HAIKOU, China, Nov. 15, 2016 /PRNewswire/ -- China Pharma
Holdings, Inc. (NYSE MKT: CPHI) ("China Pharma," the
"Company" or "We"), an NYSE MKT listed corporation with its
fully-integrated specialty pharmaceuticals subsidiary based in
China, today announced financial
results for the quarter ended September 30,
2016.
Third Quarter Highlights
- Revenue was $3.1 million in the
third quarter of 2016, which represented a decrease of 30.2%
compared to $4.5 million in the same
period of 2015;
- Gross margin was 11.2% in the third quarter of 2016, compared
to 7.2% in the same period of 2015;
- Loss from operations was $1.5
million in the third quarter of 2016 compared to income from
operations of $3.2 million in the
same period of 2015, a decrease of $4.7
million;
- Net loss was $1.7 million in the
third quarter of 2016 compared to net income of $2.9 million in the same period of 2015. Loss per
common share was $0.04 per basic and
diluted share in the third quarter of 2016 compared with income per
common share of $0.07 per basic and
diluted share in the same period of 2015.
"The China Food and Drug Administration ('CFDA') issued 'Notice
on Rectification Against Illegal Operation on Drug Logistic &
Distribution' on May 3, 2016.
As it had become the top priority for all pharmaceutical
distributors to take measures to comply with this government
policy, their time and efforts had been arranged around the
inspection from CFDA, which delayed their ordinary promoting
practices, purchase and distribution activities. Those significant
negative impact upon distributors had continued in the three months
ended September 30, 2016. which also
impacted the sales performance in the third quarter of upstream
suppliers like us." said Ms. Zhilin
Li, China Pharma's Chairman and CEO. Ms. Li continued, "With
the implementation of Consistency Evaluation on Quality and
Efficacy of Generic Drugs, as well as the CFDA rectification, we
continued to feel the pressure from macro-environment on our
industry. In addition, the government's healthcare-price-controls
also maintained continuous pressure upon our sales. Although we
believe that the pharmaceutical industry is still facing a lot of
challenges, with the continuous improvement of the national
pharmaceutical management system and pharmaceutical companies to
enhance their own strength, as well as China's huge pharmaceutical consumer market,
the pharmaceutical industry still has bright prospects for
development."
Third Quarter 2016 Results
Revenue decreased by 30.2% to $3.1
million for the three months ended September 30, 2016, as compared to $4.5 million for the three months ended
September 30, 2015. This decrease was
primarily due to the rectification and standardization upon drug
distributors by CFDA as discussed above, whose significant negative
impact upon distributors had continued in the three months ended
September 30, 2016, which also
impacted the sales performance in the third quarter of upstream
suppliers like us. In addition, the government's
healthcare-price-controls also maintained continuous pressure upon
our sales.
For the three months ended September 30,
2016, our cost of revenue was $2.7
million, or 86.3% of total revenue, which represented a
decrease of $1.0 million from
$3.7 million, or 83.1% of total
revenue, in the same period of 2015. The decrease in cost of
revenue during the third quarter of 2016 was due to the revenue
decrease.
We have 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 assess the
inventory obsolescence levels on a quarterly basis. As a result, we
determined that certain inventory was slow moving or obsolete.
Based on the developed estimates, we recognized an inventory
obsolescence expense of $0.1 million
and $0.4 million for the three months
ended September 30, 2016 and 2015,
respectively.
Gross profit was $0.3 million for
each of the three months ended September 30,
2016 and 2015. Our gross profit margin in the third
quarter of 2016 was 11.2% compared to 7.2% in the same period 2015.
Without the effect of inventory obsolescence, management estimates
that our gross profit margin would have been approximately 13.8% in
the third quarter of 2016 and 17.0% in the third quarter of
2015. The decrease in gross profit margin was mainly because
the Company sold more products with lower gross margin in this
period.
Our selling expenses for the three months ended September 30, 2016 was $0.9 million, which accounted for 29.7% of the
total revenue in the third quarter of 2016, as compared to
$1.0 million for the same period
2015, which accounted for 25.8% of the total revenue in the third
quarter of 2015. Despite the decrease in sales, we still need
to maintain personnel and continue our sales activities to support
the sales and collection of accounts receivable, therefore our
selling expenses did not decrease proportionally to our sales.
Our general and administrative expenses for the three months
ended September 30, 2016 were
$0.3 million as compared to
$0.4 million in the three months
ended September 30, 2015. General and
administrative expenses accounted for 9.4% and 8.6% of our total
revenues in the third quarter of 2016 and 2015, respectively.
