LOS ANGELES, Aug. 14 /Xinhua-PRNewswire/ -- China Pharma Holdings, Inc. ("China Pharma") today announced its operating results for the second quarter ended June 30, 2006.
Financial results in this press release for the three- and six-month periods ended June 30, 2005 reflect results of the China Pharma's predecessor company, Onny Investment Limited ("Onny"). On June 16, 2005, Onny acquired Hainan Helpson Medical & Biotechnology Co., Ltd. ("Helpson"), which is the main operating unit of China Pharma. Thus, operating results for 2005 do not include Helpson's full results for the same period, and are therefore not directly comparable to Q2 2006 results. Therefore, 2005 pro forma results and a 2005 pro forma consolidated statement of operations are provided for year-over-year comparison purposes that may be useful to investors in evaluating the Company's business performance. Such pro forma comparisons are not intended to reflect U.S. GAAP and are provided for informational purposes only.
Total revenues for the second quarter of 2006 were $4.0 million, up from $0.5 million in the second quarter of 2005, but down by 16% from the $4.7 million reported in the first quarter of 2006. On a pro forma basis, Q2 total revenues increased by 39% compared to $2.9 million for the same period in 2005. Operating income for the quarter was $1.4 million as compared to $0.1 million for the same period last year, and $1.9 million in the first quarter of 2006. Net income for the second quarter of 2006 was $1.8 million, or $0.05 per share, up from $1.6 million in the first quarter, or $0.05 per share. Net income for the same period last year was $0.1 million, or $1.23 per share. Pro forma net income for Q2 2005 was $0.7 million, or $8.12 per share. Second quarter 2006 net income benefited from a bad debt recovery of $0.6 million. Earnings per share in fiscal 2006 reflect an increase in China Pharma's average weighted shares outstanding from 85,112 shares in the second quarter of 2005 to 34.7 million shares in the second quarter of 2006.
Commenting on the second quarter results, China Pharma's President and CEO, Zhi-Lin Li, said "We are very pleased to report positive results for the second quarter of 2006, with very dramatic year-over-year top-line growth combined with excellent profitability. Given the seasonal nature of demand for many of our drugs second quarter sales were below very strong prior quarter, as expected. Sales growth was driven by our recent successful product launches such as Hepatocyte Growth-promoting Factor, PusenOK, and Gastrodin. We believe that results for the first half of 2006 confirm the strength of our low cost, high margin business model and are committed to bring a growing portfolio of drugs to market that address significant patient populations in China."
Gross profit for the quarter was $1.9 million, compared to $2.2 million last quarter and $0.2 million in the same period in 2005. Gross margin for the second quarter was unchanged at 47% compared to last quarter, and up from 34% in the second quarter in 2005. On a pro forma basis, Q2 2005 gross profit was $1.0 million, or 35% of sales.
Selling expenses in the second quarter of 2006 were $0.08 million, compared to $0.09 million for the first quarter and $0.004 million for the same period last year. General and administrative expenses for Q2 of 2006 were $0.4 million, up from $0.3 million last quarter, and $0.02 million in Q2 of 2005. The increase in general and administrative expenses was driven mainly by costs associated with being a public company, and investments made in approximately 50 new hires in the second quarter.
Six Months Results
Total revenues for the six months ended June 30, 2006 were $8.7 million, up from $0.5 million for the same period last year, and an increase of 50% from pro forma revenues of $5.8 million for the first half of 2005. Net income for the first half of 2006 was $3.4 million, versus $0.1 million for the first half of 2005, and up by 94% from pro forma net income of $1.8 million for the first half of 2005. Gross profit and gross margin were $4.1 million and 47%, respectively for the first half of 2006, compared to $0.2 million and 34% for the same period in 2005. On a pro forma basis, gross profit was $2.2 million, or 38% of sales, for the first half of 2005. Operating income was $3.2 million, compared to $0.1 million last year. Earnings per share were $0.10, versus $1.23 for the first six months in 2005.
