Bohai Pharmaceuticals Group Reports 78.3% Increase in Revenue for the Fiscal First Quarter of 2012

Bohai Pharmaceuticals Group Reports 78.3% Increase in Revenue for the Fiscal First Quarter of 2012
 
NEW YORK and YANTAI, China, Nov 14, 2011 (GlobeNewswire via COMTEX) -- Bohai Pharmaceuticals Group, Inc., a China-based pharmaceutical company engaged in the production, manufacturing and distribution of modernized traditional Chinese medicine (TCM) in China, today reported financial results for the three months ended September 30, 2011.

Fiscal First Quarter 2012 Financial Highlights:

 

       
          --  Revenue increased 78.3% to $29.9 million for the first quarter of fiscal
              2012 from $16.8 million for the first quarter of fiscal 2011
          --  Gross profit increased 69.2% to $23.0 million versus $13.6 million for
              the first quarter of fiscal 2011
          --  Income from operations increased 35.9% to $6.7 million compared to $5.0
              million for the same period of fiscal 2011
          --  Net income was $2.7 million, or $0.15 per diluted share for the first
              quarter of fiscal 2012, versus $3.0 million, or $0.15 per diluted share
              for the same period of fiscal 2011
          --  Non-GAAP net income increased 40.8% to $4.9 million, or $0.25 per
              diluted share, versus $3.5 million, or $0.17 per diluted share, for the
              first quarter of fiscal 2011
        
        
       

 

Mr. Hongwei Qu, Chairman, President and CEO of Bohai Pharmaceuticals, stated, "We are pleased to report another very strong quarter at Bohai. Our revenue growth is being driven by a number of factors, including increasing demand for our core products and brand, an expanding product line, aggressive marketing, China's expanding coverage of TCM under its national medical insurance program and, most recently, our acquisition of Yantai Tianzheng.

"We completed the acquisition of Yantai Tianzheng this past August and, by doing so, have expanded our existing product line while achieving economies of scale. The acquisition was immediately accretive to our business. We currently produce 19 varieties of approved traditional Chinese herbal medicines in seven delivery systems: tablets, granules, capsules, formulations, concentrated powder, tincture and medicinal wine. Of these 19 products, 12 are prescription drugs and 7 are over the counter (or OTC) products. Approximately 20% of the increase in our revenues during the third quarter was from Bohai and 58% was from Tianzheng.

"Our competitive advantage in the marketplace is the fact that all of our lead products are listed for coverage and reimbursement under China's national medical insurance program. The sale of our prescription drug products for the fiscal first quarter of 2012 represented 74.0% of total net revenue compared to 60.5% for the same period in last year. The increase in prescription sales was primary due to increases in sales volume from two of our core products, Tongbi Capsules and Tongbi Tablets, as well as prescription product sales from Yantai Tianzheng Pharmaceuticals. We are in a strong position in the Chinese market and seek to capture additional market share in the months ahead."

In concluding, Mr. Qu stated, "We anticipate our revenue and net profit will continue to increase as a result of the Chinese government's expansion of healthcare coverage and reimbursement for an increasing number of products produced by Bohai. By the end of 2011, China's healthcare system will provide individual health insurance for over 90% of the country's population. The health plan includes traditional Chinese medicines for coverage and reimbursement from hospitals and medical centers all over China."

Summary Financial Results

Revenue for the fiscal first quarter ended September 30, 2012 increased 78.3% to $29,927,856 as compared to $16,783,200 for the fiscal first quarter ended September 30, 2011. 20% of the increase in revenues was from Bohai Pharmaceuticals Group and 58% was from Tianzheng this fiscal quarter as compared to the same quarter last year. Sales were mostly derived from lead products Lung Nourishing Syrup, Tongbi Capsules, Tongbi Tablets, Fangfengtongsheng Granule, and Zhengxintai Capsules, which together represented over 76% of total net revenues for the three months ended September 30, 2011.

