KUNMING, China, May 16, 2011 /PRNewswire-Asia-FirstCall/ -- China Shenghuo Pharmaceutical Holdings, Inc. (NYSE Alternext US: KUN) ("China Shenghuo" or the "Company"), today reported unaudited financial results for the first quarter ended March 31, 2011.
First Quarter 2011 Highlights
First Quarter 2011 ResultsSales: Sales for the three months ended March 31, 2011 was approximately $9.4 million, an increase of approximately $1.5 million, or 19 %, from approximately $7.9 million for the three months ended March 31, 2010. The increase in sales was primarily due to the Company's main product Xuesaitong's sales increasing in Tianjin City and Yunnan Province as Xuesaitong was listed on the Provincial Insurance Catalog list of Tianjin City since the second quarter in 2010 and the Company strengthened sales promotion in Yunnan Province.
Cost of goods sold: Our cost of goods sold for the three months ended March 31, 2011 was approximately $3.8 million, an increase of $1.7 million, or 83%, from approximately $2.1 million for the three months ended March 31, 2010. The increase in cost of goods sold was primarily due to the increase of purchase price of Sanqi which is the main raw material of our main product Xuesaitong. In addition, the Zhonghuang Hotel began trial operation since January 2011 which has contributed $0.4 million to the increase of cost of goods sold.
Gross profit: Our gross profit for the three months ended March 31, 2011 was approximately $5.6 million as compared with approximately $5.8 million for the three months ended March 31, 2010, a decrease of $0.2 million, or 3%. Gross profit as a percentage of revenues was approximately 59.7% for the three months ended March 31, 2011, a decrease of 14.0% from 73.7% for the three months ended March 31, 2010. The decrease in gross profit percentage was primarily due to the increase of cost of goods sold set forth above.
Selling expense: Selling expenses were approximately $4.1 million for the three months ended March 31, 2011, a decrease of $1.0 million, or 19%, from approximately $5.1 million for the three months ended March 31, 2010. The primary reason for the decrease in selling expenses was due to decrease of commission to sales representative as a result of change of sales commission policy which took effect since the second quarter of 2010.
General and administrative expense: General and administrative expenses were approximately $1.0 million for the three months ended March 31, 2011, an increase of $0.3 million, or 51%, from approximately $0.7 million for the three months ended March 31, 2010. The increase was primarily due to the increase of the management's traveling expenses for expanding our sales channel. In addition, Zhonghuang Hotel began trial operation since January 2011 which has contributed $78,733 to the increase of general and administrative expense.
Research and development expense: Research and development expense for the three months ended March 31, 2011 was $121,725, as compared to $80,851 for the period ended March 31, 2010, an increase of $40,874. The increase was primarily due to the increase in the expenditures for outside experts for the Sh1002's registration to FDA since late 2009.
Other expenses: Other expenses were $306,883 for the three months ended March 31, 2011, which consisted of interest expense and non-operating expense, off set by subsidy income, interest income and non-operating income, an increase of $263,879, or 614%, from $43,004 for the three months ended March 31, 2010. The increase was mainly due to less subsidy income from provincial government as compared to the same period in 2010.
Income tax (expense) benefit: Income tax expense was $14,980 for the three months ended March 31, 2011 as compared to income tax benefit of $29,984 for the three months ended March 31, 2010. The tax expense was mainly for tax accrued for the profit of the Company.
Net income attributable to stockholders: Net income increased to $99,373 for the three months ended March 31, 2011 as compared to $2,355 for the three months ended March 31, 2010. Offset by the increase in raw material price and the expenses related to the trial operation of Shenghuo Plaza, the increase in net income was primarily due to decrease of selling expenses as a result of decrease of sales commission to sales representatives.
