TIANYIN PHARMACEUTICAL CO., INC. - FORM 8-K - EX-99.1 - PRESS RELEASE DATED FEBRUARY 14, 2013 - February 19, 2013

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Exhibit 99.1

TPI Reports Second Quarter Fiscal Year 2013 Financial Results
 
CHENGDU, China, February 14, 2013 -- Tianyin Pharmaceutical Inc. (NYSE Amex: TPI), a pharmaceutical company that specializes in the patented biopharmaceutical, modernized traditional Chinese medicine (mTCM), branded generics and active pharmaceutical ingredients (API) announced financial results for second quarter of the fiscal year 2013.
 
Second Quarter Fiscal Year 2013 Ended December 31, 2012 Financial Highlights:
 
 
●
Revenue was $17.6 million compared with $18.2 million in 2Q12 a decrease of 3.3% year over year,
 
 
●
Operating income was $2.6 million, compared with $2.1 million in 2Q12, an increase of 23.8% year over year,
 
 
●
Net Income was $1.8 million compared with $1.7 million in 2Q12, an increase of 5.9% year over year,
 
 
●
Earnings per share of $0.06 per basic share, and $0.06 per diluted share, compared with $0.06 per basic share, or $0.06 per diluted share in 2Q12, 
 
 
●
Cash and cash equivalents totaled $25.4 million on December 31, 2012; Operating cash flow for the six months ended December 31, 2012 was $(0.7) million, compared with operating cash flow of $7.9 million for the six months ended December 31, 2011.   
 
Comparison of results for the quarters ended December 31, 2012 and 2011:
 
   
Quarters 
Ended December 31,
  
   
2012
    
2011
  
   
(In millions)
  
Sales
   $ 17.6     $ 18.2  
Cost of sales
   $ 10.8     $ 12.1  
Gross profit
   $ 6.8     $ 6.1  
Total operating expenses
   $ 4.2     $ 4.0  
Operating income
   $ 2.6     $ 2.1  
Provision for income taxes
   $ 0.7     $ 0.6  
Net income
   $ 1.8     $ 1.7  
 
Sales for the quarter ended December 31, 2012 was $17.6 million, a decrease of 3.3% as compared to $18.2 million for the quarter ended December 31, 2011. The sales decrease was mainly due to continuous generic pricing pressure amid healthcare reform further augmented by restrictive government policies to prioritize the Essential Drug List (EDL) drug sales, which simultaneously reduced the sales of our higher margin generic pharmaceuticals. Our top five product sales are: Gingko mihuan oral liquid (GMOL) for stroke and cardiovascular disorders: $6.5 million; Mycophenolate mofetil capsules (MM) for renal transplant: $2.2 million; Azithromycin tablets (AZI) for infection: $1.0 million; Qingre jiedu oral liquid (QR): $0.8 million and Qianlie Shule capsules (QS) for prostate conditions: $0.38 million. These products totaled $10.9 million in sales, representing 62% of the quarterly revenue. Similar to the first quarter of fiscal 2013, the former two core products Apu Shuangxin (Apu) and Xuelian Chongcao (XLCC) which are not covered by EDL or National Reimbursement List (NRL) lists have not reached the level to be included in the top five products mainly because the healthcare reform regulations favor EDL and NRL drugs. Compared with a year earlier, the total core product sales have risen significantly from $7.5 million for the quarter ended December 31, 2011 mainly due to the significant rise in GMOL sales of 51% year over year from $4.3 million for the quarter ended December 31, 2011. This is attributable to the inclusion of GMOL in Provincial EDL such as the provinces of Henan and Shandong and the City of Chongqing. The contribution from our distribution business through TMT amounted to $4.6 million at 13% gross margin.
 
 
1
 
 
Gross Margin for the quarter ended December 31, 2012 was 38.7% as compared to 33.4% for the quarter ended December 31, 2011. Our gross margin improved mainly as a result of a greater mix of higher margin products sold during the period supported by a stabilization of generic pricing pressure. While a trend of continuous margin improvement has not yet been affirmed the present sales data supports a flattening and slightly positive trend in our gross margins.
 
Operating Expenses were $4.2 million for the quarter ended December 31, 2012, as compared to $4.0 million for the quarter ended December 31, 2011. The increase in operating expenses was mainly associated with an increase in sales and marketing costs.
 
Net Income was $1.8 million at a net margin of 10.2% for the quarter ended December 31, 2012, as compared to net income of $1.7 million with net margin of 9.5% for the quarter ended December 31, 2011. This was mainly due to improvements in our gross margins.
 
