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Dehaier Medical Announces Fourth Quarter and Full-Year 2010 Financial Results
Date:3/7/2011

BEIJING, March 7, 2011 /PRNewswire-Asia-FirstCall/ -- Dehaier Medical Systems Ltd. (Nasdaq: DHRM) ("Dehaier" or the "Company"), an emerging leader in the development, assembly, marketing and sale of medical devices and homecare medical products in China, today announced its financial results for the fourth quarter and 12 months ended December 31, 2010.

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Fourth Quarter 2010 Financial Highlights

  • Revenue increased by 126% year-over-year to $6.7 million, up from $2.9 million in the fourth quarter of 2009.
  • Revenue from homecare solutions grew dramatically by 998% year-over-year to $2.3 million, or 34% of total revenue, up from $209,000 in the fourth quarter of 2009.
  • Gross profit increased by 119% year-over-year to $2.5 million, or 36.9% of revenue, up from $1.1 million, or 38.2% of revenue in the fourth quarter of 2009.
  • Operating income and operating margin were $1.5 million and 22.8%, respectively, compared with $764,000 and 25.9%, respectively, in the fourth quarter of 2009.
  • Net income attributable to the Company improved 145% to $1.5 million, or $0.32 per diluted share based on 4.7 million weighted average shares outstanding, compared with net income of $602,000, or $0.20 per diluted share based on 3.0 million weighted average shares outstanding in the fourth quarter of 2009.
  • Strengthened balance sheet with $5.9 million in cash and cash equivalents, or $1.27 per diluted share, as of December 31, 2010, compared with $1.2 million as of December 31, 2009.

  • Full Year 2010 Financial Highlights

  • Revenue increased by 58% year-over-year to $19.6 million, up from $12.4 million in 2009.
  • Revenue from homecare solutions tripled to $4.5 million, up from $1.1 million in 2009.
  • Gross profit increased by 57% year-over-year to $7.6 million, or 38.9% of revenue, up from $4.9 million, or 39.3% of revenue in 2009.
  • Operating income and operating margin were $5.1 million and 26.2%, compared with $3.4 million and 27.1% in 2009, respectively.
  • Net income attributable to the Company increased 70% to $4.5 million, or $1.09 per diluted share based on 4.2 million weighted average shares outstanding, compared with net income of $2.7 million, or $0.89 per diluted share based on 3.0 million weighted average shares outstanding in 2009.

  • 2010 and Business Highlights

  • Completed initial public offering of 1.5 million shares of common stock at $8.00 per share and commenced trading on NASDAQ in April 2010.
  • Secured $2.0 million medical device distribution contract for new rural healthcare construction project supported by China Development Bank Corp.
  • Enhanced third party distributed product offering through exclusive distribution agreements with Welch Allyn and HEYER Medical.
  • Increased marketing to support growth of high margin homecare medical products business with the opening of 12 Customer Experience Centers (CECs).

  • "2010 was a record year for Dehaier. We achieved strong growth across both our branded and third party medical devices, as well as our homecare products businesses, while positioning the Company for success in 2011 and beyond," said Mr. Ping Chen, CEO of Dehaier. "Key to our growth in 2010 was the continued advancement of our homecare products business, in which we achieved triple-digit gains for both the fourth quarter and full year. While the domestic market presents a compelling growth opportunity, international expansion is a critical element of our longer-term strategy and we are making meaningful progress in this regard, with several of our respiratory therapy homecare products currently pending regulatory approval in the United States and European Union. We believe that securing these approvals and rolling out our products in targeted international markets will provide another important catalyst for our business and help propel Dehaier to the next level of top- and bottom-line growth."

    Mr. Chen continued, "The overall healthcare market in China has grown significantly in recent years, and is poised for continued expansion as a result of both government initiatives and a greater emphasis on health and wellness among Chinese citizens. The government's 12th Five-Year Plan includes a number of provisions aimed at improving both the quality and availability of healthcare nationwide and giving people greater, more cost-effective access to both professional and self-administered medical treatments. Looking ahead, we plan to devote additional resources to bolster our research and development capabilities, in order to expand our product portfolio and more effectively address the needs of this growing base of potential customers. We are confident that our increased commitment to innovation, strong relationships with leading international medical device manufacturers, extensive sales, marketing and distribution network and strong brand equity will allow Dehaier to capitalize on the favorable macro trends to extend our domestic market share, while preparing the Company for a successful international expansion."

