WEB NEWS Comments & Business Outlook
(Unaudited)
(Stated in US Dollars)
Three months ended
March 31,
2013
2012
Net sales
$ 66,577,292 $ 71,245,359
Cost of sales
55,330,933 54,733,383
Gross profit
11,246,359 16,511,976
Operating expenses
Administrative expenses
2,830,271 1,997,298
Selling expenses
2,393,033 2,380,949
Total operating expenses
5,223,304 4,378,247
Income from operations
6,023,055 12,133,729
Non-operating income (expense)
Interest income
2,288 5,349
Other income
83,502 164,440
Change in fair value of warrant liabilities
- (42,724 )
Other expenses
(6,495 ) (1,208 )
Finance costs
(318,362 ) (221,908 )
Total non-operating income (expense)
(239,067 ) (96,051 )
Income before income taxes
5,783,988 12,037,678
Income taxes
(1,194,407 ) (3,132,557 )
Net income
4,589,581 8,905,121
Other comprehensive income
Foreign currency translation adjustments
934,376 887,498
Total comprehensive income
$ 5,523,957 $ 9,792,619
Earnings per share : Basic and diluted
$ 0.09 $ 0.20
Weighted average number of shares outstanding :
Basic and diluted
38,154,340 38,154,340
Reconciliation of net income to income applicable to common stock:
Net income
$ 4,589,581 $ 8,905,121
Less: dividends and accretion on preferred stock
1,341,386 1,167,011
Income applicable to common stock
$ 3,248,195 $ 7,738,110
Comments & Business Outlook
Consolidated Statements of Income and Comprehensive Income
(Stated in US Dollars)
Three months ended
Six months ended
June 30,
June 30,
(unaudited)
(unaudited)
2012
2011
2012
2011
Sales revenue
$ 61,097,960 $ 65,115,748 $ 132,343,319 $ 123,718,988
Cost of sales
47,746,668 49,043,088 102,480,051 94,039,127
Gross profit
13,351,292 16,072,660 29,863,268 29,679,861
Operating expenses
Administrative expenses
2,624,345 2,685,357 4,621,643 5,716,052
Selling expenses
2,181,701 1,770,562 4,562,650 3,715,147
Total operating expenses
4,806,046 4,455,919 9,184,293 9,431,199
Income from operations
8,545,246 11,616,741 20,678,975 20,248,662
Non-operating income (expense)
Interest income
13,447 24,162 18,796 25,989
Other income
87,330 114,545 251,770 136,741
Change in fair value of warrant liabilities
180,177 300,662 137,453 576,044
Other expenses
(11,295 ) (17,586 ) (12,503 ) (17,586 )
Finance costs
(270,377 ) (195,846 ) (492,285 ) (389,904 )
Total non-operating income (expense)
(718 ) 225,937 (96,769 ) 331,284
Income before income taxes
8,544,528 11,842,678 20,582,206 20,579,946
Income taxes
(2,112,052 ) (3,239,723 ) (5,244,609 ) (5,727,520 )
Net income
6,432,476 8,602,955 15,337,597 14,852,426
Other comprehensive income
Foreign currency translation adjustments
124,404 1,996,994 1,011,902 2,350,904
Total comprehensive income
$ 6,556,880 $ 10,599,949 $ 16,349,499 $ 17,203,330
Earnings per share – basic and diluted
$ 0.13 $ 0.19 $ 0.34 $ 0.35
Weighted average number of shares
outstanding – basic and diluted
38,154,340 38,154,340 38,154,340 38,154,340
Reconciliation of net income to income applicable to common stock:
Net income
$ 6,432,476 $ 8,602,955 $ 15,337,597 $ 14,852,426
Less: dividends and accretion on preferred stock
(1,335,761 ) (1,167,011 ) (2,502,772 ) (1,556,015 )
Income applicable to common stock
$ 5,096,715 $ 7,435,944 $ 12,834,825 $ 13,296,411
Investor Alert
China BCT Pharmacy Group, Inc. (the “Company,” “we,” “us” or “our”) is filing this
Amendment No. 3 on Form 10-K/A to our Annual Report on Form 10-K for the year ended December 31, 2011, originally filed with the Securities and Exchange Commission (the “SEC”) on March 30, 2012 (the “Original Form 10-K”) to (i) clarify the calculation of the percentage of shares owned by certain shareholders on a fully-diluted basis in Part I, Item 1 (Business) and Item 1A (Risk Factors), (ii) correct typographical errors under the Results of Operations heading in Part II, Item 7 (Management’s Discussion and Analysis of Financial Condition and Results of Operations), which errors were not material, (iii) to enhance the disclosure regarding cash from financing activities in Part II, Item 7 (Management’s Discussion and Analysis of Financial Condition and Results of Operations) to include disclosure of net repayments to related companies, (iv) t
o revise disclosures regarding related party transactions in Part III, Item 13 (Certain Relationships and Related Transactions, and Director Independence); (v) to note that, after consideration of its controls in connection with its review as at March 31, 2012, management has
concluded that such controls were not effective at December 31, 2011and (vi) to make non-material formatting changes and corrections . No other changes to the Original Form 10-K, Amendment No. 1, filed on April 6, 2012 or Amendment No. 2, filed on April 25, 2012 , have been made and this Amendment No. 3 does not otherwise modify or update in any way disclosures made in the Original Form 10-K, Amendment No. 1 or Amendment No. 2.
