China Pharma Holdings, Inc. Reports Full Year 2014 Financial Results

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Mar 31, 2015, 06:00 ET

HAIKOU CITY, China, March 31, 2015 /PRNewswire/ -- China Pharma Holdings, Inc. (NYSE MKT: CPHI) ("China Pharma" or the "Company"), an NYSE MKT listed corporation with its fully-integrated specialty pharmaceuticals subsidiary based in China, today announced financial results for the year ended December 31, 2014.

Full Year Highlights

Revenue decreased 24% to $24.9 million in fiscal year 2014 from $32.8 million in fiscal year 2013;
Gross margin was 21.9% in fiscal year 2014, compared to gross loss margin of (1.5)% in fiscal 2013. Without the effect of inventory obsolescence, management estimates that our gross profit would have been approximately 30.9% in fiscal year 2014 and 28.7% in fiscal year 2013;
Loss from operations was $25.3 million in fiscal year 2014 compared to $18.6 million in 2013, an increase of $6.7 million;
Net loss was $26.0 million in fiscal year 2014 compared to $20.0 million in 2013. Loss per common share was $(0.60) per basic and diluted share in fiscal 2014 compared with $(0.46) per basic and diluted share in fiscal year 2013.

"We have experienced tough challenges and made remarkable achievements in 2014: we completed the construction of a 20,000 square meters new factory, installed with four (4) sterilization production lines (two liquid injectables and two dry powder injectables production lines) after nearly two years of construction. In November 2014, we obtained new GMP certificate issued by CFDA, and commenced the manufacturing at our dry powder injectables and liquid injectables production lines; We also sustained the loss brought by once-in-forty-year 16 grade super typhoon." said Ms. Zhilin Li, China Pharma's Chairman and CEO. Ms. Li continued, "During the period from January 1, 2014 to November 3, 2014, we suspended two production lines as they did not then meet the GMP upgrading deadline. In this production-suspended period, we limited our credit sales and executed a prudent marketing strategy by screening our existing and potential distributors and hospital customers based on the speed of their payment in order to gradually improve our trade turnover, especially the collection of our accounts receivable. This strategy has temporarily impacted our sales in the current period by limiting our credit sales."

Full Year Results

Revenues for the year ended December 31, 2014 were $24.9 million, a decrease of 24% from revenues of $32.8 million for the year ended December 31, 2013. This decrease primarily resulted from decreases in sales throughout all our product categories, especially our CNS Cerebral &Cardio Vascular products (decreased by approximately $2.8 million) and our Anti-Viro/Infectious & Respiratory products (decreased by approximately $1.8 million).

We had decreases in the sales estimates between the time when raw materials were purchased and the time when the sales performance is realized for certain products. We assessed the fair value of our raw material and determined that certain inventory was slow moving or obsolete. Based on the developed estimates as of December 31, 2014 and 2013, we recognized an additional inventory obsolescence expense of $2.3 million and $9.9 million for the years ended December 31, 2014 and 2013, respectively.

Gross profit for the year ended December 31, 2014 was $5.5 million, compared to gross loss of $0.5 million in 2013. Our gross profit margin in 2014 was 21.90% compared to gross loss margin of (1.5%) in 2013. Without the effect of inventory obsolescence, management estimates that our gross profit would have been approximately 30.9% in 2014 and 28.7% in 2013.

Selling, general and administrative expenses in 2014 were $5.1 million, or 20.3% of sales, compared to $5.7 million, or 17.3% of sales in 2013. For the year ended December 31, 2014, the Company's research and development expense was $2.8 million, compared to $1.7 million in 2013. The change in research and development expenses was mainly due to the costs related to testing of our new production lines. In addition, we commenced leading formulation screening, new technology exploration and technical criteria improvement activities since 2013. As a result, the expenses related to such activities increased in 2014.

