China Biologic Products Reports Record Sales and Net Income for 2010

PR Newswire
TAI'AN, SHANDONG PROVINCE, China
Mar 31, 2011

TAI'AN, SHANDONG PROVINCE, China, March 31, 2011 /PRNewswire-Asia-FirstCall/ -- China Biologic Products, Inc. (Nasdaq: CBPO) ("China Biologic" or the "Company"), one of the leading plasma-based biopharmaceutical companies in the People's Republic of China ("PRC"), today reported record sales and net income for the year ended December 31, 2010.

    --  Sales increased $20.7 million or 17.4% to $139.7 million for the year
        ended December 31, 2010 from $119.0 million in 2009.
    --  Gross profit increased $16.4 million or 18.9% to $102.7 million in 2010
        from $86.4 million in 2009. Gross profit as a percent of sales increased
        to 73.5% in 2010 from 72.6% in 2009.
    --  Income from operations increased $8.1 million or 13.3% to $69.5 million
        in 2010 from $61.4 million in 2009.
    --  GAAP Net income attributable to China Biologic in 2010 was $31.5 million
        or $1.30 per diluted share, including a $3.2 million non-cash charge
        related to change in the fair value of derivative liabilities, compared
        with $2.2 million or $0.10 per diluted share in 2009, which includes a
        $28.9 million non-cash charge related to change in the fair value of
        derivative liabilities.
    --  Non-GAAP adjusted net income was $39.0 million or $1.61 per diluted
        share in 2010 compared with $31.5 million or $1.43 per diluted share in
        2009.

In addition, China Biologic announced that it has restated the financial statements for the year 2009 and will restate the financial statements for the interim periods for years 2009 and 2010 as soon as practical which will be set forth in its Annual Report on Form 10-K for the year ended December 31, 2010 and the amendments to the periodic reports for the affected periods. The revisions were made primarily to correct: (1) inadvertent omission of the fair value of the callable features embedded in the warrants issued on July 19, 2006 (the "2006 Warrants") and (ii) misinterpretation of US GAAP regarding recognition of deferred tax liabilities related to the acquisition of Guiyang Dalin Biologic Technologies Co., Ltd. ("Dalin") in 2009 (the "Dalin Acquisition"). The Company expects that the restatement will not have an effect on the Company's liquidity, cash resources, or future business operations because they are all noncash adjustments.

CEO comments

Mr. Chao Ming (Colin) Zhao, Chief Executive Officer of China Biologic, said, "We are pleased with our progress and good operating and financial results for 2010. We believe our acquisitions from 2008 and 2009 are starting to deliver the expected good performance."

"We believe that our strategy of direct institutional sales remains the good long-term model for serving our customers for our products and markets in China. When we acquired Dalin, we converted its sales model to direct institutional sales from sales conducted mainly through distributors. In 2010, direct institutional sales of Dalin did not grow as quickly as we expected. We will continue to strengthen Dalin's direct institutional sales approach in 2011.

"We have restated our financial statements for the year 2009 and will restate the financial statements for the interim periods for years 2009 and 2010 due to adjustments to certain non-cash items below our operating income line, which are mainly associated with the evaluation of the fair market value of the callable feature of our warrants previously issued in 2006 and deferred tax liabilities in connection with the Company's prior acquisition of Dalin. We believe these adjustments will not negatively affect our operations and affect our ability to be successful in our business, expand our market share, generate free cash flow, or achieve our long-term strategic goals.

"With the continuing expansion of China's economy, China Biologic's outlook for 2011 remains good. We believe higher health standards will continue to be among the government's priorities. And our plasma collection stations and processing facilities are in good locations and are operating at high standards.

"In addition, we have completed the development stages for two new products and expect their approval by China's State Food and Drug Administration in 2011.

"We expect to continue to grow our business, primarily by internal growth and, when appropriate, by prudent acquisitions that can enlarge our geographic operations or provide natural extensions of our current product lines. We look forward to the year 2011 with confidence and determination."

The 2010 financial results presented below reflect the restatement made for fiscal year 2009. For a more detailed information about the restatements, please see below under the heading "Restatements of the financial statements for year 2009 and the interim periods for years 2009 and 2010."

Results for the year 2010

Revenues increased 17.4% or $20.7 million to $139.7 million in 2010 from $119.0 million in 2009 due mainly to a general increase in the price and volume of plasma based products.

Sales from human albumin product rose approximately 13.4% year-over-year to approximately $67.1 million, accounting for approximately 48.0% of the total sales in 2010, as compared to approximately 49.7% in 2009. Sales volume of human albumin products increased approximately 15.7% in 2010 as compared to 2009, while average selling price ("ASP") of human albumin decreased by1.8%. The price decrease in human albumin is due to the increased in volume of imported human albumin products in 2010 and we believe the trend may continue as long as the volume of the imported human albumin products continue to grow. Sales from human immunoglobulin for intravenous injection ("IVIG") grew approximately 9.6% to approximately $48.0 million in 2010 and represented approximately 34.3% of the total sales, as compared to approximately 36.8% of total sales in 2009. Increase in sales from IVIG was mainly due to an approximately 26.9% increase in ASP which was partially offset by an approximately 15.8% decrease in sales volume. Sales from the human tetanus immunoglobulin products rose approximately 55.8% to approximately $4.1 million, contributing approximately 2.9% of total sales in 2010 as compared to approximately 2.2% in 2009. Sales volume and ASP for human tetanus immunoglobulin increased approximately 24.6% and 12.6%, respectively. Sales from human hepatitis B immunoglobulin rose approximately 206.7% to approximately $10.6 million, contributing approximately 7.6% of the total sales in 2010 as compared to approximately 2.9% in 2009. Sales volume and ASP for human hepatitis B immunoglobulin increased approximately 7.4% and 186.4% in 2010, respectively. Sales from human rabies immunoglobulin rose approximately 57.2% to $7.5 million, contributing approximately 5.3% of total sales in 2010 as compared to approximately 4.0% in 2009. Sales volume and ASP for sales human rabies immunoglobulin increased 26.5% and 24.6% in 2010, respectively.

Gross profit increased $16.4 million or 18.9% to $102.7 million in 2010 from $86.4 million in 2009. Gross profit margin was 73.5% in 2010, as compared to 72.6% in the prior year.

Total operating expenses in 2010 increased 32.9% to $33.2 million, as compared to $25.0 million in the prior year. As a percentage of total sales, total expenses increased to 23.8% in 2010 from 21.0% in 2009.

Selling expenses increased 108.9% to $7.4 million in 2010 from $3.5 million in 2009. As a percentage of total sales, selling expenses increased to 5.3% in 2010 from 3.0% in 2009. The increase in selling expenses was primarily due to the increased marketing efforts in connection with strengthening our direct institution sales approach.

General and administrative ("G&A") expenses increased 18.7% to $23.5 million in 2010. As a percentage of total sales, G&A expenses were 16.8% and 16.6% for 2010 and 2009, respectively. The dollar increase in G&A expenses was mainly due to higher expenses in professional services, non-cash employee compensation, travel, and general office expenses as we continue our efforts in integrating our two main operating entities, and an increased amount of inventory allowance for reserving non-useable plasma in connection with 90 day plasma quarantine rules implemented by China SFDA in July 2008. The Company incurred $2.3 million in non-cash employee compensation in 2010, as compared to $62,281 in 2009.

Research and development expenses increased 40.5% to $2.3 million, or 1.7% of total sales in 2010, as compared to $1.7 million, or 1.4% in 2009. The dollar increase was primarily due to the costs associated with the development of two new products that are at the end of their development stages.

Income from operations increased 13.3% to $69.5 million or 49.8% of total sales in 2010, as compared to $61.4 million, or 51.6% in 2009.