Comments & Business Outlook
First Quarter 2012 Highlights
Revenue increased 21.6% year-over-year to $71.2 million
Gross profit rose 21.3% year-over-year to $16.5 million
Operating income grew 40.6% year-over-year to $12.1 million
GAAP net income applicable to common stock increased 32.0% to $7.7 million, or $0.20 per diluted share, from $5.9 million, or $0.15 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 applicable to common stock was $7.9 million, or$0.21 per diluted share
Cash and cash equivalents as of March 31, 2012 totaled $31.6 million
"We are pleased to report growth of both revenue and net income for the quarter. The strong performance was primarily driven by a 23.1% growth in sales in our pharmaceutical distribution segment, which benefited from increased coverage by China's national insurance plan coupled with separate distribution agreements with seven government-owned hospitals," said Mr. Huitian Tang, Chief Executive Officer and Chairman of China BCT. "Our retail business continued to grow to diversify our business mix. We have been consolidating our existing pharmacy stores into larger stores with built-in TCM, clinics. Also, our manufacturing operation overcame pricing pressures thanks to enhanced sales efforts. Overall, our profitability remains attractive."
Business Outlook
"For the quarters ahead in 2012, we continue to expect double digit revenue growth driven by our ability to develop and leverage new wholesale contracts at the supplier and hospital levels, our expansion of the in-store TCM counseling service concept at our retail stores and greater output from our manufacturing operation.
"We expect to focus on winning additional contracts for our distribution business. Since the centralized bidding process for the 2011 contract closed in the second quarter of 2011, we estimate that to date we have won 2,000 to 3,000 more product distribution rights with regard to our hospital and clinic clients, which represents an approximately 50% increase from 2010. In addition, we have increased the number of bids awarded to us for counties and cities under the New Rural Cooperate Medicare from 6 to 22, after being awarded an additional 16 territories in 2011.
"On the retail pharmacy front, we are committed to growing our network by refining and expanding our existing presence in selected markets. We are targeting to add 4 to 5 drug stores with built-in TCM clinics for each larger city and at least one such store for each county in Guangxi Province. We re-opened our first retail pharmacy store with a built-in TCM clinic in December 2011, the second one in March 2012 and we expect to open another 3 to 4 such stores in April 2012. In the next few quarters, we expect to continue to create larger, attractively refurbished retail stores and close some smaller ones to create higher revenue, more profitable stores. We are targeting a 20 to 30 store program that will cost an estimated $12 million by the end of 2012.
"With regard to profitability, we expect top line growth to enhance overall profitability for the remainder of the year. However we expect to face continued margin pressure. This is due to the increasing sales mix in favor of lower margin products sold to hospitals by our wholesale operation. Manufacturing margins will also be under pressure from the capping of drug prices by the Chinese government . We expect to counteract these pressures somewhat should our retail strategy, with its higher margin TCM sales, prove successful. Reducing distribution costs and increasing margins by building our own distribution center is no longer part of our short-term strategy. We believe that the investment is best undertaken when our overall revenues reach$500 million per year, at which point the economies of scale of the center will be sufficient to justify the cost," concluded Mr. Tang.
