SOURCE: Skystar

Skystar

May 16, 2013 05:00 ET

Skystar Bio-Pharmaceutical Reports First Quarter 2013 Results

Conference Call to Be Held May 16, 2013 at 7:45 AM EDT

XI'AN, CHINA--(Marketwired - May 16, 2013) - Skystar Bio-Pharmaceutical Company (NASDAQ: SKBI) ("Skystar" or the "Company"), a China-based manufacturer and distributor of veterinary medicine, vaccines, micro-organisms and feed additives, today reported unaudited first quarter fiscal year 2013 earnings, for the fiscal period ended March 31, 2013.

First Quarter 2013 Summary

  • Revenue decrease 30% YoY to $5.5 million as follows:
    • Veterinary medicines totaled $3.4 million, up 15% YoY
    • Pro-biotic micro-organism products totaled $1.7 million, decreasing 47% YoY
    • Feed additives totaled $0.3 million, decreasing 72% YoY
    • Veterinary vaccines totaled $0.1 million, decreasing 82% YoY
  • Gross Profit of $2.6 million decreased 39% for the first three months of fiscal 2013 YoY
  • Gross Margin of 47% for the first three months of fiscal 2013, compared to 54% in the prior 2012 period
  • Net Income $0.7 million or $0.09 per fully diluted share, as compared with $1.9 million or $0.26 per fully diluted share YoY
  • Company reiterates Fiscal 2013 revenue guidance range of $40 million to $45 million

Management's Comments
Mr. Weibing Lu, Chairman and Chief Executive Officer of Skystar, commented, "The Company has achieved significant milestones in preparing two of its manufacturing facilities to become fully operational. The first facility based in Huxian is expected to launch animal vaccine production once the Ministry of Agriculture concludes its stage two GMP certification process in the third quarter of fiscal year 2013. The second manufacturing facility in Kunshan, which will manufacture probiotics is currently being renovated. Probiotics production at this facility is expected to begin in the fourth quarter of the fiscal year.

"The first calendar quarter is normally the slowest for Skystar's product sales mainly due to the celebrating of China's Lunar calendar holidays in that period. Sales of Skystar's range of products in the current first quarter have slowed beyond seasonal levels however; this has been due to a variety of factors including the widely publicized Swine Flu and Avian Flu outbreak in China. In addition, while Skystar currently possesses over half of the required production permits following GMP certification, the Company is still awaiting approval for the remainder of such permits in order to make full use of the newly GMP certified Huxian facility. As of current, Skystar's remaining production permit applications are in various stages of the approval process.

"While the Government has effectively contained the Swine and Avian Flu outbreaks, subsidies are already being distributed to farmers in order to boost China's animal husbandry industry. These subsidies will assist farmers in the replacement and rearing of animals lost during the containment of the respective Swine and Avian Flu outbreaks. In timing the needs of its customers, Skystar anticipates that normal demand for its products is expected to come back later in the year as public fear over protein consumption in China diminishes and dissipates. By that time, Skystar expects to have the regulatory approvals and manufacturing capability for increasing production capacity of its products. The Company has already received several product production permits associated with the Huxian animal medication facility and expects more to be approved by the Ministry of Agriculture in the near future. The Kunshan probiotics plant is also scheduled to come online later in the year and will provide additional incremental revenue. Skystar expects fiscal 2014 to be the first normalized fiscal year for Skystar since 2011 when the Company generated record revenues and had full production capacity of its existing facilities," concluded Mr. Lu.

Financial Summary
For the three months ended March 31, 2013, the Company had Revenues of roughly $5.5 million as compared to revenues of $7.9 million for the three months ended March 31, 2012, a decrease of $2.4 million or 30.2%.

Cost of sales was $2.9 million for the three months ended March 31, 2013, as compared to $3.6 million for the three months ended March 31, 2012, a decrease of $0.7 million or 19.6%, as a result of decreased sales of other Company's product lines except veterinary medications.

