HARBIN, China, Nov. 9, 2011 /PRNewswire-Asia/ -- 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 financial results
for the third quarter of 2011.
Third Quarter 2011 Financial
Highlights
- Total revenues decreased 26.6% year-over-year to $26.6 million
- The Company marketed 85 products, compared with 115 products in
the quarter ended September 30,
2010
- Gross profit fell 38.1% to $16.3
million
- Operating income declined to $1.3
million
- GAAP net income, including a non-cash gain from change in the
fair value of derivative warrant liability, was $0.5 million, or $0.03 per diluted share
"Our third quarter revenue declined 26.6% compared to the third
quarter last year due to an increasingly challenging market
environment and the appropriate restructuring of our products
portfolio," said Mr. Yan-Qing Liu,
Chairman and CEO of China One Medical, Inc.
"We remain confident in the fundamentals of our business and
believe that we continue to be well poised to deploy our financial
resources so as to emerge in the marketplace as highly viable and
successful company," Chairman and CEO Liu continued. "To accomplish
this goal, the Company has taken several strategic steps to ensure
its competitive edge. We have acquired 74,000 acres of forest
land in the Xiao Xing'an Mountain region and started trial planting
of herbs as a strategic step to secure sourcing, and have reached
several milestones in the construction of our new facilities on our
newly acquired land in the High-Tech Development Zone of Song Bei
District in Harbin, China which
will strongly enhance our R&D, production, logistic and general
management capabilities. We believe that these decisive actions
will serve as the cornerstone of the Company in years to come and
will enable our long-term sustainability and growth."
Third Quarter 2011 Results
In the third quarter of 2011, China Sky One's total revenues
decreased 26.6% to $26.6 million from
$36.2 million in the same quarter
last year. The decrease was primarily due to the decline in sales
of certain product categories due to the termination of production
and sales of 32 products in the second and third quarters of 2011.
In the second quarter of 2011, Management decided to temporarily
discontinue the production and sales of 16 products which were less
competitive and generated lower relative sales volume. In the third
quarter of 2011, Management decided to discontinue the production
and sales of an additional 16 products because of new regulations
by China's SFDA.
By product category, sales from Ointments, Patches, Sprays,
Suppositories and Drops contributed to the Company's overall
year-over-year revenue decline, offset somewhat by top-line growth
in Wash Fluids and Diagnostic Kits.
In terms of the Company's top-selling products, revenue
generated from its Metronidazole and Chlorhexidine Wash Fluids in
the third quarter of 2011 increased 78.2% year-over-year to
$1.6 million as a result of our
successful market promotion. Revenue generated from the
Company's Cardiac Arrest Early Examination Kits and Kidney Disease
Testing Kit in the third quarter of 2011 was $1.9 million, four times that of the year-ago
quarter.
However, revenue generated from the Company's Hemorrhoids
Ointment and Compound Camphor Cream in the third quarter of 2011
decreased 57.6% year-over-year to $3.8
million. The sales decrease of the Company's Hemorrhoids
Ointment was due to the SFDA's enforcement of new regulations as
concerns the advertising of certain medicinal products which
negatively impacted sales to end users. The sales decrease of the
Company's Compound Camphor Cream was primarily due to market
competition. Revenue generated from the Company's Slim Patch in the
third quarter of 2011 decreased 66.2% year-over-year to
$1.3 million primarily because of
more aggressive market competition. Revenue generated from our
Naphazoline Hydrochloride Eye Drop in the third quarter of
decreased 62.9% year-over-year to $0.9
million also due to tougher market competition.
Gross profit declined 38.1% to $16.3
million in the third quarter of 2011. Gross margin in the
quarter was 61.5%, as compared to 72.9% in the third quarter of
2010, mainly due to increases in the price of certain raw materials
used to produce the Company's products, and lower sales prices of
certain products due to the competitive sales market. Another
contributing factor in this decline was the Company's sales and
marketing strategy to promote certain of its products which have
less market competition by coordinating with distributors who have
extensive market channels. These distributors generally seek lower
sales prices which had a negative impact on the Company's overall
gross product margins.
Operating expenses decreased 11.1% year-over-year to
$15.1 million in the third quarter of
2011. The decrease was principally due to $1.9 million in lower selling expenses and
$0.8 million in lower R&D
expenses, which were somewhat offset by $0.6
million in higher depreciation and amortization expenses and
$0.2 million in higher general and
administrative expenses.
Third quarter 2011 operating income was $1.3 million, or 4.8% of revenue, as compared to
an operating income of $9.5 million,
or 26.1% of revenue, in the same period a year ago.
Provision for income taxes was $0.8
million in the third quarter of 2011, as compared to
$2.7 million in the same period last
year.
GAAP net income for the third quarter of 2011 was $0.5 million, as compared to $8.6 million in the third quarter of 2010.