Comments & Business Outlook
Fourth Quarter 2011 Results
Revenue decreased 0.7% year-over-year to $66.3 million
Gross profit rose 12.2% year-over-year to $15.8 million
Operating income grew 0.5% year-over-year to $9.5 million
GAAP net income declined 7.1% to $6.9 million , or $0.18 per diluted share, from $7.4 million , or $0.19 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 $7.8 million , or $0.21 per diluted share
Cash and cash equivalents as of December 31, 2011 totaled $31.5 million , compared to $20.2 million at the end of 2010
"We were pleased with our fourth quarter performance. Our revenues were stable compared to the fourth quarter last year and the third quarter this year. Our wholesale business remains very competitive and the latest round of bidding for hospital supply contracts meant many of our manufacturing suppliers lost or gained new business, leading to challenges for us in developing new hospital relationships for a new set of products," said Mr. Huitian Tang , Chief Executive Officer and Chairman of China BCT Pharmacy Group, Inc. "However, our retail and manufacturing businesses grew to compensate for this challenge to our wholesale sector. We opened four more in-store TCM clinics and we closed lower-performing stores. Manufacturing continues to weather pricing pressures occasioned by the drug price ceilings imposed by the government. In all an increase of 12% in gross profit contribution compared to the same quarter a year ago is creditable."
Business Outlook
"We ended 2011 on a strong financial position with cash and cash equivalents of $31.5 million at year end. We are pleased to report double digit growth on our top line and bottom line performance, representing year-over-year growth of 28.2% and 22.1%, respectively."
"For 2012, we are targeting double digit revenue growth driven by our ability to develop and leverage new wholesale contracts at the supplier and hospital levels, our expansion of the in-store TCM concept at our retail stores and greater output from our manufacturing operation.
We are targeting improved profitability as we merge more small stores into larger ones with TCM clinics and we expect to open two more in the first quarter and one more in the second quarter.
We are in no doubt however that we will face margin pressure on several fronts. First wholesale will take at least until the second quarter to reestablish momentum following the completion of the supplier bidding process that ended in October 2011. Second, the manufacturing side of the business is under pressure as prices paid for drugs are capped by government regulation.
For the longer term we expect to become increasingly efficient as we create our distribution and logistics center at an estimated cost of $22 million . One hundred acres of land are under negotiation with the government as the site for the center and as soon as the arrangement is settled we will begin construction. We are targeting completion of phase 1 by the end of 2012. We expect to create larger, attractively refurbished retail stores and close some smaller ones again in 2012 to create higher revenue, more profitable stores. We are targeting a 20 to 30 store program that will cost an estimated $11 million .
Overall we are excited by the challenges and opportunities before us in 2012 and are looking forward to reporting our progress throughout the year," concluded Mr. Tang
Notable Share Transactions
Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers
Name
Award Amount
Tang Huitian, Chief Executive Officer
762,500
Zhang Xiaoyan, Chief Financial Officer
762,500
These stock options have an exercise price of $2.00 per share; 50% of the options vest and become exercisable immediately and the remaining 50% vest and become exercisable on December 31, 2012. These options are not granted pursuant to the Company’s 2010 Omnibus Securities and Incentive Plan (the “Plan”), but are granted pursuant to the Board’s authority to grant options.
In addition, on December 16, 2011, the Board made grants of stock options to the following employees, executive officers and directors of the Company in the amounts set forth below:
Name
Award Amount
Tang Huitian, Chief Executive Officer
1,245,000
Zhang Xiaoyan, Chief Financial Officer
830,000
Simon Cho, director
10,000
James Chiu, director
10,000
Chin Kam Cheung, director
10,000
Kwok Wai Ng, senior staff
20,000
Li Yee Yik, senior staff
10,000
These stock options are granted pursuant to the Plan and have an exercise price of $2.00 per share. The first 25% of these options vest and become exercisable on June 30, 2013, the second 25% vest and become exercisable on December 31, 2013, the third 25% vest and become exercisable on June 30, 2014 and the remaining 25% vest and become exercisable on December 31, 2014.
The Board provided the right of the recipients to have a cashless exercise election for their stock options granted above and in the event of a Change in Control of the Company (as defined in the form of stock option agreement attached), then any portion of the above options that has not become vested and exercisable shall immediately vest and become exercisable.
On December 16, 2011, the Board also approved the Form of Stock Option Agreement – Not Granted Pursuant to the Plan and the Form of Stock Option Agreement– Pursuant to 2010 Omnibus Securities and Incentive Plan (the “Option Agreements”). The Company entered into the Option Agreements with the above recipients on December 16, 2011. The Agreements set forth the terms and conditions of awards of stock options to employees, directors or officers, including, but not limited to, number of underlying shares, exercise price, vesting, termination of employment, change in control, option term, method of exercise of stock option and transfer restrictions.
