KUNMING, China, April 1 /PRNewswire-Asia-FirstCall/ -- China
Shenghuo Pharmaceutical Holdings, Inc. (NYSE Amex Equities: KUN)
("China Shenghuo" or the "Company"), reported financial results for
the year ended December 31, 2008. Year 2008 Highlights -- Total
revenue for the year 2008 increased 43.6% to a record $28.69
million -- Gross margin for the year 2008 was 73.2% -- Cash
provided by operating activities was $1.95 million "I am pleased to
report that China Shenghuo continued to deliver strong revenue
growth during 2008," commented Mr. Gui Hua Lan, CEO of China
Shenghuo. "Our flagship product, Xuesaitong Soft Capsule, again
reported strong year-over-year growth, as its sales grew almost 35%
in 2008. We continued to expand the product's geographic footprint
in China, as we leveraged the strength of our growing internal
sales and marketing capabilities. We are also encouraged by the
strong performance from our 12Ways cosmetics products and OTC
drugs. As we enter 2009, we expect our flagship Xuesaitong Soft
Capsule product to continue as a major generator of our overall
sales. However, we believe that our 12Ways cosmetics will be a
growing contributor to revenue and a key long-term growth driver
for the Company." Total revenue for the full year 2008 was a record
$28.69 million, representing a 43.6% increase from $19.97 million
for the 2007 year. The sales growth was largely due to higher sales
of the Company's flagship product, Xuesaitong Soft Capsule, as well
as an increase in the sale of the 12Ways cosmetic products by our
expanding business to more cities and provinces. Specifically, the
increase is due to (i) an increase of $6.50 million in revenue from
our main product, Xuesaitong Soft Capsules and two other
prescription drugs; (ii) an increase of $0.68 million in revenue
from other pharmaceuticals and export to other countries; (iii) an
increase of $0.95 million in revenue from our 12Ways cosmetic
products; (iv) fluctuations in foreign exchange rates and other
retail sales of $0.5 million. Xuesaitong Soft Capsule accounted for
approximately 87% of the total net revenues in 2008. It is expected
that revenues from the 12Ways cosmetics products will contribute a
bigger portion of the total revenue going forward. Our costs of
products sold for the year ended December 31, 2008 was
approximately $7.69 million, an increase of approximately $2.65
million from approximately $5.04 million for the year ended
December 31, 2007. The increase in the cost of products sold is due
to the increase in sales of our products and a slight increase in
production costs per unit in 2008 compared to 2007, because of the
increase in the price of our main raw material and other
ingredients. Gross profit for 2008 was $20.99 million, an increase
of 40.6% from the $14.94 million a year ago. Gross profit margin
was 73.2%, a slight decline from 74.8% for the 2007 year. The gross
margin decline was mainly due to higher production costs as the
price of raw materials increased during the year. Selling expenses
for the year ended December 31, 2008 were $13.27 million, an
increase of $6.43 million when compared with 2007. Selling expenses
accounted for 46.3% of total revenue in 2008, as compared to 34.2%
of total revenue in 2007. The primary reasons for the increase are
(i) an increase of $4.20 million of commissions that we paid to
sales representatives and sales offices in an effort to stimulate
the sales in existing and new markets; (ii) an increase of $1.80
million in advertising of new products, particularly in our
cosmetics line; and (iii) the impact of the fluctuation in foreign
exchange rate and other expenses of $0.40 million. General and
administrative ("G&A") expenses for 2008 were $10.86 million,
an increase of $4.98 million, when compared with $5.88 million for
the 2007 year. Overall, G&A expenses accounted for 37.8% of
total revenue in 2008 as compared to 29.4% in 2007. The increase
was primarily a result of an increase in legal, auditing and other
expenses related to being a public company and an increase in
management expenses due to the expansion of business. In 2008, we
incurred one-time, additional auditing and legal fees because of
the internal investigation conducted by the Audit Committee of the
Company regarding the accounting errors identified by our
independent auditor, resulting in the restatement of our financial
statements for fiscal year 2007 and the first fiscal quarter of
2008. The operating loss for 2008 was $3.47 million, as compared
with operating income of $1.94 million in the prior year. For the
2008 year, the Company recorded a net loss of $4.64 million, and a
fully diluted loss per share of $0.24, compared to net income of
$1.72 million, and fully diluted earnings per share of $0.09 in
2007. The weighted average number of fully diluted shares increased
1.2% from 19,439,077 shares in 2007 to 19,679,400 shares in 2008.
As of December 31, 2008, the Company had cash and cash equivalents
of $1.61 million. Business Outlook for Full Year 2009 This outlook
is based on China Shenghuo's current views on the operating and
market conditions, which are subject to change. The Company does
not provide net income projection on a quarterly and full year
basis. "We are confident that China Shenghuo can achieve its
targeted revenue growth in 2009 as the domestic healthcare industry
remains one of the few growing segments of the economy," commented
Mr. Lan. "As a producer of traditional Chinese medicine (TCM), we
expect the upcoming China medical reforms will have a very positive
impact on our business in the long term. Our domestic traditional
drug business will benefit as the government builds more rural
hospitals and community health clinics as part of the 850 billion
RMB health care reform package. As more patients receive basic
health coverage, we believe there will be increased demand for our
medicinal products. We continue to execute our plan to optimize and
diversify our product mix. Our growing market position, diversified
product portfolio, and the sterling reputation and strength of our
branded products will help China Shenghuo continue to grow through
these challenging economic times and capitalize on any new
opportunities that may arise." Business Update On March 16, 2009,
the Company appointed Dr. Xiaobo Sun as an independent director.
