HARBIN, China, May 11, 2011 /PRNewswire-Asia-FirstCall/ -- China Sky One Medical, Inc. ("China Sky One Medical" or "the Company") (NASDAQ: CSKI), a leading fully integrated pharmaceutical company in the People's Republic of China ("PRC"), today announced financial results for the first quarter of 2011.
First Quarter 2011 Highlights
"In the first quarter of 2011, we saw encouraging early signs of a sales recovery as we took aggressive steps to rebuild and expand our distribution base after the loss of two major distributor relationships during the third quarter of 2010. Sales have been spread out across a number of new distributors and we begin 2011 with a more diversified client base compared to prior years. Not one of our customers accounted for more than 10% of our total revenue or accounts receivable in the quarter ending March 31, 2011," said Mr. Yan-Qing Liu, the Company's Chairman and CEO. "A more diversified and richer product portfolio also favorably impacted first quarter results and we plan to reinforce China Sky One's long term growth prospects by continuing to invest in our higher margin branded portfolio while introducing additional new drugs in 2011 and beyond."
First Quarter 2011 Results
In the first quarter of 2011, China Sky One's total revenues decreased 1.9% to $28.4 million from $28.9 million in the same quarter last year, reflecting sales declines in the Company's Patches, Ointments and Sprays product categories, partially offset by sales increases in its Wash Fluids, Diagnostic Kits, Drops and Others product categories. During the first quarter of 2011, the Company manufactured and marketed 117 products, compared to 89 products in the first quarter of 2010.
Sales of Ointments decreased 14.6% year-over-year to $6.7 million, or approximately 23.5% of total sales in the first of quarter 2011, primarily due to lower sales of the Company's Hemorrhoids Ointment. Revenue generated from the Hemorrhoids Ointment declined from $2.3 million in the first quarter of 2010 to $0.8 million this quarter, mainly due to the SFDA's enforcement of new regulations on the advertisement of certain medicinal products, which negatively impacted our certain of our distributors' sales. Seven new Ointment products the Company launched after the first quarter of 2010 contributed incremental sales of $0.3 million during the first quarter of 2011, which partially offset the overall Ointments sales decrease.
Sales of Patches declined 41.9% year-over-year to $4.8 million, or approximately 16.8% of total sales in the first quarter of 2011, reflecting lower sales of the Company's Pain Relief Patch and Asthma Patch products after the termination of a key distribution relationship during the third quarter of 2010.
Sales of Wash Fluids increased 206.6% year-over-year to $2.7 million, or approximately 9.5% of total sales in the first quarter of 2011, mainly driven by higher sales of the Company's Metronidazole and Chlorhexidine Washing Fluids after adding a new distributor in the second quarter of 2010.
Sales of Sprays decreased 15.3% year-over-year to $2.5 million, or approximately 9.0% of total sales in the first quarter of 2011, primarily due to the lower sales of several of the Company's Spray products.
Sales of Drops increased 25.4% year-over-year to $2.3 million, or approximately 8.0% of total sales in the first quarter of 2011, mainly attributable to incremental sales of six new Drops products launched after the first quarter of 2010.
Sales of Diagnostic Kits climbed 32.5% year-over-year to $1.9 million, or approximately 6.8% of total sales in the first quarter of 2011, primarily driven by the increased sales of the Company's Cardiac Arrest Early Examination Kit.
Sales of Suppositories increased 60.0% year-over-year to $1.9 million, or approximately 6.8% of total sales in the first quarter of 2011, due to higher sales of the Company's existing Suppositories products and incremental revenue from two new Suppositories products the Company launched after the first quarter of 2010.
Sales of products in the Others category grew 22.5% year-over-year to $5.5 million, or approximately 19.5% of total sales in the first quarter of 2011, reflecting incremental revenues from thirteen products the Company launched after the first quarter of 2010.
Gross profit decreased 10.8% year-over-year to $19.3 million in the first quarter of 2011. Gross margin in the quarter was 68.0%, compared to 74.8% in the first quarter of 2010. The gross margin decline on a year-over-year basis reflects an increase in certain raw material prices, as well as lower average selling prices the Company extended to certain distributors with extensive market channels, as part of the Company's sales promotion strategy.
Operating expenses increased 10.1% year-over-year to $12.7 million in the first quarter of 2011, due to $0.4 million of incremental selling expenses, $0.3 million of higher research and development expenditures, and $0.5 million of increased depreciation and amortization expenses.
