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
============= =============
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SOURCE: Bohai Pharmaceuticals Group, Inc.
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