Weikang Bio-Technology Reports Second Quarter 2010 Financial Results
HARBIN, China, Aug. 16 /PRNewswire-Asia-FirstCall/ -- Weikang Bio-Technology Group Co., Inc. (OTC Bulletin Board: WKBT) ("Weikang" or the "Company"), a leading developer, manufacturer and marketer of Traditional Chinese Medicine (TCM), Western prescription and OTC pharmaceuticals and other health and nutritional products in the People's Republic of China, today announced its fiscal 2010 second quarter results for period ended June 30, 2010.
Second Quarter Highlights
-- Revenue was $10.5 million
-- Gross profit was $6.1 million with gross margin of 58.3%
-- Net Income was $1.9 million with fully diluted earnings per share of
$0.07
-- Adjusting for non-cash, stock-based compensation of $0.9 million, non-
GAAP net income was $2.8 million and non-GAAP fully diluted earnings
per share was $0.10
"During the second quarter we experienced severely harsh weather which disrupted business operations and impacted our sales. In early May, 2010, the southern and central region of China experienced an unusual amount of heavy rainfall resulting in extreme flooding and high humidity. This extreme weather caused disruption to transportation in the region which in turn prompted a portion of our sales to be postponed," commented Dr. Ying Wang, Chairman & CEO of Weikang Bio-Technology Group Co., Inc. "However, we are pleased to note that the majority of the problems caused by the extreme weather have been resolved and with our strong product offering as well as new therapeutics to be launched this year, we are looking forward to return to healthy revenue and net income growth for the rest of 2010."
Revenue for the second quarter of 2010 was $10.5 million, down 20.5% from revenue of $13.2 million in the second quarter of 2009. Revenue from Tianfang was $7.0 million, or 66% of total sales, and revenue from WeiKang was $3.5 million, or 34% of total sales. Revenue for the quarter was adversely impacted due to the harsh rainfall in southern and central China which caused extreme flooding as well as an unusually high level of humidity in Harbin which impacted distribution as well as operations. Both conditions have improved considerably and operations have resumed to their regular production level.
Gross profit for the quarter decreased 13.7% to $6.1 million from 7.1 million in the same period of 2009. Gross margin for the second quarter of 2010 was 58.3% compared to 53.7% in the second quarter of 2009. The increase in gross margin over the previous year period is the result of an increase of the percent of total sales of the Company's higher margin products.
Operating expenses were $3.3 million or 31.1% of sales, compared to $3.0 million or 22.5% of sales in the second quarter of 2009. The increase in operating expenses was attributable to an increase in transportation expense due to the disruption in transportation as a result of the harsh weather conditions. The Company also recognized $900,485 in non-cash, stock-based compensation expenses that it did not incurred in the comparable period a year ago. Adjusting for the non-cash, stock-based compensation, operating expenses were $2.4 million or 22.5% of total sales. The non-cash, stock-based compensation relates to the private placement done on January 20, 2010 and associated investor relation expense as well as compensation to four Directors and a key employee. The Company has recorded $2.6 million as total deferred compensation.
Operating income for the second quarter was $2.9 million, down 30.8% from $4.1 million in the second quarter of 2009. Operating margin was 27.2% compared to 31.3% in the same period a year ago. Adjusting for the previously mentioned non-cash, stock-based compensation, non-GAAP operating income was $3.8 million in the second quarter of 2010 and operating margin was 35.8%.
Net income was $1.9 million in the second quarter of 2010, down 42.5% from $3.3 million in net income from the same period a year ago. Fully diluted earnings per share were $0.07 compared to fully diluted earnings per share of $0.13 in the second quarter of 2009. Excluding the non-cash, stock-based compensation, non-GAAP net income and fully diluted earnings per share for the second quarter of 2010 was $2.8 million and $0.10, respectively.
Financial Condition
As of June 30, 2010, Weikang Bio-Technology Group Co., Inc. had $20.5 million in cash and cash equivalents, $20.3 million in working capital and $13.4 million in total liabilities. Net cash provided by operating activities for the first six months of 2010 was $7.2 million. Shareholders' equity stood at $34.2 million, up from $23.4 million at year end 2009.
