SHENZHEN, China, May 16, 2011 /PRNewswire-Asia/ -- Global Pharm
Holdings Group, Inc. (OTCBB: GPHG.OB) ("Global Pharm" or the
"Company"), a China-based leading
vertically integrated pharmaceutical company engaged in
pharmaceutical related products distribution and herbal cultivation
businesses through its subsidiaries in the Anhui, Jilin,
and Shandong provinces, today
announced its unaudited financial results for the first quarter
ended March 31, 2011.
First Quarter 2011 Highlights
- Net revenues were $42.1 million,
an increase of 45.8% over the first quarter of 2010
- Gross profit was $7.8 million, an
increase of 53.0% over the first quarter of 2010, with gross margin
of 18.6%
- Operating income was $6.7
million, an increase of 43.6% over the first quarter of
2010
- Net income was $5.3 million, or
$0.20 per diluted share, an increase
of 51.6%, as compared to $3.5
million, or $0.18 per diluted
share, in the same period in 2010
- Net operating cash generated during the quarter was
$5.8 million
"We are pleased to report a good start of the fiscal year 2011
with a 45.8% increase in revenue compared with the same period last
year. This sales growth is mainly driven by our wholly owned
subsidiary Shandong Global Pharm ("Shandong Global Pharm," formerly
known as "Yaoyuan") in the Shandong province, due to the significant
increase in customer numbers and enlarged product portfolios,"
stated Mr. Yunlu Yin, Chief
Executive Officer of Global Pharm. "During the quarter, Global
Pharm established two new 97% owned subsidiaries in the
Anhui and Shandong provinces respectively, to start its
projects of building modern Traditional Chinese Medicine, or TCM,
herbal plantation bases. We anticipate that the establishment of
the TCM herbal plantation bases will enhance our product portfolio,
increase the profit margin, and later make the direct offer to our
distribution business unit. Our distribution business will benefit
from gaining access to high-quality TCM herb products directly from
the source, as well as achieve increased revenue by the consecutive
distribution of such herbal products. Following the integration,
our distribution business would enjoy greater flexibility in terms
of making coordinated sales efforts, allowing us to price our
products and services more competitively."
First Quarter 2011 Financial Summaries (Unaudited)
|
|
|
Three months
ended March 31
|
Change
|
|
(in $ millions, except
per-share data in $)
|
2011
|
2010
|
|
Net Revenue
|
42.1
|
28.9
|
45.8%
|
|
Gross Profit
|
7.8
|
5.1
|
53.0%
|
|
Operating
Income
|
6.7
|
4.6
|
43.6%
|
|
Income before income
taxes
|
6.7
|
4.7
|
43.3%
|
|
Net Income
|
5.3
|
3.5
|
51.6%
|
|
Total comprehensive
income
|
5.4
|
3.5
|
55.9%
|
|
Basic and diluted earnings
per share
|
0.20
|
0.18
|
11.1%
|
|
|
|
|
|
|
|
First Quarter 2011 Results
Total net revenue was $42.1
million for the three months ended March 31, 2011, an increase of 45.8% compared
with the same period in 2010. The revenue increase largely reflects
strong sales of the pharmaceutical products distribution segment,
which contributed $32.5 million or
77.1% of the Company's total sales in the quarter, compared with
$20.9 million or 72.2% of the total
revenue in the corresponding quarter last year.
Below is a breakdown of sales per business segment for the three
months ended March 31, 2011 and 2010,
respectively:
For the
Three Months Ended March 31 – Revenue
|
|
in USD except
percentage
|
2011
|
2010
|
Change
|
|
|
|
% of
revenue
|
|
% of
revenue
|
|
%
|
|
Pharmaceutical products
distribution
|
$32,473,402
|
77.1
|
$20,866,986
|
72.2
|
11,606,416
|
55.6
|
|
TCM processing and
distribution
|
4,716,648
|
11.2
|
7,033,942
|
24.3
|
(2,317,294)
|
(32.9)
|
|
Herbal cultivation and
sales
|
4,656,951
|
11.1
|
-
|
-
|
4,656,951
|
NA
|
|
Flower tea bags
|
273,756
|
0.6
|
991,942
|
3.4
|
(718,186)
|
(72.4)
|
|
Total
|
$42,120,757
|
100
|
$28,892,870
|
100
|
$13,227,887
|
45.8
|
|
|
|
|
|
|
|
|
The revenue of the pharmaceutical products distribution segment
was $32.5 million for the three
months ended March 31, 2011, an
increase of 55.6% compared with the same period in 2010. The strong
growth in the pharmaceutical products distribution segment was
primarily due to a series of marketing activities to promote sales,
a broader product portfolio offered to customers and improved
efficiency in fulfilling sales orders. During the first quarter of
2011, Global Pharm's distribution product portfolio expanded from
approximately 7,000 products to over 9,000 products. In addition,
in order to streamline internal operations and resource
allocations, the Company reassigned approximately $2.1 million in revenue generated by the
distribution of OEM (OEM drugs refer to generic drugs the Company
purchases from pharmaceutical manufacturers that the Company
rebrand and sell under its own brand names) products from the TCM
processing and distribution business segment to the pharmaceutical
product distribution segment in the first quarter of 2011.