Comments & Business Outlook
Third Quarter 2011 Results
Revenue increased 28.5% year-over-year to $67.5 million
Gross profit rose 23.2% year-over-year to $16.3 million
Operating income grew 31.4% year-over-year to $12.5 million
GAAP net income climbed 36.9% to $9.5 million , or $0.22 per diluted share, from $6.9 million , or $0.18 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 $9.1 million , or $0.21 per diluted share
Cash and cash equivalents as of September 30, 2011 totaled $34.3 million , compared to $20.2 million at the end of 2010 "We are pleased with our excellent operational and financial performance in the third quarter, achieving double digit sales growth across our distribution, retail and manufacturing businesses. Because of our integrated business model, we were able to adjust our product mix and strike a good balance between product volume and selling prices, resulted in stable profitability," commented Mr. Huitian Tang , Chief Executive Officer and Chairman of China BCT Pharmacy Group, Inc. "Inflationary pressures have increased cost-base for many manufacturing businesses in China over the past few quarters. So far, we have been spared of any significant impact from raw material and labor cost increases, but we will closely monitor market developments. China BCT is primarily focused in Guangxi , serving consumers in the Tier II and Tier III cities and counties, where competition is less fierce. We maintain our focus on increasing our market share in Guangxi before venturing into neighboring regions."
Business Outlook
"Looking towards 2012, we expect to secure more contracts with hospitals for our distribution segment. During the centralized bidding process in 2011, we successfully secured 2,000-3,000 more product distribution rights to hospital and clinic networks. For our retail segment, we will remain focused on identifying opportunities for selective drugstore acquisitions to further expand our retail network within Guangxi Province . In the fourth quarter of 2011, we expect to increase of our Levodopa raw materials output for products that target the Indian market. We expect these raw materials will contribute positively to our top line growth starting from the beginning of next year. We are committed to growing our footprint to become a larger vertically integrated pharmaceutical player offering retail, wholesale and manufacturing services." concluded Mr. Tang.
Comments & Business Outlook
LIUZHOU CITY, China , October 12, 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 that the Company is in the final stages of launching 11 new retail pharmacy stores in Guangxi .
The new stores are primarily located in Liuzhou city and Liucheng County and have an average size of 67 square meters. The Company estimates that the total upfront capital investment required to complete site renovation for the new stores is approximately RMB 6.5 million ($1.0 million ). Management expects the 11 stores together will generate approximately RMB 8.8 million ($1.4 million ) in annual sales once they have reached maturity, with a payback period of approximately four and a half years. China BCT is in the process of obtaining the required business licenses and expects these stores will be fully operational by the end of 2011.
"The launch of these 11 self-opened stores will further strengthen our footprint in Guangxi by bringing the total number of 'Baicaotang' branded stores to 219," commented Mr. Hui Tian Tang , Chairman and Chief Executive Officer of China BCT Pharmacy Group, Inc. "These stores will offer a full range of pharmaceutical products supported by excellent customer service. We remain focused on continuing the vertical integration of our growing retail network and our wholesale distribution and manufacturing businesses to become the leading retail pharmacy in Guangxi ," Mr. Tang added.
Liquidity Requirements
We believe that our existing sources of liquidity, along with cash expected to be generated from our operating segments will be sufficient to fund our operations, anticipated capital expenditures, working capital, and other financing requirements for at least the next twelve months. We will continue to monitor our expenditures and cash flow position.
Investors should note this quarters capital requirements are less specific than last quarters statement.
We believe that our existing sources of liquidity, along with cash expected to be generated from our operating services will be sufficient to fund our operations, anticipated capital expenditures, working capital and other financing requirements (other than acquisitions) for at least the next twelve months. We will continue to monitor our expenditures and cash flow position.
We currently plan to selectively acquire drugstore chains or independently operated drugstores that complement our existing store network or help us to establish a presence in new markets. In particular, we plan to grow through first acquiring similar businesses in the cities in Guangxi province and then acquiring business targets outside of the Guangxi province. We target retail chains or individual stores in prime locations and with good brand names, well-developed facilities and customer bases, and which are commercially attractive. We believe that our relationship with many industry participants and our knowledge of, and operational expertise in, the drugstore market in China will assist us in making acquisitions. We also believe that we can rapidly and successfully integrate newly acquired stores into our current distribution network and quickly realize operating and financial benefits.