Six Months Financial Results
Revenue for the first six months of fiscal 2010 was $24.5 million, up 5% from $23.3 million in the same period a year ago. Gross profit was $14.4 million, up 13.3% from gross profit of $12.7 million for the first six months of fiscal 2009. Gross margin was 59.0% compared to 54.7% for the comparable period a year ago. Operating income was $9.2 million, up slightly from $9.1 million in the first six months of fiscal 2009. Adjusting for $1.9 million in non-cash, stock-based compensation, non-GAAP operating income was $11.1 million. Net income was $6.5 million, down 10.0% from $7.2 million in the same period a year ago. Fully diluted earnings per share were $0.23 compared to $0.28 in the first six months of fiscal 2009. Excluding the non-cash, stock-based compensation, non-GAAP net income and fully diluted earnings per share for the first six months of 2010 was $8.3 million and $0.30.
Recent Events
Mr. Baolin Sun was appointed as Weikang Bio-Technologly's new Chief Financial Officer as of July 23rd, 2010. Mr. Sun has more than twenty years experience in finance and accounting and obtained his Bachelor degree in Finance and Economics from Dongbei University of Finance and Economics.
Business Outlook
Weikang Bio-Technology intends to increase its sales by expanding its product offering as well as offering consumers value packages by bundling its therapeutics. At the end of August, 2010, the Company intends to launch a new value-add bundled package of its Rongrun Kidney Boost Tonic combined with newly launched therapeutics: Perilla Seed Soft Capsule, Forest Frog Oil Soft Capsule and Yangshen Pill. In the fourth quarter of 2010, Weikang Bio-Technology plans to launch two additional therapeutics, Sha Bai Shuanghuai Soft Capsules and Gouqi Xi Pu Soft Capsules which have the potential to add up to approximately $5.7 million in revenue and up to approximately $2.2 million in net income combined on an annual basis when it reaches full production.
"While the second quarter of 2010 was off due to events outside of managements' control, we are very positive about our outlook for the rest of 2010 as we have several exciting new products that we plan to launch by the end of the year," Mr. Wang continued. "Moreover, we believe our long-term growth opportunities are strong as we remain committed to expanding our distribution network and developing new high quality therapeutics. For example, a project that we believe has an exciting commercial potential is the development of licorice flavonoids for use in therapeutics which we anticipate has the possibility to contribute to over $13 million in annual sales when it reaches full production."
Conference Call
Weikang Bio-Technology Group Co., Inc. will host a conference call on Tuesday, August 17, 2010 at 9:00 a.m. Eastern Time to discuss fiscal 2010 second quarter results. To participate in the live conference call, please dial the following number fifteen minutes prior to the scheduled conference call time: 888-482-0024. International callers should dial 617-801-9702. When prompted by the operator, mention conference passcode 64593584.
If you are unable to participate in the call at this time, a replay will be available for 14 days starting on Tuesday, August 17, 2010 at 10:30 a.m. Eastern Time. To access the replay, dial 888-286-8010 and enter the passcode 30290121. International callers should dial 617-801-6888 and enter the same passcode.
This conference call will be broadcast live over the Internet and can be accessed by all interested parties by clicking on http://weikangbio.com . 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.
About Weikang Bio-Technology Group Co., Inc.
Weikang Bio-Technology Group Co., Inc. is principally engaged in developing, manufacturing and distributing Traditional Chinese Medicine (TCM), and health and nutritional supplements in China, in compliance with requisite Chinese licenses and approvals. The Company is also expanding its business scope to develop, manufacture and distribute Chinese herbal extract products and GMP certified western prescription and OTC pharmaceuticals through its acquisition of Tianfang. For more information, please visit http://www.weikangbio.com .
Use of Non-GAAP Financial Measures
To supplement Weikang Bio-Technology Group Co. condensed consolidated financial statements presented on a GAAP basis, Weikang is providing certain income statement information that is not calculated according to GAAP. Weikang believes that its non-GAAP disclosures are useful in evaluating its operating results as this information supplies the user with another view of the matching of costs and expenses. A reconciliation of the adjustments to GAAP results for the three and six month periods ended June 30, 2010 is included below. The non-GAAP information presented is supplemental and is not purported to be a substitute for information prepared in accordance with GAAP.
Non-GAAP financial results for the three and six month periods ended June 30, 2010 discussed in this release reflect operating results excluding the impact of the non-cash, stock-based compensation recognized under general and administrative expenses in connection to deferred compensation and associated investor relation expense related to its private placement financing in January 2010 as well as compensation to four Directors and a key employee.