For the year ended December 31, 2014, the Company's bad debt expense was $20.6 million, compared to a bad debt expense of $10.5 million in 2013. The increase in bad debt expense in 2014 was mainly due to the increase in our long-aging accounts receivable.

We suffered losses of $2.3 million relating to a tropical typhoon during the twelve months ended December 31, 2014. There was no comparable expense in the prior year period.

Operating loss was $25.3 million in 2014 compared to operating loss of $18.6 million in 2013. The main reasons for the increase in loss were lower revenue and higher bad debt expenses in 2014.

For the years ended December 31, 2014 and 2013, our income tax rate was 15%. Income tax expense was ($0.8) million and ($1.1) million for the years ended December 31, 2014 and 2013, respectively. We renewed our "National High-Tech Enterprise" status from the PRC government in the third quarter of 2013. With this designation, for the years ending December 31, 2014, 2015 and 2016, we will continue to enjoy a preferential tax rate of 15% which is notably lower than the statutory income tax rate of 25%.

Net loss for the year 2014 was $26.0 million, or $(0.60) per basic and diluted share, compared to net loss of $20.0 million, or $(0.46) per basic and diluted share for the year 2013. The decrease in net income was mainly due to the decrease in revenue, increase in bad debt expense, and losses from natural disaster.

Financial Condition

As of December 31, 2014, the Company had cash and cash equivalents of $5.3 million compared to $6.0 million as of December 31, 2013. Year-over-year, working capital decreased to $40 million in 2014 from $72 million in 2013 and the current ratio was 3.8 times in 2014, decreased from 7.0 times in 2013.

Our accounts receivable balance decreased to $24.9 million as of December 31, 2014 from $45.1 million as of December 31, 2013. The decrease was due to our enhanced collection efforts, the increased allowance, the decrease in sales, and the trade receivables collection discount program implemented in the third quarter of 2014 to encourage the collection of accounts receivable aged over one year.

For the year ended December 31, 2014, cash flow from operating activities was $4.6 million, as compared to $8.6 million in 2013.

Pipeline Update

As of December 31, 2014, China Pharma had various pipeline drugs in different stages of active development. Some of these are highlighted below:

Antibiotic Combination - We completed the Phase I clinical trials of our novel cephalosporin-based combination antibiotic. We are currently in Phase II of the clinical trial, due to the higher regulatory requests for clinical works.
Rosuvastatin - Rosuvastatin is a generic form of Crestor, a drug for the treatment of high blood cholesterol levels. Clinical trials for this generic drug were completed in the fourth quarter of 2010 and we have submitted an application for production approval, and are performing supplemental trials of related materials pursuant to the new criteria.
Heart Disease Drug - We have an oral solution for the treatment of coronary heart disease in our new product pipeline. This product comes with a patented Traditional Chinese Medicine (TCM) formula and is currently approaching the end point of Phase III clinical trials.

Conference Call

The Company will hold a conference call at 8:30 am ET on March 31, 2015 to discuss the results of fiscal year 2014. Listeners may access the call by dialing 1-866-519-4004 or 65-672-393-81 for international callers, Conference ID # 6732010. A webcast will also be available through CPHI's website at http://www.chinapharmaholdings.com. A replay of the call will be accessible through April 8, 2015 by dialing 1-855-452-5696 or 61-281-990-299 for international callers, Conference ID # 6732010.

About China Pharma Holdings, Inc.

China Pharma Holdings, Inc. is a specialty pharmaceutical company that develops, manufactures and markets a diversified portfolio of products focused on conditions with a high incidence and high mortality rates in China, including cardiovascular, CNS, infectious, and digestive diseases. The Company's cost-effective, high-margin business model is driven by market demand and supported by eight scalable GMP-certified product lines covering the major dosage forms. In addition, the Company has a broad and expanding nationwide distribution network across all major cities and provinces in China. The Company's wholly-owned subsidiary, Hainan Helpson Medical & Biotechnology Co., Ltd., is located in Haikou City, Hainan Province. For more information about China Pharma Holdings, Inc., please visit http://www.chinapharmaholdings.com. The Company routinely posts important information on its website.