Our bad debt benefit for the three months ended September 30, 2016 was $0.1 million, compared to bad debt benefit of
$3.2 million in the three months
ended September 30, 2015. The change
was due to our revision of estimate of allowance for doubtful
accounts, which resulted in the decrease in aged accounts
receivable balance that had not been allowed prior to the third
quarter 2015, and therefore incurred the bad debt benefit in that
period.
During the third quarter of 2016, the Company reviewed the
contracts relating to advances made for purchases of intangible
assets with independent laboratories and determined that the
advances made by the Company for one formula to one of the
independent laboratories were impaired. As a result, the Company
recognized an impairment loss for the advances made to this
laboratory in the amount of $644,696.
Net Loss for the three months ended September 30, 2016 was $1.7 million, or loss per basic and diluted
common share of $0.04, compared to
net income of $2.9 million for the
three months ended September 30,
2015, or net income per basic and diluted share of
$0.07. The change in the net result
was mainly due to the decrease in revenues, impairment loss and
lower subsidy income in the third quarter of 2016 as compared to
the same period of 2015.
Nine Months Results
For the nine months ended September 30,
2016, our sales revenue was $10.3
million, which represented a decrease of $5.5 million, or 35%, from the $15.8 million in the corresponding period of
2015. This decrease was primarily due to several missed provincial
tenders back in 2014 due to the fact that our new GMP certificates
were not received until November
2014. As a result, we lost related market shares and
negatively impacted sales afterwards. To be specific, the original
tender practice actually lasted until April
2015 given the necessary process and timing of tender. The
sales decrease in the nine months ended September 30, 2016 compared to its corresponding
period in 2015 reflected the outcome of that event. In addition,
the government's healthcare-price-controls also maintained
continuous pressure upon our sales.
Gross profit for the nine months ended September 30, 2016 was $1.5 million, compared to $1.3 million in the same period of 2015. Gross
profit margin for the nine months ended September 30, 2016 and 2015 were 14% and 8%,
respectively. Without considering the effect of inventory
obsolescence, management estimates that our gross profit margin
would have been approximately 16% for the nine months ended
September 30, 2016 and 20% for the
nine months ended September 30,
2015.
Our operating loss for the nine months ended September 30, 2016 was approximately $5.1 million, compared to $8.3 million for the same period of 2015, which
represented an improvement of $3.2
million. The decrease in operating loss was primarily due to
lower inventory obsolescence and lower bad debt expense in the
current period as compared to the corresponding period in the prior
year.
Net loss was $5.8 million, or
$0.13 per basic and diluted share for
the nine months ended September 30,
2016, compared to $9.2
million, or $0.21 per basic
and diluted share, for the same period a year ago.
Financial Condition
As of September 30, 2016, the
Company had cash and cash equivalents of $3.7 million compared to $6.2 million as of December 31, 2015. Additionally, working capital
decreased to $8.0 million in
September 30, 2016 from $12.2 million as of December 31, 2015; and the current ratio was 1.6
times as of September 30, 2016,
decreased from 2.0 times as of December 31,
2015.
Our accounts receivable balance decreased to $4.0 million as of September 30, 2016 from $5.9 million as of December 31, 2015.
Net cash provided by operating activities was $1.4 million in the nine months ended
September 30, 2016 compared to
$0.7 million for the nine months
ended September 30, 2015.
Conference Call
The Company will hold a conference call at 8:30 am ET on November 15,
2016 to discuss the results of its third quarter of 2016.
Listeners may access the call by dialing 1-866-519-4004 or
65-671-350-90 for international callers, Conference ID # 14850461.
A replay of the call will be accessible through November 22, 2016 by dialing 1-855-452-5696 or
61-281-990-299 for international callers, Conference ID #
14850461.
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 business model is driven by market
demand and supported by new 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.
- FINANCIAL TABLES FOLLOW -
CHINA PHARMA
HOLDINGS, INC.