    Fourth Quarter 2010 Financial ResultsRevenuesRevenues for the three months ended December 31, 2010 were $6.7 million as compared to $2.9 million for the three months ended December 31, 2009, an increase of $3.7 million, or 126%. The increase in revenue was attributable to growth in Dehaier's homecare products, as well as its self-branded and third party medical devices.

    Sales of self-branded and third party medical devices, including technical service products, increased 60% to $4.4 million, or 66% of total revenue, compared with $2.7 million, or 93% of revenue in the same period a year ago. Homecare products increased 998% to $2.3 million, or 34% of total revenue, compared with $209,000, or 7% of revenue in the fourth quarter of 2009.

    Gross ProfitGross profit for the three months ended December 31, 2010 was $2.5 million, an increase of 119% from $1.1 million for the three months ended December 31, 2009. As a percentage of revenue, the Company's gross margin was 36.9% for the three months ended December 31, 2010 as compared to 38.2% for the same period in 2009. The decrease in gross margin was primarily due to winning a government bid with large procurement costs and lower than average gross margin.

    Income from OperationsOperating income for the three months ended December 31, 2010 totaled $1.5 million as compared to $764,000 for the three months ended December 31, 2009, an increase of 99% year-over-year. Operating expenses for the quarter totaled $969,000, compared with $460,000 for the same period a year ago. The increase in operating expenses was largely attributable to increases in marketing expense, including expansion of the Company's CEC network, and R&D investment, as well as expenses associated with Sarbanes-Oxley Section 404 compliance.

    Net IncomeNet income attributable to the Company for the three months ended December 31, 2010 was $1.5 million as compared to $602,000 for the three months ended December 31, 2009. Earnings per diluted share were $0.32, based on 4.7 million shares outstanding for the quarter, compared with diluted EPS of $0.20, based on 3.0 million shares outstanding for the fourth quarter of 2009. The increase in share count was due to the completion of the Company's initial public offering in April 2010.

    Full Year 2010 Financial ResultsRevenuesRevenues for the 12 months ended December 31, 2010 totaled $19.6 million as compared to $12.4 million in 2009, an increase of $7.2 million, or 58%. The Company's revenue growth was primarily attributable to increased sales of the Company's distributed medical devices and respiratory homecare products.

    Full-year sales of third party and self-branded medical devices totaled $15.1 million, or 77% of sales, compared with $11.3 million, or 91% of sales in 2009. Revenue from homecare solutions increased 302% to $4.5 million, or 23% of total sales, compared with $1.1 million, or 9% of sales in the year-ago period.

    Gross ProfitFull year gross profit in 2010 was $7.6 million, an increase of 57% over $4.9 million in 2009, primarily due to increased total revenue. As a percentage of revenue, the Company's gross margin was 38.9% for the year ended December 31, 2010, compared with 39.3% in 2009.

    Income from OperationsOperating income for the year ended December 31, 2010 totaled $5.1 million as compared to $3.4 million for the same period in 2009. The increase of $1.8 million, or 53%, was primarily due to the increase in revenues. Operating expenses in 2010 totaled $2.7 million, or 13.7% of sales in 2010, up 50% from $1.8 million, or 14.5% of sales in the same period a year ago.

    Net IncomeNet income attributable to the Company for the year ended December 31, 2010 was $4.5 million, or $1.09 per diluted share based on 4.2 million weighted average shares outstanding. This compares with $2.7 million, or $0.89 per diluted share based on 3.0 million shares outstanding in 2009. The increase in share count was due to the completion of the Company's initial public offering in April 2010.

    Liquidity and Capital ResourcesAs of December 31, 2010, Dehaier had $5.9 million in cash and cash equivalents, compared with $1.2 million as of December 31, 2009. The increase in cash balance was primarily due to the Company's initial public offering completed on April 22, 2010, which generated net proceeds of $9.9 million. Current assets totaled $33.4 million, with working capital of $22.6 million and shareholders' equity of $25.8 million at December 31, 2010, respectively.

    Conference Call and WebcastManagement will host a conference call to discuss these financial results on Monday, March 7, 2011 at 8:30 a.m. EST.

    To participate in the call please dial (877) 941-2321, or (480) 629-9714 for international calls, approximately 10 minutes prior to the scheduled start time. Interested parties can also listen via a live Internet webcast, which can be found via the Company's website at http://www.chinadhr.com.