Safe Harbor Statement

Certain statements in this press release constitute forward-looking statements for purposes of the safe harbor provisions 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, which may include, but are not limited to, such factors as the achievability of financial guidance, success of new product development, unanticipated changes in product demand, increased competition, downturns in the Chinese economy, uncompetitive levels of research and development, and other information detailed from time to time in the Company's filings and future filings with the United States Securities and Exchange Commission. The forward-looking statements made herein speak only as of the date of this press release and the Company undertakes no duty to update any forward-looking statement to conform the statement to actual results or changes in the Company's expectations except as required by applicable law or regulation.

Contact:

China Pharma Holdings, Inc.
Phone: +86-898-6681-1730 (China)
Email: [email protected]

- FINANCIAL TABLES FOLLOW -

CHINA PHARMA HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS


	December 31,	December 31,
	2014	2013
ASSETS
Current Assets:
Cash and cash equivalents	$ 5,295,790	$ 5,993,139
Banker's acceptances	458,233	336,003
Trade accounts receivable, less allowance for doubtful
accounts of $33,350,109 and $13,301,622, respectively	24,851,086	45,147,602
Other receivables, less allowance for doubtful
accounts of $60,325 and $43,064, respectively	272,199	175,739
Advances to suppliers	7,889,009	7,626,716
Inventory, less allowance for obsolescence
of $6,934,044 and $8,027,126, respectively	15,321,856	24,677,120
Prepaid expenses	404,370	-
Total Current Assets	54,492,543	83,956,319

Advances for purchases of intangible assets	42,390,186	41,701,505
Property and equipment, net of accumulated depreciation of
$6,640,718 and $5,264,350, respectively	33,881,878	30,241,337
Intangible assets, net of accumulated amortization of
$4,186,273 and $3,812,992, respectively	1,317,221	1,711,793
TOTAL ASSETS	$ 132,081,828	$ 157,610,954

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Trade accounts payable	$ 2,550,816	$ 1,877,437
Accrued expenses	269,870	323,651
Other payables	1,401,470	1,312,361
Advances from customers	2,078,866	2,228,238
Other payables - related parties	1,354,567	1,354,567
Current portion of construction loan facility	1,629,062	-
Short-term notes payable	4,887,187	4,909,662
Total Current Liabilities	14,171,838	12,005,916
Non-current Liabilities:
Construction loan facility	11,403,438	12,484,183
Long-term deferred tax liability	252,707	176,414
Total Liabilities	25,827,983	24,666,513
Stockholders' Equity:
Preferred stock, $0.001 par value; 5,000,000 shares authorized;
no shares issued or outstanding	-	-
Common stock, $0.001 par value; 95,000,000 shares authorized;
43,579,557 shares and 43,579,557 shares outstanding, respectively	43,580	43,580
Additional paid-in capital	23,590,204	23,590,204
Retained earnings	62,848,901	88,896,276
Accumulated other comprehensive income	19,771,160	20,414,381
Total Stockholders' Equity	106,253,845	132,944,441
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$ 132,081,828	$ 157,610,954

CHINA PHARMA HOLDINGS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS


	For the Year
	Ended December 31,
	2014	2013
Revenue	$ 24,927,707	$ 32,806,678
Cost of revenue	17,215,576	23,405,886
Inventory obsolescence	2,250,130	9,881,711

Gross profit (loss)	5,462,001	(480,919)

Operating expenses:
Selling expenses	3,346,511	3,284,905
General and administrative expenses	1,716,760	2,404,338
Research and development expenses	2,798,557	1,683,244
Bad debt expense	20,643,035	10,752,991
Losses from natural disaster	2,276,519	-
Total operating expenses	30,781,382	18,125,478

