China BCT Reports First Quarter 2010 Results
LIUZHOU CITY, Guangxi, China, May 21 /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 results for the first quarter ended March 31, 2010.
First Quarter 2010 Highlights
-- Revenue increased 5.2% to $34.0 million year over year
-- Gross profit was up slightly year over year to $8.9 million
-- Operating income decreased 11.5% to $6.2 million year over year
-- GAAP net income was $4.2 million in the 2010 first quarter as compared
to $5.0 million in the year ago quarter
-- Excluding the non-cash, non-operating charge related to change in the
fair value of warrant liabilities, non-GAAP adjusted net income was
$4.5 million
"While we grew sales by leveraging our strong relationships with suppliers and customers, a shift in product mix and significant investments in staffing and marketing negatively affected our profit in the first quarter," commented Mr. Hui Tian Tang, Chairman and Chief Executive Officer of China BCT Pharmacy Group, Inc. "We expect that these strategic investments in our business will return substantial gains over time. As the Chinese government's health care reforms expand, we are already seeing a growing number of our medi-care pharmacy customers receiving state health insurance coverage. Further, our recent acquisition of 48 retail pharmacy stores in Guangxi Province has further expanded our retail footprint to strengthen our leadership in the region and create new growth drivers in the coming quarters."
First Quarter 2010 Results
For the first quarter ended March 31, 2010, revenue increased 5.2% to $34.0 million, as compared to $32.3 million in the same quarter of 2009. The increase in revenue was primarily driven by a 29.0% increase in retail pharmacy sales, reflecting increased marketing campaigns that boosted existing store sales and contribution from new stores which opened in the second half of 2009. Pharmaceutical distribution revenues fell slightly to $23.2 million year-over-year, with a 24.3% growth in hospital sales offset by lower distributor sales. Lower distribution sales primarily reflect a shift in the Company's focus to sell directly to hospitals and the timing of orders from distributors in the first quarter of 2010. In future quarters, the Company anticipates accelerating revenue growth in the distribution segment to be driven by increased contribution from direct sales to hospitals and the consolidation of the recently acquired 48 retail pharmacy stores.
In terms of revenue mix, wholesale distribution accounted for 68.2% of the total, while the retail pharmacy and manufacturing pharmacy contributed 26.1% and 5.7%, respectively, as compared to 72.6% from pharmaceutical distribution, 21.3% from retail pharmacy and 6.1% from manufacturing pharmacy for the first quarter of 2009.
Gross profit was $8.9 million, compared to $8.8 million for the same period of 2009. Gross margin fell to 26.0%, as compared to 27.4% in the comparable period last year. Lower gross margin in the first quarter of 2010 mainly reflected a change in the Company's distribution portfolio that included a more diversified product mix, which is expected to drive sales volume and gross profit dollar growth over time.
Operating expenses increased by 43.9% to $2.7 million, as compared to $1.9 million in the same period last year. Administrative expenses increased 64.9% to $1.6 million, as compared to $1.0 million in the same period of 2009, primarily due to an increase in staff compensation, including year-end bonuses, and rental expenditures. Administrative costs are expected to decline during the remainder of 2010. Selling expenses rose 19.5% to $1,026,519, compared to $858,686 in the same period of 2009, due to increased marketing activities to expand and gain additional market opportunities.
Operating income declined 11.5% to $6.2 million, or 18.2% of revenue, from $7.0 million, or 21.6% of revenue, in the first quarter of 2009.
GAAP net income fell to $4.2 million, or $0.11 per diluted share, as compared to $5.0 million, or $0.16 per diluted share, in the first quarter of 2009. Adjusted net income, excluding the $0.3 million non-cash expense related to change in the fair value of warrant liabilities, was $4.5 million, or $0.12 per diluted share. There were no comparable adjustments to net income in the first quarter of 2009.
Financial Condition
As of March 31, 2010, BCT had $13.0 million in cash and cash equivalents and $35.0 million in working capital and a current ratio of 1.9:1x. Long-term bank debt was $3.6 million. Shareholders' equity was $58.1 million on March 31, 2010, up from $53.4 million at the end of 2009.
The Company generated $3.9 million in cash from operating activities for the quarter ended March 31, 2010, an increase compared to cash used in operating activities of $4.1 million in the same period in 2009. The increase in cash flow from operating activities primarily reflected decrease in trade receivables and increase in accounts payable and better cash management. Inventory level increased quarter-over-quarter as the Company anticipated accelerating revenue growth in future quarters.
