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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.
For more information, please contact:
For the Company:
Mr. Sam Liu, COO
China Yongxin Pharmaceuticals, Inc.
Tel: +1-626-581-9098
Email: info@yongxinchina.com
Investors:
Mr. Matthew Hayden, HC International
Tel: +1-561-245-5155
Email: matt.hayden@hcinternational.net
Web: http://www.hcinternational.net
CHINA YONGXIN PHARMACEUTICALS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 2009 AND DECEMBER 31, 2008
(UNAUDITED)
June 30, 2009 December 31, 2008
ASSETS
Current Assets:
Cash and cash equivalents $1,620,168 $609,422
Accounts receivable, net 7,070,275 6,030,874
Notes receivable 1,561,462 1,334,078
Other receivable, net 552,549 356,573
Advances to suppliers 8,465,678 6,186,269
Prepaid expenses 245,832 345,686
Inventory, net 7,923,325 7,864,677
Current assets of the discontinued
operations 46 46
Total Current Assets 27,439,336 22,727,625
Property and Equipment, net 2,512,538 2,680,207
Construction In Progress 6,357,179 6,066,249
Intangible Assets, net 60,428 73,687
Total Assets $36,369,481 $31,547,768
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $5,944,014 $3,255,148
Accrued expenses & other payable 2,694,603 2,447,067
Advances from customers 1,570,322 2,580,894
Taxes payable 1,944,665 1,240,411
Loans to related parties 184,662 184,662
Short-term loans payable 2,221,276 1,967,185
Deferred income 186,861 273,753
Current liabilities of the
discontinued operations 628,883 628,883
Total Current Liabilities 15,375,288 12,578,003
Long term loan 1,318,500 1,320,390
Commitments and Contingency -- --
Stockholders' Equity:
Preferred stock, $0.001 par value;
5,000,000 shares
authorized; 5,000,000 shares issued
and outstanding 5,000 5,000
Common stock; $0.001 par value;
75,000,000 shares
authorized; 31,510,540 shares issued
and outstanding as of June 30, 2009
and 31,400,540 shares issued and
outstanding as of December 31, 2008 31,621 31,401
Additional paid in capital 635,487 615,906
Deferred consulting expense -
issuance of warrants -- (72,815)
Prepaid consulting - issuance of
shares -- (68,750)
Receivable from a related party (50,000) (50,000)
Statutory reserve 2,050,992 1,841,241
Other comprehensive income 1,660,196 1,684,649
Retained earnings 10,818,845 9,563,803
Non-controlling interest 4,523,552 4,098,940
Total Stockholders' Equity 19,675,693 17,649,375
Total Liabilities and Stockholders'
Equity $36,369,481 $31,547,768
CHINA YONGXIN PHARMACEUTICALS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE-MONTH AND SIX-MONTH PERIODS ENDED JUNE 30, 2009 AND 2008
(UNAUDITED)
For the Three-Month For the Six-Month
Period Period
Ended June 30, Ended June 30,
2009 2008 2009 2008
Net Revenues $14,638,615 $14,580,500 $23,823,609 $29,574,097
Cost of Goods Sold (11,920,027) (11,723,541) (18,874,297) (24,190,231)
Gross profit 2,718,588 2,856,959 4,949,312 5,383,866
Operating Expenses:
Selling expenses 763,290 963,352 1,583,452 1,724,373
General and
administrative
expenses 767,160 587,915 1,521,874 1,113,315
Total operating
expenses 1,530,449 1,551,267 3,105,325 2,837,688
Income From Operations 1,188,139 1,305,692 1,843,986 2,546,178
Other Income
(Expense):
Other income 706,758 600,205 794,555 834,140
Other expense (47,160) 103,634 (20,783) (34,906)
Interest income
(expense) 16,458 (225,005) 7,984 (227,112)
Total other income 676,057 478,834 781,757 572,122
Operating Income
Before Income Tax and
Non controlling
Interest 1,864,196 1,784,526 2,625,743 3,118,300
Provision for income
tax (525,801) (565,227) (730,566) (940,142)
Net Income Before Non
controlling Interest 1,338,394 1,219,299 1,895,177 2,178,158
Non controlling
interest (297,801) (500,378) (430,386) (691,881)
Net Income 1,040,594 718,921 1,464,791 1,486,277
Other Comprehensive
Item:
Foreign exchange
translation gain (42,017) 294,872 (18,340) 836,712
Net Comprehensive
Income 998,577 1,013,793 1,446,451 2,322,989
Earning per share
Basic $0.03 $0.02 $0.05 $0.05
Diluted $0.03 $0.02 $0.05 $0.05
Weighted average
number of shares
outstanding
Basic 31,148,219 31,116,845 31,095,623 31,079,138
Diluted 32,048,219 32,144,356 31,995,623 32,106,649
CHINA YONGXIN PHARMACEUTICALS INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTH PERIODS ENDED JUNE 30, 2009 AND 2008
(UNAUDITED)
2009 2008
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income attributable to the
company $1,464,791 $1,486,277
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 152,845 167,869
Stocks and warrants issued or to be
issued for services 61,750 141,566
Amortization of prepaid & deferred
consulting cost 141,565
Non-controlling interest 430,386 691,881
(Increase) / decrease in current
assets:
Accounts receivable (1,048,523) (3,183,428)
Notes receivable (229,403) --
Other receivable (196,580) (799,159)
Advances to suppliers (2,289,358) 2,077,575
Prepaid expenses 99,406 (70,437)
Inventory (69,939) (1,556,377)
Increase / (decrease) in current
liabilities:
Accounts payable 1,768,564 1,342,605
Notes payable 552,449 --
Other payable 677,711 2,571
Accrued expense (107,245) --
Tax payable 706,368 857,194
Advances from customers (1,007,358) 1,047,628
Deferred revenue (86,541) (249,545)
Net cash provided by operating
activities 1,020,888 1,956,221
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from minority interest
shareholders -- 11,406
Additions to construction in progress (275,529) --
Purchase of property, equipment and
intangible assets -- (2,626,220)
Net cash used in investing activities (275,529) (2,614,813)
CASH FLOWS FROM FINANCING ACTIVITIES
Receipt of short term loan -- 1,964,749
Receipts of loan from non-related
parties 256,843 --
Receipts of Loan from related parties -- (1,620,887)
Net cash provided by financing
activities 256,843 343,863
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 1,002,201 (314,730)
EFFECT OF EXCHANGE RATE CHANGES ON
CASH AND CASH EQUIVALENTS 8,545 225,092
CASH AND CASH EQUIVALENTS, BEGINNING
BALANCE 609,422 1,180,029
CASH AND CASH EQUIVALENTS, ENDING
BALANCE $1,620,168 $1,090,389
SUPPLEMENTAL DISCLOSURES:
Interest paid $71,126 $101,631
Income tax paid $19,097 $--
NON CASH TRANSACTION:
Conversion of account receivable to
note receivable $-- $841,686
SOURCE China Yongxin Pharmaceuticals, Inc.
http://www.yongxinchina.com
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