064

LIUZHOU CITY, China, August 15, 2011 /PRNewswire-Asia-FirstCall/ -- 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 second quarter ended June 30, 2011.

Second Quarter 2011 Highlights

  • Revenue increased 37.1% year-over-year to $65.1 million
  • Gross profit rose 27.4% year-over-year to $16.1 million
  • Operating income grew 13.2% year-over-year to $11.6 million
  • GAAP net income climbed 20.6% to $8.6 million, or $0.19 per diluted share, from $7.1 million, or $0.19 per diluted share, in the year ago quarter
  • Excluding non-cash items related to change in the fair value of warrant liabilities and share-based compensation expense, non-GAAP adjusted net income was $8.3 million, or $0.18 per diluted share
  • Cash and cash equivalents as of June 30, 2011 totaled $63.1 million, compared to $20.2 million at the end of 2010.

"In the second quarter of 2011, we achieved double digit sales growth across our distribution, retail and manufacturing segments, resulting in companywide year-over-year revenue growth of 37.1%," commented Mr. Hui Tian Tang, Chairman and Chief Executive Officer of China BCT Pharmacy Group, Inc. "We believe that our integrated business platform uniquely positions us to capitalize on a wide range of opportunities throughout China's pharmaceutical industry value chain. We intend to carefully deploy our strong cash balance, which totaled over $63.1 million at quarter end, on important strategic initiatives, including the continued expansion of our retail pharmacy footprint in Guangxi Province and the construction of a modern wholesale distribution logistics center in the region."

Second Quarter 2011 Results

Second quarter 2011 revenue increased 37.1% to $65.1 million from $47.5 million in the second quarter of 2010.

Net sales from the Company's pharmaceutical distribution segment increased 45.6% year-over-year to $48.5 million, or 74.5% of total revenue in the second quarter of 2011. Of the $15.1 million year-over-year increase in pharmaceutical distribution sales, $8.4 million reflected higher sales to other drug stores, $4.9 million was attributable to higher sales to hospitals, and $2.3 million was due to higher sales to clinics and health care centers.

Net sales from the Company's retail pharmacy segment grew 12.9% year-over-year to $13.2 million, or 20.1% of total second quarter revenue, driven by $2.3 million of incremental revenue from new retail stores somewhat offset by an 8.4% decline in existing store sales.

Net sales from the Company's pharmaceutical manufacturing segment rose 37.0% year-over-year to $3.5 million, or 5.4% of total second quarter revenue. This quarter's manufacturing sales growth was primarily due to increased sales volumes, as product pricing remained relatively stable year-over-year.

Gross profit grew 27.4% year-over-year to $16.1 million, up from $12.6 million for the same period of 2010. Gross profit margin declined 1.9 percentage points to 24.7%, as compared to 26.6% in the comparable period last year. The decrease in gross margin in the second quarter of 2011 mainly reflects a greater mix of sales from the Company's distribution segment, which has lower margins relative to the Company's other businesses.

Within pharmaceutical distribution, gross profit margin declined from 21.8% in the second quarter of 2010 to 19.2% this quarter, primarily due to an increased percentage of sales to other drug stores, which generate lower gross profit margin within the distribution segment, and due to a greater mix of lower margin products sold to hospitals. Retail pharmacy segment gross profit margin increased to 34.2% from 32.1% in the second quarter of 2010, reflecting fewer price reductions under the Company's recent marketing campaign. Pharmaceutical manufacturing segment gross profit margin was 64.7% and 65.2% during the quarters ending June 30, 2011 and 2010, respectively. The decrease in gross profit margin was primarily due to an increase in sales derived from products with lower margins.

Operating expenses increased by 89.3% to $4.5 million, compared to $2.4 million in the same period last year. Administrative expenses increased 107.4 to $2.7 million, or 4.1% of revenue, as compared to $1.3 million, or 2.7% of revenue, in the same period of 2010, primarily due to an increase in the incurrence of public company professional fees and increased share based compensation. Selling expenses rose 67.0% to $1.8 million, compared to $1.1 million in the same period of 2010.

Operating income increased 13.2% to $11.6 million, or 17.8% of revenue, from $10.3 million, or 21.6% of revenue, in the second quarter of 2010.

GAAP net income increased 20.6% to $8.6 million, or $0.19 per diluted share, as compared to $7.1 million, or $0.19 per diluted share, in the second quarter of 2010. Diluted earnings per share were calculated using weighted average shares of 38,154,340 and 38,471,274 for the quarters ended June 30, 2011 and 2010, respectively. Excluding a non-cash benefit related to change in the fair value of warrant liabilities and excluding share-based compensation expense, second quarter 2011 non-GAAP adjusted net income was $8.3 million, or $0.18 per diluted share, compared to non-GAAP adjusted net income of $7.6 million, or $0.20 per diluted share in the second quarter of 2010.

