Tuesday, China-Biotics, Inc. (CHBT), a probiotics products company, reported a swing to loss in the second quarter, primarily due to a book loss related to the revaluation of convertible notes. Excluding the book loss, adjusted net income was higher than reported a year-ago.
China-Biotics' net loss for the quarter was $3.48 million, compared with a net income of $4.47 million in the year-ago period. Earnings per share for the quarter increased to $0.31 from $0.13 in the year-ago period.
The calculation of diluted earnings per share for both periods assumes full conversion of the convertible notes and thus excludes the loss of $9.4 million, and the gain of $1.9 million, respectively, from the change in fair value of the notes.
Excluding a book loss related to the revaluation of convertible notes, adjusted net income was $5.9 million or $0.31 per share.
Net sales for the quarter increased to $17.14 million from $11.49 million in the year-ago period. Three Wall Street analysts estimated revenues of $14.75 millionfor the quarter.
THe sales increase resulted from an improvement in sales volume from all products, particularly Shining Probiotics Protein Powder and significant growth in bulk additive sales and price increases on bulk additives products.
The company's cost of sales for the quarter increased to $4.98 million from $3.46 million in the year-ago period. Total operating expenses increased to $4.63 million from $4.21 million last year.
Total other expenses for the quarter were $9.35 million, compared with a total other income of $1.97 million in the year-ago period.
According to Jinan Song, chairman and chief executive officer of China-Biotics, the company is gaining traction in its bulk additives business. "Our new manufacturing facility is expected to begin commercial production in the first quarter of calendar year 2010, and our pipeline of potential new bulk additives customers continues to be strong," said Song.
In October, China-Biotics completed an underwritten public offering of 5,290,000 shares of its common stock at a price of $15.00 per share, including the exercise of the underwriters' over-allotment option, generating net proceeds of approximately $75.4 million. The company expects to use the net proceeds from the offering for general corporate purposes, including expanding its retail operations, expanding its products, acquiring additional retail outlets and for general working capital purposes.
For the six-month period, China-Biotics' net income declined to $2.28 million or $0.58 per share from $7.70 million or $0.37 per share a year-ago. Year-to-date net sales increased to $32.56 million from $22.86 million year-ago.
CHBT is currently trading at $14.36, up $0.47 or 3.38%, on the Nasdaq.
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