Total loss related to change in fair value of derivative liabilities in 2010 was $3.2 million, as compared to $28.9 million in the prior year. Net interest expense decreased to $1.9 million in 2010 from $3.9 million in 2009, primarily due to the related party loan associated with the Dalin Acquisition being paid off in the second quarter of 2010.

The provision for income taxes increased 35.9% to $13.6 million in 2010, from $10.0 million in 2009. The effective tax rate in 2010 was 20.7%, as compared to 34.7% in 2009. The decrease in effective tax rate was mainly due to lower non-tax deductible charges of $25.7 million in the change in fair value of derivative liabilities as compared to the 2010.

GAAP net income attributable to China Biologic in 2010 was $31.5 million, or $1.30 per diluted share, as compared to $2.2 million, or $0.10 per diluted share, in 2009. Non-GAAP adjusted net income was $39.0 million, or $1.61 per diluted share, in 2010, as compared to $31.5 million, or $1.43 per diluted share, in 2009. Non-GAAP adjusted net income and diluted earnings per share in 2010 excluded an aggregate of $7.4 million charges, which are related to change in the fair value of derivative liabilities and non-cash employee compensation expenses after adding back interest related to the convertible notes under the if-converted method. Please see the table at the end of the release that reconciles our non-GAAP measures with the nearest comparable GAAP measures.

Financial Condition

As of December 31, 2010, the Company had $64.9 million in cash and cash equivalents, approximately $61.4 million in working capital, and a current ratio of 185.9%. Total shareholder's equity on December 31, 2010 was $145.0 million, as compared to $84.1 million at the end of 2009. The Company generated $38.8 million in net cash from operating activities in 2010 as compared to $50.3 million in 2009.

Guidance and business outlook for 2011

China Biologic expects 2011 revenue to be in the range of $154 million and $168 million. This guidance assumes only organic growth and excludes acquisitions and construction of new facilities. The guidance necessarily assumes no significant adverse price changes during 2011.

The Company expects 2011 adjusted net income to be in the range of $41 million to $43 million, excluding any non-cash charge or gain related to change in the fair value of derivative liabilities and stock-based compensation expense and any adjustments in the U.S. federal income tax provision in 2011 related to the expiration of the look-through exception for Subpart F income on December 31, 2011. To support its business expansion, the Company expects to have substantially higher expenses in 2011 to expand its geographic market coverage, add new customers, and increase direct sales to institutional customers of its products. Due to the expected expense increase associated with our marketing and sales efforts, we anticipate modest growth in adjusted net income for 2011 despite anticipated growth in sales in 2011.

As a corporate policy, the Company does not intend to update this guidance during the year unless required by the applicable laws. This forecast reflects the Company's current and preliminary views, which are subject to change.

Restatements of the financial statements for year 2009 and the interim periods for years 2009 and 2010

The Company's audit committee has determined that it will restate its previously issued financial statements for the year 2009 and the interim periods for years 2009 and 2010 to reflect the correction of accounting errors in connection with reevaluation of the accounting treatments for two issues: (1) inadvertently omission of the fair value of callable feature embedded in the 2006 Warrants; and (2) misinterpretation of US GAAP regarding the recognition of deferred tax liabilities in connection with the Dalin Acquisition.

Recognition of fair value of the callable feature for the 2006 Warrants

In 2006, the Company issued 1,070,000 warrants to certain accredited investors. According to the terms of the 2006 Warrants, the Company may, in its sole discretion, elect to require the 2006 Warrants holders to exercise up to all of the unexercised portion of the 2006 Warrants ("Callable Feature"). The Company inadvertently omitted the fair value of the Callable Features embedded in the 2006 Warrants when reclassifying the fair value of 2006 Warrants from equity to derivative liabilities as of January 1, 2009 while adopting EITF 07-5, "Determining Whether an Instrument (or Embedded Feature) Is Indexed to an Entity's Own Stock" (FASB ASC 815-40-15-5) (or "EITF 07-05"). As a result, the retained earnings and additional paid-in capital should have been increased by $535,615 and $138,160, respectively, and the derivative liabilities should have been decreased by $673,775 as of January 1, 2009. During the year ended December 31, 2009, all of the 2006 Warrants were exercised. The Company inadvertently omitted recognizing the impact of fair value change arising from the Callable Feature in estimating the fair value of the 2006 Warrants during 2009. As a result, the loss of change in fair value of derivative liabilities during the year ended December 31, 2009 should have been decreased by $710,861. The retained earnings and additional paid-in capital should have been increased by $1,246,476 and decreased by $1,246,476, respectively, as of December 31, 2009.

Recognition of deferred tax liabilities in connection with the Dalin Acquisition

In connection with the Dalin Acquisition in 2009, the Company misinterpreted US GAAP regarding the accounting for the business combination. As a result, the Company did not recognize deferred tax liabilities for differences between the assigned values and the tax bases of the intangible assets and certain property, plant and equipment acquired in the Dalin Acquisition in accordance with ASC Topic 740, Income Taxes. As of January 1, 2009, deferred tax liabilities of $4,749,099 should have been recognized with a corresponding increase in goodwill of $4,749,099. During the year ended December 31, 2009, the Company also should have recorded deferred tax benefit representing the tax effect of the amortization of intangible assets and the depreciation of property, plant and equipment for the year ended December 31, 2009. As a result, the goodwill, deferred tax liabilities, retained earnings, noncontrolling interest and accumulated other comprehensive income of the Company should have been increased by $4,775,139, $4,275,295, $232,368, $267,333 and $143, respectively, as of December 31, 2009.

Conference call

China Biologic will host a dial-in conference call at 7:00 a.m. EDT (New York) on Friday, April 1, 2011, to discuss its results for 2010. To participate in the conference call, please dial the appropriate number about 10 minutes prior to the scheduled conference call time:

The dial-in details for the live conference call are:



    U.S. toll-free number                             1 866 549 1292
    Mainland China toll-free number                     400 681 6949
    Hong Kong local access                                 3005 2050
    International toll number                         +852 3005 2050
    Participant pass code                       674 477#

A telephone replay of the call will be available after the conclusion of the conference all through 8:00 a.m. EDT on April 8, 2011.

The dial-in details for the telephone replay are:



    U.S. toll-free number                             1 866 753 0743
    Mainland China toll free number                     800 876 8594
    Hong Kong local access                                 3005 2020
    International dial-in toll number                 +852 3005 2020
    Replay pass code                            138 012#

Use of non-GAAP financial measures

This press release contains non-GAAP financial measures that exclude non-cash compensation expenses related to options granted to employees and directors under the Company's 2008 Equity Incentive Plan and changes in the fair value of derivative liabilities, including warrants and derivative instruments (including the conversion option) embedded in the Company's Senior Secured Convertible Notes (after adding back interest related to the convertible notes under the if-converted method). To supplement the Company's condensed consolidated financial statements presented on a GAAP basis, the Company has provided non-GAAP financial information excluding the impact of this item in this release. The Company's management believes that these non-GAAP measures provide investors with a better understanding of how the results relate to the Company's historical performance. A reconciliation of the adjustments to GAAP results appears in the table accompanying this press release. This additional non-GAAP information is not meant to be considered in isolation or as a substitute for GAAP financials. The non-GAAP financial information that the Company provides also may differ from the non-GAAP information provided by other companies.

About China Biologic Products, Inc.

China Biologic Products, Inc., through its indirect majority-owned subsidiaries, Shandong Taibang Biological Products Co. Ltd. and Guiyang Dalin Biologic Technologies Co., Ltd, and its equity investment in Xi'an Huitian Blood Products Co., Ltd., is currently the largest non-state-owned plasma-based biopharmaceutical company in China. The Company is a fully integrated biologic products company with plasma collection, production and manufacturing, research and development, and commercial operations. The Company's plasma-based biopharmaceutical products are irreplaceable during medical emergencies, and are used for the prevention and treatment of various diseases. The Company sells its products to hospitals and other healthcare facilities in China. Please see the Company's website www.chinabiologic.com for additional information.

