omniture

China BCT Reports Third Quarter 2011 Results

2011-11-15 19:06 953

LIUZHOU CITY, Guangxi Province, China, November 15, 2011 /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 third quarter ended September 30, 2011.

Third Quarter 2011 Highlights

  • Revenue increased 28.5% year-over-year to $67.5 million
  • Gross profit rose 23.2% year-over-year to $16.3 million
  • Operating income grew 31.4% year-over-year to $12.5 million
  • GAAP net income climbed 36.9% to $9.5 million, or $0.22 per diluted share, from $6.9 million, or $0.18 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 $9.1 million, or $0.21 per diluted share
  • Cash and cash equivalents as of September 30, 2011 totaled $34.3 million, compared to $20.2 million at the end of 2010

"We are pleased with our excellent operational and financial performance in the third quarter, achieving double digit sales growth across our distribution, retail and manufacturing businesses. Because of our integrated business model, we were able to adjust our product mix and strike a good balance between product volume and selling prices, resulted in stable profitability," commented Mr. Huitian Tang, Chief Executive Officer and Chairman of China BCT Pharmacy Group, Inc. "Inflationary pressures have increased cost-base for many manufacturing businesses in China over the past few quarters. So far, we have been spared of any significant impact from raw material and labor cost increases, but we will closely monitor market developments. China BCT is primarily focused in Guangxi, serving consumers in the Tier II and Tier III cities and counties, where competition is less fierce. We maintain our focus on increasing our market share in Guangxi before venturing into neighboring regions."

Third Quarter 2011 Results

Third quarter 2011 revenue increased 28.5% to $67.5 million from $52.5 million in the third quarter of 2010.

Revenue from the Company's pharmaceutical distribution segment increased 31.7% year-over-year to $50.2 million, or 74.4% of total revenue in the third quarter of 2011. Of the $12.1 million year-over-year increase in pharmaceutical distribution sales, $14.5 million was attributable to increased sales to hospitals, while $2.9 million reflected higher sales to other drug stores, offset by a $5.4 million decrease in sales to clinics and other health care centers.

Revenue from the Company's retail pharmacy segment grew 19.0% year-over-year to $13.7 million, or 20.3% of total second quarter revenue, driven by $2.8 million of incremental revenue from existing retail stores including the stores opened during the third quarter of 2010, but partially offset by an $0.6 million decline in new store sales in which comparatively fewer new stores been opened in third quarter 2011.

Revenue from the Company's manufacturing segment rose 23.2% year-over-year to $3.6 million, or 5.3% of total second quarter revenue. This quarter's manufacturing sales growth was due to increased sales volumes, as product pricing remained relatively stable compared with the same period last year.

Gross profit grew 23.2% year-over-year to $16.3 million, up from $13.2 million for the same period of 2010. Gross profit margin declined 1.0 percentage points to 24.2%, as compared to 25.2% in the comparable period last year. The slight decrease in gross profit margin in the third 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 20.9% in the third quarter of 2010 to 19.0% this quarter, primarily due to an increased percentage of sales to other drug stores, which generate lower gross profit margin within the distribution segment. Gross profit margin for the retail pharmacy segment increased to 32.8% from 30.8% in the third quarter of 2010, reflecting increased sales of higher gross margin products. Manufacturing segment gross profit margin was 64.2% and 59.0% during the quarters ending September 30, 2011 and 2010, respectively. The increase in gross profit margin was primarily due to an increase in sales derived from products with higher margins.

Operating expenses slightly increased 2.4% totaled $3.8 million for both periods this year and last year. Administrative expenses decreased 10.3% to $2.1 million, or 3.2% of revenue, as compared to $2.4 million, or 4.5% of revenue, in the same period of 2010, primarily due to a reduction in share based compensation, partially offset by a slight increase in rental expense associated with newly open stores. Selling expenses rose 24.2% to $1.7 million, compared to $1.4 million in the same period of 2010.

Operating income increased 31.4% to $12.5 million, or 18.5% of revenue, from $9.5 million, or 18.0% of revenue, in the third quarter of 2010.

