China Sky One Medical Announces Fourth Quarter and Fiscal Year 2009 Results; Provides Earnings Guidance for 2010
HARBIN, China, March 17 /PRNewswire-Asia-FirstCall/ -- China Sky One Medical, Inc. ("China Sky One Medical" 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 financial results for the fourth quarter and fiscal year ended December 31, 2009. The Company also announced its earnings guidance for full year 2010.
Fourth Quarter 2009 Highlights
-- Total revenues increased 15.0% year-over-year to $29.9 million
-- Gross profit rose 18.5% to $22.9 million
-- Operating income increased 1.8% to $9.1 million
-- Net income decreased 23.6% year-over-year to $5.3 million, or $0.32 per
diluted share
-- Excluding the effect of recording certain non-cash expense items; (i)
share-based compensation of $1.2 million and (ii) a registration rights
liability of $1.3 million (" the registration rights liability") due to
the Company's failure to cause a registration statement covering the
warrant shares to be declared effective as set forth in the
Registration Rights Agreement of the Company's January 2008 private
placement, our pro forma non-GAAP basis adjusted net income amounted to
$7.9 million, or $0.47 per diluted share, as compared to $6.9 million
or $0.45 per diluted share a year ago
-- Engaged a new sales agent to distribute the Company's Sumei Slim Patch
in the U.S.
-- Signed Guangdong Mediacy Kind Medical Devices Industry Service Company
as exclusive sales agent for AMI Diagnostic Kit and Human Urinary
Albumin Elisa Kit in Southeast Asia
-- Had 30 medicines included in the 2009 Edition of the National Basic
Medical Insurance Directory
-- Completed first phase of construction for new headquarters in Harbin
Song Bei New Development District, Harbin, China.
Full Year 2009 Highlights
-- Total revenues increased 41.7% to $130.1 million, in-line with
management guidance
-- Gross profit grew 41.8% to $98.4 million
-- Operating income rose 29.7% to $46.3 million
-- Net income increased 19.4% to $34.5 million, or $2.07 per diluted share
-- Excluding the effect of recording certain non-cash expense items: (i)
shared-based compensation and (ii) the registration rights liability;
the Company's pro forma non-GAAP basis adjusted net income increased
28.3% to $37.0 million, or $2.22 per diluted share
-- Received SFDA final approval for nine new drugs
-- Signed agreement with Taiwan Golden Biotechnology Corporation for the
development of new anti-cancer drug Antroquinonol, which was approved
by the U.S. FDA to enter into first stage clinical trials
"The Company's record revenues in 2009 were primarily driven by positive contribution from the strategic acquisitions that we completed in 2008, heightened consumer brand awareness and expansion of our sales network. Our full year net income was slightly below our expectations due to increased operating costs from several acquisitions in 2008 and our new corporate headquarters and other non-cash expense items as previously discussed," said Mr. Yan-Qing Liu, Chairman and CEO of China Sky One Medical, Inc. "Looking ahead, the Company plans to make significant investment in the development of high margin branded drugs to support long-term sustainable growth. With a growing distribution network and a growing pipeline of SFDA License for drug batch lots, China Sky One is well positioned to be a leading pharmaceutical company in China."
Fourth Quarter 2009 results
In the fourth quarter of 2009, China Sky One's total revenues increased 15.0% to $29.9 million comparing to $26.0 million in the same quarter last year. This increase was primarily attributable to the strong performance of the Company's sales network and the addition of direct territory managers and sales agents, as well as increased marketing and advertising activities. As of December 31, 2009, China Sky One had 1,491 sales and marketing staff. The head count included approximately 1,100 sales representatives stationed in pharmacies to educate consumers about the benefits of the Company's products and to drive end users' buying decisions.
