China Sky One Medical Announces Second Quarter 2010 Results
HARBIN, China, Aug. 10 /PRNewswire-Asia-FirstCall/ -- China Sky One Medical, Inc. ("China Sky One" or "the Company") (Nasdaq: CSKI), a leading fully integrated pharmaceutical company producing over-the-counter drugs in the People's Republic of China ("PRC"), today announced record financial results for the second quarter of 2010.
Second Quarter 2010 Financial Highlights
-- Total revenues increased 26.7% year-over-year to $40.8 million
-- Gross profit rose 20.9% to $29.5 million
-- Operating income grew 13.4% to $13.7 million
-- GAAP net income, including a non-cash gain from change in the fair
value of derivative warrant liability, increased 45.9% year-over-year
to $12.2 million, or $0.73 per diluted share
-- Excluding the non-cash gain, non-GAAP adjusted net income rose 7.4% to
$10.2 million, or $0.60 per diluted share
Second Quarter 2010 Accomplishments
-- Obtained SFDA approval for Ciclopirox Olamine Vaginal Suppositories, a
broad-spectrum antibacterial that treats fungal infection and
inflammation
-- Obtained SFDA renewal of the Good Manufacturing Practices Certificate
for Pharmaceutical Products ("GMP Certificate") for the Company's
subsidiary, Heilongjiang Tianlong Pharmaceutical, Inc. ("Tianlong")
"Our second quarter revenue grew by nearly 27% year-over-year, driven by strong product sales across a number of our product categories, partially offset by lower revenue from Slim Patch and Diagnostic Kit Sales. A noteworthy contributor to our growth this quarter continues to be strength in the sales of our ointment products, including Compound Camphor Cream, which grew 85% year-over-year and remains our best selling product," said Mr. Yan-Qing Liu, Chairman and CEO of China Sky One Medical, Inc. "In 2010, we have increased our cooperation with several larger scale distributors, who provide us with a powerful channel to expand our addressable market. We continue to make a significant investment in research and development, with a focus on innovative proprietary drugs and diagnostic kits that we expect will drive future sales growth."
Second Quarter 2010 Results
In the second quarter of 2010, China Sky One's total revenues increased 26.7% to $40.8 million from $32.2 million in the same quarter last year. Top-line growth was primarily attributable to strong sales from the Ointment and Others product categories, which together represented 57.9% of total revenue. Sales of ointments increased 51.7% year-over-year to $11.6 million, primarily due to the rapid growth of the Company's Compound Camphor Cream and Kecuo Yintong Ointment. With the successful marketing of Compound Camphor Cream under the well established Yu Fu brand, the product has replaced Slim Patch to become China Sky One's best selling product, accounting for 15.0% of total revenues in the second quarter of 2010 up from 10.5% of sales during the first quarter of 2010. Sales of the acne prevention product, Kecuo Yintong Ointment, also increased significantly, reflecting the successful efforts of a new distributor since the third quarter of 2009.
Sales of Other Products grew 98.5% in the current year quarter to $12.0 million. Higher sales in this category were mainly driven by strong market demand for Naphazoline Hydrochloride eye drops, Napadil tablet and Tinea liniment.
Sales of patch products declined 2.3% year-over-year to $9.7 million in the second quarter of 2010 due to a 31.1% decrease in Slim Patch sales to $4.8 million, as compared to $6.9 million in the comparable period of 2009. Excluding the Slim Patch, sales of other patch products, including Pain Relief Patch, Asthma Patch and Hypertension Patch, rose 63.6% to $4.9 million in the second quarter of 2010, as compared to $3.0 million in the year ago quarter.
Sales of spray products were up 5.5% from the prior year at $5.1 million. Diagnostic kit sales fell year-over-year to $2.3 million from $3.7 million. The Company has implemented training of its sales professionals to enhance cooperation with its distributors to increase marketing support for this category and is confident that new diagnostic kits under development have very significant market potential.
Gross profit rose 20.9% to $29.5 million in the second quarter of 2010. Gross margin in the quarter was 72.5%, as compared to 75.9% in the 2009 quarter. Regional flooding and droughts in the second quarter of 2010 led to higher pricing of herbal raw materials used by the Company to produce traditional Chinese medicine (TCM) products.
Operating expenses increased 28.3% year-over-year to $15.8 million in the second quarter of 2010. The increase was principally due to $2.2 million higher R&D expenses, a $0.7 million increase in general and administrative and a $0.4 million increase in depreciation and amortization expenses associated with two proprietary technologies acquired in the fourth quarter of 2009. Second quarter 2010 operating income was $13.7 million, representing an operating margin of 33.6%, as compared to $12.1 million and 37.5% in the same period a year ago.