Comments & Business Outlook
Second Quarter 20 1 1 Highlights
Revenue increased 37.1% year-over-year to $65.1 million
Gross profit rose 27.4% year-over-year to $16.1 million
Operating income grew 13.2% year-over-year to $11.6 million
GAAP net income climbed 20.6% to $8.6 million , or $0.19 per diluted share, from $7.1 million , or $0.19 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 $8.3 million , or $0.18 vs $0.20
Cash and cash equivalents as of June 30, 2011 totaled $63.1 million , compared to $20.2 million at the end of 2010. "In the second quarter of 2011, we achieved double digit sales growth across our distribution, retail and manufacturing segments, resulting in companywide year-over-year revenue growth of 37.1%," commented Mr. Hui Tian Tang , Chairman and Chief Executive Officer of China BCT Pharmacy Group, Inc. "We believe that our integrated business platform uniquely positions us to capitalize on a wide range of opportunities throughout China 's pharmaceutical industry value chain. We intend to carefully deploy our strong cash balance, which totaled over $63.1 million at quarter end, on important strategic initiatives, including the continued expansion of our retail pharmacy footprint in Guangxi Province and the construction of a modern wholesale distribution logistics center in the region."
Business Outlook
"In the second half of 2011, we plan to focus on improving the performance of our existing retail stores while selectively pursuing opportunities to expand our retail pharmacy network. We are currently launching 21 new retail pharmacy stores in Guangxi . As a group, these stores are expected to generate annual revenues of approximately $2.6 million and should be fully operational in the second half of 2011," commented Mr. Tang. "On the distribution side of our business, we expect to commence construction of a state-of-the-art logistics center in the fourth quarter 2011. We are committed to developing a larger and stronger retail and wholesale distribution network, which we expect to yield greater economies of scale and additional synergies across our vertically integrated business model," concluded Mr. Tang.
Comments & Business Outlook
LIUZHOU CITY, Guangxi Province , China , July 20, 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 that the Company is in the process of launching 21 new retail pharmacy stores in Guangxi , bringing the total number of "Baicaotang" branded stores to 208.
The new stores will offer a full range of pharmaceutical products and are located in areas of Liuzhou city, the administrative counties around Liuzhou, Yizhou City, Binyang County, and Luzhai County. Upfront capital investment to complete site renovation for the new stores, which have an average size of roughly 73 square meters, totaled approximately RMB 12.6 million ($1.9 million ). Management estimates that the pay back period on this investment will be approximately 4 years and believes that the 21 new stores, as a group, will generate annual revenues of approximately RMB 18.9 million ($2.63 million ). The Company expects all of the new locations, upon receipt of required government business licenses, to be fully operational by the end of the third quarter of 2011.
"We are pleased to announce the addition of 21 new stores to our strong regional retail pharmacy business," commented Mr. Hui Tian Tang , Chairman and Chief Executive Officer of China BCT Pharmacy Group, Inc. "Our retail strategy continues to focus on Guangxi , with an emphasis on second and third tier cities with relatively low market penetration. By investing in the Baicaotang brand, providing excellent customer service and offering ample product selection, we aim to become the leading retail pharmacy in Guangxi . Our broader strategy is to vertically integrate our growing retail network with our wholesale distribution and manufacturing businesses to maximize China BCT's overall profitability," Mr. Tang added.
Notable Share Transactions
LIUZHOU CITY, China, July 6, 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 that the Company's Board of Directors has approved a share repurchase plan that authorizes the Company to repurchase up to 2,000,000 shares of the Company's common stock from time to time during a one year period commencing on July 4, 2011. Purchases under the plan will be conducted in compliance with Rule 10b-18 promulgated under the Securities and Exchange Act of 1934, as amended. China BCT expects to fund any repurchases using cash on hand and cash generated from operations. As of July 5, 2011, China BCT had approximately 38.2 million shares of common stock outstanding.
"We believe that China BCT's shares are undervalued and do not reflect the Company's strong current fundamentals and solid long-term growth outlook," commented Hui Tian Tang, Chairman and CEO of China BCT Pharmacy. "This share repurchase plan demonstrates our confidence in China BCT's future as well as our commitment to delivering shareholder value."
Comments & Business Outlook
First Quarter 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 ."
"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 . "
Comments & Business Outlook
Fourth Quarter 20 10 Highlights
Revenue increased 82.3% year-over-year to $66.8 million
Gross profit rose 57.2% year-over-year to $14.1 million
Operating income grew 61.3% year-over-year to $9.4 million
GAAP net income climbed 83.6% to $7.4 million , or $0.19 per diluted share, from $4.0 million , or $0.13 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 $7.0 million , or $0.18 per diluted share compared to $0.13.
