Cash flow from operating activities was $9.6 million for the three months ended January 31, 2010, as compared to $1.2 million during the same period prior year. This was primarily due to higher net income and a $2.2 million decrease in trade receivables in the current quarter. Days sales outstanding (DSO) fell to 117 days in the 2010 quarter, from 154 days last year which included a period of special sales promotions offering more favorable credit terms for customers. The Company believes that the current DSO level is sustainable for fiscal 2010.
Recent Events
As part of its effort to improve internal controls, the Company appointed a new Chief Financial Officer, Yan Yi Chen, with significant experience in US GAAP accounting principles and SEC filings. Ms. Chen brings with her nine years of accounting and auditing experience, including audit management, with PricewaterhouseCoopers and is a member of the New Zealand Institute of Chartered Accountants. In her previous roles, Ms. Chen had successfully implemented accounting systems, established controls and instituted policies and procedures to assure compliance with applicable financial standards. In conjunction with the hiring of Ms. Chen, the Company also expanded its accounting and finance staff, as well as engaged external consultants to assist with the implementation of additional financial and management controls.
Outlook
"We expect to continue to deliver solid organic growth in fiscal year 2010 and beyond, driven by growing consumer acceptance of and demand for our natural products, potential listing of our products in the reimbursement catalog of essential medicine for health insurance, increased market penetration of our recently launched products, and overall volume gains as China's comprehensive healthcare reform is implemented," said Mr. Li. "We are confident in our growth outlook and look forward to another record year in fiscal 2010."
In fiscal 2010, Renhuang's quarterly earnings will be impacted by two key factors. First, as is the case in past years, a number of the Company's products experience seasonality in their sales. In particular, sales demand will be positively impacted by increased demand during the winter flu season. In contrast, demand is typically a bit softer in the warmer weather. Second, the Company will continue its promotional efforts to increase consumer brand awareness and market penetration of the products, as well as invest in the advancement of the R&D pipeline throughout the year. As such, the Company anticipates stronger sales and earnings in the first and fourth quarter of the year, as compared to those in the second and third quarters.
Based on the above factors, Renhuang is affirming its previously issued fiscal 2010 guidance for net sales in the range of $54.7-$55.6 million, which represents a 26% to 28% increase over reported revenues of $43.4 million in fiscal year 2009. The Company expects fiscal 2010 net income to be in the range of $18.6-$18.9 million, up 26% to 28% from net income of $14.8 million in fiscal year 2009.
SOURCE Renhuang Pharmaceuticals, Inc.