HARBIN, China, Aug. 14 /PRNewswire-Asia/ -- 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 record financial results for the second quarter of 2009.
Second Quarter 2009 Highlights
-- Total revenues increased 35.5% year-over-year to $32.2 million
-- Gross profit increased 34% year-over-year to $24.4 million
-- Operating income increased 19.8% to $12.1 million
-- Net income increased 16.6% year-over-year to $9.5 million, or $0.57 per
diluted share
-- Received SFDA approval to manufacture five new products, including
Geranium ointment, Musk liniment, Diclofenac Sodium eye drops,
Acyclovir gel, Shuanghuanglian suppositories
-- Received SFDA approval to enter into clinical trials for Diclofenac
Sodium suppositories
-- Renewed production license for Sumei Slim Patch through April of 2013
-- Signed an agreement with Taiwan Golden Biotechnology Corporation to
begin cooperating on the development of a new anti-cancer drug called
Antroquinonol
-- Engaged PricewaterhouseCoopers to assist the Company in continuing to
comply with the financial reporting and control requirements of
Sarbanes-Oxley Act Section 404 ("SOX 404") by December 31, 2009
"We are pleased to report another quarter of excellent results. Our products, especially our biological diagnostic kits achieved rapid sales growth, and sales of diversified products from our acquisitions in 2008 also made a strong contribution to our second quarter results. In the quarter, we launched a series of marketing campaigns in four of China's provinces to promote our skin-care products under the 'Yu Fu' brand and received very positive feedback," said Mr. Yan-Qing Liu, Chairman and CEO of China Sky One Medical, Inc.
"Over the past three months, consultants from PWC have been working closely with China Sky One Medical to examine and improve our internal controls in the fields of accounting, sales, purchasing and inventory management. We feel confident in the quality of our financial reporting," Mr. Liu added.
Second Quarter 2009 Results
Total revenues increased 35.5% year-over-year to $32.2 million for the three months ended June 30, 2009. The increase was primarily attributable to the strong performance by the Company's own sales team and its sales agents as well as contributions from several complimentary business acquisitions in 2008.
Sales of patch products rose moderately to $9.9 million in the second quarter of 2009, accounting for 30.9% of revenue, compared to 37% a year ago. Sales of ointments rose 18.1% year-over-year to $7.7 million, accounting for 23.8% of revenue, versus 28% of revenue a year ago. Sales of spray products rose 69.3% year-over-year to $4.8 million, accounting for 14.9% of revenue, versus 20.0% a year ago. The increase in spray products was mainly from the increased sales of mouth sprays due to the outbreak of the H1N1 virus. Sales of bio-engineering products, i.e. three diagnostic testing kits, rose 71.9% year-over-year to $3.7 million, accounting for 11.5% of revenue during the quarter. Sales of the Company's other 48 products reached $6.1 million for the second quarter of 2009, compared to $3.5 million for the same period last year. The higher sales in this category were mainly due to an increase in diversified products from the acquisitions of Heilongjiang Tianlong Pharmaceutical, Inc. and Peng Lai Jin Chuang Pharmaceutical Company in 2008. Contract sales of non-manufactured products were discontinued since the beginning of 2009.
Gross profit in the second quarter of 2009 was $24.4 million, an increase of 34% over the same period a year ago. Gross margin was 75.9% in the second quarter, a slight decrease compared to gross margin of 76.7% for the second quarter of 2008.
Operating expenses in the second quarter of 2009 were $12.3 million, up 52% from $8.1 million in the second quarter of 2008. The increase was mainly the result of higher research and development expenses, which was associated with the ongoing clinical trials for proposed products and studies under the patents, licenses and other technologies acquired in 2008, and higher selling, general and administrative expenses, which were primarily attributable to increased selling and marketing costs.
Operating income was $12.1 million for the second quarter of 2009, representing a 19.8% increase from $10.1 million in the second quarter of 2008. Operating margin was 37.6%, compared to 42.5% in the second quarter of 2008.
Provision for income taxes was $2.6 million in the second quarter of 2009, compared to $1.8 million in the same period last year.
Net income for the second quarter of 2009 was $9.5 million, or $0.57 per diluted share, compared to net income of $8.1 million, or $0.50 per diluted share, in the second quarter of 2008. Diluted earnings per share were calculated using a weighted average share count of 16.6 million in the second quarter of 2009, compared to 16.1 million a year ago.
Six Month Operating Highlights
Total revenues for the first half of 2009 increased 57.6% year over year to $57.0 million as a result of expanded distribution channels and successful acquisitions. Gross margin was about 75.8% compared to 76.8% for the first half of 2008. Net income for the first six months of 2009 reached $16.7 million, or $1.01 per diluted share, compared to net income of $12.0 million, or $0.78 per diluted share, in the same period of 2008.