Financial Condition
As of June 30, 2006, the Company had cash and cash equivalents of $0.2 million, versus $0.5 million as of December 31, 2005. Working capital totaled $12.3 million as of June 30, 2006, reflecting a current ratio of 2.9 to 1. The Company recently entered into a new $2 million dollar credit facility which will provide the flexibility to finance its anticipated growth.
Days sales outstanding, or DSOs, were 209 for the second quarter of 2006. Total debt was $6.3 million and total shareholders' equity totaled $15.2 million. Ms. Li added, "While our receivables days are within industry norms in China for drugs distributed through hospitals, we hope to improve our working capital efficiency in the second half of 2006. We are also very pleased with the results of recent improvements to our controls and sales incentives, which resulted in $628,000 in bad debt recovery during the second quarter."
Operating cash flow was positive in the second quarter of 2006, at $0.4 million.
Business Outlook
Ms. Li added, "For the second half of the year, we expect continued growth driven by our successful new product launches, expansion of our sales and distribution network, and what is typically seasonally stronger ordering patterns. With our recent product approvals for Ozagrel, Propylgallate, and Alginic Sodium Diester, we are maintaining our focus on large and growing patient populations, like those for stroke, heart attack, and hepatitis, which should translate into greater market share."
For fiscal 2006, China Pharma expects that revenues will be approximately $20 million and net income will be approximately $8 million. Ms. Li commented, "Looking ahead, our strategy is to continue to build on our prescription drug pipeline as well as our over-the-counter and traditional Chinese medicine products."
Conference Call
China Pharma will host a conference call on August 15, 2006 at 6:00 a.m. PT (9:00 a.m. ET) to discuss results for the second quarter of 2006. Joining Ms. Zhilin Li, President and CEO of China Pharma, will be Mr. Xinhua Wu, Chief Financial Officer, and Mr. Donald Xu, Vice President, Strategic Planning and Business Development. To participate in the conference call, please dial the following number five to ten minutes prior to the scheduled conference call time: (888) 419-5570. International callers should dial (617) 896-9871. The conference passcode is 84660865. This conference call will also be broadcast live over the Internet and can be accessed by all interested parties by clicking on http://phx.corporate-ir.net/playerlink.zhtml?c=145098&s=wm&e=1368031. Please access the link at least fifteen minutes prior to the start of the call to register, download, and install any necessary audio software. For those unable to participate during the live broadcast, a 90-day replay will be available shortly after the call by accessing the same link. If you are unable to participate in the call at this time, a replay will be available on Tuesday, August 15 at 10:30 a.m. ET, through Tuesday, August 22 at 10:30 a.m. ET. To access the replay, dial (888) 286-8010. International callers should dial (617) 801-6888. The conference passcode is 84660865.
Comparative Period Results
Onny Investment Limited ("Onny") was incorporated in the British Virgin Islands on January 12, 2005. On June 16, 2005, Onny acquired all of the outstanding shares of Hainan Helpson Medical & Biotechnology Co., Ltd ("Helpson"). On October 19, 2005, Onny was reorganized as a wholly-owned subsidiary of China Pharma. The reorganization was accomplished through a share exchange between Onny and China Pharma, plus China Pharma's commitment to issue additional shares upon amending its articles of incorporation. The reorganization of Onny into China Pharma was recognized as a stock split of the common stock of Onny and the effective issuance by Onny of approximately 2.5 million shares of common stock to the China Pharma's pre-reorganization shareholders and the assumption of certain liabilities. The reverse acquisition of the Company was recognized as a non-monetary exchange. China Pharma was formerly known as TS Electronics, Inc. On May 4, 2006, TS Electronics, Inc. filed an 8-K with the Securities and Exchange Commission, reporting its name change to "China Pharma Holdings, Inc." For more information, refer to the company's filings with the Securities and Exchange Commission.