Gross profit was $22,984,136 for the three months ended September 30, 2011, compared to $13,582,382 for the same period in fiscal 2011, representing an increase of $9,401,754, or 69.2%, over the same period last year. Overall gross profit margin as a percentage of net revenue declined in part due to an increase in unit costs of raw material for four of the company's products, Danqi Tablet, Tongbi Capsules, Stomach Nourishing Tablet, and Anti-Flu Granules as well as a decrease in the unit sales price for Medicine Wine.

Operating income for the three months ended September 30, 2011 increased 35.9% to $6,749,647 compared to $4,967,624 for the three months ended September 30, 2010. Selling, general and administrative expenses increased to $16,234,489, compared to $8,614,758 for the same period in fiscal 2011 due to an increase in sales and marketing activities, as well as the addition of Yantai Tianzheng.

Net income was $2,655,784, or $0.15 per diluted share, for the three months ended September 30, 2011, as compared to net income of $3,102,475, or $0.15 per diluted share, for the three months ended September 30, 2010, a decrease in net income of $356,691, or 11.8%. The decrease in net income was primarily attributable to certain non-cash related activities such as effective interest charges and unamortized beneficial conversion features on convertible notes converted for a total of $1,924,247 as well as a non-cash net difference in deferred tax expense of $21,722. Non-GAAP net income was $4,895,408 for the three months ended September 30, 2011, as compared to Non-GAAP net income of $3,476,169 for the three months ended September 30, 2010, an increase in Non-GAAP net income of $1,419,239, or 40.8%.

At September 30, 2011, Bohai had cash and cash equivalents of $16,230,301 and restricted cash of $391,962.

About Bohai Pharmaceuticals Group

Bohai Pharmaceuticals Group, Inc. /quotes/zigman/586085 BOPH 0.00% (otcqb:BOPH) is engaged in the production, manufacturing and distribution of modernized herbal pharmaceuticals based on Traditional Chinese Medicine in China. Bohai's medicines address common health problems such as rheumatoid arthritis, viral infections, gynecological diseases, cardio vascular issues and respiratory diseases. Bohai's products are sold either by prescription through hospitals or over-the-counter through local pharmacies and retail drug store chains. Bohai has approximately 850 employees, including approximately 350 sales representatives, operating from 21 offices throughout China. Bohai's five lead products, Tongbi Capsules, Tongbi Tablets, Lung Nourishing Syrup, Fangfengtongsheng Granule, and Zhengxintai Capsules, are eligible for reimbursement under China's National Medical Insurance Program.

For more information, please visit the Company's website at www.bohaipharmaceutical.com .

Additional Information Relating to Bohai's Trading Data

Due to certain recent disruptions in the marketplace relating to quotations on the OTC Bulletin Board operated by FINRA (OTCBB), incomplete trading data may exist for certain companies like Bohai. Real-time trading data for Bohai on the OTCQB market is available through the below link. Readers are advised that OTCQB market is operated by the owner of otcmarkets.com, and Bohai Pharmaceuticals Group, Inc. makes no representation or warranty regarding the OTCQB market.

For real-time trading data for Bohai on the OTCQB market, including Level 2 quotes, please visit: www.otcmarkets.com/stock/boph/quote .

Note on Non-GAAP Financial Measures

This press release contains references to "Non-GAAP" financial measures. A Non-GAAP financial measure is a numerical measure of a company's performance, financial position or cash flow that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with U.S. generally accepted accounting principals (GAAP). The Non-GAAP measures included in this release, however, should be considered in addition to, and not as a substitute for or superior to, operating income, cash flows, or other measures of financial performance prepared in accordance with GAAP. A reconciliation of non-GAAP to GAAP net income is set forth in the table below.

