Weikang Bio-Technology Reports First Quarter 2010 Financial Results
HARBIN, China, May 18 /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 pharmaceuticals and other health and nutritional products in the People's Republic of China, today announced its financial results for the first quarter of fiscal year 2010 ended on March 31, 2010.
First Quarter Highlights -- Revenue increased 38.1% year-over-year to a record $14.0 million -- Gross profit was a record $8.3 million with gross margin of 59.6% -- Net income increased 18% year-over-year to a record $4.5 million -- Fully diluted earnings per share were $0.17 -- Non-GAAP net income was $5.5 million for non-GAAP fully diluted shares of $0.20 -- Raised $2.5 million in private placement
"We are pleased to have achieved a record quarter in terms of revenue and net income. Moreover, we believe the strong quarter demonstrates our solid competitive position with our portfolio of proprietary therapeutics and ability to consistently expand our market penetration," commented Mr. Yin Wang, Chairman & CEO of Weikang Bio-Technology Group Co., Inc. "Both Tianfang and Weikang had strong sales growth as a result of our increased distribution network and market coverage."
Revenue was a record $14.0 million for the first quarter of 2010, up 38.1% from revenue of $10.1 million in the first quarter of 2009. Revenue from Tianfang was $8.9 million, or 64% of total sales, up 42.6% from revenue of $6.3 million in the first quarter of 2009. Tianfang increased market coverage by 20% throughout forty second- and third-tier cities. Revenue from Weikang was $5.0 million, or 36% of total sales, up 30.6% from revenue of $3.9 million in the first quarter of 2009.
Gross profit for the quarter increased 47.2% to $8.3 million from $5.6 million in the same period of 2009. Gross profit for Tianfang and Weikang was $4.7 million and $3.6 million, respectively. Gross margin for first quarter of 2010 was 59.6% compared to 55.9% in the first quarter of 2009. The increase in gross margin is the result of increased sales of higher margin products for both Tianfang and Weikang. Gross margin for Tianfang and Weikang was 53.0% and 71.3%, respectively.
Operating expenses were $2.0 million, or 14.0% of sales, compared to $0.6 million, or 6.3% of sales, in the first quarter of 2009. The increase in operating expenses was attributable to an increase in investor relations and consulting expenses. Adjusting for non-cash, stock-based compensation of $912,000, operating expenses were $1.0 million, or 7.5% of sales. The non-cash, stock-based compensation relates to the private placement done on January 20, 2010 and associated investor relation expense. The Company recorded $1.8 million as deferred compensation and amortized $912,000 as non-cash stock based compensation.
Operating income for the first quarter was $6.4 million, up 27.1% from $5.0 million in the first quarter of 2009. Operating margin was 45.6% compared to 49.6% in the same period a year ago. Adjusting for the previously mentioned non-cash, stock-based compensation, non-GAAP operating income was $5.5 million in the first quarter of 2010.
Net income was $4.5 million in the first quarter of 2010, up 17.8% from $3.9 million in net income from the same period a year ago. Net income for Tianfang and Weikang was $3.0 million and $2.5 million, respectively. Fully diluted earnings per share were $0.17 compared to fully diluted earnings per share of $0.15 in the first quarter of 2009. Excluding the non-cash, stock-based compensation, non-GAAP net income and fully diluted earnings per share for the first quarter of 2010 was $5.4 million and $0.20, respectively.
As of March 31, 2010, Weikang Bio-Technology Group Co., Inc. had $18.1 million in cash and cash equivalents, $8.7 million in working capital and $14.2 million in total liabilities. Net cash provided by operating activities for the first quarter of 2010 was $4.9 million. Shareholders' equity stood at $31.1 million, up from $23.4 million at year-end 2009.
Mr. Ren Hu was appointed as Vice President of Finance as of May 5, 2010. Mr. Hu reports directly to the Chairman and CEO of the Company and is responsible for the public company capital market operations, including investor relations, SEC compliance and financing. Mr. Hu has over eleven years of work experience in Wall Street, including over five years in working for China based US public companies.
Weikang intends to continue developing new products and expanding its distribution network throughout 2010. The Company has 10 therapeutics in various stages of the SFDA approval process and expects to launch its 10-HDA in the third quarter of 2010 and ShuangBaoGu by the end of 2010.
"The market opportunity for Traditional Chinese Medicine and Western medicine continues to expand in China as consumers' medical expenditure is estimated to double annually over the next two decades. We remain focused on our long-term growth and expanding our distribution network by increasing our wholesale network and dedicated sales force," Mr. Wang continued. "We also welcome Mr. Hu to the Weikang Bio-Technology executive team who will assist us in increasing our visibility in the investment community and enhancing our shareholder value as we continue to expand our market penetration."
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 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-month periods ended March 31, 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 month periods ended March 31, 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.