Safe harbor statement

This release may contain certain "forward-looking statements" relating to the business of China Biologic Products, Inc. and its subsidiaries. All statements, other than statements of historical fact included herein are "forward-looking statements," including, among others, statements regarding: the Company's expected financial performance in 2011 and our ability to deliver such results; our new products and expected government approval,; the Company's ability to build new or expand existing plasma collection stations; expected growth in Chinese economy and our business, our expected financial performance and strategic and operational plans, our future operating results, our expectations regarding the market for our products, as well as all assumptions, expectations, predictions, intentions or beliefs about future events.. These forward-looking statements are often identified by the use of forward-looking terminology such as "believes," "expects" or similar expressions, and 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. Investors 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 statements follow.


    CHINA BIOLOGIC PRODUCTS, INC. AND SUBSIDIARIES
           CONSOLIDATED STATEMENTS OF INCOME

                                                       For the Years
                                                           Ended
                                                         -------------
                                                 December
                                                   31,            December
                                                   2010           31,2009
                                                ---------        ---------

    Sales
               External customers             $138,674,983     $118,293,137
               Related party                     1,020,434          705,018
                                                 ---------          -------
    Total sales                                139,695,417      118,998,155

    Cost of sales
               External customers               36,793,775       32,544,743
               Related party                       157,374           77,165
                                                   -------           ------
    Cost of sales                               36,951,149       32,621,908
                                                ----------       ----------

    Gross profit                               102,744,268       86,376,247

    Operating expenses
               Selling expenses                  7,372,348        3,529,242
               General and
                administrative
                expenses                        23,510,566       19,807,123
               Research and
                development expenses             2,336,126        1,662,690
                                                 ---------        ---------

    Income from operations                      69,525,228       61,377,192

    Other expenses/(income)
               Equity in income of
                equity method investee          (1,070,241)        (566,984)
               Change in fair value of
                derivative liabilities           3,233,288       28,915,328
               Interest expense, net             1,930,165        3,930,249
               Other (income)/expense,
                net                               (169,043)         261,252
                                                  --------          -------
    Total other expenses,
     net                                         3,924,169       32,539,845
                                                 ---------       ----------

    Earnings before income
     tax expense                                65,601,059       28,837,347

    Income tax expense                          13,608,755       10,013,563


    Net income                                  51,992,304       18,823,784

    Less: Net income
     attributable to the
     noncontrolling
     interest                                   20,449,421       16,615,658


    Net income attributable
     to China Biologic
     Products, Inc.                             31,542,883        2,208,126
                                                ==========        =========

    Earnings per share:
               Basic                                 $1.34            $0.10
                                                     =====            =====
               Diluted                               $1.30            $0.10
                                                     =====            =====

    Weighted average shares
     used in computation:
               Basic                           $23,586,506      $21,754,911
                                               ===========      ===========
               Diluted                         $24,176,432      $21,949,638
                                               ===========      ===========


    CHINA BIOLOGIC PRODUCTS, INC. AND SUBSIDIARIES
              CONSOLIDATED BALANCE SHEETS

                                               December             December
                                               31, 2010             31, 2009
                                               --------             --------

                ASSETS
            Current Assets
              Cash and cash
                equivalents                 $64,941,368          $53,843,951
         Accounts receivable, net
             of allowance for
             doubtful accounts                9,922,111            1,767,076
          Accounts receivable -a
               related party                    212,611              222,617
               Inventories                   52,300,447           35,132,724
            Other receivables                 2,727,110            2,186,441
         Prepayments and prepaid
                 expenses                       855,338            1,299,125
           Deferred tax assets                1,860,753            1,053,771
                                              ---------            ---------
             Total Current Assets           132,819,738           95,505,705

          Property, plant and
             equipment, net                  39,511,731           28,873,413
        Intangible assets, net               14,559,020           17,200,512
          Land use right, net                 4,701,450            3,979,810
         Prepayments for non-
             current assets                   4,254,423            3,223,960
               Goodwill                      17,778,231           17,200,728
       Equity method investment               7,297,201            6,627,355
                                              ---------            ---------
                 Total Assets              $220,921,794         $172,611,483
                                           ============         ============

            LIABILITIES AND
          STOCKHOLDERS' EQUITY
          Current liabilities
          Short-term bank loans              $3,034,000           $4,401,000
            Short term loans -
          noncontrolling interest                     -            3,652,500
             Accounts payable                 4,392,772            3,750,441
          Due to related party                3,192,140            3,086,940
            Other payables and
             accrued expenses                21,606,730           21,516,116
            Accrued interest -
          noncontrolling interest                     -            2,068,526
          Advance from customers              3,560,018            3,868,577
            Income tax payable                6,659,805            7,479,279
           Other taxes payable                2,146,868            1,294,800
            Convertible notes                 1,196,233               89,760
        Derivative liabilities -
           embedded conversion
          option in convertible
                  notes                      14,561,661           19,960,145
        Derivative liabilities -
                 warrants                    11,095,592           12,701,262
                                             ----------           ----------
                Total Current
                  Liabilities                71,445,819           83,869,346
             Other payable                      333,008              323,687
       Deferred tax liabilities               4,098,834            4,275,295
                                              ---------            ---------
              Total Liabilities              75,877,661           88,468,328

         Stockholder's Equity
         Common stock: par value
           $.0001; 100,000,000
            shares authorized;
              24,351,126 and
            23,056,442 shares
          issued and outstanding
          at December 31, 2010
          and 2009, respectively              2,435            2,305
            Additional paid-in
                  capital                    35,435,139           21,270,601
            Retained earnings                55,739,101           24,196,218
            Accumulated other
           comprehensive income               8,023,121            4,227,537
                                              ---------            ---------
             Total stockholder's
            equity attributable to
                China Biologic
                Products, Inc.               99,199,796           49,696,661

         Noncontrolling interest             45,844,337           34,446,494
                                             ----------           ----------

             Total Stockholder's
                    Equity                  145,044,133           84,143,155
                                            -----------           ----------

             Commitments and
               contingencies                          -                    -

            Total Liabilities and
             Stockholder's Equity          $220,921,794         $172,611,483
                                           ============         ============


    CHINA BIOLOGIC PRODUCTS, INC. AND SUBSIDIARIES
         CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                   2010         2009
                                                   ----         ----
    CASH FLOWS FROM OPERATING
     ACTIVITIES:
       Net income                            51,992,304   18,823,784
       Adjustments to reconcile net
        income to cash provided by
        operating activities:
               Depreciation                   3,607,184    2,709,623
               Amortization                   3,566,269    3,358,532
               Loss on sale of property,
                plant and equipment             120,224      224,548
               Reversal of allowance for
                doubtful accounts, net          (57,624)     (13,089)
               Provision for doubtful
                accounts -other
                receivables and prepayments     475,346      280,796
               Write-down of obsolete
                inventories                     451,761      519,333
               Deferred tax benefit, net     (1,101,171)  (1,552,661)
               Stock compensation             2,341,783       62,281
               Change in fair value of
                derivative liabilities        3,233,288   28,915,328
               Amortization of deferred
                note issuance cost              258,753      247,199
               Amortization of discount on
                convertible notes             1,590,740      100,253
               Equity in income of equity
                method investee              (1,070,241)    (566,984)
          Change in operating assets
           and liabilities, net of
           acquisition in Dalin:
               Accounts receivable - third
                parties                      (7,837,681)  (1,707,714)
               Accounts receivable -
                related party                    17,158      197,284
               Other receivables                182,686   (1,744,794)
               Inventories                  (16,026,215) (12,456,975)
               Prepayments and prepaid
                expenses                        (91,307)    (248,794)
               Accounts payable                 505,407      (58,467)
               Other payables and accrued
                expenses                       (596,938)   7,058,773
               Accrued interest -
                noncontrolling interest
                shareholders                 (2,086,010)   2,068,526
               Advance from customers          (429,497)     274,768
               Income tax payable            (1,046,906)   2,943,767
               Other taxes payable              787,913      865,670
                                                -------      -------
    Net cash provided by
     operating activities                    38,787,226   50,300,987
                                             ----------   ----------