Diluted earnings per share for the quarter ended December 31, 2012 were $0.06 based on 29.3 million shares compared with the earnings of $0.06 per diluted share for the quarter ended December 31, 2011, based on 29.4 million shares.
 
Balance Sheet and Cash Flow
 
As of December 31, 2012, we had working capital totaling $34.1 million, including cash and cash equivalents of $25.4 million. Net cash used in operating activities was $(0.7) million for the six months ended December 31, 2012 as compared to net cash generated from operating activities as $7.9 million for the six months ended December 31, 2011. The net decrease in operating cash flow was predominately the result of: 1) the payment of trade notes payable of $(4.7) million that was due during the six months ended December 31, 2012; 2) an increase of inventory of $(1.1) million, and 3) an increase of accounts receivables of $0.8 million and advance from customer of $0.6 million. We believe that TPI is adequately funded to meet all of our working capital and capital expenditure needs for fiscal year 2013.
 
Business Development & Outlook
 
R&D for additional indications of flagship product Gingko Mihuan (GMOL)
 
 
2
 
 
Our flagship product GMOL (SFDA certification number: H20013079; patent number: 20061007800225) contributes approximately 37% to our total revenue. Clinical application and information gathered from our physicians showed that in addition to our approved indication for GMOL: cardiovascular disorders, coronary heart disease and cerebral ischemic attack including strokes, off-label use of GMOL have been indicated in hepatic diseases and ophthalmological diseases. The validity of these observations is currently being investigated.
 
Jiangchuan Macrolide Project (JCM)
 
TPI has completed the 240-ton JCM facility for the R&D, manufacturing and sale of API and chemical intermediates of macrolide antibiotics. In January 2012, JCM was approved for its GMP certification designated as "CHUAN M0799," which is valid for the period of December 31, 2011 until December 31, 2015. After an initial three month period of efficiency improvement and calibration for large scale production, JCM has started producing macrolide API for TPI's production of Azithromycin Dispersible Tablets (SFDA No: H20074145) since July 2012. Currently the monthly production capacity of JCM is 10 tons of Azithromycin macrolide API.
 
Tianyin Medicine Trading Distribution Business (TMT)
 
TMT is established to distribute products manufactured by both TPI and other pharmaceutical companies to fuel our expanding sales network as well as to provide synergy to our existing organic product portfolio. TMT has been distributing mainly TPI's own products since its inception in 2009. Since 2010, TPI has signed and later extended distribution contracts with Jiangsu Lianshui Pharmaceutical ("Lianshui") to distribute Lianshui-branded generic injection products including cough suppressant, antibiotics, anti-inflammatory medicines and other healthcare indications. On average, TMT distribution revenue contributed approximately $3-5 million sales per quarter to our total revenue.
 
Pre-extraction and formulation plant development at Qionglai Facility (QLF)
 
In preparation for the new Good Manufacturing Practice (GMP) standards stipulated by the PRC government in early 2011, TPI initiated the process of optimizing the manufacturing facilities and production lines in compliance with the new GMP standards by 2013. Concurrently, the city of Chengdu has re-designated various industrial parks for particular industries such as automobile, biotechnologies, pharmaceuticals and chemical engineering. As a consequence, TPI's current manufacturing facility at the Longquan district, east of Chengdu, which is designated for use by the automotive industry, is scheduled to be relocated to Qionglai city, south of Chengdu, which is designated for use by the pharmaceutical industry. The Qionglai facility (QLF) is approximately 18 miles from the Company's recently completed JCM facility. The proposed relocation project also includes our TCM pre-extraction plant, which is located near the center of city of Chengdu, a rapidly expanding residential area.
 
The QLF is estimated to be 80 mu or approximately 13 acres. Both pre-extraction plant and the formulation plant are to be relocated. The combined QLF plant, designed and constructed according to the latest GMP standards, is expected to relieve the current capacity saturation at TPI's facilities. The re-location and construction cost is estimated at $25 million for Phase I which is scheduled to be completed in the first half of 2013 calendar year,  will expand the current capacity by 30%. In order to facilitate a favorable tax treatment for QLF, Chengdu Tianyin entered into a Share Transfer Agreement (the "Agreement") with the two shareholders of Sichuan Hengshuo Pharmaceutical Co., Ltd ("Sichuan Hengshuo" or "HSP") to acquire 100% ownership of the latter, a PRC pharmaceutical trading company, for a total consideration of approximately $0.2 million (RMB 1.3 million). The share transfer was closed on November 30, 2012. As of December 31, 2012, results of HSP are consolidated into the consolidated financial statements presented herein. Currently HSP has not yet been in operation since the closing.
 