Safe Harbor Statement
Certain statements in this press release and oral statements made by Weikang Bio-Technology Group Co., Inc. on its conference call in relation to this release, constitute forward-looking statements for purposes of the safe harbor provisions under The Private Securities Litigation Reform Act of 1995. These forward-looking statements are often identified by the use of forward-looking terminology such as "believes," "expects" or similar expressions, involve known and unknown risks and uncertainties. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, they do involve assumptions, risks and uncertainties, and these expectations may prove to be incorrect. You should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including those discussed in the Company's periodic reports that are filed with the Securities and Exchange Commission and available on its website (http://www.sec.gov). All forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these factors. Other than as required under the securities laws, the Company does not assume a duty to update these forward-looking statements.
--FINANCIAL TABLES FOLLOW--
WEIKANG BIO-TECHNOLOGY GROUP CO, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
30-Jun-10 31-Dec-09
(Unaudited)
ASSETS
CURRENT ASSETS
Cash & cash equivalents $20,485,278 $11,380,019
Advances to suppliers
and other receivables 150,537 26,079
Inventory 1,045,905 285,395
Deferred tax asset 132,788 --
Total current assets 21,814,508 11,691,493
NONCURRENT ASSETS
Property and equipment, net 9,768,826 10,162,946
Construction in progress 446,823 --
Intangible assets 15,500,960 15,558,731
Total noncurrent assets 25,716,609 25,721,677
TOTAL ASSETS $47,531,117 $37,413,170
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $13,669 $12,668
Unearned revenue -- 11,716
Taxes payable 1,522,402 2,247,410
Due to related party 25,034 --
Total current liabilities 1,561,105 2,271,794
ADVANCE FORM OFFICER 650,000 650,000
OTHER PAYABLES 7,720,321 7,620,321
CONTINGENCIES
DEFERRED TAX LIABILITY 3,421,953 3,450,005
STOCKHOLDERS' EQUITY
Common stock, $.00001 par value;
authorized shares 100,000,000;
issued and outstanding shares
28,024,388 and 25,486,800 at June
30, 2010 and December 31, 2009,
respectively 280 255
Additional paid in capital 4,967,720 139,245
Deferred compensation (753,306) --
Statutory reserve 1,404,276 1,069,507
Accumulated other comprehensive
income 1,067,168 844,526
Retained earnings 27,491,600 21,367,517
Total stockholders' equity 34,177,738 23,421,050
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $47,531,117 $37,413,170
WEIKANG BIO-TECHNOLOGY GROUP CO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
SIX MONTHS ENDED JUNE 30, THREE MONTHS ENDED JUNE 30,
2010 2009 2010 2009
Net sales $24,452,199 $23,306,974 $10,493,659 $13,195,767
Cost of goods sold 10,014,363 10,564,767 4,374,061 6,103,182
Gross profit 14,437,836 12,742,207 6,119,598 7,092,585
Operating expenses
Selling expenses 1,794,301 918,214 1,103,042 485,371
General and
administrative 2,617,383 747,756 1,427,532 541,287
Research and
development 802,907 1,937,928 732,579 1,937,928
Total operating
expenses 5,214,591 3,603,898 3,263,153 2,964,586
Income from operations 9,223,245 9,138,309 2,856,445 4,127,999
Non-operating income
(expenses)
Interest income 36,190 1,616 19,946 1,371
Other income 194 521,913 1 265,635
Other (expenses) (1,907) (35,433) (1,224) (22,464)
Total non-operating
income, net 34,477 488,096 18,723 244,542
Income before income tax 9,257,722 9,626,405 2,875,168 4,372,541
Income tax 2,798,867 2,438,475 957,758 1,038,216
Net income 6,458,855 7,187,930 1,917,410 3,334,325
Basic and diluted
weighted average
shares outstanding 27,692,734 25,268,474 28,021,751 25,306,723
Basic and diluted net
earnings per share $0.23 $0.28 $0.07 $0.13
WEIKANG BIO-TECHNOLOGY GROUP CO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF NON-GAAP INCOME
(Unaudited)