Full Year 2010 Highlights
Revenue increased 47.6% year-over-year to $200.8 million
Gross profit rose 37.5% year-over-year to $48.8 million
Operating income grew 31.3% year-over-year to $35.4 million
GAAP net income climbed 32.4% to $25.7 million , or $0.67 per diluted share, compared to $19.4 million , or $0.61 per diluted share, in 2009
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 $26.4 million , or $0.68 per diluted share compared to $0.61
In 2010, the Company acquired and self-opened a total of 105 retail outlets in Guangxi Province , bringing its total store count to 170 as of December 31, 2010 .
"We ended 2010 on a positive note, achieving excellent fourth quarter revenue and earnings growth of 82% and 84%, respectively. During 2010, we significantly expanded our retail footprint within Guangxi Province by adding 105 stores to our portfolio, while continuing to rapidly grow one of the region's leading wholesale distribution networks," commented Mr. Hui Tian Tang , Chairman and Chief Executive Officer of China BCT Pharmacy Group, Inc. "We commenced 2011 with a meaningful capital infusion from Milestone Longcheng, our new strategic partner, enabling us to further penetrate Guangxi 's retail pharmacy market and invest in modern logistical infrastructure for our distribution business. We believe we have put together the right business model and team to become Guangxi 's dominant retail pharmacy chain and wholesale drug distributor."
Business Outlook
"Looking into 2011, we intend to continue to selectively build or acquire retail pharmacies in Guangxi and surrounding regions, while improving the same store sales volume of our existing portfolio. In wholesale distribution, we plan to develop and invest in a state-of-the-art logistics center and secure more profitable exclusive contracts with hospitals in Guangxi . The centralized bidding process under the New Rural Cooperative Medicare Plan for 2011 is expected to close in the second quarter of 2011, and we expect to win double the bids we won last year, further strengthening our organic growth in wholesale distribution. We will continue to vertically integrate our self-manufactured drugs with our wholesale and retail networks to improve China BCT's overall gross margin," Mr. Tang concluded.
Liquidity Requirements
We believe that our existing sources of liquidity, along with cash expected to be generated from our operating services will be sufficient to fund our operations, anticipated capital expenditures, working capital and other financing requirements (other than acquisitions) for at least the next twelve months. We will continue to monitor our expenditures and cash flow position.
We currently plan to selectively acquire drugstore chains or independently operated drugstores that complement our existing store network or help us to establish a presence in new markets. In particular, we plan to grow through first acquiring similar businesses in the cities in Guangxi province and then acquiring business targets outside of the Guangxi province. We target retail chains or individual stores in prime locations and with good brand names, well-developed facilities and customer bases, and which are commercially attractive. We believe that our relationship with many industry participants and our knowledge of, and operational expertise in, the drugstore market in China will assist us in making acquisitions. We also believe that we can rapidly and successfully integrate newly acquired stores into our current distribution network and quickly realize operating and financial benefits.
Comments & Business Outlook
For the fourth quarter ended December 31, 2010 , the Company expects
net revenue to be between $58 million and $64 million , or 58% to 75% higher than fourth quarter 2009 revenue of $36.6 million .
Fourth quarter 2010 net income, excluding both the non-cash gain of $1.0 million related to change in the fair value of warrant liabilities and the non-cash charge of share based compensation stock of $0.6 million , is expected to be between $6.6 million and $8.1 million , or 61% to 98% higher than the prior year figure of $4.1 million .
For the year ended December 31, 2010 , the Company expects
net revenue to be between $192 million and $198 million , or 41% to 45% higher than full year 2009 revenue of $136.1 million .
Full year 2010 net income, excluding both the non-cash gain of $0.6 million related to change in the fair value of warrant liabilities and non-cash charge of share based compensation stock of $1.3 million , is expected to be between $25.5 million to $27.5 million , or 31% to 41% higher than the prior year figure of $19.5 million .
"We are delighted to announce preliminary fourth quarter and full year 2010 results, highlighted by robust top- and bottom-line growth," said Mr. Huitian Tang , Chairman and CEO of China BCT Pharmacy. "We closed 2010 on a positive note and believe our momentum will continue in 2011 as we execute on our strategy to enhance our wholesale distribution network, rapidly grow our retail pharmacy chain within Guangxi province, and vertically integrate these businesses along with our manufacturing operations to improve overall profitability."
