China-Biotics, Inc. Reports Fourth Quarter and Full Year Fiscal 2008 Financial Results
-- Excluding a $3.4 million gain related to the change in fair value ofconvertible notes, net income increased 62.4% year-over-year to $4.6 million
-- Excluding a $3.4 million gain related to the change in fair value ofconvertible notes, net income increased 30.0% to $14.2 million
-- Received government approval and began construction of a 150-metric-ton-per-year bulk additives manufacturing facility
-- Completed $25 million financing
-- Opened 51 new Shining-branded retail outlets, bringing the total numberof stores to 60 in Shanghai and five other cities in China
-- Signed contracts to supply probiotics to dairy and food manufacturersas additives
Fourth Quarter 2008 Results
During the fourth quarter of the 2008 fiscal year, net sales increased51.5% to $12.7 million from $8.4 million a year ago. The increase primarilyresulted from significant growth in the sales of new products, most of whichwere sold in the Company's Shining-branded retail outlets. The sales of newproducts accounted for 19% of total sales in the fourth quarter of 2008,compared to 3% in the same quarter the prior year.
"We concluded the 2008 fiscal year with a strong finish, continuing toachieve high growth in revenues and net income, as our combined strategy ofcompany-owned retail stores and traditional sales through distributors was agreat success," said Mr. Jinan Song, Chairman and Chief Executive Officer ofChina-Biotics. "We look forward to another promising fiscal year in 2009, aswe remain on schedule to complete construction and begin production at our newbulk additives facility in the latter part of the 2008 calendar year. By then,we expect to become the dominant supplier of naturally occurring probioticbacteria in China."
Gross profit for the quarter increased 40.7% to $8.4 million from $6.0million a year ago. Gross margin was 66.4% in the fourth quarter, compared to71.5% in the same period of fiscal 2007, as a 30% increase in pulp and papercosts resulted in greater packaging costs. The Company is working withsuppliers of its packaging materials to bring down such costs in the future.
Operating expenses were $3.5 million, compared to $2.1 million in thefourth quarter of fiscal 2007. The increase was primarily due to setup andoperations costs for new retail stores and increased salary expense stemmingfrom new hires to support the Company's expansion.
Operating income increased 26.3% to $4.9 million from $3.9 million theprior year, while operating margin declined to 38.4% from 46.1% a year ago.
Other income was $4.4 million, up from other expense of $0.3 million ayear ago. The increase largely resulted from a $3.4 million book gain recordedin the fourth quarter of 2008 related to the change in the fair value of theCompany's convertible bonds.
Net income for the fourth quarter of the 2008 fiscal year was $8.0 million.Excluding the book gain associated with the revaluation of the convertiblebonds, net income was $4.6 million, up 62.4% from $2.8 million a year ago.
Diluted earnings per share were $0.26 calculated on a weighted averagebasis, compared with $0.17 per diluted share in the fourth quarter of fiscal2007. The calculation of diluted earnings per share for the fourth quarter of2008 assumes full conversion of the convertible bonds and thus excludes thegain from the change in fair value of the bonds.
Fiscal Year 2008 Results
For the 2008 fiscal year, net sales were $42.3 million, up 38.3% from$30.6 million in fiscal 200
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