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
(Unaudited)
|
|
|
|
|
|
|
|
September
30,
|
|
December
31,
|
|
|
2016
|
|
2015
|
ASSETS
|
|
|
|
|
Current
Assets:
|
|
|
|
|
Cash and cash
equivalents
|
|
$
3,650,039
|
|
$
6,248,760
|
Restricted
cash
|
|
1,470,014
|
|
-
|
Banker's
acceptances
|
|
21,546
|
|
-
|
Trade accounts
receivable, less allowance for doubtful
|
|
|
|
|
accounts of
$29,380,197 and $28,644,398, respectively
|
|
4,014,862
|
|
5,882,509
|
Other receivables,
less allowance for doubtful
|
|
|
|
|
accounts of $78,618
and $74,400, respectively
|
|
390,450
|
|
290,739
|
Advances to
suppliers
|
|
2,614,053
|
|
2,533,354
|
Inventory, less
allowance for obsolescence
|
|
|
|
|
of $6,682,357 and
$8,417,095, respectively
|
|
8,569,479
|
|
9,662,750
|
Prepaid
expenses
|
|
259,234
|
|
339,140
|
Total Current
Assets
|
|
20,989,677
|
|
24,957,252
|
|
|
|
|
|
Advances for
purchases of intangible assets
|
|
39,457,197
|
|
42,030,649
|
Property and
equipment, net of accumulated depreciation of
|
|
|
|
|
$11,521,705 and
$9,422,912, respectively
|
|
26,339,719
|
|
29,393,257
|
Intangible
assets, net of accumulated amortization of
|
|
|
|
|
$4,440,106 and
$4,360,004, respectively
|
|
621,631
|
|
841,075
|
TOTAL
ASSETS
|
|
$
87,408,224
|
|
$
97,222,233
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
|
Current
Liabilities:
|
|
|
|
|
Trade accounts
payable
|
|
$
3,478,404
|
|
$
2,824,521
|
Accrued
expenses
|
|
91,701
|
|
143,409
|
Other
payables
|
|
1,801,087
|
|
1,710,283
|
Advances from
customers
|
|
1,006,776
|
|
595,681
|
Other payables -
related parties
|
|
1,354,567
|
|
1,354,567
|
Current portion of
construction loan facility
|
|
1,499,390
|
|
1,540,666
|
Short-term notes
payable
|
|
2,249,085
|
|
4,621,998
|
Banker's acceptance
notes payable
|
|
1,470,014
|
|
-
|
Total Current
Liabilities
|
|
12,951,024
|
|
12,791,125
|
Non-current
Liabilities:
|
|
|
|
|
Construction loan
facility
|
|
8,996,338
|
|
10,784,661
|
Deferred
revenue
|
|
172,357
|
|
708,408
|
Long-term deferred
tax liability
|
|
353,100
|
|
296,890
|
Total
Liabilities
|
|
22,472,819
|
|
24,581,084
|
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
|
|
28,183,391
|
|
33,939,998
|
Accumulated other
comprehensive income
|
|
13,118,230
|
|
15,067,367
|
Total
Stockholders' Equity
|
|
64,935,405
|
|
72,641,149
|
TOTAL LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|
$
87,408,224
|
|
$
97,222,233
|
CHINA PHARMA
HOLDINGS, INC.
|
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
|
AND COMPREHENSIVE
LOSS
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
For the Three
Months
|
|
For the Nine
Months
|
|
|
Ended September
30,
|
|
Ended September
30,
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Revenue
|
|
$
3,125,596
|
|
$
4,479,113
|
|
$
10,308,320
|
|
$
15,848,218
|
Cost of
revenue
|
|
2,695,900
|
|
3,720,447
|
|
8,635,392
|
|
12,667,104
|
Inventory
obsolescence
|
|
79,728
|
|
436,666
|
|
200,044
|
|
1,855,814
|
|
|
|
|
|
|
|
|
|
Gross (loss)
profit
|
|
349,968
|
|
322,000
|
|
1,472,884
|
|
1,325,300
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
Selling
expenses
|
|
927,187
|
|
1,155,137
|
|
2,753,388
|
|
3,156,553
|
General and
administrative expenses
|
|
294,367
|
|
384,412
|
|
1,394,250
|
|
1,315,867
|
Research and
development expenses
|
|
99,095
|
|
405,438
|
|
289,189
|
|
741,116
|
Bad debt expense
(benefit)
|
|
(69,899)
|
|
(3,160,862)
|
|
1,005,949
|
|
6,045,352
|
Impairment of long
term assets
|
|
644,696
|
|
-
|
|
1,467,235
|
|
-
|
Total operating
expenses
|
|
1,895,446
|
|
(1,215,875)
|
|
6,910,011
|
|
11,258,888
|
|
|
|
|
|
|
|
|
|
Subsidy
income
|
|
(2,325)
|
|
1,655,683
|
|
346,347
|
|
1,655,683
|
|
|
|
|
|
|
|
|
|
Income (loss) from
operations
|
|
(1,547,803)
|
|
3,193,558
|
|
(5,090,780)
|
|
(8,277,905)
|
|
|
|
|
|
|
|
|
|
Other income
(expense):
|
|
|
|
|
|
|
|
|
Interest
income
|
|
32,434
|
|
36,185
|
|
99,149
|
|
93,262
|
Interest
expense
|
|
(213,740)
|
|
(279,113)
|
|
(699,932)
|
|
(915,310)
|
Net other
expense
|
|
(181,306)
|
|
(242,928)
|
|
(600,783)
|
|
(822,048)
|
|
|
|
|
|
|
|
|
|
Income (loss) before
income taxes
|
|
(1,729,109)
|
|
2,950,630
|
|
(5,691,563)
|
|
(9,099,953)
|
Income tax
expense
|
|
(20,800)
|
|
(18,906)
|
|
(65,044)
|
|
(57,618)
|
Net income
(loss)
|
|
(1,749,909)
|
|
2,931,724
|
|
(5,756,607)
|
|
(9,157,571)
|
Other comprehensive
income (loss) - foreign currency
|
|
|
|
|
|
|
|
|
translation
adjustment
|
|
(275,928)
|
|
(3,794,761)
|
|
(1,949,137)
|
|
(2,959,348)
|
Comprehensive
income (loss)
|
|
$
(2,025,837)
|
|
$
(863,037)
|
|
$
(7,705,744)
|
|
$
(12,116,919)
|
Income (loss) per
share:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
(0.04)
|
|
$
0.07
|
|
$
(0.13)
|
|
$
(0.21)
|
Diluted
|
|
$
(0.04)
|
|
$
0.07
|
|
$
(0.13)
|
|
$
(0.21)
|
CHINA PHARMA
HOLDINGS, INC.
