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China-Biotics, Inc. Reports Fourth Quarter and Full Year Fiscal 2007 Financial Results

2007-06-21 16:00 715

Full Year Revenues Increased 40% to $30.6 Million

Full year Net Income Rose 31% to $10.9 Million

SHANGHAI, China, June 21 /Xinhua-PRNewswire-FirstCall/ -- China-Biotics, Inc. (OTC Bulletin Board: CHBT) ("China-Biotics", "the Company"), a leading Chinese biotechnology firm specializing in the manufacture, research, development, marketing and distribution of probiotics dietary supplements, today announced its financial results for the fourth quarter and fiscal year ended March 31, 2007.

Fourth Quarter 2007 Highlights

-- Net sales increased 23.2% to $8.4 million

-- Gross profit increased 25.8% to $6.0 million

-- Gross profit margin increased to 71.5% from 70.0%

-- Operating income increased 13.9% to $3.9 million

-- Net income increased 24.8% to $2.8 million

Fiscal Year 2007 Highlights

-- Net sales increased 40.0% to $30.6 million

-- Gross profit rose 40.7% to $21.7 million

-- Gross profit margin increased to 70.9% from 70.5%

-- Operating income increased 22.5% to $14.9 million

-- Net income increased 30.5% to $10.9 million

-- Opened 9 new Shining brand company stores

Fourth Quarter 2007 Results

For the fourth quarter of fiscal 2007, net revenues increased 23.2% to $8.4 million from $6.8 million in the fourth quarter of fiscal 2006. Shining Essence continued to be the Company's best-selling product.

"The 2007 fiscal year was a landmark year for China-Biotics, as we began to see the fruits of our retail strategy and developed our advertising campaign to drive sales of our top-selling Shining Essence product," said Chief Executive Officer Jinan Song. "Our efforts on these and other fronts resulted in double-digit growth in both the top and bottom lines."

Gross profit in the quarter was $6.0 million, an increase of 25.8% from $4.8 million a year ago. Gross margin was 71.5% in the fourth quarter, compared to 70.0% in the same period of fiscal 2006. The improvement in gross margin was due to the implementation of cost controls.

Operating income increased 13.9% to $3.9 million from $3.4 million the prior year. Operating margin during the fourth quarter of fiscal 2007 was 46.1% in 2006, down from 49.8% a year ago.

Net income for the fourth quarter of fiscal 2007 was $2.8 million, or $0.17 per diluted share, an increase of 24.8% from $2.3 million, or $1.34 per diluted share, in the fourth quarter of fiscal 2006. The increase in net income resulted from growth in sales volume, as average product prices changed very little. The earnings per share figures reflect an increase in weighted-average shares from 1,705,242 in the fourth quarter of fiscal 2006 to 17,080,000 in the fourth quarter of fiscal 2007. This was primarily due to the share exchange transaction in the fourth quarter of fiscal 2006, through which China-Biotics became a publicly-traded company.

Fiscal Year 2007 Results

For the fiscal year 2007, net sales were $30.6 million, up 40.0% from $21.9 million in 2006. The sales increase was attributed to sales growth of the Company's primary product, Shining Essence, which accounted for 61.6% of sales during the year, compared with 68.3% in fiscal year 2006. Gross profit for fiscal year 2007 was $21.7 million, an increase of 40.7% from $15.4 million the prior year. Gross margin climbed to 70.9% in fiscal 2007 from 70.5% in fiscal 2006. Operating income for fiscal year 2007 increased 22.5% to $14.9 million from $12.2 million in fiscal 2006. Operating margin was 48.8% in fiscal 2007, compared to 55.7% in fiscal 2006. Net income for fiscal year 2007 was $10.9 million, or $0.64 per diluted share, an increase of 30.5% from net income of $8.4 million, or $4.90 per diluted share, the prior year. The earnings per share figures reflect an increase in weighted-average shares related to the previously mentioned share exchange transaction.

Financial Condition

As of March 31, 2007, the Company had cash and cash equivalents of $27.0 million and working capital of $21.2 million. Accounts receivable were $14.3 million, and days sales outstanding was 150 for the year. In fiscal 2007, China Biotics generated $10.0 million in cash flow from operations. At March 31, 2007, the Company had no debt and shareholders' equity of $23.9 million.

