omniture

China Shenghuo Pharmaceutical Reports Financial Results for the Full Year 2011

2012-03-31 02:09 912

KUNMING, China, March 31, 2012 /PRNewswire/ -- China Shenghuo Pharmaceutical Holdings, Inc. (NYSE Alternext US: KUN) ("China Shenghuo" or the "Company"), today reported financial results for the year ended December 31, 2011.

Full Year 2011 Highlights

  • Total revenue was approximately $44.2 million, an increase of 35% from approximately $32.7 million for the year 2010.
  • Gross profit as a percentage of revenues was approximately 61.5%, as compared to 65.8 % in 2010.
  • Net income attributable to stockholders was approximately $0.1 million, as compared to approximately $1.2 million for the year ended December 31, 2010.
  • The stockholder's equity was approximately $2.1 million as of December 31, 2011.

Full Year 2011 Results

Sales: Sales for the year ended December 31, 2011 were approximately $44.2 million, an increase of approximately $11.5 million, or 35%, from approximately $32.7 million for the year ended December 31, 2010. The increase in sales was primarily due to the Company's main product Xuesaitong's sales increasing in Tianjin City, Jiangsu, Guangdong and Yunnan Province as Xuesaitong was listed on the PIC list of Tianjin City since the second half year in 2010 and the Company strengthened sales promotion in the provinces and cities where Xuesaitong was listed on their PIC lists, especially Yunnan Province and Tianjin City. The OTC market also contributed part of increase of revenue as the Company also strengthened the OTC market development in 2011.

Cost of sales: Our cost of sales for the year ended December 31, 2011 was approximately $17.0 million, an increase of approximately $5.8 million, or 52%, from approximately $11.2 million for the year ended December 31, 2010. The increase in cost of sales was due to the increase of the sales volume and the purchase price of Sanqi which is the main raw material of our main product Xuesaitong. Although we have started to grow Sanqi within the Resort, we will not be able to harvest until 2014 because it has a three year growth cycle. In addition, the Zhonghuang Hotel began trial operation since January 2011 which has contributed $2.3 million to the increase of cost of sales.

Gross profit: Our gross profit for the year ended December 31, 2011 was approximately $27.2 million as compared with approximately $21.5 million for the year ended December 31, 2010. Gross profit as a percentage of revenues was approximately 61.5% for the year ended December 31, 2011, a decrease of 4.3% from 65.8 % for the year ended December 31, 2010. The decrease in gross profit percentage was primarily due to the increase of cost of sales set forth above.

Selling expenses: Selling expenses were approximately $19.8 million for the year ended December 31, 2011, an increase of approximately $4.1 million, or 26%, from approximately $15.7 million for the year ended December 31, 2010. The primary reason for the increase in selling expenses was due to increase of sales commission to sales representative in line with the sales increment.

We reimburse the sales representatives their selling and marketing expenses when they submit the appropriate documentation to be reimbursed. We reimburse the sales representatives their accrued selling expenses when related accounts receivable are collected.

General and administrative expenses: General and administrative expenses were approximately $5.0 million for the year ended December 31, 2011, an increase of approximately $1.4 million, or 38%, from approximately $3.6 million for the year ended December 31, 2010. The increase was primarily due to the increase of the management's traveling expenses and conference expenses for expanding our sales channel. In addition, Zhonghuang Hotel began trial operation since January 2011 which has contributed approximately $0.5 million to the increase of general and administrative expense.

Research and development expenses: Research and development expense for the year ended December 31, 2011 was approximately $0.71 million as compared to approximately $0.66 million for the year ended December 31, 2010. The increase was primarily due to the expenditures in 2011 for the Phase I clinical test of Sh1002 in America which amounted to $303,335.

Net other expense: Net other expense, which includes interest income, subsidy income, interest expense, other income and other expense, was approximately $1.5 million for the year ended December 31, 2011 as compared to approximately $0.1 million for the year ended December 31, 2010, an increase of approximately $1.4 million, or 1323%. The increase was mainly due to less subsidy income from provincial government as compared the same period in 2010 and more interest expenses in the 2011.

Income tax benefit (expense): Income tax benefit was $11,765 for the year ended December 31, 2011 as compared to income tax expense $105,764 for the year ended December 31, 2010. The tax benefit was mainly from medicine segment of the Company and the deferred tax assets benefit from accrued expenses and provisions for inventory.

Net income attributable to stockholders: We achieved a net income attributable to stockholders of approximately $0.1 million for the year ended December 31, 2011 as compared to approximately $1.2 million for the year ended December 31, 2010. The decrease in net income attributable to stockholders was primarily due to the decrease of subsidy income and increase of interest expense.