    A replay of the call will be available approximately 2 hours after the conclusion of the live call, through March 21, 2011. The replay can be accessed by dialing 800-406-7325 in the U.S. and Canada, or 303-590-3030 internationally and entering the passcode: 4417849. In addition, a recording of the call will be available via the company's website at http://www.chinadhr.com for one year.

    About Dehaier Medical Systems Ltd.Dehaier Medical Systems is an emerging leader in the development, assembly, marketing and sale of medical products in China, including respiratory and oxygen homecare medical products. The company develops and assembles its own branded medical devices and homecare medical products from third-party components. The company also distributes products designed and manufactured by other companies, including medical devices from IMD (Italy), Welch Allyn (USA), HEYER (Germany), Timesco (UK), ResMed (Australia), and JMS (Japan). Dehaier's technology is based on two patents, six pending patents, and proprietary technology. More information may be found at http://www.chinadhr.com.

    Forward-looking StatementsThis news release contains forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements that are other than statements of historical facts. These statements are subject to uncertainties and risks including, but not limited to, product and service demand and acceptance, changes in technology, economic conditions, the impact of competition and pricing, government regulation, and other risks contained in reports filed by the company with the Securities and Exchange Commission. All such forward-looking statements, whether written or oral, and whether made by or on behalf of the company, are expressly qualified by the cautionary statements and any other cautionary statements which may accompany the forward-looking statements. In addition, the company disclaims any obligation to update any forward-looking statements to reflect events or circumstances after the date hereof.Contact UsIn the US:The Piacente Group, Inc. Investor Relations Brandi Floberg or Lee Roth(212) 481-2050dehaier@tpg-ir.comIn China:The Piacente Group, Inc. Investor RelationsWendy Sun+86 10-6590-7991dehaier@tpg-ir.comDehaier Medical Systems LimitedRita LiuCFO+86 10-8844-5026liuz@dehaier.com.cnAnan LiuInvestor Relations Manager+86 10-5166-0080 ext 169liuanan@dehaier.com.cnDEHAIERMEDICAL SYSTEMS LIMITED AND AFFILIATECONSOLIDATED BALANCE SHEETSDecember 31, 20102009US$US$ASSETSCURRENT ASSETS:Cash and cash equivalents

    5,923,3861,151,721Accounts receivable
    -less allowance for doubtful accounts of $ 87,555 and $102,939

    9,112,0776,891,291Other receivables

    3,164,4231,499,111Prepayment and other current assets

    5,300,8251,691,387Inventories, net

    6,374,3632,326,126Total Current Assets 29,875,07413,559,636Property and equipment, net

    3,488,9472,862,625Tax receivable

    3,518,9191,362,372Total Assets 36,882,94017,784,633LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES:Short-term borrowings

    1,514,6201,464,770Accounts payable  

    29,31893,770Advances from customers

    269,189174,253Accrued expenses and other current liabilities

    330,601336,412Tax payable

    8,327,7084,993,387Warranty obligation

    301,464178,755Warrants liability

    318,109-Due to officer

    2,3583,861Total Current Liabilities 11,093,3677,245,208Commitments and ContingencyShareholders' equity ----Common stock, $0.002731 par value, 18,307,038 shares authorized, 4,500,000 and 3,000,000 shares issued and outstanding at December 31, 2010 and 2009, respectively

    12,2908,193Additional paid in capital

    13,137,0853,196,974Retained earnings

    9,838,4525,298,742Accumulated other comprehensive income

    1,474,455773,127Total Dehaier Medical Systems Limited shareholders' equity 24,462,2829,277,036Non-controlling interest

    1,327,2911,262,389Total shareholders' equity 25,789,57310,539,425Total liabilities and shareholders' equity 36,882,94017,784,633December 31, 20102009US$US$ASSETSCURRENT ASSETS:Cash and cash equivalents

    5,923,3861,151,721Accounts receivable
    -less allowance for doubtful accounts of $ 87,555 and $102,939

    9,112,0776,891,291Other receivables

    3,164,4231,499,111Prepayment and other current assets

    5,300,8251,691,387Inventories, net

    6,374,3632,326,126Tax receivable

    3,518,9191,362,372Total Current Assets 33,393,99314,922,008Property and equipment, net

    3,488,9472,862,625Total Assets 36,882,94017,784,633LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES:Short-term borrowings

    1,514,6201,464,770Accounts payable  

    29,31893,770Advances from customers

    269,189174,253Accrued expenses and other current liabilities

    330,601336,412Tax payable

    8,327,7084,993,387Warranty obligation

    301,464178,755Due to officer

    2,3583,861Total Current Liabilities 10,775,2587,245,208OTHER LIABILITIESWarrants liability