    CASH FLOWS FROM INVESTING
     ACTIVITIES:
       Dividends received                             -      384,087
       Acquisition of a subsidiary,
        net of cash acquired                 (4,063,325)   1,573,079
       Acquisition of equity method
        investment                                    -   (3,225,420)
       Purchase of property, plant
        and equipment                       (10,313,432)  (3,522,768)
       Purchase of intangible
        assets and land use right            (1,474,718)  (2,106,203)
       Proceeds from sale of
        property, plant and
        equipment                                     -       36,771
    Net cash used in investing
     activities                             (15,851,475)  (6,860,454)
                                            -----------   ----------


                       CHINA BIOLOGIC PRODUCTS, INC. AND SUBSIDIARIES
                            CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                      2,010        2,009
                                                      -----        -----

    CASH FLOWS FROM FINANCING
     ACTIVITIES:
       Proceeds from warrants exercised           1,232,482    3,649,770
       Proceeds from option exercised                97,600      350,000
       Proceeds from issuance of
        convertible notes                                 -    8,967,516
       Repayments of former
        shareholders loan in a
        subsidiary                                        -   (2,841,302)
       Proceeds from short term bank
        loans                                     5,917,600   13,536,688
       Repayment of short term bank
        loans                                    (7,397,000) (18,355,572)
       Repayment of loan from
        noncontrolling interest holder           (3,683,373)    (772,803)
       Dividends paid by subsidiaries
        to noncontrolling interest
        shareholders                            (10,446,179)  (2,969,372)
                                                -----------   ----------
    Net cash (used)/provided by
     financing activities                       (14,278,870)   1,564,925
                                                -----------    ---------
    EFFECT OF FOREIGN EXCHANGE RATE
     CHANGES ON CASH                              2,440,536       23,877
                                                  =========       ======


    NET INCREASE IN CASH                         11,097,417   45,029,335
                                                 ==========   ==========


    Cash and cash equivalents at
     beginning of year                           53,843,951    8,814,616
                                                 ==========    =========


    Cash and cash equivalents at end
     of year                                    $64,941,368  $53,843,951
                                                ===========  ===========

    Supplemental cash flow
     information
       Cash paid for income taxes               $15,756,832   $8,021,981
                                                ===========   ==========
       Cash paid for interest expense
        (net of capitalized interest)              $810,643   $1,131,271
                                                   ========   ==========
       Noncash investing and financing
        activities:

           Reclassification of warrant
            liability to paid-in capital
            upon warrants conversion             $3,045,611   $4,921,639
                                                 ==========   ==========
           Convertible notes conversion          $7,191,763   $2,187,330
                                                 ==========   ==========
           Distribution paid by offsetting
            accounts receivable -related
            party                             $           -     $944,036
                                            ===         ===     ========
           Distribution paid in exchange of
            noncontrolling interest
            shareholders loan                 $           -   $3,665,250
                                            ===         ===   ==========
           Distribution paid by offsetting
            loan and interest due from
            holder of                         $           -   $4,647,924
                                            ===         ===   ==========
    noncontrolling interest

           Net assets acquired with
            prepayments made in prior
            periods                           $           -  $14,250,492
                                            ===         ===  ===========
           Net assets acquired with unpaid
            investment                        $           -   $2,850,098
                                            ===         ===   ==========
           Property, plant and equipment
            acquired with prepayments made
            in prior periods                     $1,078,348   $2,296,113
                                                 ==========   ==========
           Land use right acquired with
            prepayments made in prior
            periods                           $           -     $146,610
                                            ===         ===     ========


    CHINA BIOLOGIC PRODUCTS, INC. AND SUBSIDIARIES
    CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME


                                                    Common stock
                                             Shares            Par value
                                             ------            ---------


    Balance as of January 1, 2009           21,434,942             $2,143
       Cumulative effect of
        reclassification of 2006 Warrants
        (see Note 14)                                -                  -
                                                   ---                ---
    Balance as of January 1, 2009
     (reclassified)                         21,434,942             $2,143
                                            ==========             ======

       Net income                                    -                  -
       Foreign currency translation
        adjustments, net of nil income
        taxes                                        -                  -
       Comprehensive income

    Dividends declared by subsidiaries
     to noncontrolling interest                                         -
    Acquisition of Dalin                             -                  -
       Stock compensation                            -                  -
    Common stock issued in connection
     with:
          - Exercise of warrants             1,284,000                128
          - Exercise of stock option            87,500                  9
          -Conversion of convertible notes     250,000                 25
                                               -------                ---
    Balance as of December 31, 2009         23,056,442             $2,305
                                            ==========             ======

       Net income                                    -                  -
       Foreign currency translation
        adjustments, net of nil income
        taxes                                        -                  -
     Comprehensive income

       Dividend declared by subsidiaries to
        noncontrolling interest                      -                  -
       Acquisition of noncontrolling
        interests                                    -                  -
       Stock compensation                            -                  -
    Common stock issued in connection
     with:
          - Exercise of warrants               294,019                 30
          - Exercise of stock option            37,130                  4
          -Conversion of convertible notes     963,535                 96
                                               -------                ---
    Balance as of December 31, 2010         24,351,126             $2,435
                                            ==========             ======




                                                Additional   Retained
                                                  paid-in
                                                  capital    earnings
                                                 --------    --------


    Balance as of January 1, 2009               $10,700,032  $22,382,054
       Cumulative effect of reclassification of
        2006 Warrants (see Note 14)                (600,289)    (393,962)
                                                   --------     --------
    Balance as of January 1, 2009
     (reclassified)                             $10,099,743  $21,988,092
                                                ===========  ===========

       Net income                                         -    2,208,126
       Foreign currency translation
        adjustments, net of nil income taxes              -            -
       Comprehensive income

    Dividends declared by subsidiaries to
     noncontrolling interest                              -            -
    Acquisition of Dalin                                  -            -
       Stock compensation                            62,281            -
    Common stock issued in connection with:
          - Exercise of warrants                  8,571,281            -
          - Exercise of stock option                349,991            -
          - Conversion of convertible notes       2,187,305            -
                                                  ---------          ---
    Balance as of December 31, 2009             $21,270,601  $24,196,218
                                                ===========  ===========

       Net income                                         -   31,542,883
       Foreign currency translation
        adjustments, net of nil income taxes              -            -
     Comprehensive income

       Dividend declared by subsidiaries to
        noncontrolling interest                           -            -
       Acquisition of noncontrolling interests            -            -
       Stock compensation                         2,341,783            -
    Common stock issued in connection with:
          - Exercise of warrants                  4,278,160            -
          - Exercise of stock option                 97,596            -
          - Conversion of convertible notes       7,446,999            -
                                                  ---------          ---
    Balance as of December 31, 2010             $35,435,139  $55,739,101
                                                ===========  ===========



                               Accumulated
                                  other
                             comprehensive  Noncontrolling
                                 income        interest     Total equity
                                 ------        --------     ------------


    Balance as of January
     1, 2009                     $4,159,298     $4,805,381    $42,048,908
       Cumulative effect of
        reclassification of
        2006 Warrants (see
        Note 14)                          -              -       (994,251)
                                        ---            ---       --------
    Balance as of January
     1, 2009
     (reclassified)              $4,159,298     $4,805,381    $41,054,657
                                 ==========     ==========    ===========

       Net income                         -     16,615,658     18,823,784
       Foreign currency
        translation
        adjustments, net of
        nil income taxes             68,239        455,788        524,027
                                                                  -------
       Comprehensive income                                    19,347,811
                                                               ==========

