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China Botanic Reports Third Quarter Fiscal Year 2012 Results

HARBIN, China, Sept. 19, 2012 /PRNewswire/ -- China Botanic Pharmaceutical Inc. (NYSE AMEX: CBP) ("China Botanic" or the "Company"), a developer, manufacturer and distributor of botanical products, bio-pharmaceuticals and Traditional Chinese Medicines ("TCM") in China, today announced financial results for the three months ended July 31, 2012.

Third Quarter Fiscal 2012 Highlights

  • Net sales increased 21.8% year over year to $15.1 million
  • Gross profit increased 19.0% year over year to $8.9 million with gross margin of 58.9%
  • Operating income increased 26.8% year over year to $3.8 million with operating margin of 25.1%
  • Net income rose 29.2% to $3.3 million, or $0.09 per diluted share, from $2.5 million, or $0.07 per diluted share, in the third quarter of fiscal 2011
  • In July 2012, China Botanic was granted a new patent on its advanced proprietary Schisandra Lignin extraction method
  • Nine Months Fiscal 2012 Highlights

  • Net sales increased 22.9% year over year to $66.2 million
  • Gross profit increased 19.8% year over year to $38.8 million with gross margin of 58.6%
  • Operating income increased 21.1% year over year to $27.4 million with operating margin of 41.4%
  • Net income rose 13.9% to $23.4 million, or $0.63 per diluted share
  • Third Quarter Fiscal Year 2012 ResultsDuring the three months ended July 31, 2012, net revenue increased by 21.8% to $15.1 million from $12.4 million in the same period of 2011. Sales volume and revenue increased in all product categories during the quarter largely due to growing market acceptance of the Company's Siberian Ginseng Series products, Compound Yangjiao Tablets, Tianma Series and Compound Honeysuckle Granules as a result of sales promotions and other marketing efforts.

    Gross profit increased 19.0% to $8.9 million compared to $7.5 million in the second quarter of fiscal 2011. Gross margin declined to 58.9% as compared to 60.3% in the same period last year. The year-over-year decline in gross margin for the quarter was primarily due to increases in average raw material prices as a result of inflation and sales tax and additions.

    Operating expenses for the three months ended July 31, 2012 increased 13.8% to $5.1 million, compared to $4.5 million in the year ago period. As a percentage of revenue, operating expenses decreased to 33.8% of total revenue from 36.2% in the year ago period. Sales and marketing expenses rose 17.5% to $1.8 million from $1.6 million a year ago, as the Company strengthened its TV advertising efforts in Heilongjiang province during the quarter to enhance market recognition of its botanic anti-depression series. General and administrative expenses increased 10.7% to $1.4 million from $1.2 million in the year-ago period. The increase was largely due to increases in depreciation expense and medical insurance premiums. Research and development expenses were approximately $1.9 million, up 12.7% from approximately $1.7 million in the year ago period.

    Operating income increased 26.8% to $3.8 million, compared to $3.0 million in the third quarter of fiscal 2011. Operating margin increased year-over-year to 25.1% from 24.1%.

    The Company incurred income tax expenses of $0.6 million in the third quarter of fiscal 2012, compared to $0.5 million for the comparable period in 2011.

    Net income increased 29.2% year over year to $3.3 million, or $0.09 per diluted share, from $2.5 million, or $0.07 per diluted share for the same period a year ago.

    Nine Months Fiscal 2012ResultsFor the nine months ended July 31, 2012, total net revenue was $66.2 million, an increase of 22.9% from $53.9 million from the same period of fiscal year 2011. Gross profit for the nine months ended July 31, 2012 rose 19.8% year over year to $38.8 million, representing a gross margin of 58.6% as compared to 60.2% in the year-ago period. Operating income grew 21.1% year-over-year to $27.4 million. In the nine months ended July 31, 2012, net income was $23.4 million or $0.63 per diluted share, up from $20.5 million or $0.54 per diluted share in the nine months ended July 31, 2011.

    Financial ConditionAs of July 31, 2012, China Botanic had cash of approximately $41.3 million and total current assets of approximately $73.9 million. The Company had working capital of approximately $67.1 million on July 31, 2012, as compared to $40.8 million at the fiscal year ended October 31, 2011. The Company had no long-term debt on its balance sheet at the end of July 31, 2012. Shareholders' equity stood at $124.0 million, compared to $99.7 million as of October 31, 2011. Net cash flow from operating activities for the nine months ended July 31, 2012 was $25.2 million compared to $26.4 million for the same period of 2011.