Sales of patch products were essentially flat year-over-year at $9.9 million or 33.2% of revenue in the fourth quarter of 2009. Sales of ointments were down modestly in the 2009 fourth quarter to $5.3 million, accounting for 17.8% of revenues, compared to $5.8 million or 22.3% of revenues in the year ago quarter. Sales of spray products increased by 56% to $4.0 million and accounted for 13.4% of revenues, versus $2.5 million or 9.7% of revenues a year ago. The increase in spray products was primarily due to increased sales of mouth sprays resulting from the outbreak of the H1N1 virus. Sales of diagnostic testing kits decreased to $0.8 million or 2.8% of revenues from $2.4 million or 9.1% of revenues a year ago. Sales of the Company's Other Product Category totaled $9.8 million or 32.8% of revenues, representing a 133.5% increase from $4.2 million sales and 16.2% of revenues in 2008. 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.
Gross profit rose 18.5% to $22.9 million in the fourth quarter of 2009. Gross margin increased to 76.6%, compared to 74.4% in the fourth quarter of 2008, primarily reflecting the Company's better production cost control.
Operating expenses increased 32.9% to $13.8 million in the fourth quarter of 2009 comparing to the same period of 2008. The increase was principally due to higher general and administrative expenses associated with the non-cash stock compensation expenses and registration rights liability. Depreciation and amortization expenses increased 170% year-over-year to $0.9 million due to the increased amortization resulting from the Company's newly acquired proprietary technologies in 2008 as well as the acquired proprietary technologies during the fourth quarter of 2009.
Operating income was $9.1 million, representing an operating margin of 30.4%, as compared to $8.9 million, or 34.4% margin, a year ago.
During the fourth quarter of 2009, the Company recorded a $1.3 million non-cash registration rights liability. The Company recorded no such expense in the year ago period.
Provision for income taxes was $2.5 million in the fourth quarter of 2009, as compared to $2.1 million in the same period of last year.
Net income for the fourth quarter of 2009 was $5.3 million, compared to $6.9 million in the fourth quarter of 2008. Excluding the effect of recording certain non-cash expense items: (i) share-based compensation and (ii) the registration rights liability expenses; the Company's pro forma non-GAAP adjusted net income was $7.9 million, or $0.47, as compared to $6.9 million or $0.45 per diluted share.
Full Year 2009 Results
For the full year 2009, total revenues were $130.1 million, up 41.7% from $91.8 million in 2008. Of the 91 products commercialized by China Sky One Medical in 2009, patches, ointments, sprays and diagnostic kits accounted for 31.3%, 22.2%, 14.2% and 7.9% of total revenues respectively.
The Company's top 10 products, including Sumei Slim Patch, Hemorrhoids Ointment, Compound Camphor Cream, Stomatitis Spray, AMI Diagnostic Kit and Naftopidil Dispersible Tablet, together accounted for approximately 68% of total revenues. Sales from export were $10.1 million, representing 7.8% of total revenues.
Gross profit was $98.4 million, an increase of 41.8% from $69.4 million in 2008. Gross margin was little changed at 75.7% and 75.6% in 2009 and 2008, respectively.
Operating income was $46.3 million, up 29.7% from $35.7 million in 2008. Operating margin was 35.6% in 2009 versus 38.8% in 2008.
Net income for 2009 rose 19.4% to $34.5 million, or a net profit margin of 26.5%, from $28.9 million or a 31.4% net margin. The decrease in net margin was primarily attributable to higher selling and R&D expenses incurred in 2009. Excluding the effect of recording certain expense items: (i) share-based compensation and (ii) the registration rights liability; the Company's pro forma non-GAAP basis adjusted net income was $37.0 million, or $2.22 per diluted share, as compared to $29.2 million or $1.89 per diluted share.
Financial Condition
As of December 31, 2009, China Sky One had $52.8 million in cash and equivalents, with a quick ratio of 7.9. Average Days Sales Outstanding increase to 51.6 days from 45.5 days principally due to the increased average accounts receivable balances on September 30 and December 31 and less increase of average daily sales during the fourth quarter of 2009 comparing to the same period in 2008. Working capital was approximately $67.0 million. Stockholders' equity at December 31, 2009, was $131.0 million, a 38.0% increase over the $94.9 million recorded at December 31, 2008.
The Company generated $33.4 million in net cash flow from operating activities in 2009, up from $27.5 million in 2008.