Financial Condition
As of June 30, 2009, China Sky One Medical had $48.2 million in cash and cash equivalents, approximately $66.0 million in working capital, and no debt. Stockholders' equity at June 30, 2009, was $111.8 million, a 17.8% increase over the $94.9 million recorded at December 31, 2008.
The Company generated $17.8 million in net cash flow from operating activities in the first half of 2009. As of June 30, 2009, the Company had spent approximately $9.9 million in constructing a new corporate headquarters in Harbin Song Bei New Development District. The project is expected to be completed by the end of 2009, at which time the Company plans to move its administration offices, R&D center, and cord blood stem cell and tissue bank to the new facility. The Company believes that combining its operations into one centralized location will result in greater efficiency and will make it easier for management to conduct business activities. The estimated cost of this project is approximately $13 million. The Company plans to fund the project using internally generated funds.
Recent Events
The Company's subsidiary, Peng Lai Jin Chuang Pharmaceutical Company, recently obtained a renewal of its Good Manufacturing Practices Certificate for Pharmaceutical Products ("GMP Certificate") from the State Food and Drug Administration (SFDA) in China. The new certificate will be valid until June 2014.
On August 6, 2009, China Sky One Medical announced the appointment of Dr. William Wei Lee as an independent member of the Company's Board of Directors, effective August 4, 2009. He replaces Mr. Jiang Qi-Feng, who resigned from the Board effective August 4, 2009. Dr. Wei Lee also replaces Mr. Jiang as a member of the Audit Committee, Compensation Committee and Finance Committee of the Board of Directors, and as "audit committee financial expert," as defined by the SEC rules adopted pursuant to the Sarbanes-Oxley Act of 2002.
Business Outlook and Guidance
"We are confident about the prospects for our business in 2009 and will continue to focus on increasing market share by both strengthening and further refining our effective sales and distribution network, building and enhancing our brand image, and making strategic acquisitions that could support our growth. In the first half of 2009, our sales representatives increased from approximately 1,300 to 1,500. Our total pharmacy coverage number in 2009 reached approximately 5,500 over 24 provinces in China versus 4,500 over 22 provinces in China in 2008. Over the long term, we will continue to focus on the development and manufacturing of biological diagnostic kits and our anti-cancer drugs, which we believe have very promising market opportunities," said Mr. Liu.
"Based on our progress so far this year, we are reaffirming our guidance for the year," added Mr. Liu. "We expect 2009 full year revenue to increase by 40%, or approximately $37.0 million, to $128-$130 million, driven by growth in all of our product sales categories. We expect 2009 gross margin to be approximately 75% due to market competition and possible higher raw material costs. Operating expenses will increase due to a higher percentage of R&D investment as well as additional costs to support our expanding distribution channels as well as our sales growth. We expect that net income will increase to $38-$39 million, resulting in net profit margin of approximately 30%."
Conference Call
The Company will conduct a conference call at 10:00 a.m. Eastern Daylight Time on Friday, August 14, 2009, to discuss its second quarter of fiscal year 2009 financial results. Joining Mr. Liu will be Stanley Hao, Chief Financial Officer of China Sky One Medical Inc.
To participate in this live conference call, please dial the following number five to ten minutes prior to the scheduled conference call time: 1 800 688 0796. International callers should call 1 617 614 4070. The Conference Passcode is 588 592 19. If you are unable to participate in the call at that time, replay of the conference call will be available for 14 days starting on Friday, August 14, 2009 at 12:00 p.m. Eastern Daylight Time. To access the replay, dial 888 286 8010. International callers should call 617 801 6888. The Conference Replay Passcode is 981 948 09.
About China Sky One Medical, Inc.
