KUNMING, CHINA -- (Marketwire) -- 03/25/13 -- China Shenghuo Pharmaceutical Holdings, Inc. (PINKSHEETS: CKUN) ("China Shenghuo" or the "Company") today announced unaudited financial results for the year ended December 31, 2012. Such unaudited financial results were prepared by management in compliance with United States Generally Accepted Accounting Practices, except for the absence of notes to the financial statements.
Full Year 2012 Highlights (unaudited)
- Total revenue was approximately $52 million, an increase of 18% from approximately $44.2 million for the year 2011.
- Gross profit as a percentage of revenues was approximately 54.9%, as compared to 61.5 % in 2011.
- Net loss attributable to stockholders was approximately $2.5 million, as compared to net income of approximately $0.1 million for the year ended December 31, 2011.
- Net loss per share was $0.13 compared to net income per share of $0.01 in 2011.
- Stockholders' equity was approximately $(0.4) million as of December 31, 2012.
Full Year 2012 Results (unaudited)
Sales: Sales for the year ended December 31, 2012 were approximately $52 million, an increase of approximately $7.8 million, or 18%, from approximately $44.2 million for the year ended December 31, 2011. The increase in sales was primarily due to an increase in sales of Xuesaitong, the Company's main product, and an increase of $871,053 in revenue from Zhonghuang Hotel, which was designed as per four-star hotel standards and operated by the Company since January of 2011.
Cost of sales: Our cost of sales for the year ended December 31, 2012 was approximately $23.5 million, an increase of approximately $6.5 million, or 38%, from approximately $17.0 million for the year ended December 31, 2011. The increase in cost of sales was due to the increase in sales volume together with increases in the costs of purchasing Sanqi, the principal raw material of our main product Xuesaitong. Although we started to grow our own captive sources of Sanqi in 2011, we will not be able to harvest our own Sanqi until 2014 because it has a three year growth cycle. In addition, the Zhonghuang Hotel has contributed $1.8 million to the cost of sales.
Gross profit: Our gross profit for the year ended December 31, 2012 was approximately $28.5 million compared with approximately $27.2 million for the year ended December 31, 2011. Gross profit as a percentage of revenues was approximately 54.9% for the year ended December 31, 2012, a decrease of 6.6% from 61.5% for the year ended December 31, 2011. The decrease in gross profit percentage was primarily due to the increase in cost of sales set forth above.
Selling expenses: Selling expenses were approximately $24.7 million for the year ended December 31, 2012, an increase of approximately $4.9 million, or 24%, from approximately $19.8 million for the year ended December 31, 2011. The primary reason for the increase in selling expenses was due to an increase in sales commission to sales representatives due to higher sales volumes.
We reimburse our sales representatives for selling and marketing expenses when they submit the appropriate documentation. We reimburse our sales representatives for their accrued selling expenses when related accounts receivable are collected.
General and administrative expenses: General and administrative expenses were approximately $5.1 million for the year ended December 31, 2012, an increase of approximately $0.1 million, or 2%, from approximately $5.0 million for the year ended December 31, 2011. The increase was mainly due to increased travel expense and expenses related to the commencement of operations in 2012 by Shilin Shenghuo Pharmaceutical Co., a subsidiary of the Company engaged in the business of medicinal herb planting and wellness tourism.
Research and development expenses: Research and development expense for the year ended December 31, 2012 was approximately $0.63 million as compared to approximately $0.71 million for the year ended December 31, 2011. The decrease was primarily due to an absence of clinical testing expenses for Sh1002 in America in 2012. We conducted Phase I clinical tests of Sh1002 in America in 2011 but did not proceed with Phase II testing in 2012.
Net other expense: Net other expense, which includes interest income, subsidy income, interest expense, other income and other expense, was approximately $1.1 million for the year ended December 31, 2012 as compared to approximately $1.5 million for the year ended December 31, 2011, a decrease of approximately $0.4 million, or 27%. The decrease was mainly due to an increase in subsidy income from the provincial government as compared to the same period in 2011 and less interest expenses in 2012.
Income tax benefit: Income tax benefit was $494,313 for the year ended December 31, 2012 as compared to income tax benefit $11,765 for the year ended December 31, 2011. The tax benefit was mainly from the medicine business of the Company, deferred tax benefits from accrued expenses and provisions for inventory.