Recent Events
As of January 4, 2010, China Sky One Medical's common shares were listed on the NASDAQ Global Select Market.
Also in January, the Company completed its two office buildings and relocated its headquarters to Harbin Song Bei New Development District and consolidated administration, research and development, accounting and sales functions to streamline operations and improve efficiency. Following the move of its headquarters, the Company also received local government-supported preferential policies, such as discounted land transfer fees and green channel to expedite project permits, which are expected to facilitate more cost effective expansion in the future.
In addition, the Company's AMI Diagnostic Kit was recently recognized by the National Development and Reform Commission as a "National Innovation Project," a designation given to innovative projects in key high technology industries.
2010 Outlook and Guidance
The Company's top priority in 2010 is to further optimize its distribution channels by locating and cooperating with more reputable distributors with extensive market coverage.
"We are confident in our 2010 outlook and plan to focus on enhancing and broadening our product portfolio to include proprietary new drugs so as to support sustainable long-term growth," said Mr. Yan-Qing Liu, Chairman and CEO of China Sky One Medical, Inc. "Our financial guidance assumes only organic growth and does not reflect any potential acquisitions or other strategic deals in 2010. The Company is committed to delivering shareholder value and will pursue opportunities to acquire new proprietary drugs, advanced technologies or companies that can increase our growth potential."
For the full year 2010, the Company expects net revenue growth of approximately 20% or $156 million. Management developed the revenue guidance based upon a careful review of sales and marketing plans submitted by our sales team, as well as detailed analysis of each product's growth outlook and marketing plan. The sales forecast is calculated mainly based on the factors of sales plans submitted by the Company's sales agents, the estimate of increase and decrease of certain products managed on our internal sales and marketing force rather than through distributors or agents, and the estimate of promotion or discontinuance of sales of certain current products. The gross margin guidance is 68%, below historical levels due to our potential lower sales price to support our new sales model, as well as anticipated increases in raw materials costs and related overhead costs. Net income is anticipated to approximate $39 million, representing a net profit margin of 25%. The expected decline in net margin primarily reflects the increase in R&D spending which is expected to be 15% of total revenue for the year of 2010. We are dedicated to advancing our major research and development projects in the current R&D pipeline and also shifting our focus to Cardiovascular medicine and antibiotic drugs.
Conference Call
China Sky One Medical will conduct a conference call at 8:00 a.m. Eastern Daylight Time (EDT) on Wednesday, March 17, 2010, to discuss the fourth quarter and full year 2009 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 61931973.
If you are unable to participate in the call at this time, a replay will be available for two weeks starting on Wednesday, March 17, 2010 at 10:00 a.m. EDT. To access the replay, dial 800-642-1687, international callers dial 706-645-9291. The Conference Replay Passcode is 61931973.
Use of Non GAAP Financial Measures
GAAP results for the three and twelve month periods ended December 31, 2009 include non-cash items of share-based compensation and registration rights liability expenses. To supplement the Company's consolidated financial statements presented on a GAAP basis, the Company has provided pro forma non- GAAP adjusted financial information which excludes the impact of these items in this release. The Company's management believes that these adjusted measures provide investors with a better understanding of how the results relate to the Company's historical performance. A reconciliation of adjustments 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"), Heilongjiang Tianlong Pharmaceutical, Inc. ("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," "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 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.