    318,109-Total Liabilities11,093,3677,245,208Commitments and ContingencyShareholders' equity Common stock, $0.002731 par value, 18,307,038 shares authorized, 4,500,000 and 3,000,000 shares issued and outstanding at December 31, 2010 and 2009, respectively

    12,2908,193Additional paid in capital

    13,137,0853,196,974Retained earnings

    9,838,4525,298,742Accumulated other comprehensive income

    1,474,455773,127Total Dehaier Medical Systems Limited shareholders' equity 24,462,2829,277,036Non-controlling interest

    1,327,2911,262,389Total shareholders' equity 25,789,57310,539,425Total liabilities and shareholders' equity 36,882,94017,784,633DEHAIERMEDICAL SYSTEMS LIMITED AND AFFILIATECONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS For the year ended
    December 31, For the three months ended
    December 31, 2010 2009 2010 2009 US$US$US$US$Revenue 19,598,46012,369,9606,667,6912,947,500Costs of revenue (11,981,820)(7,510,718)(4,204,953)(1,822,366)Gross profit 7,616,6404,859,2422,462,7381,125,134Service income

    339,379402,85165,225104,815Service expenses

    (148,016)(119,455)(39,191)(6,389)General and administrative expense

    (1,257,520)(1,091,675)(381,680)(303,891)Selling expense

    (1,421,415)(700,175)(587,136)(155,705)Operating Income 5,129,0683,350,7881,519,956763,964Financial expenses ( including interest expense
    of $70,343, $85,665, $22,088 and $17,961)

    (125,764)(87,435)(27,353)(21,051)Other income

    455,950-455,950-Change in fair value of warrants liability

    (48,109)-(162,915)-Income before provision for income taxes and non-controlling interest  5,411,1453,263,3531,785,638742,913Provision for income tax

    (850,034)(531,461)(306,285)(121,299)Net income 4,561,1112,731,8921,479,353621,614Non-Controlling interest in income

    (21,401)(57,921)(6,840)(19,419)Net income attributable to Dehaier Medical Systems Limited 4,539,7102,673,9711,472,513602,195Earnings per share-Basic

    1.121.290.330.23-Diluted

    1.090.890.320.20Weighted average number of common shares used in computation-Basic

    4,043,8362,076,6084,500,0002,630,643-Diluted

    4,153,4383,000,0004,657,5003,000,000DEHAIERMEDICAL SYSTEMS LIMITED AND AFFILIATECONSOLIDATED STATEMENTS OF CASH FLOWSFor the years ended

    December 31,20102009US$US$Operating ActivitiesNet income4,561,1112,731,892Adjustments to reconcile net income to net cash provided by (used in) operating activitiesDepreciation and amortization365,336286,395Recovery of doubtful accounts(18,311)(45,588)(Recovery of) Provision for inventory obsolescence(5,756)52,989Change in fair value of warrants liability318,109-Gain on sale of equipment (3,894)-Provision for warranty reserve122,70920,690Changes in assets and liabilities: Increase in accounts receivable(2,202,475)(1,429,001)Decrease ( Increase ) in prepayments and other current assets(3,609,438)107,500   Increase in other receivables(1,665,312)(311,751)   Increase in inventories(4,042,481)(803,887)   Increase in tax receivable(2,156,547)(809,404)   (Decrease) Increase in accounts payable(64,452)19,450   (Decrease) Increase in advances from customers94,936(56,141)   (Decrease) Increase in accrued expenses and other current liabilities(5,811)85,573   Increase in tax payable3,334,3211,941,250Net cash provided by (used in ) operating activities(4,977,955)1,789,967Investing ActivitiesProceeds from sale of equipment10,342-Capital expenditures and other additions(887,541)(917,419)Proceeds from (advances to) related parties(1,503)2,892Net cash used in investing activities(878,702)(914,527)Financing ActivitiesNet proceeds from issuance of common stock9,944,207-Net cash provided by financing activities9,944,207-Effect of exchange rate fluctuations on cash and cash equivalents 684,115(6,322)Net increase in cash and cash equivalents4,771,665869,118Cash and cash equivalents at beginning of year1,151,721282,603Cash and cash equivalents at end of year5,923,3861,151,721Supplemental cash flow informationIncome tax paid24,81312,767Interest paid70,34385,665
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