Six Months 2011 Results

Net revenue was $123.7 million in the first half of 2011, up 51.8% from $81.5 million in the first half of 2010. In terms of revenue mix, pharmacy distribution remained the Company's largest segment in the first half of 2011 at 74.2% of total sales, compared to 69.4% in the same period last year. Retail pharmacy represented 20.8% of total Company sales in the first half of 2011, down from 25.2% in the same period last year. Pharmacy manufacturing accounted for 5.0% of total sales during the first half of 2011, compared to 5.4% in the first half of last year.

Gross profit was $29.7 million, or 24.0% of revenue, up 38.2% from $21.5 million, or 26.3% of revenue, in the first half of 2010. Operating income was $20.2 million, or 16.4% of revenue, up 23.1% from $16.5 million, or 20.2% of revenue, in the first half of 2010. Net income increased 30.6% to $14.9 million, or $0.35 per diluted share, compared to $11.4 million, or $0.30 per diluted share, in the first half of 2010. Excluding non-cash expense related to change in the fair value of warrant liabilities and share-based compensation expense, adjusted net income was $14.9 million, or $0.35 per diluted share, as compared to $12.1 million, or $0.32 per diluted share in the first half of 2010.

Financial Condition

As of June 30, 2011, China BCT had $63.1 million in cash and cash equivalents, $93.1 million in working capital and a current ratio of 2.44. Long-term bank debt was $0.2 million. Stockholders' equity was $99.3 million on June 30, 2011, compared to $83.1 million at the end of 2010.

The Company generated $23.0 million in cash flow from operating activities for the six months ended June 30, 2011 compared to cash flow from operating activities of $6.0 million in the same period prior year. Cash used in investing activities was $4.5 million, compared to cash used in investing activities of $3.7 million in the first half in 2010. For the six months ended June 30, 2011, cash flow from financing activities totaled $23.4 million and included $29.5 million from the placement of preferred stock.

Subsequent Events

On July 6, 2011, the Company announced a share repurchase plan that authorizes the Company to repurchase up to 2,000,000 shares of the Company's common stock from time to time during a one year period commencing on July 4, 2011.

On July 20, 2011, the Company announced that it is in the process of launching 21 new retail pharmacy stores in Guangxi, bringing the total number of "Baicaotang" branded stores to 208.

Business Outlook

"In the second half of 2011, we plan to focus on improving the performance of our existing retail stores while selectively pursuing opportunities to expand our retail pharmacy network. We are currently launching 21 new retail pharmacy stores in Guangxi. As a group, these stores are expected to generate annual revenues of approximately $2.6 million and should be fully operational in the second half of 2011," commented Mr. Tang. "On the distribution side of our business, we expect to commence construction of a state-of-the-art logistics center in the fourth quarter 2011. We are committed to developing a larger and stronger retail and wholesale distribution network, which we expect to yield greater economies of scale and additional synergies across our vertically integrated business model," concluded Mr. Tang.

Conference Call

China BCT will conduct a conference call at 8:00 a.m. Eastern Time (ET) on Monday, August 15, 2011, to discuss its second quarter 2011 financial results.

The conference call can be accessed by dialing 866-759-2078 (U.S. and Canada callers) or 706-643-0585 (international callers) and entering the conference ID 89691490 approximately five to ten minutes prior to the call. A replay will be available for two weeks starting on Monday, August 15, 2011 at 11:00 a.m. ET by dialing 855-859-2056 (U.S. and Canada callers) or 404-537-3406 (international callers) and entering the conference replay ID 89691490.

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, 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 208 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 and six months ended June 30, 2011 and 2010 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. Crocker Coulson, President

Email: shelly.zhang@china-bct.com

Email: crocker.coulson@ccgir.com

Tel: (86) 772-363-8318

Tel: +1-646-213-1915

Website: www.china-bct.com



Mr. Kalle Ahl, CFA, Account Manager


Email: kalle.ahl@ccgir.com


Tel: +1-646-833-3417


Website: 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,


2011


2010


2011


2010

US$ - thousands, except per share








Net income (GAAP)

$ 8,603


$ 7,132


$ 14,852


$ 11,377

- Share-based compensation expense

3


26


571


26

- Change in fair value of warrant liabilities

(301)


418


(576)


707

Adjusted net income (non-GAAP)

$ 8,305


$ 7,576


$ 14,847


$ 12,110









Per diluted share








Net income (GAAP)

$ 0.19


$ 0.19


$ 0.35


$ 0.30

- Share-based compensation expense

-


-


-


-

- Change in fair value of warrant liabilities

(0.01)


0.01


(0.01)


0.02

Adjusted net income (non-GAAP)

$ 0.18


$ 0.20


$ 0.35


$ 0.32

Weighted average shares outstanding - '000








-diluted

38,154


38,471


38,154


38,295




-Financial Tables Follow-

China BCT Pharmacy Group, Inc.