About China ShenghuoFounded 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 and remains in the 2009 Provincial Insurance Catalogue of three 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 StatementThis 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. Hongling FeiDirector of Securities Department+86-871-7282698Investor Relations Contact:The Trout GroupMark Xu+86-15821996861CHINA SHENGHUO PHARMACEUTICAL HOLDINGS, INC. AND SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE SHEETS(Amounts in USD)March31,December 31,20112010(Unaudited)Assets:Current assets: Cash and cash equivalents
1,669,387 Accounts and notes receivable, net13,721,29911,531,027 Other receivables, net4,025,2844,111,315 Advances to suppliers567,477580,168 Inventories2,759,7592,599,351 Due from related parties279,077190,614 Current deferred tax assets1,003,443833,568 Other current assets143,964208,111Total current assets23,909,60721,723,541 Property, plant and equipment, net 21,342,26321,069,139 Other non-current assets2,497,0632,554,193$
45,346,873CHINA SHENGHUO PHARMACEUTICAL HOLDINGS, INC. AND SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE SHEETS (CONT'D)(Amounts in USD)March 31,December 31,20112010Liabilities and equity:(Unaudited)Current liabilities: Accounts payable
8,964,404 Other payables and accrued expenses11,148,8349,699,857 Sales representative deposits4,811,5694,936,429 Due to related parties-79,864 Short-term borrowings4,722,3135,289,178 Advances from customers2,747,5171,158,649 Taxes payables and other current liabilities1,540,686881,506 Current portion of long-term borrowings6,097,4686,039,833Total current liabilities39,286,63337,049,720Long-term borrowings6,310,8796,251,22745,597,51243,300,947Commitments and contingenciesEquity: Common stock, $0.0001 par value, 100,000,000 shares authorized and 19,679,400 shares issued and outstanding, both periods1,9681,968 Additional paid-in capital6,193,9276,193,927 Appropriated retained earnings147,023147,023 Accumulated deficit(5,841,066)(5,940,439) Accumulated other comprehensive income1,661,0611,638,109Total stockholder's equity2,162,9132,040,588Non-controlling interest(11,492)5,338Total equity2,151,4212,045,926$
45,346,873CHINA SHENGHUO PHARMACEUTICAL HOLDINGS, INC. AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF INCOMEAND COMPREHENSIVE INCOME (UNAUDITED)(Amounts in USD, except shares)Three months ended March 31,20112010(Unaudited)(Unaudited)Sales
7,907,002Cost of goods sold3,805,6922,076,353Gross profit5,635,9345,830,649Operating expenses: Selling expenses4,076,4305,051,714 General and administrative expenses1,030,215684,259 Research and development expense121,72580,8515,228,3705,816,824Income from operations407,56413,825Other income (expenses): Subsidy income7,598153,598 Interest and other income (expense)(314,481)(196,602)(306,883)(43,004)Income (loss) before income tax expenses100,681(29,179)Income tax (expense) benefit (14,980)29,984Net income85,701805Less: net loss attributable to non-controlling
interests(13,672)(1,550)Net income attributable to stockholders$99,373$2,355Comprehensive income:Net income 85,701805 Foreign currency translation adjustment19,794331Comprehensive income$105,495$1,136Less: comprehensive loss attributable to
non-controlling interests(16,830)(2,187)Comprehensive income attributable tostockholders122,3253,323Basic and diluted earnings per share$
0.00Weighted-average number of shares outstanding-basic and diluted - basic and diluted19,679,40019,679,400CHINA SHENGHUO PHARMACEUTICAL HOLDINGS, INC. AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)(Amounts in USD)Three months ended March 31,20112010(Unaudited)(Unaudited)Net cash provided by operating activities$
2,609,836$2,022,198Cash flows from investing activities:Purchase of long-lived assets(2,290,979)(3,205,176)Proceeds from disposal of property169131,913Net cash used in investing activities(2,290,810)(3,073,263)Cash flows from financing activities:Proceeds from borrowings3,292,3269,563,858Payments on borrowings(3,886,067)(9,636,020)Net cash used in financing activities (593,741)(72,162)Effect of foreign currency fluctuation on cash and cash equivalents14,632492Net decrease in cash and cash equivalents(260,083)(1,122,735)Cash and cash equivalents at beginning of period1,669,3871,986,540Cash and cash equivalents at end of period$
863,805Supplemental informationCash paid for interest
261,726Cash paid for income taxes
|SOURCE China Shenghuo Pharmaceutical Holdings, Inc.|
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