Excluding the non-cash gain related to the change in fair value of
derivative warrant liability, the Company's non-GAAP adjusted net
income was $0.5 million, or
$0.03 per diluted share, as compared
to $6.8 million, or $0.40 per diluted share, in the prior year
period.
Nine Month Operating Highlights
Total revenues for nine months ended September 30, 2011 decreased 12.5% year-over-year
to $92.6 million. The decrease was
primarily due to the termination of two major customer
relationships (one domestic distributor and one overseas agent) in
the third quarter of 2010. Revenues generated from these two
customers in the nine months ended September
30, 2010 were approximately $12.9
million or 12.1% of the Company's revenues for that period.
Gross margin was about 65.4% compared to 73.3% for the first nine
months of 2010. Total R&D expenses were approximately
$14.8 million (or 16.0% of sales) for
the first nine months of 2011 as compared to $15.3 million (or 14.4% of sales) for the
comparable period of 2010. Net income for the first nine months of
2011 was $12.8 million, or
$0.75 per diluted share, as compared
to net income of $33.4 million, or
$1.99 per diluted share, in the same
period of 2010.
Financial Condition
As of September 30, 2011, China
Sky One had $21.3 million in cash and
equivalents, with a current ratio of 6.3. The Company had working
capital of approximately $41.6
million. Stockholders' equity at September 30, 2011, was $183.7 million, 12.0% higher than the
$164.0 million recorded as of
December 31, 2010.
Accounts receivable turnover days increased to 58.3 for the nine
months ended September 30, 2011, as
compared to 55.7 in the same period of 2010. Inventory turnover
days increased to 50.9 for the first nine months of 2011 from 35.7
in the year ago period. The increase of inventory turnover days was
due to higher inventory levels since the beginning of 2011 in order
to satisfy the Company's future production needs, as well as to
limit the effects of possible future price increase of raw
materials.
The Company generated $12.2
million in net cash flow from operating activities in the
first nine months of 2011, compared to $25.6
million in the comparable year ago period. The decrease in
cash provided by operating activities was primarily due to the
decline in net income in the nine months ended September 30, 2011 as compared to the year-ago
period.
Cash flows used in investing activities were approximately
$35.5 million for the nine months
ended September 30, 2011, compared to
$7.8 million in the same period of
2010. Major cash flows in investing activities primarily related to
the Company's expenditures of approximately $22.7 million as related to its new facilities
located in the High-Tech Development Zone of Song Bei District in
Harbin, China.
Cash flows provided from financing activities were zero for the
nine months ended September 30, 2011,
compared to approximately $94,000 for
the same period in 2010.
Management believes that capital is sufficient to take advantage
of new investment opportunities and to meet future liquidity and
capital needs.
Recent Developments
In the third quarter of 2011, the Company's wholly-owned
subsidiary, Harbin Tian Di Ren Medical Science and Technology
Company (TDR) acquired the 50-year land use rights covering
approximately 85,000 square meters of land located in the High-Tech
Development Zone of Song Bei District in Harbin, China, for total consideration of
approximately $7.5 million. The
Company intends to build an R&D center, an injection
manufacturing facility, a logistics center, and an office building
on the land during the first phase of development, which the
Company currently expects to complete by mid-2012 at an estimated
cost of completion of approximately $45
million to $49 million. As of September 30, 2011, the Company has invested
approximately $22.8 million in the
construction project.
Conference Call
China Sky One will conduct a conference call at 9:00 a.m. Eastern Time (ET) on Wednesday, November 9, 2011, to discuss third
quarter 2011 financial results. A full version of the Company's
quarterly report will be filed with the SEC on Form 10-Q prior to
the call. To participate in the live conference call, please dial
the following number five to ten minutes prior to the scheduled
conference call time: (866) 395-5819. International callers should
dial (706) 643-6986. The Conference ID for this call is 23256684.
If you are unable to participate in the call at this time, a replay
will be available for two weeks starting on Wednesday, November 9, 2011 at 10:00 a.m. ET. To access the replay, dial (855)
859-2056 or (404) 537-3406, international callers dial +1
800-585-8367. The Conference Replay Passcode is 23256684.
Use of Non GAAP Financial Measures
GAAP results for the three and nine month periods ended
September 30, 2011 and September 30, 2010 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.