Recent Events
In May 2010, China BCT announced that it acquired 48 retail pharmacy stores in two separate transactions. First, the Company acquired 30 retail pharmacy stores from a retail pharmacy operator in Liuzhou City for $2.4 million in cash from Wubaitang, a local pharmaceutical company with pharmaceutical wholesale and retail divisions, in March 2010. Management expects these newly acquired stores to contribute approximately $3.7 million to the Company's revenue in 2010. Subsequently, in April 2010, the Company acquired an 18-store retail pharmacy chain in Zhaoping County, the administrative region of Hezhou City, for $1.3 million in cash from Zhaoping Laobaixing Pharmacy Retail Limited, a local retail pharmaceutical chain store enterprise. The Company estimates that these 18 stores will contribute approximately $1.8 million to annual sales after they become operational.
Business Outlook
"Following our successful bidding for distribution rights in Guangxi province over the past year, we expect sales under these contracts to become an increasingly larger share of our overall revenues," commented Mr. Tang. "While we continue to pursue an organic growth strategy for our distribution segment, we are also aggressively expanding our retail pharmacy presence throughout Guangxi Province through acquisitions. With the addition of the 48 new stores, we are on track to achieve our target of adding a total of 160 pharmacy stores by the end of 2010 to our growing retail chain in Guangxi Province. We expect to be successful once again in renewing existing and winning new contracts as part of the 2010 centralized tendering under the New Rural Corporative Health Insurance Plan and anticipate significant new business opportunities to drive China BCT's growth."
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 114 directly owned retail stores in Guangxi province and currently over 8,000 products are distributed through the Company's wholesale distribution network.
Safe Harbor Statement
This presentation 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 the successful integration of newly acquired stores, the achievability of the payback periods, and the revenue generation potential of the newly acquired stores. 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 months ended March 31, 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.
China BCT Pharmacy Group, Inc.
RECONCILIATION OF NON-GAAP NET INCOME AND DILUTED EPS
Three months Ended
March 31,
US$ - thousands, except per share 2010 2009
Net income 4,244 5,007
- Non-cash adjustment - Change in fair value
of warrant liabilities 289 --
Adjusted net income excluding non-cash item 4,533 5,007
Per diluted share
- Net income per share $0.11 $0.16
- Non-cash adjustment per share $0.01 $0.00
- Adjusted net income per share $0.12 $0.16
Weighted average shares outstanding - '000
- diluted 37,765 32,000
Financial Tables Follow
China BCT Pharmacy Group, Inc.
(Formerly named China Baicaotang Medicine Limited)
Condensed Consolidated Statements of Income and Comprehensive Income
For the three months ended March 31, 2010 and 2009
(Unaudited)
(Stated in US Dollars)
Three months ended
March 31,
2010 2009
Sales revenue $34,028,878 $32,342,392
Cost of sales 25,167,201 23,493,795
Gross profit 8,861,677 8,848,597
Operating expenses
Administrative expenses 1,642,423 996,095
Selling expenses 1,026,519 858,686
2,668,942 1,854,781
Income from operations 6,192,735 6,993,816
Interest income 50,686 106
Other income 98,040 --
Change in fair value of warrant
liabilities (288,783) --
Other expenses (39,312) (2,595)
Finance costs (263,696) (296,175)
Income before income taxes 5,749,670 6,695,152
Income taxes (1,505,505) (1,688,383)
Net income attributable to China BCT
Pharmacy Group, Inc.'s common
stockholders $4,244,165 $5,006,769
Other comprehensive income
Foreign currency translation
adjustments 24,538 (36,992)
Total comprehensive income $4,268,703 $4,969,777
Earnings per share: basic and diluted $0.11 $0.16
Weighted average number of shares
outstanding:
basic and diluted 37,764,573 32,000,000
China BCT Pharmacy Group, Inc.
(Formerly named China Baicaotang Medicine Limited)
Condensed Consolidated Balance Sheets
As of March 31, 2010 and December 31, 2009
(Stated in US Dollars)
March 31, December 31,
2010 2009
(Unaudited) (Audited)
ASSETS
Current assets
Cash and cash equivalents $13,033,360 $13,304,158
Restricted cash 871,714 1,155,779
Bills receivable 129,956 --
Trade receivables, net 35,110,436 35,410,039
Amounts due from related
companies 7,896,323 4,275,586
Other receivables, prepayments
and deposits 4,055,276 2,526,398
Inventories 10,761,047 8,745,525
Deferred taxes 28,932 60,164
Total current assets 71,887,044 65,477,649
Goodwill 107,968 107,968
Other intangible assets 625,520 660,034
Property, plant and equipment, net 12,028,584 12,171,689
Land use rights 13,218,822 13,979,753
Deposit for acquisition of retail
chain stores business 2,434,101 --
Deferred taxes 696,149 663,699
TOTAL ASSETS $100,998,188 $93,060,792
China BCT Pharmacy Group, Inc.