Deal Flow
LIUZHOU CITY, Guangxi, China, March 2, 2011 /PRNewswire-Asia / -- China BCT Pharmacy Group, Inc., today announced that it completed the closing of its Series A Convertible Preferred Shares Purchase Agreement (the "Purchase Agreement") with Milestone Longcheng Limited ("Milestone") on March 2, 2011. Pursuant to the agreement, the Company issued 9,375,000 Series A Convertible Preferred Shares (the "Preferred Shares") to Milestone in exchange for aggregate gross proceeds of $30 million . Net proceeds from the transaction will be used to fund China BCT's wholesale distribution and retail pharmacy growth initiatives, including investment in a modern logistics center in Guangxi.
Comments & Business Outlook
LIUZHOU CITY, China, Feb. 22, 2011 /PRNewswire-Asia / -- China BCT Pharmacy Group, Inc., today announced plans to launch 17 new retail pharmacies in Guangxi, further expanding its footprint in the region.
The new stores, which will be operated under the "Baicaotang" brand name, primarily will be located in well-populated cities, including Liuzhou, Hechi, Hezhou, Guigang, Laibin and Guilin. The Company has started the build out process and estimates that the new stores will require total capital expenditures of RMB 8.5 million (approximately US$1.3 million ) and will have an average pay back period of between 2.5 and 3 years.
Deal Flow
LIUZHOU CITY,China, Jan. 19, 2011 /PRNewswire-Asia / -- China BCT Pharmacy Group, Inc., today announced that it has entered into an agreement with Milestone Longcheng Limited, a private equity firm, pursuant to which Milestone will purchase 9,375,000 shares of the Company's Series A Convertible Preferred Shares for an aggregate purchase price of $30 million.
The Preferred Shares carry a dividend of 5% and are convertible initially into an equal number of shares of China BCT Pharmacy's Common Stock at an initial conversion price of $3.20 per share.
Comments & Business Outlook
Third Quarter 2010 Highlights
Revenue increased 55.1% year-over-year to $52.5 million
Gross profit rose 44.4% year-over-year to $ 13.2 million
Operating income grew 30.9% year-over-year to $9.5 million
GAAP net income was $ 6.9 million , or $0.18 per diluted share, compared to $5.1 million , or $0.16 per diluted share , in the year ago quarter
Excluding non-cash income related to a change in the fair value of warrant liabilities, non-GAAP adjusted net income was $6.7 million , or $0.17 per diluted share
"All three of our vertically integrated businesses generated robust revenue growth this quarter, led by our pharmaceutical distribution segment, which benefited primarily from new business with clinics and health care centers under China 's Basic Drugs Catalog program and from higher sales to drug store customers. During the quarter we expanded our retail pharmacy footprint by acquiring 33 outlets in Guangxi , and achieved higher sales volumes in our manufacturing business by establishing relationships with new distributors," commented Mr. Hui Tian Tang , Chairman and Chief Executive Officer of China BCT Pharmacy Group, Inc. "We intend to solidify our position as the dominant retail pharmacy chain and wholesale drug distributor in Guangxi by continuing to participate in retail pharmacy consolidation, investing in modern logistical centers and information systems, and capitalizing on China 's recent healthcare reform policies."
Business Outlook
"Heading into 2011, we intend to continue to selectively build or acquire retail pharmaceutical chain stores in Guangxi and surrounding regions. By building a larger and stronger retail network, we expect to gain economies of scale and build incremental synergies as we vertically integrate retail with pharmaceutical distribution and manufacturing. In the wholesale distribution we plan to add more profitable contracts with hospitals, as exemplified by our exclusive relationship with Liujiang County Chinese Medicine Hospital and recently strengthened relationships with Liuzhou People's and Worker's Hospitals. In manufacturing, we are very pleased with the progress of our new Compound Diphenoxylate Tablet product, which is on track to hit an annual revenue run rate of over $1.8 million next year. We aim to replicate this kind of success by focusing on those products in our pipeline that address higher-demand markets. As we execute in each of our business segments, our goal is to deliver shareholder value while playing an important role in China 's rapidly growing healthcare industry," Mr. Tang concluded.