    Dividends declared by
     subsidiaries to
     noncontrolling
     interest                             -     (8,955,392)    (8,955,392)
    Acquisition of Dalin                  -     21,525,059     21,525,059
       Stock compensation                 -              -         62,281
    Common stock issued
     in connection with:
          -Exercise of
           warrants                       -              -      8,571,409
          -Exercise of stock
           option                         -              -        350,000
          -Conversion of
           convertible notes              -              -      2,187,330
                                        ---            ---      ---------
    Balance as of
     December 31, 2009           $4,227,537    $34,446,494    $84,143,155
                                 ==========    ===========    ===========

       Net income                         -     20,449,421     51,992,304
       Foreign currency
        translation
        adjustments, net of
        nil income taxes          3,795,584      1,381,931      5,177,515
                                                                ---------
     Comprehensive income                                      57,169,819
                                                               ==========

       Dividend declared by
        subsidiaries to
        noncontrolling
        interest                          -    (10,446,179)   (10,446,179)
       Acquisition of
        noncontrolling
        interests                         -         12,670         12,670
       Stock compensation                 -              -      2,341,783
    Common stock issued
     in connection with:
          -Exercise of
           warrants                       -              -      4,278,190
          -Exercise of stock
           option                         -              -         97,600
          -Conversion of
           convertible notes              -              -      7,447,095
                                        ---            ---      ---------
    Balance as of
     December 31, 2010           $8,023,121    $45,844,337   $145,044,133
                                 ==========    ===========   ============


                          Non-GAAP to GAAP reconciliation table

                                    Fiscal Year Ended      Fiscal Year Ended
                                    December 31, 2010      December 31, 2009
                                                Diluted              Diluted
    Net Income (Loss) Diluted EPS  Net Income     EPS   Net Income      EPS
    Adjusted Net Income - Non GAAP  $38,967,447    $1.61 $31,487,745    $1.43
    ------------------------------  -----------    ----- -----------    -----
    Non-cash employee
     compensation (1)                $2,341,783    $0.10     $62,281    $0.00
    Loss in fair value of
     derivative liabilities (2)      $3,233,288    $0.13 $28,915,328    $1.32
    Interest of Convertible Notes
     (3)                             $1,849,493    $0.08    $302,010    $0.01
    Net Income attributable to
     controlling interest           $31,542,883    $1.30  $2,208,126    $0.10
    Weighted average number of
     Shares                          24,176,432           21,949,638



                                   Company Contact
                                  Mr. Y. Tristan Kuo
                               Chief Financial Officer
                            China Biologic Products, Inc.
                              Telephone: +86-538-6202206
                             Email: ir@chinabiologic.com
                                www.chinabiologic.com

SOURCE China Biologic Products, Inc.

SOURCE: China Biologic Products, Inc.

China Biologic Products Reports Record Sales and Net Income for 2010

PR Newswire

TAI'AN, SHANDONG PROVINCE, China, March 31, 2011 /PRNewswire-Asia-FirstCall/ --  China Biologic Products, Inc. (Nasdaq: CBPO) ("China Biologic" or the "Company"), one of the leading plasma-based biopharmaceutical companies in the People's Republic of China ("PRC"), today reported record sales and net income for the year ended December 31, 2010.

  • Sales increased $20.7 million or 17.4% to $139.7 million for the year ended December 31, 2010 from $119.0 million in 2009.
  • Gross profit increased $16.4 million or 18.9% to $102.7 million in 2010 from $86.4 million in 2009. Gross profit as a percent of sales increased to 73.5% in 2010 from 72.6% in 2009.
  • Income from operations increased $8.1 million or 13.3% to $69.5 million in 2010 from $61.4 million in 2009.
  • GAAP Net income attributable to China Biologic in 2010 was $31.5 million or $1.30 per diluted share, including a $3.2 million non-cash charge related to change in the fair value of derivative liabilities, compared with $2.2 million or $0.10 per diluted share in 2009, which includes a $28.9 million non-cash charge related to change in the fair value of derivative liabilities.
  • Non-GAAP adjusted net income was $39.0 million or $1.61 per diluted share in 2010 compared with $31.5 million or $1.43 per diluted share in 2009.

In addition, China Biologic announced that it has restated the financial statements for the year 2009 and will restate the financial statements for the interim periods for years 2009 and 2010 as soon as practical which will be set forth in its Annual Report on Form 10-K for the year ended December 31, 2010 and the amendments to the periodic reports for the affected periods. The revisions were made primarily to correct: (1) inadvertent omission of the fair value of the callable features embedded in the warrants issued on July 19, 2006 (the "2006 Warrants") and (ii) misinterpretation of US GAAP regarding recognition of deferred tax liabilities related to the acquisition of Guiyang Dalin Biologic Technologies Co., Ltd. ("Dalin") in 2009 (the "Dalin Acquisition"). The Company expects that the restatement will not have an effect on the Company's liquidity, cash resources, or future business operations because they are all noncash adjustments.

CEO comments

Mr. Chao Ming (Colin) Zhao, Chief Executive Officer of China Biologic, said, "We are pleased with our progress and good operating and financial results for 2010. We believe our acquisitions from 2008 and 2009 are starting to deliver the expected good performance."

"We believe that our strategy of direct institutional sales remains the good long-term model for serving our customers for our products and markets in China. When we acquired Dalin, we converted its sales model to direct institutional sales from sales conducted mainly through distributors. In 2010, direct institutional sales of Dalin did not grow as quickly as we expected. We will continue to strengthen Dalin's direct institutional sales approach in 2011.

"We have restated our financial statements for the year 2009 and will restate the financial statements for the interim periods for years 2009 and 2010 due to adjustments to certain non-cash items below our operating income line, which are mainly associated with the evaluation of the fair market value of the callable feature of our warrants previously issued in 2006 and deferred tax liabilities in connection with the Company's prior acquisition of Dalin. We believe these adjustments will not negatively affect our operations and affect our ability to be successful in our business, expand our market share, generate free cash flow, or achieve our long-term strategic goals.

"With the continuing expansion of China's economy, China Biologic's outlook for 2011 remains good. We believe higher health standards will continue to be among the government's priorities. And our plasma collection stations and processing facilities are in good locations and are operating at high standards.

"In addition, we have completed the development stages for two new products and expect their approval by China's State Food and Drug Administration in 2011.

"We expect to continue to grow our business, primarily by internal growth and, when appropriate, by prudent acquisitions that can enlarge our geographic operations or provide natural extensions of our current product lines. We look forward to the year 2011 with confidence and determination."

The 2010 financial results presented below reflect the restatement made for fiscal year 2009. For a more detailed information about the restatements, please see below under the heading "Restatements of the financial statements for year 2009 and the interim periods for years 2009 and 2010."

Results for the year 2010

Revenues increased 17.4% or $20.7 million to $139.7 million in 2010 from $119.0 million in 2009 due mainly to a general increase in the price and volume of plasma based products.