Dr. Sun is currently the deputy director of the Institute of
Medicinal Plant Development at the Chinese Academy of Medical
Sciences. "We are excited to have Dr. Sun join our Company as an
independent director. His experience and knowledge in the Chinese
health care industry will be very beneficial, and we believe his
vast experience will contribute greatly to the growth of our
business," Mr. Lan concluded. About China Shenghuo Founded in 1995,
China Shenghuo is a specialty pharmaceutical company that focuses
on 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 has already been listed in
the Insurance Catalogue. 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,
Tajikstan, Russia and Kyrgyzstan. 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. China Shenghuo Pharmaceutical Holdings,
Inc. Consolidated Balance Sheets December 31, 2008 2007 ASSETS:
Current Assets: Cash and cash equivalents $1,612,054 $2,800,641
Accounts and notes receivable, less allowance for doubtful accounts
of $4,834,745 and $3,218,661, respectively 9,108,703 10,567,672
Sales representative advances, less allowance for doubtful accounts
of $2,955,516 and $729,955, respectively 8,637,653 8,249,806
Advances to suppliers 446,168 669,858 Inventory, net of reserve for
obsolescence of $147,978 and $136,359, respectively 4,287,462
4,125,193 Receivable from related parties -- 27,555 Other current
assets 41,177 159,657 Total Current Assets 24,133,217 26,600,382
Property, plant and equipment, net of accumulated depreciation of
$5,341,933 and $4,247,993, respectively 7,581,664 7,573,204
Intangible assets, net of accumulated amortization of $71,456 and
$42,957, respectively 665,959 648,090 Long-term sales
representative advances, less allowance for doubtful accounts of
$664,532 and $1,717,078, respectively 663,433 514,042 TOTAL ASSETS
$33,044,273 $35,335,718 LIABILITIES AND STOCKHOLDERS' EQUITY:
Current Liabilities: Accounts payable $1,293,460 $745,514 Accrued
expenses 2,721,082 2,017,748 Deposits 5,550,502 3,439,892 Payable
to related parties 148,575 94,939 Short-term notes payable
9,850,211 5,334,260 Advances from customers 222,609 119,287 Taxes
and related payables 1,236,574 855,084 Current portion of long-term
debt 3,245,685 4,101,667 Total Current Liabilities 24,268,698
16,708,391 Long-Term Debt 1,131,193 6,836,111 Total Liabilities
25,399,891 23,544,502 Minority Interest in Net Assets of
Subsidiaries 248,224 479,318 Stockholders' Equity: Common stock,
$0.0001 par value, 100,000,000 shares authorized, 19,679,400 and
19,679,400 outstanding, respectively 1,968 1,968 Additional paid-in
capital 6,193,927 6,193,927 Statutory reserves 147,023 147,023
Retained (deficit) earnings (603,572) 4,039,337 Accumulated other
comprehensive income, foreign currency translation 1,656,812
929,643 Total Stockholders' Equity 7,396,158 11,311,898 TOTAL
LIABILITIES AND STOCKHOLDERS' EQUITY $33,044,273 $35,335,718 China
Shenghuo Pharmaceutical Holdings, Inc. Consolidated Statements of
Operations and Comprehensive (Loss) Income Years Ended December 31,
2008 2007 Sale of Products $28,690,509 $19,973,918 Cost of Products
Sold 7,693,635 5,038,290 Gross Profit 20,996,874 14,935,628
Operating Expenses: Selling expense 13,274,942 6,840,824 General
and administrative expense 10,856,184 5,877,948 Research and
development expense 338,546 272,295 Total Operating Expenses
24,469,672 12,991,067 (Loss) Income from Operations (3,472,798)
1,944,561 Other Income (Expense): Interest income 7,755 22,431
Income from research and development activities 408,500 448,254
Interest expense (1,309,984) (946,456) Non-operating expenses
(73,421) (78,164) Net Other (Expense) (967,150) (553,935) (Loss)
Income Before Income Taxes (4,439,948) 1,390,626 Income tax
(expense) benefit (438,279) 449,198 Minority interest in loss
(income) of subsidiaries 235,318 (119,437) Net (Loss) Income
$(4,642,909) $1,720,387 Foreign currency translation adjustment
727,169 708,770 Comprehensive (Loss) Income $(3,915,740) $2,429,157
(Loss) Earnings Per Share Basic $(0.24) $0.09 Diluted $(0.24) $0.09
Weighted-Average Shares Outstanding Basic 19,679,400 19,387,619
Diluted 19,679,400 19,439,077 For more information, please contact:
China Shenghuo Pharmaceutical Holdings, Inc. Mr. Changhua Mu
Securities Affairs Representative Tel: +86-871-7282698 Email:
Grayling Eddie Cheung Investor Relations Tel: +1-646-284-9414
Email: DATASOURCE: China Shenghuo Pharmaceutical Holdings, Inc.
CONTACT: China Shenghuo Pharmaceutical Holdings, Inc. - Mr.
Changhua Mu, Securities Affairs Representative, +86-871-7282698, or
; Grayling - Eddie Cheung, Investor Relations, +1-646-284-9414, or
Web Site: http://www.shenghuo.com.cn/
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