HAIKOU CITY, China, Nov. 15, 2012 /PRNewswire/ -- China Pharma Holdings, Inc. (NYSE MKT: CPHI) ("China Pharma" or the "Company"), a specialty pharmaceuticals company in China, today announced financial results for the quarter ended September 30, 2012.
Third Quarter 2012 Highlights
"We are excited to receive the SFDA's production approval for Candesartan in November. We believe this drug will bring positive impact on our current existing product line which has been significantly influenced by the Healthcare Reform and its associated pricing pressure in the recent quarters," Ms. Zhilin Li, China Pharma's Chairman and CEO continued, "We have adjusted our general sales and credit policies to a conservative stance since the beginning of this year in order to control and improve the growing accounts receivable, and ensure the capital requirements for new GMP upgrading requirements are met. Per those mandatory requirements, the upgrading of our dried power injectable line and liquid injectable line must be completed by the end of 2013. We have completed the planning, design and an environment contamination evaluation, and commenced construction relative to certain required facilities and equipment."
Third Quarter of FY2012 Results of OperationsRevenues for the quarter ended September 30, 2012 were $12.2 million, a decrease of $8.8 million, or 42% from $21.0 million for the quarter ended September 30, 2011. The revenue decreased mainly because the implementation of the ever-changing Healthcare Reform policies and the associated pricing adjustment. In addition we reduced our sales-on-credit in order to control our accounts receivables. As a result, sales decreased in three out of our four major product categories.Most of the decline was from our CNS Cerebral & Cardio Vascular category where sales fell by $4.0 million, or 56% to $3.2 million from $7.2 million for the quarter ended September 30, 2012. Shortfalls in sales of Ozagrel Sodium for Injection and Buflomedil Hydrochloride were major contributors for the decline. Sales in the Anti-Viro/ Infection & Respiratory category fell by $3.1 million or 37% to $5.1 million from $8.2 million in the prior year period. The "Digestive" category sales revenues edged lower by $2.0 million, or 62% to $1.2 million from $3.2 million in the same period prior year. This was mainly because sales across this category were significantly influenced by the NDRC's price adjustment targeting digestive drugs specifically in the first half of this year. Sales of "Other" category increased by $0.2 million, or 8% to $2.5 million from $2.3 million in third quarter of 2011.
Gross profit for the three months ended September 30, 2012 was $3.24 million, which was 56.8% lower compared to $7.51 million in the third quarter of 2011. Our gross margin for the third quarter of 2012 was 26.6%, compared to 35.8% in the corresponding quarter of 2011. Price controls plus rising pharmaceutical materials costs have been squeezing our profit. We expect current challenging pricing environment to persist for some time.
In terms of our gross margins by major categories, Anti-Viro/Infection & Respiratory category was 28% in the third quarter of 2012, compared to 24% in the third quarter 2011 and 26% in the second quarter of 2012. Gross margin for our CNS Cerebral & Cardio Vascular category margins was 23% in the third quarter of 2012, compared to 43% in the third quarter 2011 and 30% in the second quarter of 2012. Gross margin for our Digestive Diseases category was 36% in the third quarter of 2012, compared to 45% in the third quarter 2011 and 28% in the second quarter of 2012. And gross margin for our Other category was 23% in the third quarter of 2012, compared to 42% in the third quarter 2011 and 34% in the second quarter of 2012.
Selling, general and administrative expenses in the third quarter of 2012 were $1.45 million, compared to $1.63 million, in the same period of 2011. Fixed expenses and the spending on market maintenance and development in selling, general and administrative expenses made this item decrease less than sales did.
Operating income was $1.6 million in the third quarter of 2012, down 73% from $6.0 million in the third quarter of 2011. The decrease in operating income was mainly due to lower gross revenue, gross profit and higher bad debt expense partially offset by lower selling and general administrative expenses in the current period compared to the corresponding quarter one year ago.
