China Pharmaceuticals net sales increase 28% to $34,184,906

China Pharmaceuticals, Inc. (OTC Bulletin Board: CFMI)("China Pharmaceuticals" or the "Company"), one of China's leading manufacturers and distributors of prescription and over-the-counter pharmaceuticals today announced its financial results for fiscal year ended December 31, 2010. The Company's annual report on Form 10-K was filed with the U.S. Securities and Exchange Commission on April 15, 2011.

Fiscal Year 2010 Highlights

• Total net sales increased to $34,184,906 from $26,708,285 in fiscal 2009, an increase of $7,476,621 or approximately 28%.

• Gross profit increased to $19,436,665 from $14,300,250 in fiscal 2009, an increase of approximately 36%. Gross profit margin improved to 57% versus 54% for 2009.
• Cost of goods sold, as a percentage of sales, decreased to 43% in fiscal 2010, as compared to 46% in 2009.
• Net income was $8,409,158 compared to $8,907,379 in fiscal 2009, a decrease of approximately 5% which was primarily due to a one time stock-based compensation expense of $2,222,622 for issuance of warrants during the period.
• Net working capital increased to $20,556,811 at December 31, 2010, an increase of $11,313,690, or approximately 82 %, as compared to net working capital of $9,243,121 at December 31, 2009.

Mr. Guozhu Wang, Chairman and Chief Executive Officer of China Pharmaceuticals, commented, "We are pleased that our company continues its rapid growth annually while at the same time maintaining a strong balance sheet with no long term debt. For fiscal 2011, we are strongly positioned to accelerate our current expansion rate through continued organic sales and distribution growth combined with anticipated potential acquisition opportunities."

Net Sales

The following table sets forth the results of our operations for the years ended December 31, 2010 and 2009 indicated as a percentage of net sales:

For the year ended December 31, 2010, we had net sales of $34,184,906, an increase of 28% as compared with $26,708,285 in 2009. This increase was primarily due to increased demand for our products as a result of our successful marketing and promotion strategies.

Cost of Goods Sold

Cost of goods sold increased to $14,748,241 for the year ended December 31, 2010, representing a 19% increase as compared with $12,408,035 for 2009. This increase was primarily due to an increase in sales and production volume. The cost of goods sold as a percentage of sales was 43% for 2010 as compared to 46% for 2009. The decrease in cost of goods sold as a percentage to the sales was attributable to decreased material prices of certain major raw materials as a result of successful price negotiations with our major suppliers.

Gross profit

Gross profit increased 36% to $19,436,665 for 2010, as compared to $14,300,250 for 2009. Our gross profit margin increased from 54% for 2009 to 57% for 2010. The increase in gross margin was a result of decreased cost of goods sold.

Net Income

Net income for the fiscal year ended December 31, 2010 was $8,409,158, or diluted earnings per share of $0.75, compared to $8,907,379, or diluted earnings per share of $0.95 in fiscal 2009. As stated above, this decrease in net income is primarily due to the stock-based compensation expense of $2,222,622 for the issuance of warrants during the period, which is a one-time non-cash, non-reoccurring expense.

Working Capital

Net working capital grew to $20,556,811 at December 31, 2010, an increase of $11,313,690 over a net working capital of $9,243,121 at December 31, 2009. The ratio of current assets to current liabilities was exceptionally strong at 10:1 at December 31, 2010.

Cash Flows

The following is a summary of cash provided by or used in each of the indicated types of activities during the years ended December 31, 2010 and 2009:

Net cash provided by operating activities was $1,075,214 for 2010, a decrease of $7,848,888 or 88% from $8,924,102 cash provided for 2009. The decrease in cash inflow was primarily attributable to a significant increase in accounts receivable outstanding resulting from our rapid sales growth, prepayments for purchase of two medicine patents, and increased payments for purchases of raw material and inventory.

Balance Sheet

As of December 31, 2010, the Company had $4,729,149 in cash and equivalents, $20,556,811 in working capital, and no long term debt. Shareholders' equity at the end of fiscal year 2010 stood at $42,532,875.

Source: China Pharmaceuticals, Inc.