Renhuang Reports Third Quarter 2010 Results
HARBIN, China, Sept. 20 /PRNewswire-Asia/ -- Renhuang Pharmaceuticals, Inc. (NYSE Amex: CBP) ("Renhuang" or the "Company"), a developer, manufacturer and distributor of botanical products,
bio-pharmaceuticals and traditional Chinese medicines ("TCM"), today announced its financial results for the third quarter ended July 31, 2010 and affirmed financial guidance for fiscal year 2010.
Third Quarter Fiscal 2010 Highlights and Recent Events
"Our third quarter sales and net income are historically modestly lower as compared to those in the first two quarters due to seasonality of our product portfolio," said Mr. Shaoming Li, the Chairman and CEO of Renhuang. "Demand for our products often peaks in the fourth quarter, which represents the start of the flu season. Despite the third quarter being a historically slow quarter, we are pleased with the year-over-year growth in net sales and net income. It is also pleasing to report that our recently introduced products, Banlangen Granules and Compound Honeysuckle Granules, have been key drivers supporting our sales growth and strong margins."
Third Quarter Fiscal 2010 Results
For the third quarter ended July 31, 2010, net sales were $9.3 million, up 43.8% from $6.4 million in the same quarter last year. The sales increase was largely attributable to strong growth in sales of the Company's recently introduced products, Banlangen Granules and Compound Honeysuckle Granules, and an increase in the average selling prices (ASP) of certain of the Company's products. Banlangen Granules and Compound Honeysuckle Granules accounted for 26.2% of gross sales in the quarter. ASP rose 5.1% year-over-year in the third quarter of fiscal 2010, which included lower average sales rebates. Except for Shark Vital Capsules, ASP's across all product categories rose on a year-over-year basis.
Gross profit in the quarter increased 32.7% to $4.6 million, as compared to $3.5 million for the same period of 2009. Gross margin for the quarter ended July 31, 2010 decreased to 50.1% from 54.3% in the comparable fiscal 2009 quarter. The year-over-year decline in margin was mainly due to lower sales of the Company's higher-margin product, Shark Vital Capsules during the third fiscal quarter.
Operating expenses for the third quarter of fiscal 2010 were $3.2 million, as compared to $2.8 million in the same period last year. Sales and marketing expenses rose to $1.3 million from $1.1 million. The spending increase reflected continued investment in the Company's distribution network and TV advertising in order to increase product market share and create greater consumer awareness of the Company's premium quality products. General and administrative expenses declined 21.0% to $0.4 million, primarily as a result of the Company's strategic decision to purchase office space in the second fiscal quarter, which resulted in savings on rental expenses for its factory and administrative office. Research and development expenses increased 24.6% to $1.5 million as the Company's pipeline of projects continues to advance and grow.
Operating income in the fiscal 2010 quarter was $1.4 million, up 116.4% from $0.7 million in the 2009 quarter. Operating margin increased significantly year-over-year to 15.5% from 10.3%. The Company did not incur income tax expenses as its subsidiary registered in the PRC has been granted a tax holiday for fiscal 2010. For the third quarter ended July 31, 2010, net income grew 115.8% to $1.5 million, or $0.04 per diluted share, from $0.7 million, or $0.02 per diluted share in the prior year period.
Nine Months Fiscal 2010 Results
Total revenue for the nine-month period ended July 31, 2010 was $38.5 million, an increase of 33.1% from $28.9 million for the first nine months in fiscal 2009. The strong growth in year-over-year sales was mainly due to the introduction of Banlangen Granules and Compound Honeysuckle Granules in the last quarter of 2009, and an increase in average selling prices for certain other products.
Gross profit in the first nine months of fiscal 2010 rose 34.8% to $20.3 million, representing a gross margin of 52.8% as compared to 52.2% in the first nine months of fiscal 2009. Operating income grew 35.3% year-over-year to $12.2 million. In the first nine months of fiscal 2010, net income was $12.2 million or $0.32 per diluted share, up from $9.0 million or $0.26 per diluted share in the first nine months of fiscal 2009.