Gross profit was $2.6 million for the three months ended March 31, 2013, as compared to $4.3 million for the three months ended March 31, 2012, with gross margin of 47% as compared to 54% in the comparable 2012 period.

The decreased gross margins for the three months ended March 31, 2013 were mainly because the majority of the Company's revenue during the three months came from less profitable veterinary medications product line, while the relatively high profitable micro-organism and vaccine product lines significantly reduced their production, and therefore sales.

Operating Expenses, Skystar's Research and Development were close to nil for the three months ended March 31, 2013 primarily due to no significant new R&D efforts being undertaken during the first quarter of 2013.

Selling expenses totaled $0.3 million for the three months ended March 31, 2013 as compared to $0.7 million for the three months ended March 31, 2012, a decrease of $0.4 million or 55.0%. This decrease is mainly due to the drop of shipping and handling costs as the result of reduced sales in the first quarter.

General and administrative expenses totaled $1.2 million for the three months ended March 31, 2013 as compared to $1.1 million for the three months ended March 31, 2012, an increase of $0.1 million or 9.6%.

Income from operations decreased 56.6% or $1.4 million to $1.1 million for first quarter fiscal 2013 as compared to $2.5 million in the comparable fiscal 2013 period.

Net income decreased 62.6% year over year to $0.7 million or $0.09 per fully diluted share, as compared to $1.9 million or $0.26 per fully diluted share in the year ago period.

Financial position as of March 31, 2013 Skystar had $4.0 million in cash, current assets of $76.0 million and current liabilities of $20.2 million, which resulted in approximately a net working capital of $55.8 million.

Mr. Lu concluded, "We expect that Fiscal 2013 will be an exciting year for Skystar. Following the successful application of GMP certifications for our various manufacturing plants, we anticipate positioning ourselves to maximize the revenue generating potential of the newly certified production facilities. We maintain full fiscal year 2013 guidance which was previously announced to be in the range of $40 to $45 million and expect to generate the majority of these revenues in the second half of the year. We also expect that revenue generation will be bolstered by the addition of several product permits that have been submitted to the Ministry of Agriculture. The product permits will allow Skystar to generate incremental revenue that was not possible in previous quarters due to the GMP recertification process of its manufacturing facilities. This view also takes into consideration revenues from facilities that are in the process of coming online following the GMP certification process," concluded Mr. Lu.

Conference Call Information
The Company will host a conference call on Thursday, May 16, 2013 to discuss its financial results for the fiscal quarter ended March 31, 2013. Skystar's conference call will begin promptly at 7:45 a.m. EDT to review fiscal first quarter 2013 financial and operational performance. Mr. Weibing Lu, Skystar's chairman and chief executive officer, will host the call, which will be webcast live.

Webcast
The webcast will be made available on the investor relations section of the Skystar corporate website at http://www.investorcalendar.com/IC/CEPage.asp?ID=170974.

Phone dial-in
Telephone access to the conference call will be available in North America by dialing +1 (877) 407-8031 or internationally by dialing +1 (201) 689-8031.

An audio replay of the conference call will be available approximately two hours following the conclusion of the call and for the following 30 day period. To access the replay in North America, dial +1 (877) 660-6853 or, when calling internationally, dial +1 (201) 612-7415, referencing conference ID # 414186. Alternatively you can listen to the replay online at http://www.investorcalendar.com/IC/index.asp.

To be added to the Company's email distribution for future news releases, please send your request to skystar@grayling.com.

About Skystar Bio-Pharmaceutical Company
Skystar is a China-based developer and distributor of veterinary healthcare and medical care products. Skystar has four product lines (veterinary medicines, micro-organisms, vaccines and feed additives) and 275 products. Skystar has formed strategic sales distribution networks covering 29 provinces throughout China. For additional information, please visit http://www.skystarbio-pharmaceutical.com.