For the quarter ended September 30, 2012, the Company paid income tax at a rate of approximately 15%. Income tax expense for the third quarter of 2012 was $0.24 million, compared to $0.93 million for the same period last year. The Company obtained "National High-Tech Enterprise" status from the PRC government in the fourth quarter of 2010. With this designation, the Company is entitled to a preferential tax rate of 15% for three years from 2011 to 2013, which is notably lower than the statutory income tax rate of 25% for corporations in China.
Net income for the third quarter of 2012 was $1.3 million, or $0.03 per basic and diluted share, compared to $5.0 million, or $0.11 per basic and diluted share, in the third quarter of 2011. The main reasons for the decrease in our net income are the decrease in sales revenue, falling gross margins and higher operating expenses.
Nine months ResultsRevenues for the nine months ended September 30, 2012 were $42.9 million, down 27% from revenues of $58.7 million for the nine months ended September 30, 2011. Gross profit for the nine months ended September 30, 2012 was $12.7 million, down 41% from gross profit of $21.7 million for the corresponding period of 2011. Gross margin was 29.6%, compared to 36.9% for the first nine months of 2011. Operating income was $7.2 million, down 58% from $17.1 million for the first nine months of 2011. Net income was $5.9 million, or $0.13 per basic and diluted share, compared to $15.1 million, or $0.35 per basic and diluted share, for the same period a year ago.
Financial ConditionAs of September 30, 2012, the Company had cash and cash equivalents of $5.1 million compared to $4.1 million as of December 31, 2011.
Working capital increased to $102.2 million at September 30, 2012 from $96.8 million at December 31, 2011. The current ratio decreased to 7.2 times at September 30, 2012 from 8.0 times at December 31, 2011.
Accounts receivable balance rose to $69.8 million at the end of the third quarter of 2012 from $69.7 million at the end of 2011; which also represents a decrease of $1.7 million compared to $71.4 million as of June 30, 2012. The Company's management team continues to be sharply focused on improving accounts receivable collection and expects to make progress in the quarters to come.
For the nine months ended September 30, 2012, cash flow from operating activities was $3.0 million, as compared to $3.6 million as of December 31, 2011; which represent an improvement from $1.9 million as of June 30, 2012.
Conference CallThe Company will hold a conference call at 8:30 am ET on November 15, 2012 to discuss third quarter of year 2012 results. Listeners may access the call by dialing 1-866-519-4004 or 65-672-393-81 for international callers, Conference ID # 65749586. A webcast will also be available through CPHI's website at http://www.chinapharmaholdings.com. A replay of the call will be accessible through November 23, 2012 by dialing 1-855-452-5696 or 61-281-990-299 for international callers, Conference ID # 65749586.
About China Pharma Holdings, Inc. China Pharma Holdings, Inc. is a rapidly growing 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, high-margin business model is driven by market demand and supported by eight scalable 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 updated 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. AND SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE SHEETS(Unaudited)September 30,December 31,20122011ASSETSCurrent Assets:Cash and cash equivalents$
4,050,854Banker's acceptances365,24883,512Trade accounts receivable, less allowance for doubtfulaccounts of $4,268,356 and $3,536,405, respectively69,819,57569,695,556Other receivables, less allowance for doubtfulaccounts of $52,860 and $38,921, respectively128,84155,039Advances to suppliers4,833,8595,778,841Inventory37,814,47230,378,658Deferred tax assets678,297566,226Total Current Assets118,702,058110,608,686Advances for purchases of property and equipment1,190,423170,323Advances for purchases of intangible assets37,691,58636,194,494Property and equipment, net of accumulated depreciation of$4,049,480 and $3,391,124, respectively5,818,4756,334,817Intangible assets, net of accumulated amortization of$3,518,478 and $3,041,804, respectively2,644,2813,082,671TOTAL ASSETS$