Financial Condition
As of July 31, 2010, Renhuang had $28.7 million in cash and cash equivalents. Working capital was $42.3 million with a current ratio of 18.0x, as compared to $8.1 million and 12.9x as of October 31, 2009. The Company had no debt on its balance sheet. At the end of the third quarter of 2010, shareholders' equity was $63.1 million, as compared to $50.5 million at the end of fiscal 2009.
Cash flow from operating activities was $22.9 million for the nine months ended July 31, 2010, as compared to $3.1 million during the same period in the prior year. The cash flow increase was primarily attributable to an increase in net income and a decrease in trade receivables that reflected a change in credit terms and more aggressive receivable collection efforts year-over-year. Average days sales outstanding fell to 76 days in first nine months of fiscal 2010 from 249 in the first nine months of fiscal 2009.
Recent Events
In August 2010, Renhuang announced that the Company has appointed Ms. Xiaoying Lu as its Interim CFO, while the Company seeks a permanent replacement. The change follows the resignation for personal reasons of Ms. Yan Yi Chen, the Company's former Chief Financial Officer effective August 3, 2010.
Additionally in August 2010, Renhuang announced that the State Intellectual Property Office of China ("SIPO") of the People's Republic of China recently granted the Company patent protection for the product packaging design for its Compound Honeysuckle Granules, one of Renhuang's leading Traditional Chinese Medicine Products.
Outlook - Affirming Fiscal 2010 Guidance
Renhuang is affirming its fiscal 2010 guidance for net sales in the range of $54.7-$55.6 million, which represents a 26% to 28% increase over reported revenues of $43.4 million in fiscal year 2009. The Company continues to expect fiscal 2010 net income, excluding any non-cash, non-operating gains and expenses (such as the change in fair market value of warrant liability), to be in the range of $18.6-$18.9 million, up 26% to 28% from net income of $14.8 million in fiscal year 2009.
Fourth quarter sales and net income are expected to exhibit strong growth, as it is historically our outstanding quarter with peak sales primarily driven by the beginning of the flu season.
Renhuang expects sales of its leading Siberian Ginseng products to expand as it benefits from further market penetration and the Company's rapidly growing new products to continue their growth momentum driving future revenue and net income growth. Renhuang plans to terminate sales of Shark Vital Capsules by the end of the fourth quarter of 2010 and launch its new product, Badger Oil -- a natural medicine for the treatment of burns with no known toxic side effects or allergic reactions -- in the same period. The Company also launched Qing Re Jie Du Oral Liquid, a TCM for the treatment of influenza and upper respiratory infections in June 2010 and Compound Schisandra Tables in July 2010, a new all-natural anti-depressant and nerve regulation product.
"During the current Spring and Autumn season, China battles with influenza (or common flu), which drives up the sales of our Banlangen Granules and Compound Honeysuckle Granules. These products have established a strong market reputation due to their high-quality and performance," added Mr. Li. "We will continue to maintain our focus on botanical anti depression and nerve regulation products, and invest in research and development of these products. Our target is to become the leading pharmaceutical company in botanical anti depression and nerve regulation medicine in China. In addition to focusing on organic growth, Renhuang continues to actively evaluate external growth opportunities through strategic acquisitions."
Conference Call
The Company will host a conference call at 9:00 a.m. ET on Tuesday, September 21, 2010 to discuss the third quarter of its fiscal year 2010, ended July 31, 2010.
To participate in the conference call, please dial the following number five to ten minutes prior to the scheduled conference call time: 877-812-1464. International callers should dial +1 706-902-4248. The conference ID number for the call is 98347783.
If you are unable to participate in the call at this time, a replay will be available on Tuesday, September 21, 2010 at 12:00 noon Eastern Time, through Tuesday, October 5, 2010. To access the replay, dial 800-642-1687. International callers should dial +1 706-645-9291. The conference ID number for the replay is 98347783.
ABOUT RENHUANG PHARMACEUTICALS, INC.