Sales from human albumin product rose approximately 13.4% year-over-year to approximately $67.1 million, accounting for approximately 48.0% of the total sales in 2010, as compared to approximately 49.7% in 2009. Sales volume of human albumin products increased approximately 15.7% in 2010 as compared to 2009, while average selling price ("ASP") of human albumin decreased by1.8%. The price decrease in human albumin is due to the increased in volume of imported human albumin products in 2010 and we believe the trend may continue as long as the volume of the imported human albumin products continue to grow. Sales from human immunoglobulin for intravenous injection ("IVIG") grew approximately 9.6% to approximately $48.0 million in 2010 and represented approximately 34.3% of the total sales, as compared to approximately 36.8% of total sales in 2009. Increase in sales from IVIG was mainly due to an approximately 26.9% increase in ASP which was partially offset by an approximately 15.8% decrease in sales volume. Sales from the human tetanus immunoglobulin products rose approximately 55.8% to approximately $4.1 million, contributing approximately 2.9% of total sales in 2010 as compared to approximately 2.2% in 2009. Sales volume and ASP for human tetanus immunoglobulin increased approximately 24.6% and 12.6%, respectively. Sales from human hepatitis B immunoglobulin rose approximately 206.7% to approximately $10.6 million, contributing approximately 7.6% of the total sales in 2010 as compared to approximately 2.9% in 2009. Sales volume and ASP for human hepatitis B immunoglobulin increased approximately 7.4% and 186.4% in 2010, respectively. Sales from human rabies immunoglobulin rose approximately 57.2% to $7.5 million, contributing approximately 5.3% of total sales in 2010 as compared to approximately 4.0% in 2009. Sales volume and ASP for sales human rabies immunoglobulin increased 26.5% and 24.6% in 2010, respectively.

Gross profit increased $16.4 million or 18.9% to $102.7 million in 2010 from $86.4 million in 2009. Gross profit margin was 73.5% in 2010, as compared to 72.6% in the prior year.

Total operating expenses in 2010 increased 32.9% to $33.2 million, as compared to $25.0 million in the prior year. As a percentage of total sales, total expenses increased to 23.8% in 2010 from 21.0% in 2009.

Selling expenses increased 108.9% to $7.4 million in 2010 from $3.5 million in 2009. As a percentage of total sales, selling expenses increased to 5.3% in 2010 from 3.0% in 2009. The increase in selling expenses was primarily due to the increased marketing efforts in connection with strengthening our direct institution sales approach.

General and administrative ("G&A") expenses increased 18.7% to $23.5 million in 2010. As a percentage of total sales, G&A expenses were 16.8% and 16.6% for 2010 and 2009, respectively.  The dollar increase in G&A expenses was mainly due to higher expenses in professional services, non-cash employee compensation, travel, and general office expenses as we continue our efforts in integrating our two main operating entities, and an increased amount of inventory allowance for reserving non-useable plasma in connection with 90 day plasma quarantine rules implemented by China SFDA in July 2008. The Company incurred $2.3 million in non-cash employee compensation in 2010, as compared to $62,281 in 2009.

Research and development expenses increased 40.5% to $2.3 million, or 1.7% of total sales in 2010, as compared to $1.7 million, or 1.4% in 2009. The dollar increase was primarily due to the costs associated with the development of two new products that are at the end of their development stages.

Income from operations increased 13.3% to $69.5 million or 49.8% of total sales in 2010, as compared to $61.4 million, or 51.6% in 2009.

Total loss related to change in fair value of derivative liabilities in 2010 was $3.2 million, as compared to $28.9 million in the prior year. Net interest expense decreased to $1.9 million in 2010 from $3.9 million in 2009, primarily due to the related party loan associated with the Dalin Acquisition being paid off in the second quarter of 2010.

The provision for income taxes increased 35.9% to $13.6 million in 2010, from $10.0 million in 2009. The effective tax rate in 2010 was 20.7%, as compared to 34.7% in 2009. The decrease in effective tax rate was mainly due to lower non-tax deductible charges of $25.7 million in the change in fair value of derivative liabilities as compared to the 2010.

GAAP net income attributable to China Biologic in 2010 was $31.5 million, or $1.30 per diluted share, as compared to $2.2 million, or $0.10 per diluted share, in 2009. Non-GAAP adjusted net income was $39.0 million, or $1.61 per diluted share, in 2010, as compared to $31.5 million, or $1.43 per diluted share, in 2009. Non-GAAP adjusted net income and diluted earnings per share in 2010 excluded an aggregate of $7.4 million charges, which are related to change in the fair value of derivative liabilities and non-cash employee compensation expenses after adding back interest related to the convertible notes under the if-converted method. Please see the table at the end of the release that reconciles our non-GAAP measures with the nearest comparable GAAP measures.

Financial Condition

As of December 31, 2010, the Company had $64.9 million in cash and cash equivalents, approximately $61.4 million in working capital, and a current ratio of 185.9%. Total shareholder's equity on December 31, 2010 was $145.0 million, as compared to $84.1 million at the end of 2009. The Company generated $38.8 million in net cash from operating activities in 2010 as compared to $50.3 million in 2009.

Guidance and business outlook for 2011

China Biologic expects 2011 revenue to be in the range of $154 million and $168 million. This guidance assumes only organic growth and excludes acquisitions and construction of new facilities. The guidance necessarily assumes no significant adverse price changes during 2011.

The Company expects 2011 adjusted net income to be in the range of $41 million to $43 million, excluding any non-cash charge or gain related to change in the fair value of derivative liabilities and stock-based compensation expense and any adjustments in the U.S. federal income tax provision in 2011 related to the expiration of the look-through exception for Subpart F income on December 31, 2011. To support its business expansion, the Company expects to have substantially higher expenses in 2011 to expand its geographic market coverage, add new customers, and increase direct sales to institutional customers of its products. Due to the expected expense increase associated with our marketing and sales efforts, we anticipate modest growth in adjusted net income for 2011 despite anticipated growth in sales in 2011.

As a corporate policy, the Company does not intend to update this guidance during the year unless required by the applicable laws. This forecast reflects the Company's current and preliminary views, which are subject to change.

Restatements of the financial statements for year 2009 and the interim periods for years 2009 and 2010

The Company's audit committee has determined that it will restate its previously issued financial statements for the year 2009 and the interim periods for years 2009 and 2010 to reflect the correction of accounting errors in connection with reevaluation of the accounting treatments for two issues: (1) inadvertently omission of the fair value of callable feature embedded in the 2006 Warrants; and (2) misinterpretation of US GAAP regarding the recognition of deferred tax liabilities in connection with the Dalin Acquisition.

Recognition of fair value of the callable feature for the 2006 Warrants

In 2006, the Company issued 1,070,000 warrants to certain accredited investors. According to the terms of the 2006 Warrants, the Company may, in its sole discretion, elect to require the 2006 Warrants holders to exercise up to all of the unexercised portion of the 2006 Warrants ("Callable Feature").  The Company inadvertently omitted the fair value of the Callable Features embedded in the 2006 Warrants when reclassifying the fair value of 2006 Warrants from equity to derivative liabilities as of January 1, 2009 while adopting EITF 07-5, "Determining Whether an Instrument (or Embedded Feature) Is Indexed to an Entity's Own Stock" (FASB ASC 815-40-15-5) (or "EITF 07-05").  As a result, the retained earnings and additional paid-in capital should have been increased by $535,615 and $138,160, respectively, and the derivative liabilities should have been decreased by $673,775 as of January 1, 2009. During the year ended December 31, 2009, all of the 2006 Warrants were exercised.  The Company inadvertently omitted recognizing the impact of fair value change arising from the Callable Feature in estimating the fair value of the 2006 Warrants during 2009.  As a result, the loss of change in fair value of derivative liabilities during the year ended December 31, 2009 should have been decreased by $710,861. The retained earnings and additional paid-in capital should have been increased by $1,246,476 and decreased by $1,246,476, respectively, as of December 31, 2009.

Recognition of deferred tax liabilities in connection with the Dalin Acquisition

In connection with the Dalin Acquisition in 2009, the Company misinterpreted US GAAP regarding the accounting for the business combination. As a result, the Company did not recognize deferred tax liabilities for differences between the assigned values and the tax bases of the intangible assets and certain property, plant and equipment acquired in the Dalin Acquisition in accordance with ASC Topic 740, Income Taxes. As of January 1, 2009, deferred tax liabilities of $4,749,099 should have been recognized with a corresponding increase in goodwill of $4,749,099. During the year ended December 31, 2009, the Company also should have recorded deferred tax benefit representing the tax effect of the amortization of intangible assets and the depreciation of property, plant and equipment for the year ended December 31, 2009. As a result, the goodwill, deferred tax liabilities, retained earnings, noncontrolling interest and accumulated other comprehensive income of the Company should have been increased by $4,775,139, $4,275,295, $232,368, $267,333 and $143, respectively, as of December 31, 2009.

