Bohai Pharmaceuticals Group, Inc. (OTCBB:BOPH)
(OTCQB:BOPH), 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. (OTCBB:BOPH) (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,
2011 |
June 30, 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 |
Contact:
David Waldman, Klea Theoharis or Vivian Huo
Crescendo Communications, LLC
Boph@crescendo-ir.com
Tel: (212) 671-1020