 
3
 
 
Fiscal 2013 Guidance
 
We are assuming that continued pricing pressures in our marketplace shall remain for the second half of fiscal 2013 amid ongoing healthcare reform in China which may continue to put pressure on our revenue growth for the year. Yet we expect that JCM and TMT distribution business may help TPI to offset these external pressures to deliver 2013 revenue growth of approximately 10% to 15%. We reiterate our fiscal 2013 revenue projection of approximately $75 to $80 million along with a net margin of approximately 10%.
 
We believe the following factors will influence the growth perspectives of TPI: 1) Market expansion and revenue growth of TPI's core product portfolio led by flagship product GMOL, Azithromycin and other major products; 2) Ramp up of JCM revenue in the fiscal year 2013; 3) The gradual stabilization of generic sales following the progressive pricing restrictions as a result of the ongoing healthcare reform; 4) Steady TMT distribution revenue contribution; and 5) QLF relocation and smooth transition of production capacity.  
 
Management will continue to evaluate the Company's business outlook and communicate any changes on a quarterly basis or as when appropriate.
 
Conference Call
 
Senior management of TPI will host its earnings conference call for the second quarter of fiscal year 2013 ending December 31, 2012 to be held at 8:30 a.m. ET on Thursday, February 14, 2013.
 
Interested parties may access the call by dialing toll free: 1-877-941-2068; international: 1-480-629-9712
 
The conference ID is 4594892. It is advisable to dial in approximately 5 minutes prior to the start of the call.
 
A replay will be available by calling toll free: 1-877-870-5176; international: 1-858-384-5517 from: 02/14/13 @ 11:30 am ET to: 02/28/13 @ 11:59 pm ET. Replay Pin Number: 4594892
 
This call is being web cast by ViaVid Broadcasting and can be accessed at ViaVid's website at the following link: http://public.viavid.com/index.php?id=103373
 
About TPI
 
Headquartered at Chengdu, China, TPI is a pharmaceutical company that specializes in the development, manufacturing, marketing and sales of patented biopharmaceutical, modernized traditional Chinese medicines, branded generics and other pharmaceuticals. TPI currently manufactures a comprehensive portfolio of 58 products, 24 of which are listed in the highly selective national medicine reimbursement list, 7 are included in the essential drug list of China. TPI's pipeline targets various high incidence healthcare indications.
 
 
4
 
 
For more information about TPI, please visit: http://www.tianyinpharma.com or write to: ir@tpi.asia
 
Safe Harbor Statement
 
The Statements which are not historical facts contained in this press release are forward-looking statements that involve certain risks and uncertainties including but not limited to risks associated with the uncertainty of future financial results, additional financing requirements, development of new products, government approval processes, the impact of competitive products or pricing, technological changes, the effect of economic conditions and other uncertainties detailed in the Company's filings with the Securities and Exchange Commission.
 
For more information, please contact:
Investors Contact: ir@tpi.asia
Web: http://www.tianyinpharma.com
Tel: +86-28-8551-6696 (Chengdu, China)
        +86-134-36-550011 (China)
 
Address:
23rd Floor Unionsun Yangkuo Plaza
No. 2, Block 3, South Renmin Road
Chengdu, 610041
China
 
 
5
 
 
Tianyin Pharmaceutical Co., Inc.
  
Consolidated Balance Sheets
  
             
   
December 31,
2012
    
June 30,
2012
  
Assets
  
(Unaudited)
        
Current assets:
            
Cash and cash equivalents
  
$
25,439,653
    
$
35,152,295
  
Restricted cash
    
-
      
3,534,550
  
Accounts receivable, net of allowance for doubtful accounts of $114,006
                
   and $113,862 at December 31, 2012 and June 30,
   2012, respectively
    
10,500,199
      
11,272,367
  
Inventory
    
6,970,478
      
5,863,013
  
Advance payments
    
-
      
642,075
  
Other current assets
    
451,358
      
436,664
  
Total current assets
    
43,361,688
      
56,900,964
  
                 
Property and equipment, net
    
32,848,630
      
26,458,349
  
                 
Intangibles, net
    
20,584,589
      
20,958,226
  
                 
Advance payments – construction and equipment
    
5,300,580
      
-
  
                 
Goodwill
    
206,310
      
-
  
                 
Total assets
  
$
102,301,797
    
$
104,317,539
  
                 
Liabilities
                
Current liabilities:
                