56,390,991LIABILITIES AND STOCKHOLDERS' EQUITYCurrent Liabilities:Trade accounts payable$
3,112,385Accrued expenses193,088184,017Accrued taxes payable3,018,9723,082,353Other payables966,432822,448Advances from customers2,361,6601,784,474Other payables - related parties1,254,567861,563Short-term notes payable3,956,3223,931,745Total Current Liabilities16,541,23013,778,985Long-term deferred tax liability170,756128,909Total Liabilities16,711,98613,907,894Stockholders' Equity:Preferred stock, $0.001 par value; 5,000,000 shares authorized;no shares issued or outstanding--Common stock, $0.001 par value; 95,000,000 shares authorized;43,579,557 shares and 43,529,557 shares outstanding, respectively
43,58043,530Additional paid-in capital23,590,20423,448,534Retained earnings110,148,426104,286,666Accumulated other comprehensive income15,552,62714,704,367Total Stockholders' Equity149,334,837142,483,097TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY$
CHINA PHARMA HOLDINGS, INC. AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF OPERATIONSAND COMPREHENSIVE INCOME(Unaudited)For the Three MonthsFor the Nine MonthsEnded September 30,Ended September 30,2012201120122011Revenue$12,176,344$20,987,725$42,861,478$58,708,134Cost of revenue8,932,55213,472,80430,174,98337,041,618Gross profit3,243,7927,514,92112,686,49521,666,516Operating expenses:Selling expenses856,1721,006,8152,632,1772,410,516General and administrative expenses598,258621,3362,087,4012,525,230Bad debt expense (benefit)171,508(76,187)724,745(185,463)Total operating expenses1,625,9381,551,9645,444,3234,750,283Government subsidy income-968-146,415Income from operations1,617,8545,963,9257,242,17217,062,648Other income (expense):Interest income1,5881,2413,0695,656Interest expense(79,507)(62,438)(235,516)(184,874)Derivative gain---934,260Net other income (expense)(77,919)(61,197)(232,447)755,042Income before income taxes1,539,9355,902,7287,009,72517,817,690Income tax expense(244,452)(927,845)(1,147,965)(2,670,115)Net income1,295,4834,974,8835,861,76015,147,575Other comprehensive income - foreigncurrency translation adjustment(124,625)1,556,979848,2604,404,968Comprehensive income$1,170,858$6,531,862$6,710,020$19,552,543Earnings per Share:Basic$0.03$0.11$0.13$0.35Diluted$0.03$0.11$0.13$0.35
CHINA PHARMA HOLDINGS, INC. AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(Unaudited)For the Nine MonthsEnded September 30,20122011Cash Flows from Operating Activities:Net income$
5,147,575Depreciation and amortization1,096,6411,081,890Stock based compensation141,721139,074Bad debt expense (benefit)724,745(185,463)Deferred income taxes(67,603)67,789Derivative gain-(934,260)Changes in assets and liabilities:Trade accounts receivable(2,443,587)(9,507,941)Other receivables(73,579)3,204Advances to suppliers1,385,889228,319Inventory(5,911,799)(274,331)Trade accounts payable1,661,109(1,933,820)Accrued expenses80,653309,977Accrued taxes payable(83,191)812,897Other payables30,20345,162Advances from customers566,972410,195Net Cash Provided by Operating Activities2,969,9345,410,267Cash Flows from Investing Activities:Net investment in banker's acceptances-(130,135)Advances for purchases of property and equipment (1,020,731)-Advances for purchases of intangible assets(1,272,956)(4,334,490)Purchase of property and equipment(81,352)(280,645)Net Cash Used in Investing Activities(2,375,039)(4,745,270)Cash Flows from Financing Activity:Proceeds from related party loan393,004347,919Net Cash Provided by Financing Activity393,004347,919Effect of Exchange Rate Changes on Cash23,013147,738Net Increase in Cash and Cash Equivalents1,010,9121,160,654Cash and Cash Equivalents at Beginning of Period4,050,8543,692,086Cash and Cash Equivalents at End of Period$
4,852,740Supplemental Cash Flow Information:Cash paid for interest$
79,467Cash paid for income taxes1,343,9571,554,339Supplemental Noncash Investing and Financing Activities:Accounts payable for purchases of property and equipment
45,777Accounts receivable collected with banker's acceptances
2,026,9285,161,084Advances to suppliers paid with banker's acceptances402,338-Inventory purchased with banker's acceptances1,248,8205,161,084
|SOURCE China Pharma Holdings, Inc.|
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