Renhuang Pharmaceuticals, Inc. is engaged in the research, development, manufacturing, and distribution of botanical products, bio-pharmaceutical products, and traditional Chinese medicines ("TCM"), in the People's Republic of China. All of the Company's products are produced at its three GMP-certified production facilities in Ah City, Dongfanghong and Qingyang. The Company distributes its botanical anti-depression and nerve-regulation products, biopharmaceutical products, and botanical antibiotic and OTC TCMs through its network of over 3,000 distributors and over 70 sales centers across 24 provinces in China. Company Website: http://www.renhuang.com .
Safe Harbor Statement
This press release contains certain statements that may include
forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are based upon management's beliefs, assumptions and expectations of the Company's future operations and economic performance, taking into account the information currently available to management. These statements are not statements of historical fact. Forward-looking statements involve risks and uncertainties, some of which are not currently known that may cause actual results, performance or financial condition to be materially different from the expectations of future results, performance or financial condition expressed or implied in any forward-looking statements. These forward-looking statements are based on current plans and expectations and are subject to a number of uncertainties including, but not limited to, the Company's ability to achieve its financial guidance, ability to manage expansion of its operations effectively, competition in the marketing and sales of its products, and other factors detailed in the Company's annual report on Form 10-K and other filings with the Securities and Exchange Commission. 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. You are cautioned not to unduly rely on such forward-looking statements when evaluating the information presented herein.
- Financial Tables Follow -
RENHUANG PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
July 31, October 31,
2010 2009
US$ US$
(Unaudited) (Audited)
ASSETS
Current assets:
Cash and cash equivalents 28,749,480 8,111,514
Trade receivables, net 10,817,824 23,203,410
Due from related parties -- 130,199
Inventory, net 3,573,349 3,024,016
Deposits 1,473,796 --
Prepayments -- 89,281
Other receivables, net 144,011 102,613
Total current assets 44,758,460 34,661,033
Property and equipment, net 2,090,592 2,352,163
Deposits 18,695,870 16,137,000
Total assets 65,544,922 53,150,196
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Current liabilities:
Accounts payable 256,993 369,329
Value added tax payable 471,282 1,186,642
Accrued employee benefits 1,422,006 1,136,267
Warrant liability 342,770 --
Total current liabilities 2,493,051 2,692,238
Commitments and Contingencies
Shareholders' equity
Preferred stock (no par value,
1,000,000 shares authorized; none
issued and outstanding as of July
31, 2010 and October 31, 2009) -- --
Common stock ($0.001 par value,
100,000,000 shares authorized;
37,239,536 issued and outstanding
as of July 31, 2010 and October
31, 2009) 37,240 37,240
Additional paid-in capital 7,651,460 7,596,525
Common stock warrants 496,732 496,732
Reserves 3,372,697 3,372,697
Accumulated other comprehensive income 3,669,590 3,367,659
Retained earnings 47,824,152 35,587,105
Total shareholders' equity 63,051,871 50,457,958
Total liabilities and shareholders'
equity 65,544,922 53,150,196
RENHUANG PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
Three months ended Nine months ended
July 31, July 31,
2010 2009 2010 2009
US$ US$ US$ US$
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Sales, net 9,263,892 6,442,197 38,489,012 28,915,072
Cost of goods sold (4,620,568) (2,942,649)(18,151,062) (13,825,692)
Gross profit 4,643,324 3,499,548 20,337,950 15,089,380
Operating and
administrative
expenses:
Sales and marketing 1,284,990 1,109,540 3,689,290 2,534,865
General and
administrative 395,131 499,949 2,208,965 1,712,342
Research and
development 1,528,933 1,227,411 2,251,854 1,833,391
Total operating
expenses 3,209,054 2,836,900 8,150,109 6,080,598
Income from
operations 1,434,270 662,648 12,187,841 9,008,782
Other income:
Interest income 22,039 12,054 49,206 31,204