Reconciliation to GAAP
In addition to GAAP results included in this press release, the Company has provided certain information that is not calculated according to GAAP ("non-GAAP"). Management believes these non-GAAP measures are useful in evaluating operating performance and/or are regularly used by security analysts and institutional investors and other interested parties in the evaluation of the Company. Non-GAAP measures are not purported to be a substitute for any GAAP measure and as calculated, may not be comparable to other similarly titled measures of the performance of other companies.
For a reconciliation of non-GAAP measures to the closest GAAP measure and for share amounts used to derive earnings per share, please see the financial schedules that accompany this release.
About China Pharma Holdings, Inc.
China Pharma Holdings, Inc. develops, manufactures, and markets generic and brand bio-pharmaceutical products in China that treat a wide range of conditions, including infections, hepatitis, vascular, CNS and other prevailing diseases. Helpson Bio-pharmaceutical Co., Ltd (Helpson), a specialty bio-pharmaceutical company headquartered in Haikou City, Hainan province in China, is a wholly owned subsidiary of China Pharma Holdings.
Safe Harbor Statement 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 unanticipated changes in product demand, increased competition, failure to obtain or maintain intellectual property protection, downturns in the Chinese economy, uncompetitive levels of research and development, failure to obtain regulatory approvals, and other information detailed from time to time in the Company's filings and future filings with the United States Securities and Exchange Commission.
CHINA PHARMA HOLDINGS, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) For the period from January 12, 2005 (Date of For the three For the six Inception) months ended months ended through June 30, June 30, June 30, 2006 2005 2006 2005 Revenue $3,975,569 $492,530 $8,709,334 $492,530 Cost of revenue 2,105,082 324,994 4,631,549 324,994 Gross profit 1,870,487 167,536 4,077,785 167,536 Operating expenses: Selling expenses 82,133 4,490 170,161 4,490 General and administrative 436,340 20,078 680,321 20,078 Total operating expenses 518,473 24,568 850,482 24,568 Income from operations 1,352,014 142,968 3,227,303 142,968 Non-operating income (expenses): Interest income 87 - 182 - Bad debt recovery 627,861 - 626,580 - Interest expense (24,103) (28,895) (47,898) (28,895) Other income (expense) 120,803 - 120,461 - Total non-operating income (expense) 724,648 (28,895) 699,325 (28,895) Income before taxes 2,076,662 114,073 3,926,628 114,073 Income tax expense (246,200) (9,521) (525,022) (9,521) Net income $1,830,462 $104,552 $3,401,606 $104,552 Comprehensive income - foreign currency translation adjustments 62,557 - 221,558 - Comprehensive income $1,893,019 $104,552 $3,623,164 $104,552 Basic and diluted earnings per common share $0.05 $1.23 $0.10 $1.23 Weighted-average common shares outstanding 34,723,056 85,112 34,723,056 85,112
See the 10QSB filed August 14, 2006 for accompanying notes to the unaudited condensed consolidated financial statements.
CHINA PHARMA HOLDINGS, INC. PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) Three Months ended Six Months ended June 30, 2005 June 30, 2005 Revenues $2,868,677 $5,816,888 Cost of revenues 1,862,187 3,580,530 Gross profit 1,006,490 2,236,358 Operating expenses Selling/other operating expenses 23,051 42,920 General and administrative 289,066 364,272 Total operating expenses 312,117 407,192 Income from operations 694,373 1,829,166 Non-operating income (expenses): Interest income 138 396 Interest expense (145,002) (185,185) Other income (expense) 215,942 215,841 Total non-operating income (expense) 71,078 31,052 Income before taxes 765,451 1,860,218 Income/sales tax expense (74,165) (109,627) Net income 691,286 1,750,591 Basic and diluted earnings per common share 8.12 0.05 Weighted-average common shares outstanding 85,112 34,723,056
This unaudited pro forma condensed consolidated statement of operations for the six months ended June 30, 2005 has been prepared to present the effects of the acquisition of Helpson and related transactions as though they had occurred on January 1, 2005.