Conference call

China Biologic will host a dial-in conference call at 7:00 a.m. EDT (New York) on Friday, April 1, 2011, to discuss its results for 2010. To participate in the conference call, please dial the appropriate number about 10 minutes prior to the scheduled conference call time:

The dial-in details for the live conference call are:

U.S. toll-free number

1 866 549 1292

Mainland China toll-free number

400 681 6949

Hong Kong local access

3005 2050

International toll number

+852 3005 2050

Participant pass code

674 477#



A telephone replay of the call will be available after the conclusion of the conference all through 8:00 a.m. EDT on April 8, 2011.

The dial-in details for the telephone replay are:

U.S. toll-free number

1 866 753 0743

Mainland China toll free number

800 876 8594

Hong Kong local access

3005 2020

International dial-in toll number  

+852 3005 2020

Replay pass code

138 012#



Use of non-GAAP financial measures

This press release contains non-GAAP financial measures that exclude non-cash compensation expenses related to options granted to employees and directors under the Company's 2008 Equity Incentive Plan and changes in the fair value of derivative liabilities, including warrants and derivative instruments (including the conversion option) embedded in the Company's Senior Secured Convertible Notes (after adding back interest related to the convertible notes under the if-converted method). To supplement the Company's condensed consolidated financial statements presented on a GAAP basis, the Company has provided non-GAAP financial information excluding the impact of this item in this release. The Company's management believes that these non-GAAP measures provide investors with a better understanding of how the results relate to the Company's historical performance. A reconciliation of the adjustments to GAAP results appears in the table accompanying this press release. This additional non-GAAP information is not meant to be considered in isolation or as a substitute for GAAP financials. The non-GAAP financial information that the Company provides also may differ from the non-GAAP information provided by other companies.

About China Biologic Products, Inc.

China Biologic Products, Inc., through its indirect majority-owned subsidiaries, Shandong Taibang Biological Products Co. Ltd. and Guiyang Dalin Biologic Technologies Co., Ltd, and its equity investment in Xi'an Huitian Blood Products Co., Ltd., is currently the largest non-state-owned plasma-based biopharmaceutical company in China. The Company is a fully integrated biologic products company with plasma collection, production and manufacturing, research and development, and commercial operations. The Company's plasma-based biopharmaceutical products are irreplaceable during medical emergencies, and are used for the prevention and treatment of various diseases. The Company sells its products to hospitals and other healthcare facilities in China. Please see the Company's website www.chinabiologic.com for additional information.

Safe harbor statement

This release may contain certain "forward-looking statements" relating to the business of China Biologic Products, Inc. and its subsidiaries. All statements, other than statements of historical fact included herein are "forward-looking statements," including, among others, statements regarding: the Company's expected financial performance in 2011 and our ability to deliver such results; our new products and expected government approval,; the Company's ability to build new or expand existing plasma collection stations; expected growth in Chinese economy and our business, our expected financial performance and strategic and operational plans, our future operating results, our expectations regarding the market for our products, as well as all assumptions, expectations, predictions, intentions or beliefs about future events.. These forward-looking statements are often identified by the use of forward-looking terminology such as "believes," "expects" or similar expressions, and 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. Investors 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 statements follow.

CHINA BIOLOGIC PRODUCTS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME





For the Years Ended





December 31, 2010


December 31,2009












Sales








           External customers


$

138,674,983

$

118,293,137



           Related party



1,020,434


705,018



Total sales



139,695,417


118,998,155











Cost of sales








           External customers



36,793,775


32,544,743



           Related party



157,374


77,165



Cost of sales



36,951,149


32,621,908











Gross profit



102,744,268


86,376,247











Operating expenses








           Selling expenses



7,372,348


3,529,242



           General and administrative expenses



23,510,566


19,807,123



           Research and development expenses



2,336,126


1,662,690











Income from operations



69,525,228


61,377,192











Other expenses/(income)








           Equity in income of equity method investee



(1,070,241)


(566,984)



           Change in fair value of derivative liabilities



3,233,288


28,915,328



           Interest expense, net



1,930,165


3,930,249



           Other (income)/expense, net



(169,043)


261,252



Total other expenses, net



3,924,169


32,539,845











Earnings before income tax expense



65,601,059


28,837,347











Income tax expense



13,608,755


10,013,563











Net income



51,992,304


18,823,784











Less: Net income attributable to the noncontrolling interest



20,449,421


16,615,658











Net income attributable to China Biologic Products, Inc.



31,542,883


2,208,126











Earnings per share:








           Basic


$

1.34

$

0.10



           Diluted


$

1.30

$

0.10











Weighted average shares used in computation:








           Basic


$

23,586,506

$

21,754,911



           Diluted


$

24,176,432

$

21,949,638






CHINA BIOLOGIC PRODUCTS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS




December



December





31, 2010



31, 2009










ASSETS








Current Assets








   Cash and cash equivalents


$

64,941,368


$

53,843,951


   Accounts receivable, net of allowance for doubtful accounts



9,922,111



1,767,076


   Accounts receivable - a related party



212,611



222,617


   Inventories



52,300,447



35,132,724


   Other receivables



2,727,110



2,186,441


   Prepayments and prepaid expenses



855,338



1,299,125


   Deferred tax assets



1,860,753



1,053,771


       Total Current Assets



132,819,738



95,505,705










Property, plant and equipment, net



39,511,731



28,873,413


Intangible assets, net



14,559,020



17,200,512


Land use right, net



4,701,450



3,979,810


Prepayments for non-current assets



4,254,423



3,223,960


Goodwill



17,778,231



17,200,728


Equity method investment



7,297,201



6,627,355


       Total Assets


$

220,921,794


$

172,611,483










LIABILITIES AND STOCKHOLDERS' EQUITY








Current liabilities








   Short-term bank loans


$

3,034,000


$

4,401,000


   Short term loans - noncontrolling interest



-



3,652,500


   Accounts payable



4,392,772



3,750,441


   Due to related party



3,192,140



3,086,940


   Other payables and accrued expenses



21,606,730



21,516,116


   Accrued interest - noncontrolling interest  



-



2,068,526


   Advance from customers



3,560,018



3,868,577


   Income tax payable



6,659,805



7,479,279


   Other taxes payable



2,146,868



1,294,800


Convertible notes



1,196,233



89,760


Derivative liabilities - embedded conversion option in convertible notes



14,561,661



19,960,145


Derivative liabilities - warrants



11,095,592



12,701,262


       Total Current Liabilities



71,445,819



83,869,346


Other payable



333,008



323,687


Deferred tax liabilities



4,098,834



4,275,295


       Total Liabilities



75,877,661



88,468,328










Stockholder's Equity








Common stock: par value $.0001; 100,000,000 shares authorized; 24,351,126 and 23,056,442 shares issued and outstanding at December 31, 2010 and 2009, respectively



2,435



2,305


   Additional paid-in capital



35,435,139



21,270,601


   Retained earnings



55,739,101



24,196,218


   Accumulated other comprehensive income



8,023,121



4,227,537


       Total stockholder's equity attributable to China Biologic Products, Inc.