Income from
operations before
income tax expenses 1,456,309 674,702 12,237,047 9,039,986
Income tax expenses -- -- -- --
Net income 1,456,309 674,702 12,237,047 9,039,986
Other comprehensive
income:
Cumulative currency
translation
adjustments 461,820 (93,739) 301,931 (79,568)
Total comprehensive
income 1,918,129 580,963 12,538,978 8,960,418
Earnings per common
stock - Basic 0.04 0.02 0.33 0.26
Earnings per common
stock - Diluted 0.04 0.02 0.32 0.26
Weighted average
common stock
outstanding
Basic 37,239,536 36,796,990 37,239,536 35,096,680
Diluted 37,901,089 36,796,990 37,793,370 35,096,680
RENHUANG PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the nine months ended
July 31,
2010 2009
US$ US$
(Unaudited) (Unaudited)
Cash flows from operating activities:
Net income 12,237,047 9,039,986
Adjustments to reconcile net income
to operating activities:
Depreciation of property and equipment 261,572 265,559
Warrants issued for services 342,770 --
Share compensation 42,759 --
Changes in assets and liabilities:
Decrease (increase) in trade
receivables 12,385,586 (5,868,520)
Decrease (increase) in due from
related parties 130,199 (321,010)
Decrease (increase) in inventory, net (549,333) 43,425
Decrease (increase) in prepayments
and in other receivables (1,425,913) 77,805
Decrease in accounts payable (112,336) (93,249)
Decrease in value added tax payable (715,360) (270,065)
Increase in accrued employee benefits 285,739 281,611
Decrease in other payables -- (96,754)
Net cash provided by operating
activities 22,882,730 3,058,788
Cash flows from investing activities:
Purchase of property and equipment -- (16,183)
Deposits for office properties (2,558,870) --
Net cash used in investing activities (2,558,870) (16,183)
Effect of exchange rate changes on
cash 314,106 (22,551)
Net increase in cash and cash
equivalents 20,637,966 3,042,605
Cash and cash equivalents, beginning
of year 8,111,514 9,747,693
Cash and cash equivalents, end of
year 28,749,480 12,767,747
Supplemental disclosure of cash flow
information:
Cash paid during the year for income
taxes -- --
Interest paid during the year -- --
For more information, please contact:
Renhuang Pharmaceuticals, Inc.
Ms. Portia Tan, IR Contact
Phone: +86-451-8260-2162
Email: ir@renhuang.com
CCG Investor Relations:
Mr. Mark Collinson, Partner
Phone: +1-310-954-1343 (Los Angeles)
Email: mark.collinson@ccgir.com
Web: http://www.ccgirasia.com
Mr. Crocker Coulson, President
Phone: +1-646-213-1915 (New York)
Email: crocker.coulson@ccgir.com
Renhuang Reports Third Quarter 2010 Results
- Sales increased 44% on a year-over-year basis to reach $9.3 million
- Management reiterates fiscal 2010 guidance
HARBIN, China, Sept. 20 /PRNewswire-Asia-FirstCall/ -- Renhuang Pharmaceuticals, Inc. (NYSE Amex: CBP) ("Renhuang" or the "Company"), a developer, manufacturer and distributor of botanical products,
bio-pharmaceuticals and traditional Chinese medicines ("TCM"), today announced its financial results for the third quarter ended July 31, 2010 and affirmed financial guidance for fiscal year 2010.
Third Quarter Fiscal 2010 Highlights and Recent Events
-- Net sales grew 43.8% year-over-year to $9.3 million.
-- Gross profit increased 32.7% to $4.6 million from $3.5 million in 2009
-- Gross margin was 50.1%
-- Net income rose 115.8% to $1.5 million or $0.04 per diluted share, as compared to $0.7 million or $0.02 per diluted share in 2009
-- New products, Banlangen Granules and Compound Honeysuckle Granules, accounted for 26.2% of gross sales in the quarter
-- In July 2010, Renhuang's common stock began trading on the NYSE Amex Market under the ticker symbol "CBP"
"Our third quarter sales and net income are historically modestly lower as compared to those in the first two quarters due to seasonality of our product portfolio," said Mr. Shaoming Li, the Chairman and CEO of Renhuang. "Demand for our products often peaks in the fourth quarter, which represents the start of the flu season. Despite the third quarter being a historically slow quarter, we are pleased with the year-over-year growth in net sales and net income. It is also pleasing to report that our recently introduced products, Banlangen Granules and Compound Honeysuckle Granules, have been key drivers supporting our sales growth and strong margins."