GAAP net income increased 36.9% to $9.5 million, or $0.22 per diluted share, as compared to $6.9 million, or $0.18 per diluted share, in the third quarter of 2010. Diluted earnings per share were calculated using weighted average shares of 38,154,340 and 38,506,274 for the quarters ended September 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, third quarter 2011 non-GAAP adjusted net income was $9.1 million, or $0.21 per diluted share, compared to non-GAAP adjusted net income of $7.3 million, or $0.19 per diluted share in the third quarter of 2010.

Nine Months 2011 Results

Revenue was $191.2 million for the first nine months of 2011, increasing 42.6% from $134.0 million in the same period prior year.

In terms of revenue mix, pharmaceutical distribution segment remained the Company's largest segment for the nine months ended September 30, 2011 at 74.2% of total sales, compared to 70.6% for the same period last year. Retail pharmacy segment sales were $39.4 million, representing 20.6% of total Company sales for the nine months ended September 30, 2011, up 23.0% from $32.0 million, or 23.9% for the same period last year. Manufacturing segment accounted for 5.2% of total sales for the nine months ended September 30, 2011, compared to 5.5% for the same period last year.

Gross profit was $46.0 million, or 24.0% of revenue, up 32.6% from $34.7 million, or 25.9% of revenue, for the nine months ended September 30, 2010.

Operating income was $32.7 million, or 17.1% of revenue, up 26.1% from $25.9 million, or 19.3% of revenue, for the nine months ended September 30, 2010.

Net income increased 33.0% to $24.3 million, or $0.57 per diluted share, compared to $18.3 million, or $0.48 per diluted share, for the first nine months 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 $23.9 million, or $0.56 per diluted share, as compared to $19.4 million, or $0.51 per diluted share for the nine months ended September 30, 2010.

Financial Condition

As of September 30, 2011, China BCT had $34.3 million in cash and cash equivalents, $103.1 million in working capital and a current ratio of 2.81. Long-term bank debt was $0.2 million. Stockholders' equity was $108.7 million on September 30, 2011, compared to $83.1 million at the end of 2010.

The Company used $4.8 million in cash flow from operating activities for the nine months ended September 30, 2011 compared to cash flow generated by operating activities of $9.9 million in the same period prior year, primarily due to an increase in accounts receivable due to a slowdown in payment from customers. Cash used in investing activities was $5.2 million, compared to cash used in investing activities of $8.5 million in the nine months ended September 30, 2010. For the nine months ended September 30, 2011, cash flow from financing activities totaled $22.9 million and included $29.5 million from the placement of preferred stock, offset by the repayment of bank loans.

Business Outlook

"Looking towards 2012, we expect to secure more contracts with hospitals for our distribution segment. During the centralized bidding process in 2011, we successfully secured 2,000-3,000 more product distribution rights to hospital and clinic networks. For our retail segment, we will remain focused on identifying opportunities for selective drugstore acquisitions to further expand our retail network within Guangxi Province. In the fourth quarter of 2011, we expect to increase of our Levodopa raw materials output for products that target the Indian market. We expect these raw materials will contribute positively to our top line growth starting from the beginning of next year. We are committed to growing our footprint to become a larger vertically integrated pharmaceutical player offering retail, wholesale and manufacturing services." concluded Mr. Tang.

Conference Call

China BCT will conduct a conference call at 8:00 a.m. Eastern Time (ET) on Tuesday, November 15, 2011, to discuss its third 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 23706035 approximately five to ten minutes prior to the call. A replay will be available for two weeks starting on Tuesday, November 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 23706035.

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 219 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.

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



Ms. Linda Salo, Account Manager


Email: linda.salo@ccgir.com


Tel: +1-646-922-0894


Website: www.ccgirasia.com



Use of Non-GAAP Financial Information

GAAP results for the three and nine months ended September 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.

China BCT Pharmacy Group, Inc.