99,199,796



49,696,661










   Noncontrolling interest



45,844,337



34,446,494










       Total Stockholder's Equity



145,044,133



84,143,155










   Commitments and contingencies



-



-










       Total Liabilities and  Stockholder's Equity


$

220,921,794


$

172,611,483





CHINA BIOLOGIC PRODUCTS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS




2010



2009


CASH FLOWS FROM OPERATING ACTIVITIES:







   Net income


51,992,304



18,823,784


   Adjustments to reconcile net income to cash provided by operating activities:







           Depreciation


3,607,184



2,709,623


           Amortization


3,566,269



3,358,532


           Loss on sale of property, plant and equipment


120,224



224,548


           Reversal of allowance for doubtful accounts, net


(57,624)



(13,089)


           Provision for doubtful accounts - other receivables and prepayments


475,346



280,796


           Write-down of obsolete inventories


451,761



519,333


           Deferred tax benefit, net


(1,101,171)



(1,552,661)


           Stock compensation


2,341,783



62,281


           Change in fair value of derivative liabilities


3,233,288



28,915,328


           Amortization of deferred note issuance cost


258,753



247,199


           Amortization of discount on convertible notes


1,590,740



100,253


           Equity in income of equity method investee


(1,070,241)



(566,984)


      Change in operating assets and liabilities, net of acquisition in Dalin:







           Accounts receivable – third parties


(7,837,681)



(1,707,714)


           Accounts receivable - related party


17,158



197,284


           Other receivables


182,686



(1,744,794)


           Inventories


(16,026,215)



(12,456,975)


           Prepayments and prepaid expenses


(91,307)



(248,794)


           Accounts payable


505,407



(58,467)


           Other payables and accrued expenses


(596,938)



7,058,773


           Accrued interest - noncontrolling interest shareholders


(2,086,010)



2,068,526


           Advance from customers


(429,497)



274,768


           Income tax payable


(1,046,906)



2,943,767


           Other taxes payable


787,913



865,670


Net cash provided by operating activities


38,787,226



50,300,987









CASH FLOWS FROM INVESTING ACTIVITIES:







   Dividends received


-



384,087


   Acquisition of a subsidiary, net of cash acquired


(4,063,325)



1,573,079


   Acquisition of equity method investment


-



(3,225,420)


   Purchase of property, plant and equipment


(10,313,432)



(3,522,768)


   Purchase of intangible assets and land use right


(1,474,718)



(2,106,203)


   Proceeds from sale of property, plant and equipment


-



36,771


Net cash used in investing activities


(15,851,475)



(6,860,454)





CHINA BIOLOGIC PRODUCTS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS




2,010


2,009






CASH FLOWS FROM FINANCING ACTIVITIES:





   Proceeds from warrants exercised


1,232,482


3,649,770

   Proceeds from option exercised


97,600


350,000

   Proceeds from issuance of convertible notes


-


8,967,516

   Repayments of former shareholders loan in a subsidiary


-


(2,841,302)

   Proceeds from short term bank loans


5,917,600


13,536,688

   Repayment of short term bank loans


(7,397,000)


(18,355,572)

   Repayment of loan from noncontrolling interest holder


(3,683,373)


(772,803)

   Dividends paid by subsidiaries to noncontrolling interest shareholders


(10,446,179)


(2,969,372)

Net cash (used)/provided by financing activities


(14,278,870)


1,564,925

EFFECT OF FOREIGN EXCHANGE RATE CHANGES ON CASH


2,440,536


23,877






NET INCREASE IN CASH


11,097,417


45,029,335






Cash and cash equivalents at beginning of year


53,843,951


8,814,616






Cash and cash equivalents at end of year

$

64,941,368

$

53,843,951






Supplemental cash flow information





   Cash paid for income taxes

$

15,756,832

$

8,021,981

   Cash paid for interest expense (net of capitalized interest)

$

810,643

$

1,131,271

   Noncash investing and financing activities:





       Reclassification of warrant liability to paid-in capital upon warrants conversion

$

3,045,611

$

4,921,639

       Convertible notes conversion

$

7,191,763

$

2,187,330

       Distribution paid by offsetting accounts receivable - related party

$

-

$

944,036

       Distribution paid in exchange of noncontrolling interest shareholders loan

$

-

$

3,665,250

       Distribution paid by offsetting loan and interest due from holder of

$

-

$

4,647,924

noncontrolling interest

       Net assets acquired with prepayments made in prior periods

$

-

$

14,250,492

       Net assets acquired with unpaid investment

$

-

$

2,850,098

       Property, plant and equipment acquired with prepayments made in prior periods

$

1,078,348

$

2,296,113

       Land use right acquired with prepayments made in prior periods

$

-

$

146,610



CHINA BIOLOGIC PRODUCTS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME










Accumulated other






Common stock


Additional


Retained


comprehensive


Noncontrolling




Shares


Par value


paid-in capital


earnings


income


interest


Total equity





























Balance as of January 1, 2009

21,434,942

$

2,143

$

10,700,032

$

22,382,054

$

4,159,298

$

4,805,381

$

42,048,908

  Cumulative effect of reclassification of 2006 Warrants (see Note 14)

-


-


(600,289)


(393,962)


-


-


(994,251)

Balance as of January 1, 2009 (reclassified)

21,434,942

$

2,143

$

10,099,743

$

21,988,092

$

4,159,298

$

4,805,381

$

41,054,657















   Net income

-


-


-


2,208,126


-


16,615,658


18,823,784

   Foreign currency translation adjustments, net of nil income taxes

-


-


-


-


68,239


455,788


524,027

   Comprehensive income













19,347,811















Dividends declared by subsidiaries to noncontrolling interest



-


-


-


-


(8,955,392)


(8,955,392)

Acquisition of Dalin

-


-


-


-


-


21,525,059


21,525,059

   Stock compensation

-


-


62,281


-


-


-


62,281

Common stock issued in connection with:














      - Exercise of warrants

1,284,000


128


8,571,281


-


-


-


8,571,409

      - Exercise of stock option

87,500


9


349,991


-


-


-


350,000

      - Conversion of convertible notes

250,000


25


2,187,305


-


-


-


2,187,330

Balance as of December 31, 2009

23,056,442

$

2,305

$

21,270,601

$

24,196,218

$

4,227,537

$

34,446,494

$

84,143,155















   Net income

-


-


-


31,542,883


-


20,449,421


51,992,304

   Foreign currency translation adjustments, net of nil income taxes

-


-


-


-


3,795,584


1,381,931


5,177,515

 Comprehensive income













57,169,819















   Dividend declared by subsidiaries to noncontrolling interest

-


-


-


-


-


(10,446,179)


(10,446,179)

   Acquisition of noncontrolling interests

-


-


-


-


-


12,670


12,670

   Stock compensation

-


-


2,341,783


-


-


-


2,341,783

Common stock issued in connection with:














      - Exercise of warrants

294,019


30


4,278,160


-


-


-


4,278,190

     - Exercise of stock option

37,130


4


97,596


-


-


-


97,600

     - Conversion of convertible notes

963,535


96


7,446,999


-


-


-


7,447,095

Balance as of December 31, 2010

24,351,126

$

2,435

$

35,435,139

$

55,739,101

$

8,023,121

$

45,844,337

$

145,044,133



Non-GAAP to GAAP reconciliation table


Fiscal Year Ended December 31, 2010

Fiscal Year Ended December 31, 2009

Net Income (Loss) Diluted EPS

Net Income

Diluted EPS

Net Income

Diluted EPS

Adjusted Net Income - Non GAAP

$38,967,447

$1.61

$31,487,745

$1.43

Non-cash employee compensation (1)

$2,341,783

$0.10

$62,281

$0.00

Loss in fair value of derivative liabilities (2)

$3,233,288

$0.13

$28,915,328

$1.32

Interest of Convertible Notes  (3)

$1,849,493

$0.08

$302,010

$0.01

Net Income attributable to controlling interest

$31,542,883

$1.30

$2,208,126

$0.10

Weighted average number of Shares

24,176,432


21,949,638





Company Contact

Mr. Y. Tristan Kuo

Chief Financial Officer

China Biologic Products, Inc.

Telephone: +86-538-6202206

Email: ir@chinabiologic.com

www.chinabiologic.com



SOURCE China Biologic Products, Inc.

Web Site: http://www.chinabiologic.com


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