    The Company has total capital commitments of $32.9 million to be paid by end of 2013 for the purchase of Ah City Nature and Pharmaceutical Plant, undergrowth resources rights, product patents, an advertising contract and Ah City Phase Two construction-in-progress.

    Business OutlookFor fiscal year 2012, China Botanic reaffirms its guidance of revenues of between $91.6 million and $93.1 million, representing an increase of 26% to 28% over fiscal year 2011 revenue of $72.7 million. The Company expects net income to be in the range of $32.7 million to $33.2 million, representing an increase of between 26% and 28% over fiscal year 2011 net income of $25.9 million.

    "With our intensive sales and marketing efforts, we are expanding our distribution network throughout the PRC, improving our market share and raising awareness of our products. During the quarter, we experienced increased demand in all product categories and going forward we anticipate particularly strong demand for our leading Siberian Ginseng series products. We anticipate that we will be successful in becoming one of the PRC's essential medicine suppliers as the PRC government moves forward with its Health Reforms in 2012," said Mr. Shaoming Li, Chairman and Chief Executive Officer of China Botanic.

    "Our research efforts, Ah City expansion project and recently acquired new patents pave the way for our longer term growth and success. We continue to invest in development of Siberian Ginseng cultivation and extraction of effective components of this plant to develop new products and enhance our existing product portfolio. We expect Ah City Phase Two project to be completed at the end of 2013 to support our growing market demand, new product introductions and market expansion."

    Conference CallThe Company will host a conference call at 9:00 a.m. Eastern Time on Thursday, September 20, 2012 to discuss financial results for the third quarter of fiscal year 2012 ended July 31, 2012.

    To participate in the conference call, please dial the following number five to ten minutes prior to the scheduled conference call time: 866-394-2209. International callers should dial 706-758-1481. The conference ID number for the call is 28057322.

    If you are unable to participate in the call at this time, a replay will be available on Thursday, September 20, 2012 at 12:00 noon Eastern Time, through Monday, October 1, 2012. To access the replay, dial 855-859-2056. International callers should dial 404-537-3406. The conference ID number for the replay is 28057322.

    About China Botanic Pharmaceutical Inc.China Botanic Pharmaceutical Inc. is engaged in the research, development, manufacturing, and distribution of botanical products, bio-pharmaceutical products, and traditional Chinese medicines ("TCM"), in the People's Republic of China. All of the Company's products are produced at its three GMP-certified production facilities in Ah City, Dongfanghong and Qingyang. The Company distributes its botanical anti-depression and nerve-regulation products, biopharmaceutical products, and botanical antibiotic and OTC TCMs through its network of over 3,000 distributors and over 70 sales centers across 24 provinces in China. For more information, please visit

    Safe Harbor StatementThis press release contains certain statements that may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are based upon management's beliefs, assumptions and expectations of the Company's future operations and financial performance, taking into account the information currently available to management. These statements are not statements of historical fact. Forward-looking statements involve risks and uncertainties, some of which are not currently known that may cause actual results, performance or financial condition to be materially different from the expectations of future results, performance or financial condition expressed or implied in any forward-looking statements. These forward-looking statements are based on current plans and expectations and are subject to a number of uncertainties including, but not limited to, the Company's ability to manage expansion of its operations effectively, and other factors detailed in the Company's annual report on Form 10-K and other filings with the Securities and Exchange Commission. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. You are cautioned not to unduly rely on such forward-looking statements when evaluating the information presented herein.Company Contact:CCG Investor Relations:China Botanic Pharmaceutical Inc.