Business Outlook

As the Chinese consumer becomes more health-conscious, consumption of dairy products and health foods becomes a greater part of the daily diet. The Chinese government has said it is committed to reducing the use of antibiotics and promoting the use of probiotics, which bodes well for China-Biotics. While consumers look for alternatives to dealing with infections in the absence of common antibiotics and turn toward healthier lifestyles, the Company believes it is poised to fill these needs as they develop into a significant market in the very near future.

"The 2008 fiscal year presents tremendous opportunities for China-Biotics, as we embark on the construction of a 150-ton production facility in the first half of the fiscal year. We also expect to expand our presence in metropolitan areas throughout China, primarily through our planned 300-store expansion of our retail strategy in the next two years," Mr. Song said. "We also look to strengthen our product pipeline to fuel sales of new products in the coming years."

About China-Biotics, Inc.

China-Biotics, Inc. ("China-Biotics", "the Company"), a leading manufacturer of biotechnology products and supplements, engages in research, development, marketing and distribution of probiotics dietary supplements. Through its wholly owned subsidiary, Shanghai Shining Biotechnology Co., Ltd., the Company has operations in Shanghai. Its proprietary product portfolio contains live microbial nutritional supplements under the "Shining" brand. Currently, the products are sold OTC through large distributors to pharmacies and supermarkets in Shanghai, Jiangsu, and Zhejiang. China-Biotics plans to launch 300 Shining brand stores in major cities in China during the next two years. The Company's flagship product, "Shining Essence," was approved by the Chinese Ministry of Health for production and to market as a health product in August 2000, and has been a profit driver since its launch in Shanghai in April 2001. Currently, China-Biotics is strategically expanding its production capacity of probiotics to meet growing demand in the bulk additive market.

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995: Any statements set forth above that are not historical facts are forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Such factors include, but are not limited to, the Company's ability to market existing and new products, ability to access to capital for expansion, and changes from anticipated levels of sales, future national or regional economic and competitive conditions, changes in relationships with customers, dependence on its flagship product profits and other factors detailed from time to time in the Company's filings with the United States Securities and Exchange Commission and other regulatory authorities. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

-FINANCIAL TABLES FOLLOW-

CHINA-BIOTICS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts expressed in US Dollars)

Three months ended March 31, Years ended March 31,

2007 2006 2007 2006

(unaudited) (unaudited)

Net sales $8,376,790 $6,801,193 $30,609,941 $21,862,385

Cost of sales (2,390,986) (2,041,536) (8,910,633) (6,445,148)

Gross profit 5,985,804 4,759,657 21,699,308 15,417,237

Operating expenses:

Selling expenses (1,236,525) (958,962) (4,502,687) (2,434,448)

General and

administrative expenses (890,476) (412,972) (2,265,220) (797,232)

Total operating expenses (2,127,001) (1,371,934) (6,767,907) (3,231,680)

Income from operations 3,858,803 3,387,723 14,931,401 12,185,557

Other income and

expenses:

Other income 81,159 24,730 223,401 69,041

Other expenses 26,528 (18) (62,948) (89)

Total other income

(expenses) 107,687 24,712 160,453 68,952

Income before taxes 3,966,490 3,412,435 15,091,854 12,254,509

Provision for income

taxes (1,120,756) (1,132,642) (4,186,868) (3,900,541)

Net income 2,845,734 2,279,793 10,904,986 8,353,968

Earnings per share:

Basic and diluted $0.17 $1.34 $0.64 $4.90

Weighted average shares

outstanding:

Basic and diluted 17,080,000 1,705,242 17,080,000 1,705,242

CHINA-BIOTICS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Audited, amounts expressed in US Dollars)