-- 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 the Three Months Ended September
30,
|
|
For the Nine Months Ended
September 30,
|
|
|
|
|
|
|
|
|
|
|
|
2011
|
|
2010
|
|
2011
|
|
2010
|
|
Net
Income
|
Diluted
EPS
|
|
Net
Income
|
Diluted
EPS
|
|
Net
Income
|
Diluted
EPS
|
|
Net
Income
|
Diluted
EPS
|
Net Income
|
$ 531
|
$ 0.03
|
|
$ 8,595
|
$ 0.51
|
|
$ 12,756
|
$ 0.75
|
|
$ 33,426
|
$ 1.99
|
Loss (gain) related to change in fair value
of derivative warrant liabilities
|
(10)
|
(0.00)
|
|
(1,833)
|
(0.11)
|
|
(1,601)
|
(0.09)
|
|
(8,847)
|
(0.53)
|
|
$ 521
|
$ 0.03
|
|
$ 6,762
|
$ 0.40
|
|
$ 11,155
|
$ 0.66
|
|
$ 24,579
|
$ 1.46
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted Weighted Average Shares
Outstanding
|
16,940,539
|
|
|
16,790,851
|
|
|
16,940,539
|
|
|
16,825,294
|
|
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
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
|
|
2011
|
|
|
2010
|
|
|
2011
|
|
|
2010
|
|
Revenues
|
|
$
|
26,583
|
|
|
$
|
36,193
|
|
|
$
|
92,619
|
|
|
$
|
105,856
|
|
Cost of Goods Sold
|
|
|
10,246
|
|
|
|
9,796
|
|
|
|
32,063
|
|
|
|
28,287
|
|
Gross Profit
|
|
|
16,337
|
|
|
|
26,397
|
|
|
|
60,556
|
|
|
|
77,569
|
|
Operating Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
|
1,513
|
|
|
|
879
|
|
|
|
4,243
|
|
|
|
2,547
|
|
Research and
development
|
|
|
4,778
|
|
|
|
5,592
|
|
|
|
14,813
|
|
|
|
15,266
|
|
Selling
|
|
|
7,764
|
|
|
|
9,673
|
|
|
|
22,594
|
|
|
|
23,567
|
|
General and
administrative
|
|
|
1,002
|
|
|
|
798
|
|
|
|
2,722
|
|
|
|
2,911
|
|
Total operating
expenses
|
|
|
15,057
|
|
|
|
16,942
|
|
|
|
44,372
|
|
|
|
44,291
|
|
Income from Operations
|
|
|
1,280
|
|
|
|
9,455
|
|
|
|
16,184
|
|
|
|
33,278
|
|
Other Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
49
|
|
|
|
29
|
|
|
|
136
|
|
|
|
88
|
|
Change in fair value of derivative warrant
liability
|
|
|
10
|
|
|
|
1,833
|
|
|
|
1,601
|
|
|
|
8,847
|
|
Total other
income
|
|
|
59
|
|
|
|
1,862
|
|
|
|
1,737
|
|
|
|
8,935
|
|
Net Income Before Provision for Income
Tax
|
|
|
1,339
|
|
|
|
11,317
|
|
|
|
17,921
|
|
|
|
42,213
|
|
Provision for Income Taxes
|
|
|
808
|
|
|
|
2,722
|
|
|
|
5,165
|
|
|
|
8,787
|
|
Net Income
|
|
$
|
531
|
|
|
$
|
8,595
|
|
|
$
|
12,756
|
|
|
$
|
33,426
|
|
Basic Earnings Per Share
|
|
$
|
0.03
|
|
|
$
|
0.51
|
|
|
$
|
0.75
|
|
|
$
|
1.99
|
|
Basic Weighted Average Shares
Outstanding
|
|
|
16,940,539
|
|
|
|
16,790,851
|
|
|
|
16,940,539
|
|
|
|
16,786,240
|
|
Diluted Earnings Per Share
|
|
$
|
0.03
|
|
|
$
|
0.51
|
|
|
$
|
0.75
|
|
|
$
|
1.99
|
|
Diluted Weighted Average Shares
Outstanding
|
|
|
16,940,539
|
|
|
|
16,790,851
|
|
|
|
16,940,539
|
|
|
|
16,825,294
|
|
Other Comprehensive Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency
translation adjustment
|
|
$
|
3,234
|
|
|
$
|
2,538
|
|
|
$
|
6,924
|
|
|
$
|
3,094
|
|
Net Income
|
|
|
531
|
|
|
|
8,595
|
|
|
|
12,756
|
|
|
|
33,426
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive Income
|
|
$
|
3,765
|
|
|
$
|
11,133
|
|
|
$
|
19,680
|
|
|
$
|
36,520
|
|
China Sky One Medical, Inc. and
Subsidiaries
Condensed Consolidated Balance Sheets
($ in thousands, except share data)
|
|
|
September 30,
2011
|
|
|
December 31,
2010
|
|
ASSETS
|
|
(Unaudited)
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
21,347
|
|
|
$
|
43,124
|
|
Accounts receivable,
net
|
|
|
21,357
|
|
|
|
20,080
|
|
Inventories
|
|
|
6,779
|
|
|
|
2,409
|
|
Prepaid and other
current assets
|
|
|
9
|
|
|
|
21
|
|
Total current
assets
|
|
|
49,492
|
|
|
|
65,634
|
|
Property and