CHINA PHARMA HOLDINGS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS June 30, December 31, 2006 2005 (unaudited) ASSETS Current Assets: Cash and cash equivalents $195,224 $461,220 Trade accounts receivable, less allowance for doubtful accounts of $826,146 and $1,412,353, respectively 9,119,327 5,709,762 Other non-trade receivables, less allowance for doubtful accounts of $79,341 and $111,029, respectively 486,691 385,957 Advances to suppliers 1,978,947 2,123,729 Inventory 6,782,480 5,785,196 Total Current Assets 18,562,669 14,465,864 Non-current Assets: Property and equipment, net 2,806,435 2,808,342 Intangible assets, net 76,604 96,406 Deferred tax assets 107,063 130,458 Total Non-current Assets 2,990,102 3,035,206 TOTAL ASSETS $21,552,771 $17,501,070 LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Trade accounts payable $1,213,611 $679,104 Accrued expenses 105,386 15,625 Taxes payable 447,173 565,236 Other accounts payable 217,880 250,317 Advances from customers 68,921 50,755 Short-term notes payable 4,256,158 - Dividends payable - 4,209,889 Total Current Liabilities 6,309,129 5,770,926 Research and development commitments 31,225 30,966 Total Liabilities 6,340,354 5,801,892 Shareholders' Equity: Common stock, $0.001 par value, 60,000,000 shares authorized, 34,723,056 shares issued and outstanding 34,723 34,723 Additional paid-in capital 7,764,979 7,764,979 Accumulated other comprehensive income 211,558 99,926 Retained earnings 7,201,157 3,799,550 Total Shareholders' Equity 15,212,417 11,699,178 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $21,552,771 $17,501,070
See the 10QSB filed August 14, 2006 for accompanying notes to the unaudited condensed consolidated financial statements.
CHINA PHARMA HOLDINGS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) For the period For the six from January 12, 2005 months ended (Date of Inception) June 30, through June 30, 2006 2005 Cash Flows from Operating Activities: Net income $3,401,606 $104,552 Depreciation and amortization 193,065 7,289 Loss on disposal of property and equipment - 19,934 Accretion of discount on notes payable - 12,870 Deferred tax assets 24,387 - Changes in assets and liabilities: Accounts receivable (3,348,145) (472,696) Other receivables (97,112) (453,974) Advances to suppliers 161,868 807,785 Inventory (945,068) (529,801) Trade accounts payable 526,675 536,973 Accrued expenses 84,810 9,389 Taxes payable (122,285) (21,547) Other accounts payable - (213,403) Advances from customers 17,670 95,902 Short-term notes payable 31,653 - Net Cash Used in Operating Activities (70,876) (96,727) Cash Flows from Investing Activities: Capital expenditures, net of dispositions (144,790) (3,565) Net cash received in purchase of Subsidiary - 129,073 Proceeds from note receivable - 11,083 Purchase of intangible assets (2,477) - Net Cash (Used) Provided by Investing Activities (147,267) 136,591 Cash Flows from Financing Activities: Proceeds from issuance of common stock - 1 Net Cash Proceeds from Financing Activities - 1 Effect of Exchange Rate Changes in Cash (47,853) - Net Change in Cash (265,996) 39,865 Cash and Cash Equivalents at Beginning of Period 461,220 - Cash and Cash Equivalents at End of Period $195,224 $39,865
See the 10QSB filed August 14, 2006 for accompanying notes to the unaudited condensed consolidated financial statements.
China Pharma Holdings, Inc.
CONTACT: Crocker Coulson, President of CCG Elite, +1-310-231-8600 ext 103,crocker.coulson@ccgir.com, for China Pharma Holdings, Inc.; or Donald Xu,VP, Strategic Planning, +1-858-776-8880, dxu@chinapharmaholdings.com, ofChina Pharma Holdings, Inc.