First quarter 2011 operating income was $6.6 million, or 23.4% of total sales, as compared to $10.1 million, or 35.0% of total sales in the first quarter of the prior year.
Total other income, which includes a non-cash gain related to change in the fair value of derivative warrant liability related to the Company's issuance of warrants in the private placement it completed in January 2008, was $1.4 million in the first quarter of 2011, as compared to $4.9 million in the same quarter of the prior year.
Provision for income taxes was $1.9 million in the first quarter of 2011, as compared to $2.5 million in the same period last year.
GAAP net income for the first quarter of 2011 was $6.1 million, or $0.36 per diluted share, as compared to $12.6 million, or $0.74 per diluted share, in the first quarter of 2010.
Excluding the non-cash gain of $1.4 million related to the change in fair value of derivative warrant liability, the Company's non-GAAP adjusted net income decreased 38.1% year-over-year to $4.7 million, or $0.28 per diluted share, in the first quarter of 2011, as compared to net income of $7.66 million, or $0.45 per diluted share in the first quarter 2010.
Financial Condition
As of March 31, 2011, China Sky One had $48.1 million in cash and equivalents, with a current ratio of 6.9. Working capital was approximately $61.0 million, up from $57.4 million at the end of 2010. Stockholders' equity at March 31, 2011, was $171.6 million, a 4.6% increase over the $164.0 million recorded at December 31, 2010.
Accounts receivable turnover days decreased to 58.3 days in the three months ended March 31, 2011, as compared to 61.9 days in the same period of 2010. Inventory turnover days increased to 44.7 days in the first quarter of 2011 from 28.6 days in the first quarter of 2010. This increase primarily reflected management's decision to increase raw material inventory in response to anticipated raw material price increases as well as to fulfill expected sales in the coming period.
The Company generated $9.0 million in net cash flow from operating activities in the first quarter of 2011, down from $12.6 million in the year ago quarter. The decrease was primarily attributable to lower income from operations and an increased level of inventories. In the first quarter of 2011, approximately $4.4 million was spent to purchase thirteen drug batch numbers from Heilongjiang Traditional Chinese Medical University. The Company is preparing for trial production and defining optimal production process for these thirteen products, which the Company's management believes could be introduced to the market as soon as the fourth quarter of 2011.
Business Outlook
On December 21, 2010, China Sky One entered into an agreement with Heilongjiang Tang Wang He Forest Bureau that gives the Company the right to grow and harvest herbs, among other plants, on approximately 74,000 acres of forested land in the Xiao Xing'an Mountain region. The Company's management believes this arrangement will provide its TCM business with a hedge against fluctuations in raw material prices. The Company plans to evaluate the land in the second quarter of 2011 and subsequently develop a strategic plan for its future operation.
"We commenced 2011 by engaging several new distributors and recently acquired thirteen new drug licenses, which we expect to launch as soon as the fourth quarter of this year," said Mr. Liu. "Throughout 2011, we anticipate a more strict regulated medicinal market in China, which may impose more challenges on the Company's operating performance. However, given our strong management team, rich product portfolio, outstanding R&D capability, and extensive sales network, we believe we are in a good position to compete and improve shareholder value."
Conference Call
China Sky One Medical will conduct a conference call at 9:00 a.m. Eastern Time (ET) on Thursday, May 12, 2011, to discuss its first quarter 2011 financial results. To participate in the live conference call, please dial the following number five to ten minutes prior to the scheduled conference call time: 866-395-5819. International callers should dial 706-643-6986. The Conference ID for this call is 63344218.
If you are unable to participate in the call at this time, a replay will be available for two weeks starting on Thursday, May 12, 2011 at 12:00 a.m. ET. To access the replay, dial 800-642-1687, international callers dial 706-645-9291. The Conference Replay Passcode is 63344218.
Use of Non GAAP Financial Measures
GAAP results for the three month period ended March 31, 2011 include gain related to the change in the fair market value of the derivative warrant liability. To supplement its consolidated financial statements presented on a GAAP basis, the Company has provided non-GAAP adjusted financial information, which excludes the impact of this item in this release. The Company's management believes that this adjusted measure provides investors with a better understanding of how the results relate to the Company's historical performance. A reconciliation of adjustment to GAAP results appears in the tables accompanying this press release. This additional adjusted information is not meant to be considered in isolation or as a substitute for GAAP financials. The adjusted financial information that the Company provides also may differ from the adjusted information provided by other companies.