equipment, net
|
|
|
29,082
|
|
|
|
28,960
|
|
Intangible assets,
net
|
|
|
26,162
|
|
|
|
23,155
|
|
Construction in
progress
|
|
|
22,828
|
|
|
|
19
|
|
Land use rights,
net
|
|
|
51,447
|
|
|
|
40,844
|
|
Land and construction
deposits
|
|
|
12,589
|
|
|
|
13,612
|
|
Total
Assets
|
|
$
|
191,600
|
|
|
$
|
172,224
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
|
Accounts payable and
accrued expenses
|
|
$
|
6,174
|
|
|
$
|
3,309
|
|
Taxes payable
|
|
|
1,657
|
|
|
|
3,225
|
|
Derivative warrant
liability
|
|
|
73
|
|
|
|
1,674
|
|
Total current
liabilities
|
|
|
7,904
|
|
|
|
8,208
|
|
|
|
|
|
|
|
|
|
|
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, 16,940,539 issued and outstanding)
|
|
|
17
|
|
|
|
17
|
|
Additional paid-in
capital
|
|
|
39,252
|
|
|
|
39,252
|
|
Retained earnings
|
|
|
126,498
|
|
|
|
113,742
|
|
Accumulated other
comprehensive income
|
|
|
17,929
|
|
|
|
11,005
|
|
Total
stockholders' equity
|
|
|
183,696
|
|
|
|
164,016
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities
and Stockholders' Equity
|
|
$
|
191,600
|
|
|
$
|
172,224
|
|
China Sky One Medical, Inc. and
Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited, $ in thousands)
|
|
|
Nine Months Ended September 30,
|
|
|
|
2011
|
|
|
2010
|
|
|
|
|
|
|
|
|
Cash flows from operating activities
|
|
|
|
|
|
|
Net Income
|
|
$
|
12,756
|
|
|
$
|
33,426
|
|
Adjustments to reconcile net cash provided
by (used in) operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
|
4,679
|
|
|
|
2,895
|
|
Change in fair value
of derivative liability
|
|
|
(1,601)
|
|
|
|
(8,847)
|
|
Net change in
assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
(456)
|
|
|
|
(1,363)
|
|
Inventories
|
|
|
(4,179)
|
|
|
|
(1,816)
|
|
Prepaid expenses and
other current assets
|
|
|
(43)
|
|
|
|
(13)
|
|
Accounts payable and
accrued expenses
|
|
|
2,727
|
|
|
|
880
|
|
Taxes payable
|
|
|
(1,661)
|
|
|
|
397
|
|
Net cash provided by operating
activities
|
|
|
12,222
|
|
|
|
25,559
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
Land and construction
deposits
|
|
|
(6,115)
|
|
|
|
(7,335)
|
|
Purchase of property
and equipment
|
|
|
(162)
|
|
|
|
(473)
|
|
Purchase of land use
rights
|
|
|
(2,152)
|
|
|
|
-
|
|
Purchase of
intangible assets
|
|
|
(4,389)
|
|
|
|
-
|
|
Purchase of
construction in process
|
|
|
(22,670)
|
|
|
|
(14)
|
|
Net cash used in investing
activities
|
|
|
(35,488)
|
|
|
|
(7,822)
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
Proceeds from
warrants conversion
|
|
|
-
|
|
|
|
94
|
|
Net cash provided by financing
activities
|
|
|
-
|
|
|
|
94
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash and
cash equivalents
|
|
|
1,489
|
|
|
|
1,384
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash
equivalents
|
|
|
(21,777)
|
|
|
|
19,215
|
|
Cash and cash equivalents at beginning of
period
|
|
|
43,124
|
|
|
|
52,756
|
|
Cash and cash equivalents at end of
period
|
|
$
|
21,347
|
|
|
$
|
71,971
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow
information
|
|
|
|
|
|
|
|
|
Interest paid
|
|
$
|
-
|
|
|
$
|
-
|
|
Income taxes paid
|
|
$
|
6,306
|
|
|
$
|
8,541
|
|
Company
Contact:
|
Investor Relations Contact:
|
China Sky One Medical,
Inc.
|
CCG Investor Relations
|
Mr. Yan-Qing Liu, CEO
|
Mr. Crocker Coulson, President
|
Email: ir@cski.com.cn
|
Tel: +1-646-213-1915
|
|
Email: crocker.coulson@ccgir.com
|
|
Website: www.ccgirasia.com
|
|
|
|
Ms. Mabel Zhang, Vice President
|
|
Tel: +1-310-954-1353
|
|
Email: mabel.zhang@ccgir.com
|
SOURCE China Sky One Medical, Inc.