SIX MONTHS ENDED JUNE 30, THREE MONTHS ENDED JUNE 30,
2010 2009 2010 2009
Net sales $24,452,199 $23,306,974 $10,493,659 $13,195,767
Cost of goods sold 10,014,363 10,564,767 4,374,061 6,103,182
Gross profit 14,437,836 12,742,207 6,119,598 7,092,585
Operating expenses
Selling
expenses 1,794,301 918,214 1,103,042 485,371
General and
administrative 739,688 747,756 527,047 541,287
Research and
development 802,907 1,937,928 732,579 1,937,928
Total operating
expenses 3,336,896 3,603,898 2,362,668 2,964,586
Income from
operations 11,100,939 9,138,309 3,756,930 4,127,999
Non-operating income
(expenses)
Interest income 36,190 1,616 19,946 1,371
Other income 194 521,913 1 265,635
Other (expenses) (1,907) (35,433) (1,224) (22,464)
Total non-
operating income,
net 34,477 488,096 18,723 244,542
Income before income
tax 11,135,417 9,626,405 3,775,653 4,372,541
Income tax 2,798,867 2,438,475 957,758 1,038,216
Net income 8,336,550 7,187,930 2,817,895 3,334,325
Basic and diluted
weighted average
shares outstanding 27,692,734 25,268,474 28,021,751 25,306,723
Basic and diluted
net earnings per
share $0.30 $0.28 $0.10 $0.13
WEIKANG BIO-TECHNOLOGY GROUP CO., INC
RECONCILIATION OF NON- GAAP FINANCIAL MEASURES
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2010
Net Income Diluted Net Income Diluted
Net Income (Loss) and Diluted EPS EPS EPS
Adjusted Amount Non-GAAP $2,817,895 $0.10 $8,336,550 $0.30
Adjustments
Compensation adjustment (1) 857,170 0.03 1,769,180 0.064
Stock-based compensation adjustment
(2) 43,315 0.00 108,515 0.003
Amount per consolidated statement
of operations 2,130,745 0.07 6,458,855 0.23
(1) Non cash compensation expense in connection with the private
placement done on January 20, 2010 and associated investor relation
expense, the Company recorded $2.4 million total as deferred
compensation.
(2) Amortized stock-based compensation issued to a key employee and four
Directors.
WEIKANG BIO-TECHNOLOGY GROUP CO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
SIX MONTHS ENDED JUNE 30,
2010 2009
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $6,458,855 $7,187,930
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 599,057 587,162
Stock issued for consulting expenses 65,200 127,500
Deferred compensation 1,812,494 --
Changes in deferred tax (178,885) (50,671)
(Increase) decrease in current assets:
Accounts receivable -- (73,178)
Advances to suppliers and other receivables (124,277) (49,501)
Inventory (755,128) (275,882)
Increase (decrease) in current liabilities:
Accounts payable 927 --
Unearned revenue (11,721) (219,533)
Other payables 109,948 5,296
Taxes payable (743,596) 364,740
Net cash provided by operating
activities 7,232,874 7,603,863
CASH FLOWS FROM INVESTING ACTIVITIES:
Construction in progress (444,577) --
Acquisition of property & equipment (8,869) (2,187)
Net cash used in investing activities (453,446) (2,187)
CASH FLOWS FROM FINANCING ACTIVITIES:
Changes in due from management -- 1,242,783
Net proceeds from shares issued 2,197,500 --
Payment for purchase of Tianfang -- (3,812,283)
Changes in due from related party 24,908 (117,628)
Net cash provided by (used in)
financing activities 2,222,408 (2,687,128)
EFFECT OF EXCHANGE RATE CHANGE ON CASH &
CASH EQUIVALENTS 103,423 5,220
INCREASE IN CASH & CASH EQUIVALENTS 9,105,259 4,919,768
CASH & CASH EQUIVALENTS, BEGINNING OF
PERIOD 11,380,019 16,927
CASH & CASH EQUIVALENTS, END OF PERIOD $20,485,278 $4,936,695
For more information, please contact:
Company contact:
Ren Hu, VP of Finance
Weikang Bio-Technology Group Co., Inc.
US Tel: +1-201-887-0415
China cell: +86-137-1872-8163
Email: [email protected]
Investors Relation contacts:
John Marco, Partner, Elite IR
Tel: +1-310-819-2948
Email: [email protected]
Leslie J. Richardson, Partner, Elite IR
Tel: +852-3183-0283
Email: [email protected]
SOURCE Weikang Bio-Technology Group Co., Inc.
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