About China Sky One Medical, Inc.
China Sky One Medical, Inc., a Nevada corporation, is a holding company. The Company engages in the manufacturing, marketing and distribution of pharmaceutical, medicinal and diagnostic products. Through its wholly-owned subsidiaries, Harbin Tian Di Ren Medical Science and Technology Company, Harbin First Bio-Engineering Company Limited, Heilongjiang Tianlong Pharmaceutical, Inc. and Peng Lai Jin Chuang Pharmaceutical Company, the Company manufactures and distributes over-the-counter pharmaceutical products, which make up its major revenue source. For more information, visit http://www.cski.com.cn .
Safe Harbor Statement
Certain of the statements made in the press release constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements can be identified by the use of forward- looking terminology such as "believe," "expect," "intend," "anticipate," "estimate," "should", "would", "could", "may", "plan", "possible", "project" or similar expressions. Such statements typically involve risks and uncertainties and may include financial projections or business development. Actual results could differ materially from the expectations reflected in such forward-looking statements as a result of a variety of factors, including the risks associated with the effect of changing economic conditions in PRC, the ability to achieve guidance, the announcement or execution of any acquisitions or other strategic deals, the success of any pipeline projects, variations in cash flow, reliance on collaborative retail partners and on new product development, variations in new product development, risks associated with rapid technological change, and the potential of introduced or undetected flaws and defects in products, and other risk factors detailed in reports filed with the Securities and Exchange Commission from time to time.
- FINANCIAL TABLES FOLLOW –
| China Sky One Medical, Inc. and Subsidiaries Condensed Consolidated Statements of Operations and Comprehensive Income (Unaudited, $ in thousands except share and per share data) |
|||||||||
| ThreeMonthsEndedMarch 31, | |||||||||
| 2011 | 2010 | ||||||||
| Revenues | $ | 28,365 | $ | 28,903 | |||||
| Cost of Goods Sold | 9,064 | 7,275 | |||||||
| Gross Profit | 19,301 | 21,628 | |||||||
| Operating Expenses | |||||||||
| Depreciation and amortization | 1,334 | 841 | |||||||
| Research and development | 4,112 | 3,764 | |||||||
| Selling | 6,300 | 5,911 | |||||||
| General and administrative | 920 | 990 | |||||||
| Total operating expenses | 12,666 | 11,506 | |||||||
| Income from Operations | 6,635 | 10,122 | |||||||
| Other Income | |||||||||
| Interest income | 32 | 29 | |||||||
| Change in fair value of derivative warrant liability | 1,377 | 4,927 | |||||||
| Total other income | 1,409 | 4,956 | |||||||
| Net Income Before Provision for Income Tax | 8,044 | 15,078 | |||||||
| Provision for Income Taxes | 1,921 | 2,489 | |||||||
| Net Income | $ | 6,123 | $ | 12,589 | |||||
| Basic Earnings Per Share | $ | 0.36 | $ | 0.75 | |||||
| Basic Weighted Average Shares Outstanding | 16,940,539 | 16,776,864 | |||||||
| Diluted Earnings Per Share | $ | 0.36 | $ | 0.74 | |||||
| Diluted Weighted Average Shares Outstanding | 16,940,539 | 16,955,535 | |||||||
| Other Comprehensive Income | |||||||||
| Foreign currency translation adjustment | $ | 1,415 | $ | 21 | |||||
| Net Income | 6,123 | 12,589 | |||||||
| Comprehensive Income | $ | 7,538 | $ | 12,610 | |||||
|
China Sky One Medical, Inc. and Subsidiaries |
||||||||
|
|
March31, | December31, | ||||||
| 2011 (Unaudited) | 2010 | |||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash and cash equivalents | $ | 48,058 | $ | 43,124 | ||||
| Accounts receivable, net | 16,678 | 20,080 | ||||||
| Inventories | 6,589 | 2,409 | ||||||
| Prepaid and other current assets | 34 | 21 | ||||||