Net (loss) income attributable to stockholders: We incurred a net loss attributable to stockholders of approximately $2.5 million for the year ended December 31, 2012 as compared to net income attributable to stockholders of approximately $0.1 million for the year ended December 31, 2011. The net loss attributable to stockholders was primarily due to the increase of cost of sales described above.
About China Shenghuo
Founded in 1995, China Shenghuo is primarily engaged in the research, development, manufacture, and marketing of Sanqi-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. At present, China Shenghuo incorporates a sales network of agencies and representatives throughout China, which markets Sanqi-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.
China Shenghuo is also expanding into the businesses of the hotel, hospitality and wellness tourism. For more information, please visit http://www.shenghuo.com.cn.
As previously announced, the Board of Directors of China Shenghuo received a preliminary, non-binding proposal from Lan's Int'l Medicine Investment Co., Limited ("LIMI"), in which LIMI proposed that the Board consider a "going private" transaction to cash out the public shareholders of the Company at a price of $0.15 per share, to be funded by LIMI if necessary. LIMI currently owns approximately 77.3% of the Company's outstanding common stock.
Safe Harbor Statement
This press release may contain certain "forward-looking statements". All statements other than statements of historical fact included herein are "forward-looking statements." These forward looking statements are often identified by the use of forward-looking terminology such as "believes," "expects," or similar expressions. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, they do involve assumptions, risks, and uncertainties. You should not place undue reliance on these forward-looking statements, which speak only as of the date of this news release. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including those discussed in the Company's periodic reports previously filed with the Securities and Exchange Commission. The Company is no longer a reporting company under the U.S. Securities Exchange Act of 1934 and undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
CHINA SHENGHUO PHARMACEUTICAL HOLDINGS, INC.AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(Amounts in USD)
December 31, December 31,
------------- -------------
2012 2011
------------- -------------
(unaudited)
Assets:
Current Assets:
Cash and cash equivalents $ 4,147,796 $ 1,247,230
Restricted Cash 529,760 794,115
Accounts and notes receivable, net 19,825,583 18,076,050
Other receivables, net 3,068,855 4,084,102
Advances to suppliers, net 355,210 542,153
Inventories, net 2,547,486 2,695,388
Due from related parties 153,111 574,899
Current deferred tax assets 1,634,018 1,394,101
Other current assets 379,375 199,929
Assets to be disposed of 232,498 -
------------- -------------
Total Current Assets 32,873,692 29,607,967
Property, plant and equipment, net 26,792,347 25,873,670
Intangible assets, net 1,388,442 1,473,074
Deposits for long-live assets 258,484 1,078,846
Non-current deferred tax assets 601,785 275,677
Investment 318,193 -
------------- -------------
$ 62,232,943 $ 58,309,234
============= =============
Liabilities and Equity:
Current Liabilities:
Accounts payable $ 13,521,426 $ 9,395,483
Other payables and accrued expenses 16,615,568 11,819,179
Sales representative deposits 5,207,784 6,106,287
Due to related parties 18,459 18,414
Short-term borrowings 16,906,422 15,858,895
Advances from customers 4,826,591 1,090,668
Taxes payable and other current liabilities 2,159,888 2,255,322
Current portion of long-term borrowings - 6,253,075
Liabilities to be disposed of 294,510 -
------------- -------------
Total Current Liabilities 59,550,648 52,797,323
Commitments and Contingencies
Equity:
Common stock, $0.0001 par value, 100,000,000
shares authorized and 19,679,400 shares
issued and outstanding 1,968 1,968
Additional paid-in capital 6,014,688 6,014,688
Appropriated retained earnings 147,023 147,023
Accumulated deficit (8,276,666) (5,790,759)
Accumulated other comprehensive income 1,745,980 1,743,393
------------- -------------
Total stockholder's equity (367,007) 2,116,313
Noncontrolling interest 3,367,495 3,395,598
------------- -------------
Due from noncontrolling interest for hotel
project (318,193) -
------------- -------------
Total noncontrolling interest 3,049,302 -
------------- -------------
Total Equity 2,682,295 5,511,911
------------- -------------
Total liabilities and equity $ 62,232,943 $ 58,309,234