(Formerly named China Baicaotang Medicine Limited)

Consolidated Statements of Income and Comprehensive Income

(Stated in US Dollars)




Three months ended



Six months ended




June 30



June 30




(unaudited)



(unaudited)




2011



2010



2011



2010


Sales revenue


$

65,115,748



$

47,492,718



$

123,718,988



$

81,521,596


Cost of sales



49,043,088




34,879,110




94,039,127




60,046,311


Gross profit



16,072,660




12,613,608




29,679,861




21,475,285



















Operating expenses

















Administrative expenses



2,685,357




1,294,476




5,716,052




2,936,899


Selling expenses



1,770,562




1,059,916




3,715,147




2,086,435


Total operating expenses



4,455,919




2,354,392




9,431,199




5,023,334



















Income from operations



11,616,741




10,259,216




20,248,662




16,451,951



















Non-operating income (expense)

















Interest income



24,162




4,023




25,989




4,142


Other income



114,545




28,667




136,741




126,707


Change in fair value of warrant liabilities



300,662




(418,027)




576,044




(706,810)


Other expenses



(17,586)




(1,387)




(17,586)




(40,699)


Finance costs



(195,846)




(264,480)




(389,904)




(477,609)


Total non-operating income (expense)



225,937




(651,204)




331,284




(1,094,269)



















Income before income taxes



11,842,678




9,608,012




20,579,946




15,357,682


Income taxes



(3,239,723)




(2,475,603)




(5,727,520)




(3,981,108)


Net income



8,602,955




7,132,409




14,852,426




11,376,574


Other comprehensive income

















Foreign currency translation adjustments



1,996,994




(25,872)




2,350,904




(1,334)


Total comprehensive income


$

10,599,949



$

7,106,537



$

17,203,330



$

11,375,240



















Earnings per share - basic


$

0.19



$

0.19



$

0.35



$

0.30


Earnings per share - diluted


$

0.19



$

0.19



$

0.35



$

0.30



















Weighted average number of shares

















outstanding - basic



38,154,340




38,119,340




38,154,340




37,942,936


Weighted average number of shares

















outstanding - diluted



38,154,340




38,471,274




38,154,340




38,294,870



















Reconciliation of net income to income

















applicable to common stock:

















Net income


$

8,602,955



$

7,132,409



$

14,852,426



$

11,376,574


Less: dividends and accretion on preferred stock



(1,167,011)




-




(1,556,015)




-


Income applicable to common stock


$

7,435,944



$

7,132,409



$

13,296,411



$

11,376,574





China BCT Pharmacy Group, Inc.

(Formerly named China Baicaotang Medicine Limited)

Consolidated Balance Sheets

(Stated in US Dollars)




June 30,



December 31,




2011



2010




(Unaudited)




(*)










Assets








Current assets








Cash and cash equivalents


$

63,100,570



$

20,157,112


Restricted cash



1,615,155




1,334,868


Accounts receivable, net



70,680,351




68,664,308


Bills receivable



23,205




-


Amounts due from related companies



1,079,596




3,784,069


Other receivables, prepayments and deposits



4,707,578




3,332,747


Inventories



16,458,159




10,776,877


Deferred income taxes



211,739




207,222


Total current assets



157,876,353




108,257,203











Property, plant and equipment, net



15,625,002




14,605,888


Land use rights, net



13,567,738




13,422,048


Long-term deposit



6,961,500




3,482,200


Goodwill



570,280




560,418


Other intangible assets, net



536,727




581,481


Deferred income taxes



645,375




629,798


Total assets


$

195,782,975



$

141,539,036



(*) Derived from audited financial statements.




China BCT Pharmacy Group, Inc.