China Sky One Medical, Inc. 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," "may," "will," "should," "project," "plan," "seek," "intend," or "anticipate" or the negative thereof or comparable terminology. Such statements typically involve risks and uncertainties and may include financial projections or information regarding the progress of new product development and market conditions. 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 The People's Republic of China, 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 Statements Below
China Sky One Medical, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
June 30, December 31,
2009 2008
(Unaudited) (Audited)
ASSETS
Current Assets
Cash and cash equivalents $ 48,233,324 $ 40,288,116
Accounts receivable, net 16,172,625 14,978,648
Inventories 1,571,465 462,351
Prepaid and other current assets 76,763 106,386
Land and construction deposit 8,525,025 8,513,284
Total current assets 74,579,202 64,348,785
Property and equipment, net 30,553,224 21,058,779
Intangible assets, net 15,193,190 15,851,765
$ 120,325,616 $ 101,259,329
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current Liabilities
Accounts payable and accrued
expenses $ 4,274,858 $ 2,937,068
Taxes payable 4,265,075 3,362,888
Deferred revenues -- 26,079
Total current liabilities 8,539,933 6,326,035
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,
16,652,016 and 16,306,184 issued
and outstanding, respectively) 16,652 16,306
Additional paid-in capital 40,133,957 40,105,134
Accumulated other comprehensive
income 5,690,195 5,566,806
Retained earnings 65,944,879 49,245,048
Total stockholders' equity 111,785,683 94,933,294
$ 120,325,616 $ 101,259,329
China Sky One Medical, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations and Comprehensive Income
(Unaudited)
Three Months Ended June 30, Six Months Ended June 30,
2009 2008 2009 2008
Revenues $32,181,590 $23,748,592 $57,015,282 $36,162,022
Cost of Goods
Sold 7,752,371 5,522,314 13,793,289 8,382,742
Gross Profit 24,429,219 18,226,278 43,221,993 27,779,280
Operating
Expenses
Depreciation and
amortization 449,294 139,004 900,666 215,352
Research and
development 3,681,914 1,372,579 6,094,694 2,042,412
Selling, general
and
administrative 8,216,348 6,587,059 15,093,816 10,543,854
Total operating
expenses 12,347,556 8,098,642 22,089,176 12,801,618
Other Income
(Expense)
Other income
(Expense) (1,918) (35,539) (1,128) 27,509
Interest income
(expense, net) 15,921 (132,495) 26,954 (133,642)
Total other
income
(expense) 14,003 (168,034) 25,826 (106,133)
Net Income Before
Provision for
Income Tax 12,095,666 9,959,602 21,158,643 14,871,529
Provision for
Income Taxes
Current 2,638,673 1,848,935 4,458,812 2,895,951
Net Income $9,456,993 $8,110,667 $16,699,831 $11,975,578
Basic Earnings
Per Share $0.57 $0.54 $1.01 $0.84
Basic Weighted
Average
Shares
Outstanding 16,537,066 $14,971,652 16,475,833 14,253,547
Diluted Earnings
Per Share $0.57 $0.50 $1.01 $0.78
Diluted Weighted
Average Shares
Outstanding 16,628,892 16,090,211 16,547,037 15,372,106
Comprehensive
Income
Net Income $9,456,993 $8,110,667 $16,699,831 $11,975,578
Foreign currency
translation
adjustment 6,447 1,507,587 123,389 3,155,780
Comprehensive
Income $9,463,440 $9,618,254 $16,823,220 $15,131,358
China Sky One Medical, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Six Months Ended June 30,
2009 2008
Cash flows from operating activities
Net Income $ 16,699,831 $ 11,975,578
Adjustments to reconcile net cash
provided by operating activities
Depreciation and amortization 1,168,601 352,833
Share-based compensation expense -- 20,234
Net change in assets and liabilities
Accounts receivables (1,184,343) 1,972,239
Inventories (1,108,724) (807,993)
Prepaid expenses and other current
assets 40,536 (14,607)
Accounts payable and accrued expenses 1,307,906 2,474,459
Taxes payable 897,750 1,872,324
Deferred revenues -- (24,504)
Net cash provided by operating
activities 17,821,557 17,820,563
Cash flows from investing activities
Purchase of fixed assets (83,687) (667,432)
Purchase of subsidiary -
TianLong and Haina -- (8,437,375)
Purchase of construction in
progress (9,877,830) --
Purchase of intangible assets -- (7,139)
Net cash used in investing
activities (9,961,517) (9,111,946)
Cash flows from financing activities
Sale of common stock for cash, net of
offering costs -- 23,487,963
Proceeds from warrants conversion 29,169 840,000
Net cash provided by financing
activities 29,169 24,327,963
Effect of exchange rate changes
on cash 55,997 303,955
Net increase in cash and cash
equivalents 7,945,206 33,340,535
Cash and cash equivalents at
beginning of period 40,288,117 9,190,870
Cash and cash equivalents at
end of period $ 48,233,324 $ 42,531,405
Supplemental disclosure of
cash flow information
Interest paid $ -- $ 1,157
Taxes paid $ 3,928,870 $ 6,366,350
For more information, please contact:
Company Contact:
China Sky One Medical, Inc.
Mr. Stanley Hao, CFO
Tel: +86-451-5399-4069
Email: stanleyhao@cski.com.cn
Investor Relations Contact:
CCG Investor Relations
Mr. Crocker Coulson, President
Tel: +1-646-213-1915
Email: crocker.coulson@ccgir.com
Web: http://www.ccgasiair.com