RECONCILIATION OF NON-GAAP NET INCOME AND DILUTED EPS


Three months Ended


Nine months Ended

September 30,

September 30,


2011


2010


2011


2010

US$ - thousands, except per share








Net income (GAAP)

$ 9,458


$ 6,908


$ 24,310


$ 18,284

- Share-based compensation expense

3


632


574


658

- Change in fair value of warrant liabilities

(392)


(249)


(968)


458

Adjusted net income (non-GAAP)

$ 9,069


$ 7,291


$ 23,916


$ 19,400









Per diluted share








Net income (GAAP)

$ 0.22


$ 0.18


$ 0.57


$ 0.48

- Share-based compensation expense

0.00


0.02


0.02


0.02

- Change in fair value of warrant liabilities

(0.01)


(0.01)


(0.03)


0.01

Adjusted net income (non-GAAP)

$ 0.21


$ 0.19


$ 0.56


$ 0.51

Weighted average shares outstanding - '000








-diluted

38,154


38,506


38,154


38,506




-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



Nine months ended




September 30,



September 30,




(unaudited)



(unaudited)




2011



2010



2011



2010















Sales revenue


$

67,480,712



$

52,528,246



$

191,199,700



$

134,049,842


Cost of sales



51,180,349




39,294,987




145,219,476




99,341,298


Gross profit



16,300,363




13,233,259




45,980,224




34,708,544



















Operating expenses

















Administrative expenses



2,127,195




2,371,018




7,843,247




5,307,917


Selling expenses



1,719,926




1,384,765




5,435,073




3,471,200


Total operating expenses



3,847,121




3,755,783




13,278,320




8,779,117



















Income from operations



12,453,242




9,477,476




32,701,904




25,929,427



















Non-operating income (expense)

















Interest income



21,510




2,781




47,499




6,923


Other income



20,278




16,936




157,019




143,643


Change in fair value of warrant liabilities



391,652




249,092




967,696




(457,718)


Other expenses



(7,147)




(162,352)




(24,733)




(203,051)


Finance costs



(256,156)




(202,259)




(646,060)




(679,868)


Total non-operating income (expense)



170,137




(95,802)




501,421




(1,190,071)



















Income before income taxes



12,623,379




9,381,674




33,203,325




24,739,356


Income taxes



(3,165,839)




(2,474,101)




(8,893,359)




(6,455,209)


Net income



9,457,540




6,907,573




24,309,966




18,284,147


Other comprehensive income

















Foreign currency translation

















adjustments



1,047,236




-




3,398,140




(1,334)


Total comprehensive income


$

10,504,776



$

6,907,573



$

27,708,106



$

18,282,813



















Earnings per share - basic


$

0.22



$

0.18



$

0.57



$

0.48


Earnings per share - diluted


$

0.22



$

0.18



$

0.57



$

0.48



















Weighted average number of shares

















outstanding - basic



38,153,430




38,154,340




38,153,430




38,032,897


Weighted average number of shares

















outstanding - diluted



38,153,430




38,506,274




38,153,430




38,384,831



















Reconciliation of net income to income applicable to common stock:

















Net income


$

9,457,540



$

6,907,573



$

24,309,966



$

18,284,147


Less: dividends and accretion on preferred stock



(1,167,011)




-




(2,723,026)




-


Income applicable to common stock


$

8,290,529



$

6,907,573



$

21,586,940



$

18,284,147





China BCT Pharmacy Group, Inc.

(Formerly named China Baicaotang Medicine Limited)

Consolidated Balance Sheets

(Stated in US Dollars)




September 30,



December 31,




2011



2010




(Unaudited)



(Audited)


Assets







Current assets







Cash and cash equivalents


$

34,263,735



$

20,157,112


Restricted cash



901,963




1,334,868


Accounts receivable, net



104,250,461




68,664,308


Bills receivable



18,745




-


Amounts due from related companies



1,047,670




3,784,069


Other receivables, prepayments and deposits



5,248,675




3,332,747


Inventories



13,962,097




10,776,877


Deferred income taxes



213,806




207,222


Total current assets



159,907,152




108,257,203











Property, plant and equipment, net



16,173,348




14,605,888


Goodwill



574,793




560,418


Other intangible assets, net



520,598




581,481


Land use rights, net



13,589,998




13,422,048


Long-term deposits



7,029,450




3,482,200


Deferred income taxes



652,661




629,798


Total assets


$

198,448,000



$

141,539,036














China BCT Pharmacy Group, Inc.