 

       
       
                                                                                   Three Months Ended
                                                                                ------------------------
       
                                                                                     September 30,
                                                                                ------------------------
       
                                                                                   2011         2010
                                                                                -----------  -----------
       
          Net income available to common shareholders -GAAP                     $ 2,655,784  $ 3,012,475
                                                                                -----------  -----------
          Add back (subtract):
          Change in fair value of warrants                                         -332,485       30,554
          Unamortized beneficial conversion features and effective interest
           charges                                                                2,328,387      404,140
          Change in option and equity based compensation                             22,000       29,000
          Deferred tax expenses and impairment losses - indefinite intangible
           assets                                                                   221,722           --
                                                                                -----------  -----------
       
          Adjusted net income available to common shareholders -non-GAAP        $ 4,895,408  $ 3,476,169
                                                                                -----------  -----------
        
       

 

Cautionary Note Regarding Forward-Looking Statements

This press release and the statements of representatives of our officers, directors, employees and representatives related thereto or in the conference call referred to herein contain or may contain forward-looking statements which are based upon the current beliefs and expectations of our management. Such statements contained in this release are based on management's exercise of business judgment as well as assumptions made by and information currently available to management. When used in this document, the words "guidance," "projects," "may," "could," "would," "should," "believes," "expects," "anticipates," "estimates," "intends," "plans," "ultimately" and words of similar import, are intended to identify any forward-looking statements. The information contained in the forward looking statements is inherently uncertain, and our actual results may differ materially due to a number of factors, many of which are beyond our ability to predict or control, including, among others: (i) changes in the level of consumer spending or preferences or demand for our products; (ii) pressures from competition; (iii) our ability to hire and retain key personnel and our relationship with our employees; (iv) the performance of our distributors and other key vendors; (v) effectively carrying out and managing our growth strategies; (vi) failure to maintain the value and image of our brand and protect our intellectual property rights; (vii) seasonality; (viii) costs of materials and labor; (ix) sales, manufacturing, supply or distribution difficulties or disruptions; (x) compliance with or changes in Chinese, U.S. or international laws and regulations; (xi) costs as a result of operating as a public company; (xii) material weaknesses in internal controls; (xiii) interest rate and foreign currency risks; (xiv) our ability to maintain our land use and drug manufacturing rights in China; (xv) general economic and industry conditions in China and internationally, and other risks as more fully detailed in our filings with the Securities and Exchange Commission ("SEC"). Our filings with the SEC are available at www.sec.gov . You are urged to consider these factors carefully in evaluating our forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements which are qualified in their entirety by this cautionary statement. The forward-looking statements speak only as of the date on which they are made, and the company undertakes no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances unless as required by applicable laws or regulations.

 

       
                     CONDENSED CONSOLIDATED BALANCE SHEETS
       
       
                                          September 30,    June 30,
                                               2011          2011
                                          -------------  ------------
       
                                           (unaudited)
                                          -------------  ------------
          ASSETS
          Current assets:
            Cash and cash equivalents      $ 16,230,301  $ 13,344,426
            Restricted cash                     391,962        11,043
            Accounts receivable              24,473,987    15,891,642
            Inventories                       3,128,213     1,511,021
            Prepaid expenses and other
             current assets                   1,375,518     1,060,138
       
       
                                          -------------  ------------
       
            Total current assets             45,599,981    31,818,270
                                          -------------  ------------
       
          Property, plant and equipment,
           net                               11,757,622     5,214,962
          Prepayment for property, plant
           and equipment                        256,560            --
          Intangible assets --
           pharmaceutical formulas           35,280,170    25,019,377
          Long term prepayments - land
           use right, net                    19,021,828    17,577,271
          Customer relationships, net        13,837,904            --
          Goodwill                            4,944,646            --
          Debt issue costs                      247,679       485,039
       
       
                                          -------------  ------------
       
          TOTAL ASSETS                    $ 130,946,390  $ 80,114,919
                                          =============  ============
       
