China BCT Reports Strong First Quarter 2011 Results

LIUZHOU CITY, Guangxi, China, May 16, 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 first quarter ended March 31, 2011.

First Quarter 2011 Highlights

• Revenue increased 72.2% year-over-year to $58.6 million
• Gross profit rose 53.6% year-over-year to $13.6 million
• Operating income grew 39.4% year-over-year to $8.6 million
• GAAP net income climbed 47.2% to $6.2 million, or $0.16 per diluted share, from $4.2 million, or $0.11 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 $6.5 million, or $0.17 per diluted share
• We expanded our retail pharmacy footprint in Guangxi with the opening of 17 new stores, 9 of which began generating revenue in the first quarter of 2011

"In the first quarter of 2011, we achieved strong revenue growth across all three of our business segments, led by pharmaceutical distribution, while growing net income 47% on a year-over-year basis," commented Mr. Hui Tian Tang, Chairman and Chief Executive Officer of China BCT Pharmacy Group, Inc. "We ended the first quarter with a solid balance sheet, including roughly $63 million of cash and cash equivalents, providing us with flexibility this year to expand our retail pharmacy footprint within Guangxi Province and to invest in a state-of-the-art logistics center for our distribution business. We aim to strike an optimum balance among our distribution, retail and manufacturing segments to enhance shareholder value."

First Quarter 2011 Results

First quarter 2011 revenue increased 72.2% to $58.6 million from $34.0 million in the first quarter of 2010.

Net sales from the Company's pharmaceutical distribution segment increased 86.3% year-over-year to $43.3 million, or 73.8% of total revenue in the first quarter of 2011. Of the $20.0 million year-over-year increase in pharmaceutical distribution sales, $8.9 million was attributable to higher sales to hospitals, $3.8 million was due to higher sales to clinics and health care centers, $3.8 million reflected higher sales to other drug stores, and $3.5 million was due to higher sales to distributors and others.  

Net sales from the Company's retail pharmacy segment grew 41.0% year-over-year to $12.5 million, or 21.4% of total first quarter revenue. This quarter's increase in retail pharmacy revenue was driven by approximately $5.2 million of incremental sales from new stores added after March 31, 2010, partially offset by a 12.4% year-over-year decrease in existing store sales.  The decline in existing store sales from $8.3 million in the first quarter of 2010 to $7.3 million in the first quarter of 2011, in part reflects the continuing impact of the government's insurance computer system software upgrade, which disrupted the Company's medi-card related sales starting in the second half of 2010.  

Net sales from the Company's pharmaceutical manufacturing segment rose 46.9% year-over-year to $2.8 million, or 4.8% of total first quarter revenue. This quarter's manufacturing sales growth was primarily due to increased sales volumes, as product pricing remained relatively stable year-over-year.  

Gross profit grew 53.6% year-over-year to $13.6 million, up from $8.9 million for the same period of 2010. Gross margin declined 2.8 percentage points to 23.2%, as compared to 26.0% in the comparable period last year.  The decrease in gross margin in the first quarter of 2011 mainly reflects an increase in the portion of sales derived from the Company's distribution segment, which generates slightly lower gross margin.

Within pharmaceutical distribution, gross margin declined from 20.8% in first quarter 2010 to 18.0% this quarter, due to increased lower margin product volume to hospitals and a higher percentage of lower margin product volume sold to other distributors.  Retail pharmacy segment gross margin increased to 32.2% from 31.5% this quarter, reflecting less price reduction promotional activity during the quarter. Pharmaceutical manufacturing segment gross margin remained flat at 64.1% during the quarters ending March 31, 2011 and 2010.

Operating expenses increased by 86.4% to $5.0 million, compared to $2.7 million in the same period last year. Administrative expenses increased 84.5% to $3.0 million, or 5.2% of revenue, as compared to $1.6 million, or 4.8% of revenue, in the same period of 2010, primarily due to an increase in the incurrence of public company professional fees and increased share based compensation. Selling expenses rose 89.4% to $1.9 million, compared to $1.0 million in the same period of 2010.

Operating income increased 39.4% to $8.6 million, or 14.7% of revenue, from $6.2 million, or 18.2% of revenue, in the first quarter of 2010.

GAAP net income increased 47.2% to $6.2 million, or $0.16 per diluted share, as compared to $4.2 million, or $0.11 per diluted share, in the first quarter of 2010. Diluted earnings per share were calculated using weighted average shares of 38,154,340 and 37,764,573 for the quarters ended March 31, 2011 and March 31, 2010, respectively.  Excluding a non-cash benefit of $0.3 million related to change in the fair value of warrant liabilities and excluding non-cash share-based compensation expense of $0.6 million, first quarter 2011 non-GAAP adjusted net income was $6.5 million, or $0.17 per diluted share, compared to non-GAAP adjusted net income of $4.5 million, or $0.12 per diluted share in the first quarter of 2010, excluding non-cash gain in loss in fair value of warrant liabilities.

Financial Condition

As of March 31, 2011, China BCT had $62.8 million in cash and cash equivalents, $88.6 million in working capital and a current ratio of 2.79. Long-term bank debt was $1.9 million. Stockholders' equity was $89.9 million on March 31, 2011, compared to $83.1 million at the end of 2010.

The Company generated $18.8 million in cash flow from operating activities for the three months ended March 31, 2011 compared to cash flow from operating activities of $3.9 million in the same period prior year. Cash used in investing activities was $1.2 million, compared to cash used in investing activities of $1.8 million in the first quarter in 2010. For the three months ended March 31, 2011, cash flow from financing activities included $29.5 million from the placement of preferred stock.

Business Outlook

"We expect China's strong economy, rapidly growing pharmaceutical industry and favorable healthcare reform policies to continue to create excellent opportunities for China BCT in 2011 and beyond. This year we intend to improve the performance of our existing retail pharmacies while selectively building or acquiring new retail pharmacies within Guangxi Province. By developing a larger, stronger retail network, we expect to gain economies of scale and harvest incremental synergies as we vertically integrate retail with our wholesale distribution and manufacturing operations," said Mr. Tang. "For our distribution segment, we aim to obtain more product distribution rights with hospitals and clinics and win more bids under the New Rural Cooperate Plan. Centralized bidding for the Cooperative's 2011 contract is expected to close in the second quarter of this year and thus far we have won approximately 2,000 additional product distribution rights. We also are on track to begin construction of an advanced wholesale distribution logistics center this year. We believe this modern center and our improved distribution capabilities will help further distinguish China BCT from the competition during future bidding processes. "

Conference Call

China BCT will conduct a conference call at 9:00 a.m. Eastern Time (ET) on Monday, May 16, 2011, to discuss its first 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 65629830 approximately five to ten minutes prior to the call. A replay will be available for two weeks starting on Monday, May16, 2011 at 11:00 a.m. ET by dialing 800-642-1687 (U.S. and Canada callers) or 706-645-9291 (international callers) and entering the conference replay ID 65629830.

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 187 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.

Use of Non-GAAP Financial Information  

GAAP results for the three ended March 31, 2011 and 2010 include change in fair value of warrant liabilities and share-based compensation expense. 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.

-Financial Tables Follow-

SOURCE China BCT Pharmacy Group, Inc.

WANT YOUR COMPANY'S NEWS FEATURED ON PRNEWSWIRE.COM?

440k+
Newsrooms &
Influencers

9k+
Digital Media
Outlets

270k+
Journalists
Opted In

GET STARTED