Total other income was $2.1 million in the second quarter of 2010, as compared to an expense of $1.1 million in the prior year quarter. The increase reflected a non-cash gain related to the change in the fair value of our derivative warrant liability related to the private placement in January 2008.
Provision for income taxes was $3.6 million in the second quarter of 2010, as compared to $2.6 million in the same period last year.
GAAP net income for the second quarter of 2010 was $12.2 million, as compared to $8.4 million in the second quarter of 2009. Excluding the non-cash $2.1 million gain related to the change in fair value of derivative warrant liability, the Company's non-GAAP adjusted net income rose 7.4% to $10.2 million or $0.60 per diluted share, as compared to $9.5 million or $0.57 per diluted share, in the prior year period.
Financial Condition
As of June 30, 2010, China Sky One had $64.7 million in cash and equivalents, with a current ratio of 5.5. Working capital was approximately $77.2 million, up from $60.6 million at the end of second quarter 2009. Stockholders' equity at June 30, 2010, was $147.2 million, a 21.8% increase over the $120.9 million recorded at December 31, 2009.
Accounts receivable turnover days increased to 53.4 in the three months ended June 30, 2010, as compared to 47.1 days in the same period of 2009. Inventory turnover days increased to 30.4 in the second quarter of 2010 from 15.4 days in the year ago quarter. This increase primarily reflected management's decision to increase raw material inventory ahead of anticipated price increases and in anticipation of expected sales growth in 2010.
The Company generated $19.3 million in net cash flow from operating activities in the first six months of 2010, an increase from $17.8 million in the year ago comparable period. Management believes current working capital and borrowing capabilities are sufficient to cover their operating and capital requirements in the near future.
Business Outlook
The Company is currently in the process of negotiating with a few of its key customers for business in the second half of 2010 and plans to provide an update to its annual guidance in the near future if there is any material change.
"We delivered strong organic revenue growth of nearly 27% this quarter and continued to invest in our pipeline. Our strong balance sheet and cash flow provide us with the flexibility to invest in new products, expand our capacity and pursue additional acquisitions. We remain optimistic that we will obtain SFDA approval of 3 to 5 of new products during the second half of 2010, leading to new revenue streams beginning in 2011. We will continue our efforts in research and development of high margin branded products, while focusing on increasing sales and promotion of our current products, including our promising portfolio of diagnostic kits," concluded Mr. Liu.
Conference Call
China Sky One Medical will conduct a conference call at 8:00 a.m. Eastern Daylight Time (EDT) on Tuesday, August 10, 2010, to discuss its second quarter 2010 financial results. To participate on the live call, please dial the following number five to ten minutes prior to the scheduled conference call time: 877-585-2309. International callers should dial 706-902-4207. The Conference ID for this call is 92105755.
If you are unable to participate in the call at this time, a replay will be available for two weeks starting on Tuesday, August, 2010 at 9:00 a.m. EDT. To access the replay, dial 800-642-1687, international callers dial 706-645-9291. The Conference Replay Passcode is 92105755.
Use of Non GAAP Financial Measures
GAAP results for the three and six month periods ended June 30, 2010 and June 30, 2009 include gains or losses 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 are adjusted net income and adjusted diluted earnings per share, excluding the impact of these items. 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 ("TDR"), Harbin First Bio-Engineering Company Limited ("First"), Tianlong and Peng Lai Jin Chuang Pharmaceutical Company ("Jin Chuang") 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.
For more information, please contact:
Company Contact:
China Sky One Medical, Inc.