          LIABILITIES AND SHAREHOLDERS'
           EQUITY
       
          Current liabilities:
            Convertible notes, net of
             discount of $7,198,510 and
             $9,317,897 as of
            September 30 and June 30,
             2011, respectively             $ 3,251,490   $ 1,132,103
            Accounts payable                  3,105,502     1,291,907
            Advances from customers             172,004            --
            Accrued expenses                  5,461,790     4,324,313
            Income taxes payable              1,911,097       721,771
            Short-term borrowings             1,563,673       920,554
            Acquisition price payable --
             current portion                 24,000,000            --
            Derivative liabilities -
             investor and agent warrants        605,382       937,867
       
       
                                          -------------  ------------
       
            Total current liabilities        40,070,938     9,328,515
                                          -------------  ------------
       
          Acquisition price payable --
           non-current portion                5,000,000            --
          Deferred tax liability              8,449,282     2,878,397
       
       
                                          -------------  ------------
       
          TOTAL LIABILITIES                  53,520,220    12,206,912
                                          -------------  ------------
       
          COMMITMENTS, CONTINGENCIES,
           AND OTHER MATTERS
       
          SHAREHOLDERS' EQUITY
            Common stock , $0.001 par
             value, 150,000,000 shares
             authorized, 17,861,085
            shares issued and
             outstanding as of September
             30 and June 30, 2011,
            respectively                         17,861        17,861
            Additional paid-in capital       24,593,353    18,345,574
            Accumulated other
             comprehensive income             4,173,955     3,559,355
            Statutory reserves                2,201,817     2,201,817
            Retained earnings                46,439,184    43,783,400
       
       
                                          -------------  ------------
       
          Total shareholders' equity         77,426,170    67,908,007
                                          -------------  ------------
       
       
                                          -------------  ------------
          TOTAL LIABILITIES AND
           SHAREHOLDERS' EQUITY           $ 130,946,390  $ 80,114,919
                                          =============  ============
        
       

 


       
       
       
               CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND
                            COMPREHENSIVE INCOME
       
                                       For the Three Months Ended
                                             September 30,
       
                                           2011           2010
                                      -------------  -------------
       
          Revenues                     $ 29,927,856   $ 16,783,200
       
          Cost of revenues                6,943,720      3,200,818
       
       
                                      -------------  -------------
          Gross profit                   22,984,136     13,582,382
       
          Selling, general and
           administrative expenses       16,234,489      8,614,758
       
       
                                      -------------  -------------
       
          Income from operations          6,749,647      4,967,624
                                      -------------  -------------
       
          Other income (expense):
          Interest income                    21,242             --
          Interest expense              (2,622,511)      (754,004)
          Other (expense) income,
           net                              (6,720)         11,093
          Change in fair value of
           derivative liabilities           332,485       (30,554)
       
       
                                      -------------  -------------
       
          Total other expenses          (2,275,504)      (773,465)
                                      -------------  -------------
       
          Income before provision
           for income taxes               4,474,143      4,194,159
       
          Provision for income taxes    (1,818,359)    (1,181,684)
       
       
                                      -------------  -------------
          Net income                    $ 2,655,784    $ 3,012,475
       
          Comprehensive income:
          Net income                      2,655,784      3,012,475
          Other comprehensive income
          Unrealized foreign
           currency translation gain        614,600        888,370
                                      -------------  -------------
       
          Comprehensive income          $ 3,270,384    $ 3,900,845
                                      =============  =============
       
          Earnings per common share
       
          Basic                              $ 0.15         $ 0.18
                                      =============  =============
       
          Diluted                            $ 0.15         $ 0.15
                                      =============  =============
       
          Weighted average common
           shares outstanding
       
          Basic                          17,861,085     16,506,626
                                      =============  =============
       
          Diluted                        23,086,085     22,250,104
                                      =============  =============
       
       

 

This news release was distributed by GlobeNewswire, www.globenewswire.com

SOURCE: Bohai Pharmaceuticals Group, Inc.

 

       
        Contact:
        David Waldman, Klea Theoharis or Vivian Huo
        Crescendo Communications, LLC
        [email protected]
        Tel: (212) 671-1020
       

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