The revenue of the TCM processing and distribution segment was
$4.7 million, a decrease of
approximately 32.9% from the first quarter of 2010, primarily due
to approximately $2 million of
related sales from OEM products for the three months ended
March 31, 2011 have been recorded in
the pharmaceutical product distribution segment.
The revenue of the herbal cultivation and sales segment was
$4.7 million for the three months
ended March 31, 2011. The increase
was primarily attributable to the additional sales of herbal
products for the three months ended March
31, 2011. The Company had no herbal sales for the
comparable period in 2010.
Revenue from the flower tea bags segment was $0.3 million for the three months ended
March 31, 2011, compared to
approximately $1.0 million for the
comparable period in 2010. The significant decrease in sales of
flower tea bags was mainly due to increased competition in the
market and insufficient marketing.
Gross profit for first quarter 2011 was $7.8 million, an increase of 53.0%, from
$5.1 million in the same period a
year ago. Gross margins were 16.6%, 19.2%, 31.0%, and 34.0% for
each of our pharmaceutical products distribution segment, TCM
processing and distribution segment, herbal cultivation and sales
segment, and flower tea bags segment, respectively. The increase
was largely due to the stronger sales volume of its distribution
business and the growth of its herbal cultivation and sales
business in the first three months in 2011.
Operating expenses for the first quarter 2011 were
$0.4 million, an increase of 150.1%,
mostly due to an increase in advertising, freight and labor costs
in order to support business growth and expansion.
General and administrative expenses for the first quarter
2011 were $0.7 million, an increase
of 142.1%, which was consistent with the increase in net revenue
and increased professional service fees of becoming a public
company.
Operating income for the first quarter 2011 was
$6.7 million, an increase of 43.6%
from $4.6 million for the comparable
period in 2010.
The effective tax rate for the Company's operating
subsidiaries was 20.6% for the first quarter 2011, and 25% in the
same period in 2010. The reduced effective tax rate was mainly due
to the increased contribution of its herbal cultivation and sales
business, which is subject to zero income tax in the People's Republic of China ("PRC").
Net income for the first quarter 2011 was $5.3 million, or $0.20 per weighted and diluted share, compared
with net income of $3.5 million, or
$0.18 per weighted and diluted share,
for the same period a year ago. The diluted weighted average number
of shares outstanding was 26.0 million as of March 31, 2011.
Financial Condition
As of March 31, 2011, the Company
had $8.9 million in cash and
$23.1 million in accounts receivable
compared with $4.3 million and
$19.8 million as of December 31, 2010. The increase was in line with
increased sales. The Company's inventories increased to
$17.7 million as of March 31, 2011 from $16.1
million as of December 31,
2010, mainly due to the increased scale of sales during the
first quarter 2011. Working capital was $22.8 million, compared with $17.4 million at the end of 2010. As of
March 31, 2011, the Company had
$0.6 million in short-term debt
compared with $2.0 million as of
December 31, 2010. Stockholders'
equity totaled $23.1 million as of
March 31, 2011, compared with
$17.6 million at the end of 2010.
For the period ended March 31,
2011, Global Pharm generated $5.8
million cash from operating activities, as compared to
$0.2 million for the comparable
period in 2010. The increase is primarily due to the additional
$1.8 million in net income generated,
$1.0 million in inventory,
$2.1 million in other current assets,
and the release of $1.2 million in
restricted cash, offset by the decrease of $0.7 million in accounts receivable and
$0.4 million of other accrued
liabilities. The Company used $46.0
thousand in investing activities for the three months ended
March 31, 2011 compared to
$9.0 thousand in the same period in
2010, primarily as a result of increased capital expenditures. The
Company used $1.1 million in cash for
financing activities for the three months ended March 31, 2011 compared with $3.2 million for the three months ended
March 31, 2010, a decrease of
$2.1 million mainly due to loan
payment in the first quarter in 2011 and the dividend paid to the
former shareholders of $3.2 million
in the comparable period in 2010.