About China Shenghuo

Founded in 1995, China Shenghuo is primarily engaged in the research, development, manufacture, and marketing of Sanchi-based medicinal and pharmaceutical, nutritional supplement and cosmetic products. Through its subsidiary, Kunming Shenghuo Pharmaceutical (Group) Co., Ltd., it owns thirty SFDA (State Food and Drug Administration) approved medicines, including the flagship product Xuesaitong Soft Capsules, which is currently being listed in the 2010 Provincial Insurance Catalogue of sixteen provinces around China. At present, China Shenghuo incorporates a sales network of agencies and representatives throughout China, which markets Sanchi-based traditional Chinese medicine to hospitals and drug stores as prescription and OTC drugs primarily for the treatment of cardiovascular, cerebrovascular and peptic ulcer disease. The Company also exports medicinal products to Asian countries such as Indonesia, Singapore, Japan, Malaysia, and Thailand and to European countries such as the United Kingdom, Tajikistan, Russia and Kyrgyzstan.

With the substantial completion of Shenghuo Plaza at the end of 2010, China Shenghuo entered into a new business -- the hotel and hospitality business. Two floors of Shenghuo Plaza are designed to be utilized as 12 Ways Chinese Herbal Beauty Demonstration Center. The balance of Shenghuo Plaza is used as a business hotel -- Zhonghuang Hotel, restaurant and banquet facilities and an entertainment venue.

China Shenghuo is also expanding into the businesses of wellness tourism. For more information, please visit http://www.shenghuo.com.cn.

Safe Harbor Statement

This press release may contain certain "forward-looking statements," as defined in the United States Private Securities Litigation Reform Act of 1995, that involve a number of risks and uncertainties. There can be no assurance that such statements will prove to be accurate, and the actual results and future events could differ materially from management's current expectations. Such factors include, but are not limited to, risks of litigation and governmental or other regulatory proceedings arising out of or related to any of the matters described in recent press releases, including arising out of the restatement of the Company's financial statements; the Company's ability to refinance or repay loans received; the Company's uncertain business condition; the Company's continuing ability to satisfy any requirements which may be prescribed by the Exchange for continued listing on the Exchange; risks arising from potential weaknesses or deficiencies in the Company's internal controls over financial reporting; the Company's reliance on one supplier for Sanchi; the possible effect of adverse publicity on the Company's business, including possible contract cancellation; the Company's ability to develop and market new products; the Company's ability to establish and maintain a strong brand; the Company's continued ability to obtain and maintain all certificates, permits and licenses required to open and operate retail specialty counters to offer its cosmetic products and conduct business in China; protection of the Company's intellectual property rights; market acceptance of the Company's products; changes in the laws of the People's Republic of China that affect the Company's operations; cost to the Company of complying with current and future governmental regulations; the impact of any changes in governmental regulations on the Company's operations; general economic conditions; and other factors detailed from time to time in the Company's filings with the United States Securities and Exchange Commission and other regulatory authorities. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.


Company Contact:

China Shenghuo Pharmaceutical Holdings, Inc.

Ms. Shujuan Wang

Secretary of Board of Directors

+86-871-7282698




CHINA SHENGHUO PHARMACEUTICAL HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Amounts in USD, except shares)




December 31,


2011



2010








Assets:







Current assets:







Cash and cash equivalents


$

1,247,230


$

1,669,387

Restricted cash



794,115



-

Accounts and notes receivable, net



18,076,050



11,531,027

Other receivables, net



4,084,102



4,111,315

Advances to suppliers, net



542,153



580,168

Inventories



2,695,388



2,599,351

Amounts due from related parties




574,899



190,614

Current deferred tax assets



1,394,101



833,568

Other current assets




199,929



208,111

Total current assets



29,607,967



21,723,541








Property, plant and equipment, net



25,873,670



21,069,139

Intangible assets, net



1,473,074



1,432,736

Deposits for long-live assets



1,078,846



754,979

Non-current deferred tax assets



275,677



366,478

Total assets


$

58,309,234


$

45,346,873




CHINA SHENGHUO PHARMACEUTICAL HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (CONT'D)

(Amounts in USD, except shares)




December 31,


2011


2010

Liabilities and Equity:






Current liabilities:






Accounts payable


$

9,395,483

$

8,964,404

Other payables and accrued expenses



11,819,179


9,699,857

Sales representative deposits



6,106,287


4,936,429

Amounts due to related parties



18,414


79,864

Short-term borrowings



15,858,895


5,289,178

Advances from customers



1,090,668



1,158,649

Taxes and related payables



2,255,322


881,506

Current portion of long-term borrowings



6,253,075


6,039,833

Total current liabilities



52,797,323


37,049,720

Long-term borrowings



-



6,251,227

Total liabilities



52,797,323


43,300,947

Commitments and Contingencies






Equity:






Common stock, $0.0001 par value, 100,000,000 shares

authorized and 19,679,400 shares issued and outstanding



1,968


1,968

Additional paid-in capital



6,014,688


6,193,927

Appropriated retained earnings



147,023


147,023

Accumulated deficit



(5,790,759)


(5,940,439)

Accumulated other comprehensive income



1,743,393


1,638,109

Total stockholder's equity



2,116,313


2,040,588

Non-controlling interest



3,395,598


5,338

Total equity



5,511,911


2,045,926

Total liabilities and equity


$

58,309,234

$

45,346,873





CHINA SHENGHUO PHARMACEUTICAL HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE INCOME (LOSS)

(Amounts in USD, except shares)










Years ended December 31,


2011



2010








Sales


$

44,158,182


$

32,697,195

Cost of goods sold



16,980,006



11,198,736

Gross profit



27,178,176



21,498,459

Operating expenses:







Selling expenses



19,838,582



15,715,325

General and administrative expenses



5,015,534



3,638,445

Research and development expense



710,361



656,225




25,564,477



20,009,995

Income from operations



1,613,699



1,488,464

Other income (expenses):







Interest income



11,810



8,325

Subsidy income



536,013



786,916

Interest expense



(1,714,887)



(842,560)

Other income



82,712



247,536

Other expenses



(409,405)



(305,185)




(1,493,757)



(104,968)

Income before income tax



119,942



1,383,496

Income tax benefit (expense)



11,765



(105,764)

Net income before allocation to non-controlling interests



131,707




1,277,732

Less: net (loss) income attributable to non-controlling interests



(17,973)




60,878

Net income attributable to stockholders


$

149,680


$

1,216,854

Comprehensive income:







Net income



131,707



1,277,732

Foreign currency translation adjustment



187,150



51,517

Comprehensive income


$

318,857


$

1,329,249

Comprehensive income attributable to

non-controlling interests



63,893




63,333

Comprehensive income attributable to stockholders



254,964



1,265,916

Basic and diluted earnings per share


$

0.01


$

0.06

Weighted-average number of shares outstanding

- basic and diluted



19,679,400



19,679,400




CHINA SHENGHUO PHARMACEUTICAL HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in USD)



Years ended December 31,


2011


2010

Cash Flows from Operating Activities:






Net income

$

131,707


$

1,277,732

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






Deferred income tax


(398,459)



58,362

Depreciation and amortization


1,494,985



755,380

Bad debt provision and allowance and inventories write off


380,825



1,786,315

Gain on disposal of fixed assets


-



(103,140)

Change in working capital:






Accounts and notes receivable


(5,980,478)



799,195

Other receivables


233,585



1,234,888

Amounts due from/to related parties


(365,393)



313,278

Advances to suppliers


(88,842)



(168,759)

Inventories


(22,393)



1,164,966

Other current assets


18,351



(186,754)

Accounts payable


(26,097)



1,935,119

Other payables and accrued expenses


1,584,229



(713,701)

Advances from customers


(124,047)



207,968

Sales representative deposits


895,308



(2,277,841)

Taxes and related payables


1,296,310



(242,273)

Net Cash (Used in) Provided by Operating Activities


(970,409)



5,840,735







Cash Flows from Investing Activities:






Purchase of long-lived assets


(2,299,690)



(8,354,461)

Proceeds from disposal of long-lived assets


4,753



317,679

Net Cash Used in Investing Activities


(2,294,937)



(8,036,782)







Cash Flows from Financing Activities:






Increase in restricted cash


(794,115)



-

Contribution from non-controlling interests


-



29,539

Proceeds from borrowings


25,897,076



29,582,155

Payments on borrowings


(22,352,041)



(27,791,252)

Net Cash Provided by Financing Activities


2,750,920



1,820,442







Effect of exchange rate fluctuation on cash and cash equivalents


92,269



58,452

Net decrease in cash and cash equivalents


(422,157)



(317,153)

Cash and cash equivalents at beginning of year


1,669,387



1,986,540

Cash and cash equivalents at end of year

$

1,247,230


$

1,669,387







Supplemental Information:






Cash paid for interest

$

1,540,896


$

967,686

Cash paid for income tax

$

71,503


$

130,229







Non-cash activity:






Contribution from non-controlling interests


3,199,273



-




Source: China Shenghuo Pharmaceutical
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