China Shenghuo Pharmaceutical Reports Financial Results for the First Quarter of 2011

Mon May 16, 2011 9:00pm EDT

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China Shenghuo Pharmaceutical Reports Financial Results for the First Quarter of 2011

PR Newswire

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

  • Total revenue increased to $9.4 million for the first quarter of 2011, representing 19% year-over-year growth.
  • Net cash provided by operating activities was approximately $2.6 million, an increase of approximately $0.6 million, from approximately $2.0 million for the first quarter ended March 31, 2010.
  • Net income attributable to stockholders increased to $99,373, as compared to $2,355 for the first quarter ended March 31, 2010.

First Quarter 2011 Results

Sales: 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 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 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 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. Hongling Fei

Director of Securities Department

+86-871-7282698


Investor Relations Contact:

The Trout Group

Mark Xu

+86-15821996861





CHINA SHENGHUO PHARMACEUTICAL HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in USD)



March31,

December 31,


2011



2010



(Unaudited)




Assets:






Current assets:






  Cash and cash equivalents

$

1,409,304


$

1,669,387

  Accounts and notes receivable, net


13,721,299



11,531,027

  Other receivables, net


4,025,284



4,111,315

  Advances to suppliers


567,477



580,168

  Inventories


2,759,759



2,599,351

  Due from related parties


279,077



190,614

  Current deferred tax assets


1,003,443



833,568

  Other current assets


143,964



208,111

Total current assets


23,909,607



21,723,541







  Property, plant and equipment, net


21,342,263



21,069,139

  Other non-current assets


2,497,063



2,554,193


$

47,748,933


$

45,346,873






CHINA SHENGHUO PHARMACEUTICAL HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (CONT'D)

(Amounts in USD)



March 31,


December 31,


2011


2010

Liabilities and equity:


(Unaudited)



Current liabilities:





  Accounts payable

$

8,218,246

$

8,964,404

  Other payables and accrued expenses


11,148,834


9,699,857

  Sales representative deposits


4,811,569


4,936,429

  Due to related parties


-


79,864

  Short-term borrowings


4,722,313


5,289,178

  Advances from customers


2,747,517


1,158,649

  Taxes payables and other current liabilities


1,540,686


881,506

  Current portion of long-term borrowings


6,097,468


6,039,833

Total current liabilities


39,286,633


37,049,720

Long-term borrowings


6,310,879


6,251,227



45,597,512


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, both periods


1,968


1,968

  Additional paid-in capital


6,193,927


6,193,927

  Appropriated retained earnings


147,023


147,023

  Accumulated deficit


(5,841,066)


(5,940,439)

  Accumulated other comprehensive income


1,661,061


1,638,109

Total stockholder's equity


2,162,913


2,040,588

Non-controlling interest


(11,492)


5,338

Total equity


2,151,421


2,045,926


$

47,748,933

$

45,346,873






CHINA SHENGHUO PHARMACEUTICAL HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

AND COMPREHENSIVE INCOME (UNAUDITED)

(Amounts in USD, except shares)








Three months ended March 31,


2011


2010



(Unaudited)


(Unaudited)

Sales

$

9,441,626

$

7,907,002

Cost of goods sold


3,805,692


2,076,353

Gross profit


5,635,934


5,830,649

Operating expenses:





  Selling expenses


4,076,430


5,051,714

  General and administrative expenses


1,030,215


684,259

  Research and development expense


121,725


80,851



5,228,370


5,816,824

Income from operations


407,564


13,825

Other income (expenses):










  Subsidy income


7,598


153,598

  Interest and other income (expense)


(314,481)


(196,602)



(306,883)


(43,004)

Income (loss) before income tax expenses


100,681


(29,179)

Income tax (expense) benefit


(14,980)


29,984

Net income


85,701


805

Less: net loss attributable to non-controlling

interests


(13,672)


(1,550)

Net income attributable to stockholders

$

99,373

$

2,355

Comprehensive income:





Net income


85,701


805

  Foreign currency translation adjustment


19,794


331

Comprehensive income

$

105,495

$

1,136

Less: comprehensive loss attributable to  

non-controlling interests


(16,830)


(2,187)

Comprehensive income attributable to

stockholders


122,325


3,323

Basic and diluted earnings per share

$

0.01

$

0.00

Weighted-average number of shares outstanding-basic and diluted

 - basic and diluted


19,679,400


19,679,400





CHINA SHENGHUO PHARMACEUTICAL HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(Amounts in USD)


Three months ended March 31,


2011

2010


(Unaudited)

(Unaudited)

Net cash provided by operating activities

$

2,609,836

$

2,022,198

Cash flows from investing activities:





Purchase of long-lived assets


(2,290,979)


(3,205,176)

Proceeds from disposal of property


169


131,913

Net cash used in investing activities


(2,290,810)


(3,073,263)






Cash flows from financing activities:





Proceeds from borrowings


3,292,326


9,563,858

Payments 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 equivalents


14,632


492

Net decrease in cash and cash equivalents


(260,083)


(1,122,735)

Cash and cash equivalents at beginning of period


1,669,387


1,986,540

Cash and cash equivalents at end of period

$

1,409,304

$

863,805






Supplemental information





Cash paid for interest

$

332,323

$

261,726

Cash paid for income taxes

$

-

$

-




SOURCE China Shenghuo Pharmaceutical Holdings, Inc.

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