Third Quarter Fiscal 2010 Results
For the third quarter ended July 31, 2010, net sales were $9.3 million, up 43.8% from $6.4 million in the same quarter last year. The sales increase was largely attributable to strong growth in sales of the Company's recently introduced products, Banlangen Granules and Compound Honeysuckle Granules, and an increase in the average selling prices (ASP) of certain of the Company's products. Banlangen Granules and Compound Honeysuckle Granules accounted for 26.2% of gross sales in the quarter. ASP rose 5.1% year-over-year in the third quarter of fiscal 2010, which included lower average sales rebates. Except for Shark Vital Capsules, ASP's across all product categories rose on a
year-over-year basis.
Gross profit in the quarter increased 32.7% to $4.6 million, as compared to $3.5 million for the same period of 2009. Gross margin for the quarter ended July 31, 2010 decreased to 50.1% from 54.3% in the comparable fiscal 2009 quarter. The year-over-year decline in margin was mainly due to lower sales of the Company's higher-margin product, Shark Vital Capsules during the third fiscal quarter.
Operating expenses for the third quarter of fiscal 2010 were $3.2 million, as compared to $2.8 million in the same period last year. Sales and marketing expenses rose to $1.3 million from $1.1 million. The spending increase reflected continued investment in the Company's distribution network and TV advertising in order to increase product market share and create greater consumer awareness of the Company's premium quality products. General and administrative expenses declined 21.0% to $0.4 million, primarily as a result of the Company's strategic decision to purchase office space in the second fiscal quarter, which resulted in savings on rental expenses for its factory and administrative office. Research and development expenses increased 24.6% to $1.5 million as the Company's pipeline of projects continues to advance and grow.
Operating income in the fiscal 2010 quarter was $1.4 million, up 116.4% from $0.7 million in the 2009 quarter. Operating margin increased significantly year-over-year to 15.5% from 10.3%. The Company did not incur income tax expenses as its subsidiary registered in the PRC has been granted a tax holiday for fiscal 2010. For the third quarter ended July 31, 2010, net income grew 115.8% to $1.5 million, or $0.04 per diluted share, from $0.7 million, or $0.02 per diluted share in the prior year period.
Nine Months Fiscal 2010 Results
Total revenue for the nine-month period ended July 31, 2010 was $38.5 million, an increase of 33.1% from $28.9 million for the first nine months in fiscal 2009. The strong growth in year-over-year sales was mainly due to the introduction of Banlangen Granules and Compound Honeysuckle Granules in the last quarter of 2009, and an increase in average selling prices for certain other products.
Gross profit in the first nine months of fiscal 2010 rose 34.8% to $20.3 million, representing a gross margin of 52.8% as compared to 52.2% in the first nine months of fiscal 2009. Operating income grew 35.3% year-over-year to $12.2 million. In the first nine months of fiscal 2010, net income was $12.2 million or $0.32 per diluted share, up from $9.0 million or $0.26 per diluted share in the first nine months of fiscal 2009.
Financial Condition
As of July 31, 2010, Renhuang had $28.7 million in cash and cash equivalents. Working capital was $42.3 million with a current ratio of 18.0x, as compared to $8.1 million and 12.9x as of October 31, 2009. The Company had no debt on its balance sheet. At the end of the third quarter of 2010, shareholders' equity was $63.1 million, as compared to $50.5 million at the end of fiscal 2009.