Subsequent Events
On April 29, 2011, the Company's
Board of Directors appointed Mr. Yanliang
Song as Vice President in charge of operations of Global
Pharm for a term of three years, effective May 1, 2011, thereby increasing the number of
Global Pharm executive officers from three to four.
On April 25, 2011, the Company
suspended its flower tea bags and sales operations. The Company's
decision was based on the intentions of the local government of
Bozhou, in conjunction with another pharmaceutical company, to
expand the industry development park in Bozhou, that will utilize
the site where Xuelingxian is currently located. The factory
buildings and relevant land on which Xuelingxian is situated will
be expropriated and Xuelingxian will be required to relocate to a
new commercial address. The Company is currently evaluating
potential new locations and is conducting market research on the
flower tea bags market. The management will decide to either reopen
the flower tea bags business in a new location or permanently close
it after completing its market research, which expected to be
completed in mid-2011.
On April 21, 2011, the Company
obtained a business license for its newly established joint
venture, Shandong Sino-Green TCM Tech Development Co., Ltd.
("Shandong Sino-Green") in Jinan City, Shandong Province. The joint venture was
established between Shandong Global Pharm and Jinan Linong TCM
Plantation Co., Ltd. ("Jinan
Linong"), a PRC company, in Mashan Town of Changqing
District of Jinan City, Shandong
province. The registered capital of Shandong Sino-Green is
RMB 10 million ($1.5 million). Shandong Global Pharm will invest
RMB 9.7 million ($1.5 million) and Jinan
Linong will invest RMB 0.3
million ($0.1 million), which
reflects 97 percent and 3 percent of the ownership of Shandong
Sino-Green, respectively. On April 20,
2011, the Company paid RMB 9.7
million (approximately $1.5
million) registered capital.
On April 6, 2011, the Company
obtained the business license for its newly established joint
venture, Anhui Sino-Green TCM Tech Development Co., Ltd" ("Anhui
Sino-Green"). Global Pharm's Hong
Kong subsidiary, Hong Kong Wisdom Fortune Medicine Holding
Group Ltd. (Wisdom Fortune) together with Anhui Qianyi
Pharmaceutical Co., Ltd. ("Qianyi Pharmaceutical"), a PRC company,
established the Anhui Sino-Green in Bozhou City, Anhui Province with the registered capital of
$10 million. Wisdom Fortune will
invest $9.7 million and Qianyi
Pharmaceutical will invest $0.3
million, which reflects 97 percent and 3 percent of the
ownership of Anhui Sino-Green, respectively. The Company is
required to pay approximately $1.5
million registered capital by July 6,
2011 and $8.2 million by
April 6, 2013. The Company will fund
the registered capital from working capital.
Business Outlook
"We are pleased with our first quarter performance of the
pharmaceutical distribution business, especially in the
Shandong province. Following the
rapid development of the pharmaceutical market in China, we expect to sustain our organic growth
by continuing our market development to broaden our customer bases,
enhancing our distribution process to improve operating efficiency,
increasing marketing efforts, increasing coordination with
suppliers and manufacturers and expanding our product portfolio. In
addition, we plan to effectively utilize the purchasing power
supported by the strategic alliance between our distribution
business and our pharmaceutical manufacture suppliers in the
Shandong province in order to
obtain more attractive procurement prices and value-added services
from pharmaceutical manufactures," said Mr. Yin.
For the remaining quarters of 2011, we expect to continue our
acquisition efforts by targeting several city-level distributors in
the Shandong province. The purpose
of this consolidation effort is to reduce the incumbent
distribution tiers and lower the price mark-up of pharmaceuticals.
Moreover, with support from the Bozhou Municipal Government and the
Mashan Town Government of Jinan City, we expect to increase our
investment in our TCM herbal plantation business in Anhui and Shandong provinces. Through the integration of
herbal cultivation and the establishment of a broader regional
sales network, we expect to create significant synergies that
empower Global Pharm to gain more market share in pharmaceutical
distribution and to enhance the overall profitability of our
business. We look forward to continuously strengthening our local
market leadership position in 2011 and beyond," concluded Mr.
Yin.
About Global Pharm Holdings Group, Inc.
