CHANGCHUN, China and LOS ANGELES, Oct. 14 /PRNewswire-Asia/ -- China Yongxin Pharmaceuticals, Inc. , a leading manufacturer, distributor and retailer of pharmaceuticals in Northeastern China, today announced its unaudited financial results for the second quarter of 2009 which ended June 30, 2009.
Revenues for the second quarter of 2009 were essentially flat at approximately $14.6 million compared to the second quarter of 2008, with a marginal increase due to an increase in revenue from its retail drug stores offset by a decrease in volume from its pharmaceutical wholesale business. Revenues from retail drug stores were $6.0 million, compared to $5.8 million for the same period in 2008, which included a 10.9% increase for existing same store sales. A broader product portfolio, in addition to increased marketing activities, contributed to the growth. During the quarter, the Company launched one new chain drug store in Tianjin.
“We believe our business during the first half of 2009 was impacted by customers waiting for specifics on the new healthcare reform plan. On August 18 the Chinese government issued China’s Essential Drug List (EDL) which included 307 commonly used pharmaceuticals. These will be subsidized by the government to provide easier access to all citizens. China Yongxin distributes 295 products included on this list and we believe our Company will benefit from the government’s efforts to boost domestic spending, in addition to the new healthcare reform which is gaining momentum,” commented Mr. Yongxin Liu, Chairman and Chief Executive Officer of China Yongxin. “We have added 12 high margin pharmaceutical products with exclusive distribution rights in Jilin province in the first half of 2009 and we expect this to drive market share gains and growth during the balance of this year.”
Cost of goods sold for the second quarter was approximately $11.9 million, yielding a gross profit of $2.7 million and gross margins of 18.6%, compared to $2.9 million in gross profit and a gross margin of 19.6% during the second quarter of 2008. The slight decrease in gross margins was primarily attributable to the slight increase in cost of goods sold.
Operating expenses for the three months ended June 30, 2009, were $1.5 million, compared to approximately $1.6 million in the same period in 2008. Selling expenses for the period decreased marginally to $0.2 million from the year ago period. The Company prudently managed utilities usage, transportation costs and sales people to effectively reduce selling expenses and maintain gross profit. General and administration expenses for the three months ended June 30, 2009 increased approximately 30.7% to $0.8 million, compared to $0.6 million in the same year ago period, with the majority of the increase related to auditing expenses.
Operating income for the second quarter of 2009 totaled approximately $1.2 million, a 9.0% decrease from the $1.3 million reported for the second quarter of 2008. Operating margins were 8.1% and 9.0% for the second quarter of 2009 and 2008, respectively.
For the second quarter of 2009, net income was approximately $1.0 million, a 44.8% increase from the $0.7 million reported during the second quarter of 2008. The increase was primarily related to the absence of a $0.2 million interest expense which occurred during the second quarter of 2008. Diluted earnings per share were $0.03 compared to $0.02 for the second quarter of 2009 and 2008 respectively, based upon 32.0 million and 32.1 million shares. The income tax was $0.5 million compared to $0.6 million in the second quarter of 2008 with an effective tax rate of 28.2% in the second quarter.
Six-Month Results
For the six months ended June 30, 2009, revenues decreased approximately 19.4% to $23.8 million compared to the same period in 2008. Gross profit was $4.9 million for the first six months of 2009, representing a decrease of 8.1% from the first six months of 2008. Gross margins were 20.8% for the first six months of 2009 compared to 18.2% for the same period in 2008.
Income from operations was $1.8 million for the first six months of 2009, representing a decrease of 27.6% over the first six months of 2008. Operating margins were 7.7% for the first six months of 2009 compared to 8.6% for the first six months of 2008. Net income decreased marginally to $1.5 million for the six months ended June 30, 2009 compared to the same period in 2008. Diluted earnings per share were $0.05 compared to $0.05 for the first six months of fiscal 2009 and 2008 respectively, based upon 32.0 million and 32.1 million shares.