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
(Unaudited)
|
|
|
For the Nine
Months
|
|
|
Ended September
30,
|
|
|
2016
|
|
2015
|
Cash Flows from
Operating Activities:
|
|
|
|
|
Net loss
|
|
$
(5,756,607)
|
|
$
(9,157,571)
|
Depreciation and
amortization
|
|
2,583,066
|
|
2,769,761
|
Bad debt
expense
|
|
1,005,949
|
|
6,045,352
|
Deferred income
taxes
|
|
65,044
|
|
677,209
|
Inventory
obsolescence reserve
|
|
(1,529,912)
|
|
460,537
|
Impairment of
long-term assets
|
|
1,467,235
|
|
-
|
Changes in assets and
liabilities:
|
|
|
|
|
Trade accounts and
other receivables
|
|
(709,257)
|
|
(2,642,445)
|
Advances to
suppliers
|
|
(150,606)
|
|
(1,746,117)
|
Inventory
|
|
3,157,553
|
|
3,314,458
|
Trade accounts
payable
|
|
739,551
|
|
2,061,895
|
Accrued taxes
payable
|
|
(74,080)
|
|
16,307
|
Other payables and
accrued expenses
|
|
119,085
|
|
(18,951)
|
Advances from
customers
|
|
432,904
|
|
(1,128,459)
|
Prepaid
expenses
|
|
71,790
|
|
-
|
Net Cash Provided
by Operating Activities
|
|
1,421,715
|
|
651,976
|
|
|
|
|
|
Cash Flows from
Investing Activities:
|
|
|
|
|
Purchases of property
and equipment
|
|
(86,350)
|
|
(310,247)
|
Bankers acceptances
redeemed for cash
|
|
-
|
|
306,904
|
Net Cash Used in
Investing Activities
|
|
(86,350)
|
|
(3,343)
|
|
|
|
|
|
Cash Flows from
Financing Activities:
|
|
|
|
|
Payments of
construction term loan
|
|
(1,519,932)
|
|
-
|
Payments of short
term debt
|
|
(2,279,899)
|
|
-
|
Net Cash Used by
Financing Activity
|
|
(3,799,831)
|
|
-
|
|
|
|
|
|
Effect of Exchange
Rate Changes on Cash
|
|
(134,255)
|
|
(226,914)
|
Net (Decrease)
Increase in Cash and Cash Equivalents
|
|
(2,598,721)
|
|
421,719
|
Cash and Cash
Equivalents at Beginning of Period
|
|
6,248,760
|
|
5,319,990
|
Cash and Cash
Equivalents at End of Period
|
|
$
3,650,039
|
|
$
5,741,709
|
|
|
|
|
|
Supplemental Cash
Flow Information:
|
|
|
|
|
Cash paid for
interest
|
|
$
689,773
|
|
$
905,151
|
|
|
|
|
|
Supplemental
Noncash Investing and Financing Activities:
|
|
|
|
|
Accounts payable for
purchases of property and equipment
|
|
-
|
|
137,854
|
Accounts receivable
collected with banker's acceptances
|
|
803,655
|
|
1,968,818
|
Inventory purchased
with banker's acceptances
|
|
781,814
|
|
1,400,447
|
Restricted cash
related to letter of credit
|
|
1,490,154
|
|
-
|
Advances for
intangible assets purchased with banker's acceptances
|
|
-
|
|
395,445
|
Contact:
China Pharma Holdings,
Inc.
Phone: +86-898-6681-1730 (China)
Email:
hps@chinapharmaholdings.com
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/china-pharma-holdings-inc-reports-third-quarter-financial-results-300362787.html
SOURCE China Pharma Holdings, Inc.