Cash flow from operating activities was $22.9 million for the nine months ended July 31, 2010, as compared to $3.1 million during the same period in the prior year. The cash flow increase was primarily attributable to an increase in net income and a decrease in trade receivables that reflected a change in credit terms and more aggressive receivable collection efforts year-over-year. Average days sales outstanding fell to 76 days in first nine months of fiscal 2010 from 249 in the first nine months of fiscal 2009.
Recent Events
In August 2010, Renhuang announced that the Company has appointed Ms. Xiaoying Lu as its Interim CFO, while the Company seeks a permanent replacement. The change follows the resignation for personal reasons of Ms. Yan Yi Chen, the Company's former Chief Financial Officer effective August 3, 2010.
Additionally in August 2010, Renhuang announced that the State Intellectual Property Office of China ("SIPO") of the People's Republic of China recently granted the Company patent protection for the product packaging design for its Compound Honeysuckle Granules, one of Renhuang's leading Traditional Chinese Medicine Products.
Outlook - Affirming Fiscal 2010 Guidance
Renhuang is affirming its fiscal 2010 guidance for net sales in the range of $54.7-$55.6 million, which represents a 26% to 28% increase over reported revenues of $43.4 million in fiscal year 2009. The Company continues to expect fiscal 2010 net income, excluding any non-cash, non-operating gains and expenses (such as the change in fair market value of warrant liability), to be in the range of $18.6-$18.9 million, up 26% to 28% from net income of $14.8 million in fiscal year 2009.
Fourth quarter sales and net income are expected to exhibit strong growth, as it is historically our outstanding quarter with peak sales primarily driven by the beginning of the flu season.
Renhuang expects sales of its leading Siberian Ginseng products to expand as it benefits from further market penetration and the Company's rapidly growing new products to continue their growth momentum driving future revenue and net income growth. Renhuang plans to terminate sales of Shark Vital Capsules by the end of the fourth quarter of 2010 and launch its new product, Badger Oil -- a natural medicine for the treatment of burns with no known toxic side effects or allergic reactions -- in the same period. The Company also launched Qing Re Jie Du Oral Liquid, a TCM for the treatment of influenza and upper respiratory infections in June 2010 and Compound Schisandra Tables in July 2010, a new all-natural anti-depressant and nerve regulation product.
"During the current Spring and Autumn season, China battles with influenza (or common flu), which drives up the sales of our Banlangen Granules and Compound Honeysuckle Granules. These products have established a strong market reputation due to their high-quality and performance," added Mr. Li. "We will continue to maintain our focus on botanical anti depression and nerve regulation products, and invest in research and development of these products. Our target is to become the leading pharmaceutical company in botanical anti depression and nerve regulation medicine in China. In addition to focusing on organic growth, Renhuang continues to actively evaluate external growth opportunities through strategic acquisitions."
Conference Call
The Company will host a conference call at 9:00 a.m. ET on Tuesday, September 21, 2010 to discuss the third quarter of its fiscal year 2010, ended July 31, 2010.
To participate in the conference call, please dial the following number five to ten minutes prior to the scheduled conference call time: 877-812-1464. International callers should dial +1 706-902-4248. The conference ID number for the call is 98347783.
If you are unable to participate in the call at this time, a replay will be available on Tuesday, September 21, 2010 at 12:00 noon Eastern Time, through Tuesday, October 5, 2010. To access the replay, dial 800-642-1687. International callers should dial +1 706-645-9291. The conference ID number for the replay is 98347783.
ABOUT RENHUANG PHARMACEUTICALS, INC.
Renhuang Pharmaceuticals, Inc. is engaged in the research, development, manufacturing, and distribution of botanical products, bio-pharmaceutical products, and traditional Chinese medicines ("TCM"), in the People's Republic of China. All of the Company's products are produced at its three
GMP-certified production facilities in Ah City, Dongfanghong and Qingyang. The Company distributes its botanical anti-depression and nerve-regulation products, biopharmaceutical products, and botanical antibiotic and OTC TCMs through its network of over 3,000 distributors and over 70 sales centers across 24 provinces in China. Company Website: http://www.renhuang.com .
Safe Harbor Statement
This press release contains certain statements that may include