Global Pharm Holdings Group, Inc. operates as a pharmaceutical
distribution and herbal cultivation business in the People's Republic of China. Through its
subsidiaries, Shandong Global Pharm Co., Ltd., Tonghua Tongdetang
Pharmaceutical & Medicinal Material Co., Ltd., Anhui
Xuelingxian Pharmaceutical Co., Ltd., Anhui Sino-Green TCM Tech
Development Co., Ltd. and Shandong Sino-Green TEC Tech Development
Co., Ltd. Currently, Global Pharm owns GSP-certified, modern
logistics distribution centers totally occupying 237,600 square
feet, manages over 13,000 inventory products and 1,812 acres herbal
cultivation base. Its sales network covers Shandong, Jilin, and Anhui provinces, as well as other developed
provinces in China. Global Pharm
intends to establish an integrated value chain in the
pharmaceutical industry through strategic acquisitions within
pharmaceutical production, distribution, and retail sectors. Global
Pharm anticipates it will achieve a solid distribution capacity and
grow to be a major rapid-growing and profitable pharmaceutical
company. For further information, please visit the Company's
corporate website at http://www.globalpharmholdings.com.
Forward-looking Statements
Certain statements set forth in this press release contain or
may contain forward-looking statements and information that are
based upon beliefs of, and information currently available to, our
management as well as estimates and assumptions made by our
management. Such statements reflect the current view of our
management with respect to future events and are subject to risks,
uncertainties, assumptions and other factors as they relate to our
industry, our operations and results of operations, plans for
future facilities, capital-expenditure plans, and any businesses
that we may acquire. Although we believe that the expectations
reflected in the forward looking statements are reasonable, we
cannot guarantee future results, levels of activity, performance or
achievements. Except as required by applicable law, including the
U.S. federal securities laws, we do not intend to update any of the
forward-looking statements to conform them to actual
results.
–FINANCIAL TABLES FOLLOW—
|
|
GLOBAL PHARM
HOLDINGS GROUP, INC.
|
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
|
|
|
|
|
ASSETS
|
March 31,
2011
(Unaudited)
|
December
31, 2010
|
|
Current assets:
|
|
|
|
Cash and cash
equivalents
|
$8,905,768
|
$4,271,498
|
|
Accounts
receivable
|
23,127,696
|
19,771,619
|
|
Inventories
|
17,737,211
|
16,058,760
|
|
Restricted cash
|
369,422
|
1,538,251
|
|
Other current
assets
|
949,813
|
1,326,660
|
|
Total current
assets
|
51,089,910
|
42,966,788
|
|
Property, plant and equipment,
net
|
238,795
|
210,665
|
|
Total assets
|
$51,328,705
|
$43,177,453
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
Current liabilities:
|
|
|
|
Short term
loans
|
$610,677
|
$1,972,150
|
|
Bank acceptance
|
260,108
|
21,212
|
|
Accounts payable and
accrued expenses
|
24,752,556
|
20,944,923
|
|
Income and other taxes
payable
|
1,447,207
|
1,728,499
|
|
Due to related
party
|
1,189,421
|
882,505
|
|
Total current liabilities
|
28,259,969
|
25,549,289
|
|
Stockholders'
equity:
|
|
|
|
Common stock, par value, $
0.001 per share, 100,000,000 shares
authorized, 26,000,000
issued and outstanding.
|
26,000
|
26,000
|
|
Additional paid-in
capital
|
9,200,623
|
9,200,623
|
|
Statutory surplus
reserves
|
1,310,701
|
1,310,701
|
|
Retained
earnings
|
11,837,920
|
6,546,406
|
|
Accumulated other
comprehensive income
|
693,492
|
544,434
|
|
Total
stockholders' equity
|
23,068,736
|
17,628,164
|
|
Total liabilities and
stockholders' equity
|
$51,328,705
|
$43,177,453
|
|
|
|
|
|
|
|
|
GLOBAL PHARM
HOLDINGS GROUP, INC.