(Formerly named China Baicaotang Medicine Limited)
Condensed Consolidated Balance Sheets (Cont'd)
As of March 31, 2010 and December 31, 2009
(Stated in US Dollars)
March 31, December 31,
2010 2009
(Unaudited) (Audited)
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Current liabilities
Trade payables $20,744,178 $19,159,212
Bills payable 1,743,428 2,239,604
Other payables and accrued
expenses 3,786,462 3,194,612
Amounts due to directors 848,208 1,008,111
Amounts due to related
companies 922,913 128,579
Income tax payable 682,251 562,603
Secured bank loans 6,626,811 7,136,069
Other loans 1,500,569 2,361,258
Retirement benefit costs 59,158 59,158
Total current liabilities 36,913,978 35,849,206
Secured long-term bank loans 3,631,957 3,631,957
Warrant liabilities 2,144,202 --
Retirement benefit costs 201,320 201,320
TOTAL LIABILITIES 42,891,457 39,682,483
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock: par value $0.001
per share
Authorized 100,000,000 shares and
38,119,340 and 37,089,370 shares
issued and outstanding as of
March 31, 2010 and December 31,
2009 respectively 38,119 37,089
Additional paid-in capital 15,379,588 14,920,899
Statutory and other reserves 2,605,901 2,605,901
Accumulated other comprehensive
income 2,134,808 2,110,270
Retained earnings 37,948,315 33,704,150
TOTAL STOCKHOLDERS' EQUITY 58,106,731 53,378,309
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $100,998,188 $93,060,792
China BCT Pharmacy Group, Inc.
(Formerly named China Baicaotang Medicine Limited)
Condensed Consolidated Statements of Cash Flows
For the three months ended March 31, 2010 and 2009
(Unaudited)
(Stated in US Dollars)
Three months ended
March 31,
2010 2009
Cash flows from operating activities
Net income attributable to China
BCT Pharmacy Group, Inc.'s
common stockholders $4,244,165 $5,006,769
Adjustments to reconcile net
income to net cash provided by
(used in) operating activities:-
Depreciation 181,481 158,941
Deferred taxes (1,218) --
Gain on disposal of
land use right (44,919) --
Loss on disposal of
property, plant and
equipment -- 306
Amortization of
intangible assets 34,514 29,024
Amortization of land
use rights 108,355 83,873
Change in fair
value of warrant
liabilities 288,783 --
Changes in operating assets
and liabilities:-
Trade receivables 299,603 (7,574,526)
Bills receivable (129,956) --
Other receivables,
prepayments and
deposits (1,528,878) (1,477,625)
Inventories (2,015,522) (440,823)
Trade payables 1,584,966 (1,397,972)
Amounts due from (to)
related companies 388,390 (277,722)
Other payables and accrued
expenses 591,850 1,463,456
Bills payable (496,176) 2,223,521
Restricted cash 284,065 (2,201,559)
Income tax payable 119,648 344,597
Net cash flows provided by (used
in) operating activities $3,909,151 $(4,059,740)
China BCT Pharmacy Group, Inc.
(Formerly named China Baicaotang Medicine Limited)
Condensed Consolidated Statements of Cash Flows (Cont'd)
For the three months ended March 31, 2010 and 2009
(Unaudited)
(Stated in US Dollars)
Three months ended
March 31,
2010 2009
Cash flows from investing activities
Payments to acquire and deposit for
acquisition of property, plant and
equipment $(38,376) $(14,110)
Proceeds from sales of property,
plant and equipment -- 407
Proceeds from sales of land use right 697,495 --
Deposit for acquisition of retail
chain stores business (2,434,101) --
Repayment from related companies -- 3,671,755
Net cash flows (used in) provided by
investing activities (1,774,982) 3,658,052
Cash flows from financing activities
Repayment (to) from related
companies (3,214,793) 1,040,480
Repayment to directors (159,903) --
Net cash received from private
placement 2,315,138 --
Proceeds from bank loans 1,290,960 9,675,520
Repayment of bank loans (1,800,218) (7,243,454)
Repayment of other loans (860,689) (122,333)
Net cash flows (used in) provided by
financing activities (2,429,505) 3,350,213
Effect of foreign currency translation
on cash and cash equivalents 24,538 (2,571)
Net (decrease) increase in cash and
cash equivalents (270,798) 2,945,954
Cash and cash equivalents - beginning
of period 13,304,158 1,265,184
Cash and cash equivalents - end of
period $13,033,360 $4,211,138
Supplemental disclosures for cash
flow information:
Cash paid for:
Interest $196,262 $218,520
Income taxes $1,387,075 $1,343,750
For more information, please contact:
Company Contact:
Ms. Shelly Zhang, Chief Financial Officer
China BCT Pharmacy Group, Inc.
Email: [email protected]
Tel: +86-772-363-8318
Investor Relations Contact:
Ms. Lei Huang, Account Manager
Email: [email protected]
Tel: +1-646-833-3417
Mr. Crocker Coulson, President
Email: [email protected]
Tel: +1-646-213-1915
CCG Investor Relations
Web: http://www.ccgirasia.com
SOURCE China BCT Pharmacy Group, Inc.
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