Subsidy income	65,113	-

Loss from operations	(25,254,268)	(18,606,397)

Other income (expense):
Interest income	69,739	8,457
Interest expense	(785,804)	(348,696)
Net other expense	(716,065)	(340,239)

Loss before income taxes	(25,970,333)	(18,946,636)
Income tax expense	(77,402)	(1,061,413)
Net loss	(26,047,375)	(20,008,049)
Other comprehensive income (loss) - foreign currency
translation adjustment	(643,221)	4,435,923
Comprehensive loss	$ (26,690,596)	$ (15,572,126)
Loss per share:
Basic	$ (0.60)	$ (0.46)
Diluted	$ (0.60)	$ (0.46)

CHINA PHARMA HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2013 AND 2014

					Accumulated
			Additional			Other		Total
	Common Stock		Paid-in	Retained	Comprehensive		Stockholders'
	Shares	Amount	Capital	Earnings		Income		Equity

Balance, December 31, 2012	43,579,557	43,580	23,590,204	108,904,325		15,978,458		148,516,567

Net loss for the year	-	-	-	(20,008,049)		-		(20,008,049)
Foreign currency translation adjustment	-	-	-			4,435,923		4,435,923
Balance, December 31, 2013	43,579,557	43,580	23,590,204	88,896,276		20,414,381		132,944,441

Net loss for the year	-	-	-	(26,047,375)		-		(26,047,375)
Foreign currency translation adjustment	-	-	-	-		(643,221)		(643,221)
Balance, December 31, 2014	43,579,557	$ 43,580	$ 23,590,204	$ 62,848,901		$ 19,771,160		$ 106,253,845

CHINA PHARMA HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS


	For the Year
	Ended December 31,
	2014	2013
Cash Flows from Operating Activities:
Net loss	$ (26,047,375)	$ (20,008,049)
Depreciation and amortization	1,785,835	1,612,830
Bad debt expense	20,643,035	10,752,991
Deferred income taxes	77,042	1,061,413
Inventory obsolescence reserve	(1,055,529)	6,121,655
Changes in assets and liabilities:
Trade accounts and other receivables	(3,443,329)	3,633,180
Advances to suppliers	(296,979)	(2,625,629)
Inventory	12,780,457	11,155,810
Trade accounts payable	634,673	(1,183,733)
Accrued taxes payable	84	(2,499,949)
Other payables and accrued expenses	37,584	356,640
Advances from customers	(139,066)	218,656
Prepaid expenses	(404,060)	-
Net Cash Provided by Operating Activities	4,572,372	8,595,815

Cash Flows from Investing Activities:
Advances for purchases of intangible assets	(714,697)	(298,631)
Purchases of property and equipment	(5,128,699)	(18,794,261)
Net Cash Used in Investing Activities	(5,843,396)	(19,092,892)

Cash Flows from Financing Activities:
Proceeds from construction term loan	605,002	12,322,648
Net Cash Provided by Financing Activity	605,002	12,322,648

Effect of Exchange Rate Changes on Cash	(31,327)	137,860
Net (Decrease) Increase in Cash and Cash Equivalents	(697,349)	1,963,431
Cash and Cash Equivalents at Beginning of Period	5,993,139	4,029,708
Cash and Cash Equivalents at End of Period	$ 5,295,790	$ 5,993,139

Supplemental Cash Flow Information:
Cash paid for interest	$ 1,230,800	$ 569,855
Cash paid for income taxes	-	2,481,164

Supplemental Noncash Investing and Financing Activities:
Accounts payable for purchases of property and equipment	$ 46,780	$ 144,243
Accounts receivable collected with banker's acceptances	2,777,579	8,317,045
Inventory purchased with banker's acceptances	2,489,698	4,626,165
Advances for purchases of equipment paid with banker's acceptances	-	2,564,790
Advances for purchases of intangibles paid with banker's acceptances	164,208	897,820