|
|
CONDENSED
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE
INCOME
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
Three months
ended March 31,
|
|
|
|
2011
|
|
2010
|
|
Revenues, net
|
|
$42,120,757
|
|
$28,892,870
|
|
Cost of goods
sold
|
|
34,296,106
|
|
23,777,194
|
|
Gross profit
|
|
7,824,651
|
|
5,115,676
|
|
Expenses:
|
|
|
|
|
|
Operating
expenses
|
|
419,050
|
|
167,570
|
|
General and
administrative
|
|
733,019
|
|
302,783
|
|
Income from
operations
|
|
6,672,582
|
|
4,645,323
|
|
Interest (expense)
income
|
|
(4,147)
|
|
5,915
|
|
Miscellaneous
expense
|
|
(1,874)
|
|
-
|
|
Income before income
taxes
|
|
6,666,561
|
|
4,651,238
|
|
Provision for income
taxes
|
|
1,375,047
|
|
1,161,722
|
|
Net income
|
|
5,291,514
|
|
3,489,516
|
|
Other comprehensive
income
|
|
|
|
|
|
Foreign currency
translation adjustment
|
|
149,058
|
|
(812)
|
|
Total comprehensive
income
|
|
$5,440,572
|
|
$3,488,704
|
|
Earnings per share of common
stock:
|
|
|
|
|
|
Basic and diluted
earnings per share
|
|
$0.20
|
|
$0.18
|
|
Basic and diluted weighted
average shares
|
|
26,000,000
|
|
19,094,000
|
|
|
|
|
|
|
|
|
|
|
|
|
GLOBAL PHARM
HOLDINGS GROUP, INC.
|
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
(Unaudited)
|
|
|
|
Three months
ended March 31,
|
|
|
|
2011
|
|
2010
|
|
Cash flows from operating
activities
|
|
|
|
|
|
Net Income
|
|
$5,291,514
|
|
$3,489,516
|
|
Adjustments to reconcile
net income to net cash provided by operating activities:
|
|
|
|
|
|
Depreciation and
amortization
|
|
18,894
|
|
16,975
|
|
|
|
|
|
|
|
Changes in operating assets and
liabilities:
|
|
|
|
|
|
Accounts
receivable
|
|
(3,215,411)
|
|
(2,522,535)
|
|
Inventories
|
|
(1,569,016)
|
|
(2,520,577)
|
|
Restricted cash
|
|
1,173,196
|
|
-
|
|
Other current
assets
|
|
383,506
|
|
(1,685,213)
|
|
Accounts payable and other
accrued liabilities
|
|
3,657,596
|
|
4,011,196
|
|
Other taxes
payable
|
|
(290,947)
|
|
329,736
|
|
Due to related
party
|
|
312,770
|
|
(928,148)
|
|
Net cash provided by operating
activities
|
|
5,762,102
|
|
190,950
|
|
|
|
|
|
|
|
Cash flows from investing
activities
|
|
|
|
|
|
Purchase of property,
plant and equipment
|
|
(45,560)
|
|
(9,092)
|
|
|
|
|
|
|
|
Cash flows from financing
activities:
|
|
|
|
|
|
Short-term loan
borrowing
|
|
-
|
|
219,713
|
|
Short-term loan
repayments
|
|
(1,367,704)
|
|
-
|
|
Bank acceptance
|
|
237,663
|
|
(219,713)
|
|
Dividend paid to the
former shareholders
|
|
-
|
|
(3,208,521)
|
|
Net cash used in financing
activities
|
|
(1,130,041)
|
|
(3,208,521)
|
|
|
|
|
|
|
|
Net increase (decrease) in cash
and cash equivalents
|
|
4,586,501
|
|
(3,026,663)
|
|
Effect of exchange rate changes
on cash and cash equivalents
|
|
47,769
|
|
(3,245)
|
|
Cash and cash equivalents -
beginning of period
|
|
4,271,498
|
|
7,455,147
|
|
Cash and cash equivalents - end
of period
|
|
$8,905,768
|
|
$4,425,239
|
|
|
|
-
|
|
|
|
Supplemental disclosure of cash
flow information:
|
|
|
|
|
|
Cash paid for
interest
|
|
$10,747
|
|
$829
|
|
Cash paid for income
taxes
|
|
$1,179,482
|
|
$690,986
|
|
|
|
|
|
|
|
|
For
Additional Information Contact
|
|
Global Pharm Holdings
Group, Inc.
|
|
Ms. Susan Liu
|
|
Phone: +86-755-3693-9373
(Shenzhen, China)
|
|
Email:
susanliu@globalpharmholdings.com
|
|
CCG Investor Relations,
Inc.
|
|
Ms. Linda Salo, Account
Manager
|
|
Phone: +1-646-922-0894
(New York, USA)
|
|
Email:linda.salo@ccgir.com
|
|
|
SOURCE Global Pharm Holdings Group, Inc.