China Sky One Medical, Inc. and Subsidiaries
Consolidated Balance Sheets
$ in thousands, except share data
Year Ended December 31,
2009 2008
ASSETS
Current Assets
Cash and cash equivalents $52,756 $40,288
Accounts receivable, net 21,146 14,979
Inventories 2,413 462
Prepaid and other current assets 74 106
Total current assets 76,389 55,835
Property and equipment, net 15,491 14,797
Intangible assets, net 25,114 15,852
Construction in progress 12,932 4,317
Land use rights, net 4,586 1,945
Construction deposit 5,851 8,513
Total Assets $140,363 $101,259
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued expenses $4,186 $2,937
Taxes payable 3,873 3,363
Deferred revenue -- 26
Derivative liability 1,330 --
Total current liabilities 9,389 6,326
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, 16,714,267 and 16,306,184
issued and outstanding at December 31, 2009
and 2008, respectively) 17 16
Additional paid-in capital 41,376 40,105
Retained earnings 5,879 5,567
Accumulated other comprehensive income 83,702 49,245
Total stockholders' equity 130,974 94,933
$140,363 $101,259
China Sky One Medical, Inc. and Subsidiaries
Consolidated Balance Sheets
$ in thousands, except share and per share data
Three Months Years Ended
Ended December 31, December 31,
2009 2008 2009 2008
(Unaudited) (Audited)
Revenues 29,850 25,955 130,092 91,816
Cost of Goods Sold 6,654,502 6,980 6,655 31,671
Gross Profit 22,869 19,300 98,421 69,413
Operating Expenses
Selling, general
and administrative
expenses 8,892 7,342 34,955 25,482
Depreciation and
amortization 908 335 2,255 858
Research and
development 3,981 3,532 14,960 7,413
13,781 11,209 52,170 33,753
Income from operations 9,088 8,091 46,251 35,659
Other Income (Expense)
Miscellaneous
income (1,337) 679 (1,291) 814
Net Income Before
Provision for
Income Tax 7,750 9,040 44,960 36,473
Provision for Income
Taxes
Current 2,453 2,103 10,503 7,616
Net Income 5,298 6,937 34,457 28,857
Basic Earnings Per
Share $0.32 $0.45 $2.08 $1.91
Basic Weighted
Average
Shares Outstanding 16,664,869 -- 16,575,885 15,101,833
Diluted Earnings Per
Share $0.32 $0.45 $2.07 $1.87
Diluted Weighted
Average
Shares Outstanding 16,815,445 16,566,776 16,668,452 15,429,136
China Sky One Medical, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
$ in thousands
Years Ended December 31,
2009 2008
Cash Flows From Operating Activities
Net income $34,457 $28,857
Adjustments to reconcile net income
to net cash provided (used) by
operating activities:
Allowance for bad debt 17 38
Depreciation and amortization 2,747 858
Share-based compensation 1,242 316
Change in fair value of
Derivative liability 1,330 --
Decrease (increase) in operating
assets:
Accounts receivable and other
receivables (6,204) (3,398)
Inventories (1,948) (66)
Prepaid expenses and others 92 (24)
Increase (decrease) in operating
liabilities:
Accounts payable and accrued
liabilities 1,215 (678)
Tax payable 501 1,660
Deferred revenue -- (26)
Net cash provided by operating
activities 33,449 27,538
Cash Flows From Investing Activities
Purchase of property and
equipment (254) (11,167)
Land and construction deposit -- --
Construction in progress (9,932) 4
Purchase of intangible assets (10,968) (11,951)
Net cash used in investing
activities (21,154) (23,115)
Cash Flows From Financing Activities
Sale of common stock for cash,
net of offering costs -- 23,488
Proceeds from warrants
conversion 29 1,868
Repayment of short-term loan -- --
Net cash provided by (used in)
financing activities 29 25,355
Effect of exchange rate changes on
cash 272 1,318
Net Increase in Cash and Cash
Equivalents $12,468 $31,097
Cash and Cash Equivalents at
Beginning of Year 40,288 9,191
Cash and Cash Equivalents at End of
Year $52,756 $40,288
Supplemental disclosure of cash flow
information
Interest paid $-- $135
Taxes paid $10,164 $6,630
For more information, please contact:
Company Contact:
China Sky One Medical, Inc.
Mr. Stanley Hao, CFO
Tel: +86-0451-8703-2617
Email: [email protected]
Investor Relations Contact:
CCG Investor Relations
Ms. Lei Huang, Account Manager
Tel: +1-646-833-3417
Email: [email protected]
Web: http://www.ccgirasia.com
Ms. Mabel Zhang, Vice President
Tel: +1-310-954-1353
Email: [email protected]
SOURCE China Sky One Medical, Inc.
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