(Formerly named China Baicaotang Medicine Limited)

Consolidated Balance Sheets (Cont'd)

(Stated in US Dollars)




June 30,



December 31,




2011



2010




(Unaudited)




(*)










Liabilities and Stockholders' Equity








Current liabilities








Accounts payable


$

42,275,442



$

35,497,337


Bills payable



2,613,799




2,669,752


Other payables and accrued expenses



4,992,112




4,856,956


Dividend payable



500,000




-


Amounts due to directors



157,023




190,484


Amounts due to related companies



214,162




139,219


Income tax payable



3,141,063




2,564,359


Secured bank loans



10,672,726




8,898,218


Other loans



169,087




162,664


Retirement benefit costs



22,424




33,412


Total current liabilities



64,757,838




55,012,401











Secured long-term bank loans



243,893




1,941,606


Warrant liabilities



697,149




1,273,193


Retirement benefit costs



215,513




213,763


Total liabilities



65,914,393




58,440,963











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 and zero shares issued and outstanding as of









June 30, 2011 and December 31, 2010, respectively



30,551,881




-




















Stockholders' Equity









Common stock: par value $0.001 per share;









150,000,000 and 100,000,000 shares authorized;









38,154,340 shares issued and outstanding as of June 30, 2011 and









December 31, 2010, respectively



38,154




38,154


Additional paid-in capital



17,204,725




16,633,411


Statutory and other reserves



4,585,854




4,585,856


Accumulated other comprehensive income



6,778,769




4,427,865


Retained earnings



70,709,199




57,412,787


Total Stockholders' Equity



99,316,701




83,098,073


Total Liabilities and Stockholders' Equity


$

195,782,975



$

141,539,036



(*) Derived from audited financial statements




China BCT Pharmacy Group, Inc.

(Formerly named China Baicaotang Medicine Limited)

Consolidated Statements of Cash Flows

(Stated in US Dollars)




Six months ended June 30




(Unaudited)




2011



2010









Cash flows from operating activities :







Net income


$

14,852,426



$

11,376,574


Adjustments to reconcile net income to net cash flows









provided by operating activities :









Depreciation and amortization



693,078




574,981


Deferred income taxes



(2,737)




(1,218)


Gain on sale of land use right



-




(44,919)


Loss on sale of property, plant and equipment



10,960




-


Change in fair value of warrant liabilities



(576,044)




706,810


Share-based compensation expense



571,314




25,717


Changes in operating assets and liabilities, net of effects of acquisitions of retail stores :









Accounts receivable



2,598,361




(11,889,740)


Bills receivables



(23,052)




-


Other receivables, prepayments and deposits



(634,987)




(1,338,371)


Inventories



(4,673,617)




(3,116,638)


Accounts payable



10,732,080




9,119,546


Bills payables



(109,528)




(322,516)


Other payables and accrued expenses



(915,249)




(1,138,461)


Retirement benefit costs



(14,454)




12,976


Income tax payable



517,804




2,023,721


Total adjustments



8,173,929




(5,388,112)


Net cash flows provided by operating activities


$

23,026,355



$

5,988,462













China BCT Pharmacy Group, Inc.

(Formerly named China Baicaotang Medicine Limited)

Consolidated Statements of Cash Flows (Cont'd)

(Stated in US Dollars)




Six months ended June 30




(Unaudited)




2011



2010









Cash flows from investing activities :







Acquisition of property, plant and equipment


$

(1,175,346)



$

(70,183)


Payments to acquire retail stores



-




(4,278,998)


Net cash from acquisition of distribution chains



36,502




-


Acquisition of intangible assets



(6,730)




-


Proceeds from sale of property, plant and equipment



4,039




-


Proceeds from sale of land use right



-




697,495


Payment for long-term deposit



(3,365,600)




-


Net cash flows used in investing activities



(4,507,135)




(3,651,686)











Cash flows from financing activities :









Advance/repayment activities with related companies, net



(5,697,634)




(1,133,858)


Proceeds received from private placement



-




2,315,138


Proceeds received from placement of preferred stock



29,495,866




-


Changes in restricted cash



(251,467)




230,242


Repayments to directors



(37,397)




(311,817)


Proceeds from bank loans



5,839,840




6,865,560


Repayments of bank loans



(5,958,109)




(4,750,189)


Proceeds from other loans



-




35,208


Repayments of other loans



-




(2,392,476)


Net cash flows provided by financing activities



23,391,099




857,808











Effect of foreign currency translation on cash and cash equivalents



1,033,139




(1,334)











Net increase in cash and cash equivalents



42,943,458




3,193,250











Cash and cash equivalents - beginning of period



20,157,112




13,304,158











Cash and cash equivalents - end of period


$

63,100,570



$

16,497,408











Supplemental disclosures for cash flow information :









Cash paid for :









Interest


$

359,815



$

485,932


Income taxes


$

5,212,452



$

1,958,606























Source: China BCT Pharmacy Group, Inc.
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