Accounts payable and accrued expenses
  
$
1,268,655
    
$
1,586,151
  
Accounts payable – construction related
    
411,938
      
740,832
  
Short-term bank loans
    
6,030,600
      
6,023,000
  
Trade notes payable
    
-
      
4,675,750
  
Income tax payable
    
667,583
      
804,595
  
Other taxes payable
    
468,545
      
500,782
  
Other current liabilities
    
434,017
      
466,982
  
Total current liabilities
    
9,281,338
      
14,798,092
  
                 
Total liabilities
    
9,281,338
      
14,798,092
  
                 
Equity Stockholders' equity:
                
Common stock, $0.001 par value, 
  50,000,000 shares authorized, 29,332,791
  shares issued and outstanding at December
  31, 2012 and June 30, 2012, respectively
    
29,446
      
29,446
  
Additional paid-in capital
    
30,122,632
      
30,104,902
  
Treasury stock
    
(135,925
 )    
(135,925
 )
Statutory reserve
    
6,120,143
      
6,120,143
  
Retained earnings
    
48,427,896
      
45,022,329
  
Accumulated other comprehensive income
    
8,214,490
      
8,100,526
  
Total stockholders' equity
    
92,778,682
      
89,241,421
  
                 
Noncontrolling interest
    
241,777
      
278,026
  
                 
Total equity
    
93,020,459
      
89,519,447
  
                 
Total liabilities and equity
  
$
102,301,797
    
$
104,317,539
  
 
 
6
 
 
Tianyin Pharmaceutical Co., Inc.
    
Consolidated Statements of Operations
    
(Unaudited)
    
             
   
For the Three Months Ended
    
For the Six Months Ended
  
   
December 31,
    
December 31,
  
   
2012
    
2011
    
2012
    
2011
  
                         
Sales
  
$
17,603,298
    
$
18,236,701
    
$
33,574,995
    
$
35,765,279
  
                                 
Cost of sales
    
10,799,516
      
12,148,399
      
20,527,509
      
23,823,928
  
                                 
Gross profit
    
6,803,782
      
6,088,302
      
13,047,486
      
11,941,351
  
                                 
Operating expenses:
                                
Selling expenses
    
2,885,087
      
2,801,630
      
5,646,525
      
5,278,956
  
General and administrative expenses
    
1,097,854
      
1,022,039
      
2,219,387
      
2,041,161
  
Research and development
    
222,423
      
210,784
      
438,353
      
421,499
  
Total operating expenses
    
4,205,364
      
4,034,453
      
8,304,265
      
7,741,616
  
                                 
Income from operations
    
2,598,418
      
2,053,849
      
4,743,221
      
4,199,735
  
                                 
Other income (expenses):
                                
Interest income
    
31,842
      
43,246
      
99,444
      
78,207
  
Interest expense
    
(113,468
)
    
(82,930
)
    
(221,872
)
    
(132,775
)
Gain on disposal of fixed assets
    
-
      
229,110
      
-
      
229,110
  
Other expenses
    
-
      
(5,115
)
    
-
      
(9,833
)
Total other income (expenses)
    
(81,626
)
    
184,311
      
(122,428
)
    
164,709
  
                                 
Income before provision for income tax
    
2,516,792
      
2,238,160
      
4,620,793
      
4,364,444
  
                                 
Provision for income tax
    
668,762
      
556,590
      
1,251,810
      
1,175,657
  
                                 
Net income
    
1,848,030
      
1,681,570
      
3,368,983
      
3,188,787
  
                                 
Less: Net loss attributable to noncontrolling interest
    
(15,920
)
    
(56,035
)
    
(36,584
)
    
(74,058
)
                                 
Net income attributable to Tianyin Pharmaceutical Co., Inc.
  
$
1,863,950
    
$
1,737,605
    
$
3,405,567
    
$
3,262,845
  
                                 
Basic earnings per share
  
$
0.06
    
$
0.06
    
$
0.12
    
$
0.11
  
Diluted earnings per share
  
$
0.06
    
$
0.06
    
$
0.12
    
$
0.11
  
                                 
Weighted average number of common
                                
shares outstanding
                                
Basic
    
29,332,791
      
29,396,276
      
29,332,791
      
29,396,276
  
Diluted
    
29,332,791
      
29,396,276
      
29,332,791
      
29,396,276
  
 
 
7
 
 
   
Tianyin Pharmaceutical Co., Inc.
  