AS OF MARCH 31, 2007 AND 2006

ASSETS

Current assets 2007 2006

Cash and cash equivalents $26,992,025 $19,840,812

Restricted cash -- 752,778

Accounts receivable 14,309,818 10,941,595

Deposit Paid 216,236 --

Inventories 203,054 257,584

Prepayment 176,094 31,200

Travel advances -- 8,972

Total current assets 41,897,227 31,832,941

Plant, equipment and leasehold

improvements, net 2,682,617 1,594,047

Total assets 44,579,844 33,426,988

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable 1,523,471 1,826,441

Tax payables 18,019,721 15,316,318

Loan from stockholders -- 2,290,230

Other payables and accruals 1,126,645 1,656,987

Total current liabilities 20,669,837 21,089,976

Commitments

Stockholders' equity:

Preferred stock -- --

Common stock 1,708 1,708

Additional paid-in capital 7,863,031 7,863,031

Retained earnings 12,284,900 1,379,914

Accumulated other comprehensive

income (loss) 734,574 66,565

Capital and statutory reserves 3,025,794 3,025,794

Liquidating dividends -- --

Total stockholders' equity 23,910,007 12,337,012

Total liabilities and stockholders'

equity 44,579,844 33,426,988

CHINA-BIOTICS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOW

(Audited, amounts expressed in US Dollars)

FOR THE YEARS ENDED MARCH 31, 2007 AND 2006

CASH FLOWS FROM OPERATING ACTIVITIES 2007 2006

Net income $10,904,986 $8,353,968

Adjustment for:

Gain on disposal of plant and

equipment (14,793) --

Depreciation 493,472 516,217

(Increase)/Decrease in restricted

cash 748,742 (752,778)

(Increase)/Decrease in accounts

receivable (2,881,034) (3,684,694)

(Increase)/Decrease in inventories 65,303 195,360

(Increase)/Decrease in prepayment (352,923) (31,070)

(Increase)/Decrease in travel

advances -- (8,978)

(Increase)/Decrease in other

receivables 2,732 7,454

Increase/(Decrease) in accounts

payable (451,305) 186,662

Increase in income tax and surcharge

tax payable 4,186,868 3,900,541

Income tax paid (2,373,846) (1,684,976)

Increase/(Decrease) in other payables

and accruals, and value added tax

payable (321,043) (13,744)

NET CASH PROVIDED BY OPERATING

ACTIVITIES 10,007,159 6,983,962

CASH FLOWS USED IN INVESTING

ACTIVITIES

Sales proceeds from disposal of plant

and equipment 14,793 --

Purchase of fixed assets and payments

for leasehold improvements (1,485,789) (97,560)

NET CASH PROVIDED BY/(USED IN)

INVESTING ACTIVITIES (1,470,996) (97,560)

CASH FLOWS FROM FINANCING ACTIVITIES

Temporary advance from shareholders -- 1,500,609

Repayment on temporary advance from

shareholders -- (1,500,609)

Advances to related parties -- (1,712,646)

Cash received on advances to related

parties -- 3,345,705

Proceeds from issuance of common

stock -- 5,076,700

Procceds from issue of convertible

bond -- 2,578,000

Distributions to previous owners of

the subsidiary -- (6,850,585)

Payment of liquidating dividends (in

form of purchase consideration) to

previous owners of the subsidiary in

conjunction with acquisition of

subsidiary -- (2,270,141)

Loan from shareholders / (repayment

on loan from shareholders) (2,280,687) 2,280,687

Payment to settle liabilities assumed

in connection with reverse

acquisition -- (5,000)

NET CASH PROVIDED BY/(USED IN)

FINANCING ACTIVITIES (2,280,687) 2,442,720

Effect of exchange rate changes on

cash 895,737 240,187

NET INCREASE IN CASH AND CASH

EQUIVALENTS BALANCES 7,151,213 9,569,309

CASH AND CASH EQUIVALENTS BALANCES AT

BEGINNING OF PERIOD 19,840,812 10,271,503

CASH AND CASH EQUIVALENTS BALANCES AT

END OF PERIOD $26,992,025 $19,840,812

Schedule of noncash transactions

Conversion of convertible bonds into

common stock -- 2,578,000

Net liabilities assumed in reverse

acquisition with the issue of common

stock -- 2,562

For more information, please contact::

CCG Elite Investor Relations

Crocker Coulson, President

Tel: +1-646-213-1915 (New York)

Email: crocker.coulson@ccgir.com

Source: China-Biotics, Inc.
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