Mr. Yan-qing Liu, CEO
Email: [email protected]
Investor Relations Contact:
CCG Investor Relations
Mr. Crocker Coulson, President
Tel: +1-646-213-1915
Email: [email protected]
Website: http://www.ccgirasia.com
Ms. Mabel Zhang, Vice President
Tel: +1-310-954-1353
Email: [email protected]
- FINANCIAL TABLES FOLLOW -
China Sky One Medical, Inc. and Subsidiaries
Reconciliation of Non-GAAP Net Income and Diluted EPS
(Unaudited, $ in thousands except share and per share data)
For Three Months Ended June 30,
2010 2009
(restated)
Net Diluted Net Diluted
Income EPS Income EPS
Net Income $12,242 $0.73 $8,390 $0.51
Loss (gain) related to change in
fair value of derivative warrant
liabilities ($2,087) ($0.12) $1,066 $0.06
Adjusted Net Income $10,155 $0.60 $9,456 $0.57
Diluted Weighted Average Shares
Outstanding 16,812,810 16,628,892
For Six Months Ended June 30,
2010 2009
(restated)
Net Diluted Net Diluted
Income EPS Income EPS
Net Income $24,830 $1.47 $17,873 $1.08
Loss (gain) related to change in
fair value of derivative warrant
liabilities ($7,013) ($0.42) ($1,173) ($0.07)
Adjusted Net Income $17,817 $1.05 $16,700 $1.01
Diluted Weighted Average Shares
Outstanding 16,894,775 16,547,037
China Sky One Medical, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations and Comprehensive Income
(Unaudited, $ in thousands except share and per share data)
Three Months Ended Six Months Ended
June 30, June 30,
2010 2009 2010 2009
(restated) (restated)
Revenues $40,760 $32,181 $69,663 $57,015
Cost of Goods Sold 11,216 7,752 18,491 13,793
Gross Profit 29,544 24,429 51,172 43,222
Operating Expenses
Depreciation and
amortization 827 449 1,668 901
Research and development 5,910 3,682 9,674 6,095
Selling 7,983 7,796 13,894 13,763
General and administrative 1,123 420 2,113 1,330
Total operating expenses 15,843 12,347 27,349 22,089
Income from Operations 13,701 12,082 23,823 21,133
Other Income (Expense)
Interest income 30 14 59 26
Change in fair value of
derivative warrant
liability 2,087 (1,066) 7,013 1,173
Total other income
(expense) 2,117 (1,052) 7,072 1,199
Net Income Before
Provision for Income Tax 15,818 11,030 30,895 22,332
Provision for Income Taxes 3,576 2,639 6,065 4,459
Net Income $12,242 $8,391 $24,830 $17,873
Basic Earnings Per Share $0.73 $0.51 $1.48 $1.09
Basic Weighted Average
Shares Outstanding 16,790,851 16,537,066 16,783,896 16,475,833
Diluted Earnings Per Share $0.73 $0.51 $1.47 $1.08
Diluted Weighted Average
Shares Outstanding 16,812,810 16,628,892 16,894,775 16,547,037
Other Comprehensive Income
Foreign currency
translation adjustment $535 $6 $556 $123
Net Income 12,242 8,391 24,830 17,873
Comprehensive Income $12,777 $8,397 $25,386 $17,996
China Sky One Medical, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
($ in thousands, except share data)
June 30, December 31,
2010 2009
(Unaudited) (Restated)
ASSETS
Current Assets
Cash and cash equivalents $64,656 $52,756
Accounts receivable, net 23,964 21,146
Inventories 5,559 2,413
Prepaid and other current assets 24 74
Total current assets 94,203 76,389
Property and equipment, net 15,451 15,491
Intangible assets, net 23,853 25,114
Construction in progress 12,986 12,932
Land use rights, net 4,559 4,586
Construction and land deposits 13,219 5,851
Total Assets $164,271 $140,363
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued expenses $7,768 $4,186
Taxes payable 5,734 3,873
Derivative warrant liability 3,549 11,435
Total current liabilities 17,051 19,494
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,
16,790,851 and 16,714,267 issued and
outstanding, respectively) 17 17
Additional paid-in capital 38,154 37,188
Retained earnings 102,615 77,785
Accumulated other comprehensive
income 6,434 5,879
Total stockholders' equity 147,220 120,869
Total Liabilities and Stockholders'
Equity $164,271 $140,363
China Sky One Medical, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited, $ in thousands)
Six Months Ended June 30,
2010 2009
(restated)
Cash flows from operating activities
Net Income $24,830 $17,873
Adjustments to reconcile net cash
provided by (used in) operating
activities:
Depreciation and amortization 1,919 1,168
Change in fair value of derivative
warrant liability (7,013) (1,173)
Net change in assets and liabilities
Accounts receivable (2,719) (1,184)
Inventories (3,124) (1,109)
Prepaid and other current assets 50 41
Accounts payable and accrued expenses 3,487 1,308
Taxes payable 1,838 898
Net cash provided by operating
activities 19,268 17,822
Cash flows from investing activities
Land deposit (7,316)
Purchase of fixed assets (407) (84)
Purchase of construction in progress -- (9,878)
Net cash used in investing activities (7,723) (9,962)
Cash flows from financing activities
Proceeds from warrants conversion 94 29
Net cash provided by financing
activities 94 29
Effect of exchange rate changes on
cash and cash equivalents 261 56
Net increase in cash and cash
equivalents 11,900 7,945
Cash and cash equivalents at
beginning of period 52,756 40,288
Cash and cash equivalents at end of
period $64,656 $48,233
Supplemental disclosure of cash flow
information
Interest paid $-- $--
Taxes paid $4,942 $3,929
SOURCE China Sky One Medical, Inc.
WANT YOUR COMPANY'S NEWS FEATURED ON PRNEWSWIRE.COM?
Newsrooms &
Influencers
Digital Media
Outlets
Journalists
Opted In
Share this article