Comments & Business Outlook
"Following our successful bidding for distribution rights in Guangxi province over the past year, we expect sales under these contracts to become an increasingly larger share of our overall revenues," commented Mr. Tang. "While we continue to pursue an organic growth strategy for our distribution segment, we are also aggressively expanding our retail pharmacy presence throughout Guangxi Province through acquisitions. With the addition of the 48 new stores, we are on track to achieve our target of adding a total of 160 pharmacy stores by the end of 2010 to our growing retail chain in Guangxi Province. We expect to be successful once again in renewing existing and winning new contracts as part of the 2010 centralized tendering under the New Rural Corporative Health Insurance Plan and anticipate significant new business opportunities to drive China BCT's growth."
see release
Comments & Business Outlook
China Baicaotang plans to implement a three-pronged growth strategy to support its business expansion. For its pharmaceutical distribution and retail pharmacy segments, the Company will continue to focus on second and third tier cities and rural markets supported by well-designed marketing initiatives. For 2010, the Company plans to open an additional 160 pharmacy stores and expand the product portfolio which it manufactures to gain market share. In addition, China Baicaotang plans to invest in advanced logistics and information management systems and maximize its utilization rate of Hefeng production capacity.
"China Baicaotang is well-positioned to benefit from Chinese healthcare reform programs and maintain its position as one of the largest manufacturers and distributors in Guangxi Province," concluded Mr. Tang. "As a highly integrated player, our growth is supported by a balanced product portfolio, healthy product margins and a strong brand name."
Share Structure
Post Merger Share Calculation :
Pre reverse merger outstanding shares: 5,500,000
2 , 900 ,000
Newly issued shares of Common Stock in reverse merger: 32,000,000
Shares of Common Stock associated with private placement on 12/30/09 : 2,489,370
Shares from warrants associated with private placement 12/30/09 : 1,244,366
Placement agent warrants: 351,934
Shares of Common Stock associated with private placement on 02/01/10 : 2,489,370
Shares from warrants associated with private placement 02/01/10 : 1,029,970
GeoTeam® best effort calculation of total post reverse merger outstanding shares assuming full conversions: 42,204,980
Source: SEC From 8K (December 30, 2009) (March,3 2010)
Financial Target Agreements
Management has placed 4,000,000 shares of their Common Stock in escrow that will be distributed to merger investors in the event that the company fails to achieve a 2010 performance target of $26,000,000. 1,000,000 shares will be distributed to all investors on a pro rata basis for every $1,000,000 shortfall under the Performance Target.
Source: SEC From 8K (December 30, 2009)
Financials
Nine months ended
September 30
(Unaudited)
2009
2008
Sales revenue
$ 99,473,445
$ 85,515,029
Cost of sales
72,944,350
63,331,372
Gross profit
26,529,095
22,183,657
Operating expenses
Administrative expenses
2,807,799
2,125,503
Research and development expenses
52,969
-
Selling expenses
2,577,153
1,458,392
5,437,921
3,583,895
Income from operations
21,091,174
18,599,762
Interest income
65,902
28,813
Other income
70,754
69,087
Other expenses
(11,990 )
(103,545 )
Finance costs
(1,090,930 )
(988,436 )
Income before income taxes
20,124,910
17,605,681
Income taxes
(4,748,741 )
(4,018,843 )
Net income
$ 15,376,169
$ 13,586,838
Other comprehensive income
Foreign currency translation
Adjustments
25,143
1,046,791
Total comprehensive income
$ 15,401,312
$ 14,633,629
____________________________________________________________________________
Year Ended
December 31,
2008
2007
2006
Sales revenue
$ 108,991,329
$ 66,359,554
$ 32,020,449
Cost of sales
79,361,987
53,307,827
25,212,469
Gross profit
29,629,342
13,051,727
6,807,953
Operating expenses
Administrative expenses
3,341,605
1,954,536
1,673,242
Research and development expenses
763,995
-
-
Selling expenses
2,122,153
1,209,891
1,170,458
6,227,753
3,164,427
2,843,700
Income from operations
23,401,589
9,887,300
3,964,253
Interest income
29,315
30,186
21,436
Other income
143,426
78,966
64,985
Finance costs
(1,260,290 )
(658,912 )
(512,329 )
Income before income taxes
22,314,040
9,337,540
3,557,181
Income taxes
(5,656,878 )
(3,161,419 )
1,235,124
Net income
$ 16,657,162
$ 6,176,121
$ 2,322,057
Source: SEC From 8K (December 30, 2009)
Reverse Merger Activity
China Baicaotang Medicine became public via a reverse merger transaction on
China Baicaotang Medicine (Baicaotang) is South Western China’s leading company in drug distribution and retailing. Based in Liuzhou city, the largest industrial city of Guangxi Province, it enjoys an ideal geographical location in one of China’s most significant medical production and distribution centers. Baicaotang operates more than 64 retail pharmacy stores in Guangxi Province.
Source: SEC From 8K (December 30, 2009)