Financial Tables Follow

 
 
SKYSTAR BIO-PHARMACEUTICAL COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2013 AND 2012
(Unaudited)
   
                 
    Three Months Ended  
    March 31,  
    2013     2012  
                 
REVENUE, net   $ 5,530,741     $ 7,926,337  
                 
COST OF REVENUE     2,930,886       3,643,658  
                 
GROSS PROFIT     2,599,855       4,282,679  
                 
OPERATING EXPENSES:                
  Research and development costs     461       3,654  
  Selling expenses     317,836       705,616  
  General and administrative expenses     1,211,273       1,105,435  
    Total operating expenses     1,529,570       1,814,705  
                 
INCOME FROM OPERATIONS     1,070,285       2,467,974  
                 
OTHER INCOME (EXPENSE):                
  Other income (expense), net     (187 )     53,760  
  Interest (expense), net     (40,547 )     (153,612 )
  Change in fair value of warrant/purchase option liability     4,466       5,600  
    Total other (expense), net     (36,268 )     (94,252 )
                 
INCOME BEFORE PROVISION FOR INCOME TAXES     1,034,017       2,373,722  
                 
PROVISION FOR INCOME TAXES     321,284       468,968  
                 
NET INCOME     712,733       1,904,754  
                 
OTHER COMPREHENSIVE INCOME:                
  Foreign currency translation adjustment     550,883       558,757  
                 
COMPREHENSIVE INCOME   $ 1,263,616     $ 2,463,511  
                 
EARNINGS PER SHARE:                
  Basic   $ 0.09     $ 0.26  
  Diluted   $ 0.09     $ 0.26  
                 
WEIGHTED AVERAGE NUMBER OF COMMON SHARES:                
  Basic     7,613,712       7,210,256  
  Diluted     7,613,712       7,210,256  
                   
 
 
SKYSTAR BIO-PHARMACEUTICAL COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
             
             
    March 31,    
    2013   December 31,
    (Unaudited)   2012
ASSETS            
             
CURRENT ASSETS:            
  Cash   $ 3,979,494   $ 11,321,848
  Accounts receivable, net of allowance for doubtful accounts of $600,823 (Unaudited) and $247,269 as of March 31, 2013 and December 31, 2012, respectively     11,444,339     10,010,796
  Inventories     23,650,679     22,962,209
  Deposits, prepaid expenses and other receivables     2,546,256     2,839,850
  Prepayments to suppliers     33,284,834     23,438,735
  Loans receivable     1,084,945     1,078,827
    Total current assets     75,990,547     71,652,265
             
PROPERTY, PLANT AND EQUIPMENT, NET     28,733,056     28,867,816
             
CONSTRUCTION-IN-PROGRESS     8,740,649     8,691,360
             
OTHER ASSETS:            
  Long-term prepayments     1,056,283     1,050,327
  Long-term prepayments for acquisitions     178,752     177,744
  Intangible assets, net     5,289,021     5,319,831
  Total other assets     6,524,056     6,547,902
    Total assets   $ 119,988,308   $ 115,759,343
             
LIABILITIES AND SHAREHOLDERS' EQUITY            
             
CURRENT LIABILITIES:            
  Accounts payable   $ 5,065,400   $ 4,017,530
  Other payable and accrued expenses     3,901,488     4,374,047
  Short-term loans     6,862,800     4,443,600
  Deposits from customers     1,658,365     1,621,061
  Taxes payable     1,672,657     1,950,757
  Due to related parties     1,001,795     798,925
    Total current liabilities     20,162,505     17,205,920
             
OTHER LIABILITIES:            
  Long-term loan     1,276,800     1,269,600
  Deferred government grant     1,069,320     1,063,290
  Purchase option liability     1,134     5,600
  Total other liabilities     2,347,254     2,338,490
    Total liabilities     22,509,759     19,544,410
             
COMMITMENTS AND CONTINGENCIES            
             
SHAREHOLDERS' EQUITY            
  Preferred stock, $0.001 par value, 50,000,000 shares authorized, No Series "A" shares authorized. 48,000,000 Series "B" shares authorized. No Series "B" shares issued and outstanding     -     -
  Common stock, $0.001 par value, 40,000,000 shares authorized, 7,604,800 shares issued and outstanding as of March 31, 2013 (Unaudited) and December 31, 2012     7,605     7,605
  Paid-in capital     37,021,085     37,021,085
  Statutory reserves     5,897,298     5,897,298
  Retained earnings     45,228,029     44,515,296
  Accumulated other comprehensive income     9,324,532     8,773,649
    Total shareholders' equity     97,478,549     96,214,933
      Total liabilities and shareholders' equity   $ 119,988,308   $ 115,759,343
                   