Consolidated Statements of Comprehensive Income
  
(Unaudited)
  
   
   
For the Three Months Ended
    
For the Six Months Ended
  
   
December 31,
    
December 31,
  
   
2012
    
2011
    
2012
    
2011
  
                         
Net income
  
$
1,848,030
    
$
1,681,570
    
$
3,368,983
    
$
3,188,787
  
                                 
Other comprehensive income
                                
Foreign currency translation adjustment
    
226,799
      
567,535
      
114,299
      
1,515,042
  
                                 
Comprehensive income
    
2,074,829
      
2,249,105
      
3,483,282
      
4,703,829
  
                                 
Less: comprehensive income (loss) attributable to noncontrolling interest
    
(15,225
)
    
(52,025
)
    
(36,249
)
    
185,379
  
                                 
Comprehensive income attributable to
                                
Tianyin Pharmaceutical Co., Inc.
  
$
2,090,054
    
$
2,301,130
    
$
3,519,531
    
$
4,518,450
  
 
 
 
8
 
 
Tianyin Pharmaceutical Co., Inc.
  
Consolidated Statements of Cash Flows
  
(Unaudited)
  
       
   
For the Six Months Ended
  
   
December 31,
  
   
2012
    
2011
  
Cash flows from operating activities:
            
Net Income
  
$
3,368,983
    
$
3,188,787
  
Adjustments to reconcile net income to net cash
                
provided by (used in) operating activities:
                
Depreciation and amortization
    
1,171,649
      
518,131
  
Gain on disposal of fixed assets
    
-
      
(229,110
 )
Share-based payments
    
17,730
      
-
  
Provision for bad debts
    
-
      
43,726
  
Changes in current assets and current liabilities:
                
Accounts receivable
    
786,045
      
46,185
  
Inventory
    
(1,099,581
 )    
908,557
  
Advance payments
    
642,602
      
1,662,080
  
Other current assets
    
(14,137
 )    
(154,593
 )
Accounts payable and accrued expenses
    
(319,349
 )    
608,143
  
Accounts payable – construction related
    
(329,684
 )    
(579,391
 )
Trade notes payable
    
(4,679,585
 )    
2,665,260
  
Income tax payable
    
(137,967
 )    
(345,177
 )
Other taxes payable
    
(32,854
 )    
(386,642
 )
Other current liabilities
    
(33,539
 )    
(31,265
 )
Total adjustments
    
(4,028,670
 )    
4,725,904
  
                 
Net cash provided by(used in) operating activities
    
(659,687
 )    
7,914,691
  
                 
Cash flows from investing activities:
                
Additions to property and equipment
    
(1,002,716
 )    
(2,836
 )
Proceeds from disposal of fixed assets
    
-
      
377,164
  
Advance payments – construction and equipment
    
(5,298,242
 )    
-
  
Additions of construction in progress
    
(6,123,118
 )    
(136,400
 )
Acquisition of subsidiary–Hengshuo (HSP)
    
(206,219
 )    
-
  
Additions to intangible assets – approved drugs
    
-
      
(768,222
 )
Additions to intangible assets – land use right
    
-
      
(1,822,780
 )
                 
Net cash used in investing activities
    
(12,630,295
 )    
(2,353,074
 )
                 
Cash flows from financing activities:
                
Restricted cash
    
3,537,449
      
(3,104,244
 )
Proceeds from short-term bank loans
    
-
      
1,567,800
  
                 
Net cash provided by(used in) financing activities
    
3,537,449
      
(1,536,444
 )
                 
Effect of foreign currency translation on cash
    
39,891
      
1,158,325
  
                 
Net increase(decrease) in cash and cash equivalents
    
(9,712,642
 )    
5,183,498
  
                 
Cash and cash equivalents – beginning
    
35,152,295
      
31,724,906
  
                 
Cash and cash equivalents – ending
  
$
25,439,653
    
$
36,908,404
  
                 
Supplemental disclosures of cash activities
                
Cash paid for interest
  
$
221,872
    
$
132,775
  
Cash paid for income taxes
  
$
1,390,391
    
$
1,560,653
  
 
 
 9

TIANYIN PHARMACEUTICAL CO., INC. Reports