    Mr. Mark Collinson, PartnerMs. Portia Tan, IR Contact

    Phone: +1-310-954-1343 (Los Angeles)Tel: 86-451-8260-2162

    Email: mark.collinson@ccgir.comEmail:

    Website: Tables Follow-CHINA BOTANIC PHARMACEUTICAL INC. AND SUBSIDIARIESCondensed Consolidated Balance SheetsJuly 31, 2012October 31, 2011(Unaudited)(Audited)ASSETSCurrent assetsCash$


    15,283,583Trade receivables, net17,129,54421,548,325Inventory, net15,301,6597,416,720Other receivables, net180,2116,823,410Total current assets73,919,59151,072,038Property and equipment, net4,254,9751,778,984Intangible assets, net16,739,51417,146,700Construction-in-progress1,952,3531,937,103Deposits for properties33,818,76337,822,113Deferred tax assets140,322139,226Total assets$


    109,896,164LIABILITIES AND SHAREHOLDERS' EQUITYCurrent LiabilitiesAccounts payable$


    2,098,256Tax payable2,358,6445,976,417Accrued employee benefits2,710,3012,131,565Warrant Liabilities1,08623,443Total liabilities6,855,07410,229,681Shareholders' equityPreferred stock (no par value, 1,000,000 shares authorized; none issued and outstanding as of July 31, 2012 and October 31, 2011,respectively)--Common stock ($0.001 par value, 100,000,000 shares authorized; 37,239,536  issued and outstanding as of July 31, 2012 and October 31, 2011, respectively)37,24037,240Additional paid-in capital8,332,2127,763,987Common stock warrants0496,732Reserves3,372,6973,372,697Accumulated other comprehensive income9,440,2728,620,695Retained earnings102,788,02379,375,132Total shareholders' equity123,970,44499,666,483Total liabilities and shareholders' equity$


    109,896,164 CHINA BOTANIC PHARMACEUTICAL INC. AND SUBSIDIARIESCondensed Consolidated Statements of Income and Comprehensive Income ( Unaudited )For the three monthsFor the nine monthsended July 31, ended July 31,2012201120122011Sales, net$

    15,076,66312,376,35266,239,13953,875,101Cost of goods sold6,190,6884,908,93927,399,57921,450,356Gross profit8,885,9757,467,41338,839,56032,424,745Operating and administrative expenses:Sales and marketing1,832,3511,559,8635,247,1224,430,053General and administrative1,365,8051,233,2883,221,1922,744,932Research and development1,900,3631,686,6772,928,8752,585,863Total operating expenses5,098,5194,479,82811,397,1899,760,848Income from operations3,787,4562,987,58527,442,37122,663,897Other income:Interest income, net44,15334,144109,07981,286Income before income tax expenses3,831,6093,021,72927,551,45022,745,183Income tax expenses576,071501,8844,138,5592,195,987Net income$

    3,255,5382,519,84523,412,89120,549,196Other comprehensive income:Unrealized currency translation adjustments143,931828,537819,5773,004,411Total comprehensive income3,399,4693,348,38224,232,46823,553,607Earnings per common stock- Basic$ per common stock - Diluted$ average common stock outstandingBasic37,239,53637,239,53637,239,53637,239,536Diluted37,239,53637,473,91137,239,53637,749,587 CHINA BOTANIC PHARMACEUTICAL INC. AND SUBSIDIARIESCondensed Consolidated Statements of Cash Flows ( Unaudited )For the nine months ended July 31,20122011Cash flows from operating activities:Net income$


    20,549,196Adjustments to reconcile net income to operating activities:Depreciation367,173286,379Amortization541,380368,782Share compensation71,49396,981Noncash rental expenses760,652572,065Warrants liability reevaluation(22,357)(305,797)Deferred tax assets-(135,409)Changes in assets and liabilities:Decrease in trade receivables, net4,581,6886,891,867(Increase) in due from related parties-(98,049)(Increase) in inventory, net(7,815,061)(3,815,951)Decrease (Increase) in other receivables, net6,687,086(115,187)(Decrease) in accounts payable(329,248)(159,845)(Decrease) Increase in tax payable(3,659,443)1,898,697Increase in accrued employee benefits561,130391,128Net cash provided by operating activities25,157,38426,424,857Cash flows from investing activities:Deposits for land use right, property and patents(908,396)(15,255,064)Refunds from patents deposit2,525,651-Increase in construction-in-progress-(1,884,000)Purchase of property and equipment(908,396)(5,862)Net cash provided by (used in) investing activities708,859(17,144,926)Effect of exchange rate changes on cash158,3511,215,171Net increase in cash26,024,59410,495,102Cash, beginning of year15,283,58327,826,142Cash, end of year$


    38,321,244Supplemental disclosure of cash flow information:Noncash investing activities in office building1,917,149-Cash paid during the year for income taxes8,595,354-Interest paid during the year-- 

    SOURCE China Botanic Pharmaceutical Inc.
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