Balance Sheet and Cash Flow
Cash and cash equivalents totaled $1.6 million on June 30, 2009, compared to $0.6 million on December 31, 2008, while the Company maintained a short-term loan payable of $2.2 million. Accounts receivable grew 17.2% to $7.1 million from $6.0 million on December 31, 2008. Days sales outstanding stood at 43 compared to 37 in the second quarter of last year. The Company had a current ratio of 1.8 to 1 on June 30, 2009 and stockholders’ equity of $19.7 million. For the first six months of 2009, the Company generated $1.0 million in cash from operations versus $2.0 million for the same period in 2008.
Business Development
On March 9, 2009, China Yongxin formally launched its Electronic Diagnosis System. To date the Company has installed 20 systems in Yongxin chain drugstores, all located in Changchun, Jilin. The System enables its customers to remotely receive a medical diagnosis and conveniently purchase prescription drugs at the store. The Company is always working to improve the level of service it offers, and leverage its large and growing base of “Member” customers who are entitled to discounts, rebates and special offers. This strategy, in addition to selling a broader array of higher margin health, beauty and cosmetics products, has increased customer retention and improved revenue and profitability in this business segment.
Since the beginning of 2009, China Yongxin has signed 12 exclusive distribution agreements for Jilin province with several well-known Pharmaceutical Manufacturers including Tianjin Smith Kline & French Laboratones Ltd. As of June 30, 2009, China Yongxin has approximately 216 drugs with exclusive distribution rights in Jilin province. This portfolio is a key component of its long-term growth strategy to leverage the large distribution center and channels established to drive incremental future revenue growth. These agreements are typically one year in duration and renewable.
China Yongxin recently secured loans from local banks and rural credit unions totaling $2.9 million with terms ranging from 1 to 3 years and are renewable after the initial terms. These funds will be utilized to provide working capital for the Company’s distribution segment as it capitalizes on new organic growth opportunities supported by the government’s new healthcare initiative.
“With enhanced government support, specifically the commencement of China’s $126 billion health care reform plan focused on providing a broader spectrum of healthcare services and pharmaceutical products to all Chinese residents, we are confident that our modernized logistic center and distribution channels, broad customer base of chain drugstores, extensive product portfolio, and committed management team will enable us to resume our growth momentum and capitalize on a long-term, secular growth opportunity,” concluded Mr. Liu.
About China Yongxin Pharmaceuticals, Inc.
China Yongxin Pharmaceuticals, Inc. was founded in 1993 as the Changchun Yongxin Dirui Medical Co., Ltd. (Yongxin), a wholesale drug distributor. Its products include Chinese traditional medicines, pharmaceutical preparations, natural health products, health food, cosmetics, and medical equipment. It began retail operations in 2004, and in 2005, it gained franchise rights from one of the world’s largest drug chains for China’s Jilin Province. By the end of 2007, the Company had become one of the fastest growing pharmaceutical companies in China through its retail chain of 93 drug outlets as well as wholesale distribution and manufacturing operations in Northeastern China. For more information about China Yongxin Pharmaceuticals, please visit http://www.yongxinchina.com .
Forward-Looking Statements
This news release contains certain “forward-looking statements.” Forward-looking statements are based on current expectations and assumptions and are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, and many of which are beyond the Company’s control. The forward-looking statements are also identified through the use of words “believe,” enable,” “may,” “will,” “could,” “intends,” “estimate,” “anticipate,” “plan,” “predict” “probable,” “potential,” “possible,” “should,” “continue,” and other words of similar meaning. Actual results could differ materially from these forward-looking statements as a result of a number of risk factors detailed in the Company’s periodic reports filed with the SEC. Given these risks and uncertainties, investors are cautioned not to place undue reliance on such forward-looking statements and no assurances can be given that such statements will be achieved. China Yongxin Pharmaceutical Inc. does not assume any duty to publicly update or revise the material contained herein.
SOURCE China Yongxin Pharmaceuticals, Inc.
CONTACT: Mr. Sam Liu, COO of China Yongxin Pharmaceuticals, Inc.,
+1-626-581-9098, info@yongxinchina.com; or Investors, Matthew Hayden of HC
International, +1-561-245-5155, matt.hayden@hcinternational.net
Web site: http://www.yongxinchina.com/