============= =============
CHINA SHENGHUO PHARMACEUTICAL HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE (LOSS) INCOME (UNAUDITED)
(Amounts in USD, except shares)
Years Ended December 31,
----------------------------
2012 2011
------------- -------------
Sales $ 52,008,642 $ 44,158,182
Cost of Goods Sold 23,476,147 16,980,006
------------- -------------
Gross Margin 28,532,495 27,178,176
------------- -------------
Operating Expenses:
Selling expenses 24,683,880 19,838,582
General and administrative expenses 5,116,105 5,015,534
Research and development expense 628,402 710,361
------------- -------------
30,428,387 25,564,477
------------- -------------
(Loss) Income from Operations (1,895,892) 1,613,699
------------- -------------
Other Income (Expenses):
Subsidy income 875,222 536,013
Interest and other expense (2,019,395) (2,029,770)
------------- -------------
(1,144,173) (1,493,757)
------------- -------------
(Loss) Income Before Income Tax Expenses (3,040,065) 119,942
Income tax benefit (expense) 494,313 11,765
------------- -------------
Income or (loss) from continuing operations (2,545,752) 131,707
Discontinued operations
Loss/gain from operations of the discontinued
component, including gain/loss on the
disposal of Nil 40,311 -
Income tax/benefit (8,690) -
------------- -------------
Net gain/loss on discontinued operation 31,621 -
------------- -------------
Income/(loss) before extraordinary items (2,514,131) 131,707
------------- -------------
Less: Net loss attributable to non-controlling
interests (28,224) (17,973)
------------- -------------
Net (Loss) Income Attributable to Stockholders $ (2,485,907) $ 149,680
============= =============
Comprehensive (Loss) Income:
Net (Loss) Income (2,514,131) 131,707
Foreign currency translation adjustment 2,708 187,150
------------- -------------
Comprehensive (Loss) Income $ (2,511,423) $ 318,857
Less: Comprehensive loss attributable to non-
controlling interests (28,103) 63,893
------------- -------------
Comprehensive (Loss) Income Attributable to
Stockholders (2,483,320) 254,964
============= =============
Weighted-average number of shares outstanding-
basic and diluted $ 19,679,400 $ 19,679,400
============= =============
Basic and diluted (loss) earnings per share (0.13) 0.01
============= =============
CHINA SHENGHUO PHARMACEUTICAL HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Amounts in USD)
Years Ended December 31,
----------------------------
2012 2011
Net Cash Provided by Operating Activities:
Net income (loss) $ (2,514,131) $ 131,707
Adjustments to reconcile net loss to net cash
provided by operating activities:
Deferred income tax (559,530) (398,459)
Depreciation and amortization 1,666,103 1,494,985
Bad debt provision and allowance (40,213) 380,825
Gain on disposal of fixed assets - -
Change in current assets and liabilities:
Accounts and notes receivable (1,411,865) (5,980,478)
Other receivables 825,564 233,585
Amounts due from/to related parties 421,386 (365,393)
Advances to suppliers 187,466 (88,842)
Inventories 188,605 (22,393)
Other current assets (178,190) 18,351
Accounts payable 4,085,373 (26,097)
Other payables and accrued expenses 5,040,290 1,584,229
Advances from customers 3,717,283 (124,047)
Deposits payable (909,556) 895,308
Taxes and related payables (100,528) 1,296,310
------------- -------------
Net Cash (Used in) Provided by Operating
Activities 10,418,057 (970,409)
------------- -------------
Cash Flows from Investing Activities:
Purchase of long-lived assets (1,927,212) (2,299,690)
Equity investment (316,832) -
Due from noncontrolling interest for hotel
project (318,193) -
Process from disposal of long-lived assets - 4,753
------------- -------------
Net Cash Used in Investing Activities (2,562,237) (2,294,937)
------------- -------------
Cash Flows from Financing Activities:
Increase in restricted cash 265,162 (794,115)
Proceeds from borrowings 37,658,614 25,897,076
Payments on borrowings (42,895,842) (22,352,041)
------------- -------------
Net Cash Provided by (Used in) Financing
Activities (4,972,066) 2,750,920
------------- -------------
Effect of exchange rate changes on cash and
cash equivalents 16,812 92,269
------------- -------------
Net Increase (Decrease) in Cash and Cash
Equivalents 2,900,566 (422,157)
Cash and Cash Equivalents at Beginning of
Period 1,247,230 1,669,387
------------- -------------
Cash and Cash Equivalents at End of Period $ 4,147,796 $ 1,247,230
============= =============
Company Contact:
China Shenghuo Pharmaceutical Holdings, Inc.
Ms. Shujuan Wang
Secretary of Board of Directors
+86-871-67282698