| Total current assets | 71,359 | 65,634 | ||||||
| Property and equipment, net | 28,906 | 28,960 | ||||||
| Intangible assets, net | 26,997 | 23,155 | ||||||
| Construction in progress | 40 | 19 | ||||||
| Land use rights, net | 40,860 | 40,844 | ||||||
| Construction deposit | 13,727 | 13,612 | ||||||
| Total Assets | $ | 181,889 | $ | 172,224 | ||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| Current Liabilities | ||||||||
| Accounts payable and accrued expenses | $ | 6,738 | $ | 3,309 | ||||
| Taxes payable | 3,300 | 3,225 | ||||||
| Derivative warrant liability | 297 | 1,674 | ||||||
| Total current liabilities | 10,335 | 8,208 | ||||||
| Commitments and Contingencies | - | - | ||||||
| Stockholders' Equity | ||||||||
| Preferred stock ($0.001 par value, 5,000,000 shares authorized, none issued and outstanding) | - | - | ||||||
| Common stock ($0.001 par value, 50,000,000 shares authorized, 16,940,539 issued and outstanding) | 17 | 17 | ||||||
| Additional paid-in capital | 39,252 | 39,252 | ||||||
| Retained earnings | 119,865 | 113,742 | ||||||
| Accumulated other comprehensive income | 12,420 | 11,005 | ||||||
| Total stockholders' equity | 171,554 | 164,016 | ||||||
| Total Liability and Shareholders' Equity | $ | 181,889 | $ | 172,224 | ||||
|
China Sky One Medical, Inc. and Subsidiaries |
||||||
| ThreeMonthsEndedMarch31, | ||||||
| 2011 | 2010 | |||||
| Cash flows from operating activities | ||||||
| Net Income | $ | 6,123 | $ | 12,589 | ||
| Adjustments to reconcile net cash provided by (used in) operating activities: | ||||||
| Depreciation and amortization | 1,461 | 944 | ||||
| Change in fair value of derivative liability | (1,377) | (4,927) | ||||
| Net changein assets and liabilities: | ||||||
| Accounts receivable | 3,557 | 2,563 | ||||
| Inventories | (4,143) | 190 | ||||
| Prepaid expenses and other current assets | (13) | (24) | ||||
| Accounts payable and accrued expenses | 3,387 | 1,143 | ||||
| Taxes payable | 48 | 138 | ||||
| Net cash provided by operating activities | 9,043 | 12,616 | ||||
| Cash flows from investing activities | ||||||
| Purchase of fixed assets | (93) | (77) | ||||
| Purchase of intangible assets | (4,389) | - | ||||
| Purchase of construction in process | (19) | |||||
| Net cash used in investing activities | (4,501) | (77) | ||||
| Cash flows from financing activities | ||||||
| Proceeds from warrants conversion | - | 94 | ||||
| Net cash provided by financing activities | - | 94 | ||||
| Effect of exchange rate changes on cash and cash equivalents | 392 | 10 | ||||
| Net increase in cash and cash equivalents | 4,934 | 12,643 | ||||
| Cash and cash equivalents at beginning of period | 43,124 | 52,756 | ||||
| Cash and cash equivalents at end of period | $ | 48,058 | $ | 65,399 | ||
| Supplemental disclosure of cash flow information | ||||||
| Interest paid | $ | - | $ | - | ||
| Taxes paid | $ | 1,894 | $ | 2,452 | ||
| China Sky One Medical, Inc. and Subsidiaries Reconciliation of Non-GAAP Net Income and Diluted EPS ($ in thousands except share and per share data) |
|||||
| For the Three Months Ended March 31, 2011 (Unaudited) |
For the Three Months Ended March 31, 2010 |
||||
| Net Income | $6,123 | Per share $0.36 |
$12,589 | Per share $0.74 |
|
| Change in fair value of derivative warrant liability | (1,377) | (0.08) | (4,927) | (0.29) | |
| Adjusted Net Income | $4,746 | $0.28 | $7,662 | $0.45 | |
| Diluted Weighted Average Shares Outstanding | 16,940,539 | 16,955,535 | |||
| Company Contact: | Investor Relations Contact: |
| China Sky One Medical, Inc. | CCG Investor Relations |
| Yan-qing Liu, CEO | Mr. Crocker Coulson, President |
| Email: ir@cski.com.cn | Tel: +1-646-213-1915 |
| Email: crocker.coulson@ccgir.com | |
| Website: www.ccgirasia.com | |
| Ms. Mabel Zhang, Vice President | |
| Tel: +1-310-954-1353 | |
| Email: mabel.zhang@ccgir.com |