(Formerly named China Baicaotang Medicine Limited)

Consolidated Balance Sheets (Cont'd)

(Stated in US Dollars)




September 30,



December 31,




2011



2010




(Unaudited)



(Audited)









Liabilities and stockholders' equity







Current liabilities







Accounts payable


$

36,798,915



$

35,497,337


Bills payable



1,803,926




2,669,752


Other payables and accrued expenses



5,158,730




4,856,956


Amounts due to directors



164,366




190,484


Amounts due to related companies



193,774




139,219


Income tax payable



3,149,880




2,564,359


Secured bank loans



9,528,824




8,898,218


Other loans



-




162,664


Retirement benefit costs



29,252




33,412


Total current liabilities



56,827,667




55,012,401











Secured long-term bank loans



226,132




1,941,606


Warrant liabilities



305,497




1,273,193


Retirement benefit costs



212,523




213,763


Total liabilities



57,571,819




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









September 30, 2011 and December 31, 2010, respectively



32,218,892




-











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 September 30, 2011 and December 31, 2010, respectively



38,154




38,154


Additional paid-in capital



17,207,547




16,633,411


Statutory and other reserves



4,585,854




4,585,856


Accumulated other comprehensive income



7,826,005




4,427,865


Retained earnings



78,999,729




57,412,787


Total stockholders' equity



108,657,289




83,098,073











Total liabilities and stockholders' equity


$

198,448,000



$

141,539,036





China BCT Pharmacy Group, Inc.

(Formerly named China Baicaotang Medicine Limited)

Consolidated Statements of Cash Flows

(Stated in US Dollars)




Nine months ended September 30,




(Unaudited)




2011



2010









Cash flows from operating activities:







Net income

$

24,309,966


$

18,284,147


Adjustments to reconcile net income to net cash provided by

(used in) operating activities:







Depreciation and amortization


1,141,687



908,659


Deferred income taxes


(4,133)



(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


(967,696)



457,718


Share-based compensation expense


574,136



658,207


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







Accounts receivable


(30,174,501)



(18,553,269)


Bills receivable


(18,381)



-


Other receivables, prepayments and deposits


(1,128,518)



(1,035,193)


Inventories


(2,025,584)



(5,733,211)


Bills payable


(942,186)



-


Accounts payable


4,862,137



12,484,937


Other payables and accrued expenses


(967,922)



574,481


Retirement benefit costs


(6,803)



8,929


Income tax payable


496,034



1,910,398


Total adjustments


(29,150,770)



(8,364,481)


Net cash flows provided by (used in) operating activities

$

(4,840,804)



$

9,919,666





China BCT Pharmacy Group, Inc.

(Formerly named China Baicaotang Medicine Limited)

Consolidated Statements of Cash Flows (Cont'd)

(Stated in US Dollars)




Nine months ended September 30,




(Unaudited)




2011



2010









Cash flows from investing activities:







Acquisition of property, plant and equipment


$

(1,887,074)



$

(119,641)


Acquisition of retail stores



-




(4,521,744)


Net cash from acquisition of distribution chains



36,502




-


Acquisition of intangible assets



(12,068)




-


Deposit for acquisition of retail stores assets



-




(1,290,960)


Long-term deposits



(3,365,600)




(3,227,400)


Proceeds from sale of property, plant and equipment



4,039




-


Proceeds from sale of land use right



-




697,495


Net cash flows used in investing activities



(5,224,201)




(8,462,250)











Cash flows from financing activities:









Advance/repayment activities with related companies, net



(5,677,714)




(1,097,401)


Proceeds from private placement



29,495,866




2,315,138


Restricted cash



475,110




179,622


Repayments to directors



(31,606)




(820,685)


Proceeds from bank loans



9,888,040




8,039,160


Repayments of bank loans



(11,270,387)




(7,553,771)


Proceeds from other loans



-




35,208


Repayments of other loans



-




(2,241,580)


Net cash flows provided by (used in) financing activities



22,879,309




(1,144,309)











Effect of foreign currency translation on cash and cash equivalents



1,292,319




(1,334)











Net increase in cash and cash equivalents



14,106,623




311,773











Cash and cash equivalents - beginning of period



20,157,112




13,304,158











Cash and cash equivalents - end of period


$

34,263,735



$

13,615,931











Supplemental disclosures for cash flow information :









Cash paid for :









Interest


$

580,475



$

762,622


Income taxes


$

8,401,458



$

4,546,029











Non-cash financing and investing activities:









Accretion of preferred stock to redemption


$

1,848,026



$

-





Source: China BCT Pharmacy Group, Inc.
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