Safe Harbor Statement
This press release contains certain statements that may include "forward looking statements." All statements other than statements of historical fact included herein are "forward-looking statements." 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, RECONCILIATION OF NON-GAAP FINANCIAL MEASURES FOR THE THREE MONTHS ENDED MARCH 31, 2010 Three months ended Adjusted Net income March 31, 2010 Net Income (Loss) and Diluted EPS Net Income Diluted EPS Adjusted Amount Non-GAAP 5,453,445 0.20 Adjustments Non-cash compensation adjustment (1) 912,000 0.03 Amount per consolidated statement of operations 4,541,445 0.17 (1) Non-cash compensation expense in connection with the private placement done on January 20, 2010 and associated investor relation expense, the Company recorded $1.8 million as deferred compensation and amortized $912,000 as non-cash stock based compensation. WEIKANG BIO-TECHNOLOGY GROUP CO., INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited) March 31, December 31, 2010 2009 ASSETS (Unaudited) CURRENT ASSETS Cash & cash equivalents $18,098,606 $11,380,019 Advances to suppliers and other receivables 895,936 24,334 Inventory 470,754 285,395 Due from management 1,745 1,745 Total current assets 19,467,041 11,691,493 NONCURRENT ASSETS Property and equipment, net 9,945,642 10,162,946 Construction in progress 445,238 -- Intangible assets 15,488,871 15,558,731 Total noncurrent assets 25,879,751 25,721,677 TOTAL ASSETS $45,346,792 $37,413,170 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $13,599 $12,668 Unearned revenue -- 11,716 Taxes payable 2,453,471 2,247,410 Other payables 7,634,863 7,620,321 Due to related party 24,903 -- Advance from officer 650,000 650,000 Total current liabilities 10,776,836 10,542,115 CONTINGENCIES DEFERRED TAX LIABILITY 3,427,129 3,450,005 STOCKHOLDERS' EQUITY Common stock, $.00001 par value; authorized shares 100,000,000; issued and outstanding shares 27,984,388 and 25,486,800 at March 31, 2010 and December 31, 2009, respectively 280 255 Additional paid in capital 4,781,720 139,245 Deferred compensation (1,467,791) -- Statutory reserve 1,321,806 1,069,507 Accumulated other comprehensive income 850,151 844,526 Retained earnings 25,656,661 21,367,517 Total stockholders' equity 31,142,827 23,421,050 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $45,346,792 $37,413,170 WEIKANG BIO-TECHNOLOGY GROUP CO., INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (Unaudited) THREE MONTHS ENDED MARCH 31, 2010 Non-GAAP 2010 2009 Net sales $13,958,540 $13,958,540 $10,111,207 Cost of goods sold 5,640,302 5,640,302 4,461,585 Gross profit 8,318,238 8,318,238 5,649,622 Operating expenses Selling expenses 691,259 691,259 432,843 General and administrative expenses 348,179 1,260,179 206,469 Total operating expenses 1,039,438 1,951,438 639,312 Income from operations 5,454,800 6,366,800 5,010,310 Non-operating income (expenses) Interest income 16,244 16,244 245 Financial expense (522) (522) (110) Other income 193 193 256,278 Other expenses (161) (161) (12,859) Total non-operating income, net 15,754 15,754 243,554 Income before income tax 5,470,554 6,382,554 5,253,864 Income tax 1,841,109 1,841,109 1,400,259 Net income 5,453,445 4,541,445 3,853,605 Other comprehensive income Foreign currency translation gain (loss) 9,307 9,307 (3,140) Comprehensive Income 5,479,861 $4,550,752 $3,850,465 Basic and diluted weighted average shares outstanding 27,360,062 27,360,062 25,229,800 Basic and diluted net earnings per share $0.20 $0.17 $0.15 WEIKANG BIO-TECHNOLOGY GROUP CO., INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) THREE MONTHS ENDED MARCH 31, 2010 2009 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $4,541,445 $3,853,605 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 301,286 293,452 Stock issued for consulting expenses 65,200 -- Deferred compensation 912,009 -- Changes in deferred tax (23,834) (25,204) (Increase) decrease in current assets: Advances to suppliers and other receivables (871,532) (6,195) Inventory (185,263) (296,952) Increase (decrease) in current liabilities: Accounts payable 927 -- Unearned revenue (11,718) (36,573) Accrued liabilities and other payable 14,541 8,519 Taxes payable 205,418 727,431 Net cash provided by operating activities 4,948,479 4,518,083 CASH FLOWS FROM INVESTING ACTIVITIES: Construction in progress (445,199) -- Acquisition of property & equipment (6,989) -- Net cash used in investing activities (452,188) -- CASH FLOWS FROM FINANCING ACTIVITIES: Changes in due from management -- 245,785 Net proceeds from shares Issued 2,197,500 -- Payment for purchase of Tianfang -- (3,811,898) Changes in due from related party 24,901 -- Net cash provided by (used in) financing activities 2,222,401 (3,566,113) EFFECT OF EXCHANGE RATE CHANGE ON CASH & CASH EQUIVALENTS (105) 5,893 INCREASE IN CASH & CASH EQUIVALENTS 6,718,587 957,863 CASH & CASH EQUIVALENTS, BEGINNING OF PERIOD 11,380,019 16,927 CASH & CASH EQUIVALENTS, END OF PERIOD $18,098,606 $974,790 For more information, please contact: Company contact: Ren Hu, VP WeiKang Bio-Technology Group Co., Inc. US Tel: +1-201-887-0415 China cell: +86-137-1872-8163 Email: firstname.lastname@example.org Investors Relation contact: John Marco, Partner, Elite IR Tel: +1-310-819-2948 Email: John.email@example.com Leslie J. Richardson, Partner, Elite IR Tel: +852-3183-0283 Email: Leslie.firstname.lastname@example.org
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