 
 
SKYSTAR BIO-PHARMACEUTICAL COMPANY AND SUBSIDIARIES   
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS   
FOR THE THREE MONTHS ENDED MARCH 31, 2013 AND 2012   
(Unaudited)   
                 
                 
    Three months ended  
    March 31,  
    2013     2012  
CASH FLOWS FROM OPERATING ACTIVITIES:                
  Net income   $ 712,733     $ 1,904,754  
  Adjustments to reconcile net income to net cash (used in) provided by operating activities:                
      Depreciation     313,561       343,129  
      Amortization     60,872       100,373  
      Provision for doubtful accounts     351,534       38,869  
      Common stock to be issued to related parties for compensation     4,340       40,020  
      Change in fair value of warrant/purchase option liability     (4,466 )     (5,600 )
    Change in operating assets and liabilities                
      Accounts receivable     (1,725,889 )     (2,415,647 )
      Inventories     (557,269 )     985,908  
      Deposits, prepaid expenses and other receivables     292,476       335,498  
      Prepayments to suppliers     (9,696,136 )     (2,479,854 )
      Accounts payable     1,023,288       980,926  
      Other payables and accrued expenses     (339,030 )     566,311  
      Repayment of government grants     (159,320 )     -  
      Deposits from customers     28,061       199,329  
      Taxes payable     (288,655 )     1,427,655  
  Net cash (used in) provided by operating activities     (9,983,900 )     2,021,671  
                 
CASH FLOWS FROM INVESTING ACTIVITIES:                
    Loans receivables     -       (11,515 )
    Purchases of plant and equipment     -       (54,965 )
    Payments on construction-in-progress     -       (44,940 )
  Net cash used in investing activities     -       (111,420 )
                 
CASH FLOWS FROM FINANCING ACTIVITIES:                
    Proceeds from short-term loan     4,779,600       63,520  
    Repayment of short-term loan     (2,389,800 )     -  
    Due to related parties     201,325       326,061  
  Net cash provided by financing activities     2,591,125       389,581  
                 
EFFECT OF EXCHANGE RATE CHANGES ON CASH     50,421       37,784  
                 
(DECREASE) INCREASE IN CASH     (7,342,354 )     2,337,616  
                 
CASH, beginning of period     11,321,848       7,048,968  
                 
CASH, end of period   $ 3,979,494     $ 9,386,584  
                 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:                
  Cash paid for interest   $ 181,426     $ 152,583  
  Cash paid for income taxes   $ -     $ -  
                 
  Non-cash investing and financing activities                
    Construction-in-progress transferred to property, plant and equipment   $ -     $ 3,633  
    Long-term prepayments transferred to construction-in-progress   $ -     $ 333,480  
                     
                     
                     
SKYSTAR BIO-PHARMACEUTICAL COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(UNAUDITED)
                                             
    Common stock             Retained earnings            
    Shares   Amount   Paid-in capital       Statutory reserves   Unrestricted   Accumulated other comprehensive income   Total
                                             
BALANCE, January 1, 2013   7,604,800   $ 7,605   $ 37,021,085       $ 5,897,298   $ 44,515,296   $ 8,773,649   $ 96,214,933
                                             
  Foreign currency translation   -     -     -         -     -     550,883     550,883
  Net income   -     -     -         -     712,733     -     712,733
                                             
BALANCE, March 31, 2013   7,604,800   $ 7,605   $ 37,021,085       $ 5,897,298   $ 45,228,029   $ 9,324,532   $ 97,478,549
                                             
                                             

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995:

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," "may," "will," "should," "project," "plan," "seek," "intend," or "anticipate" or the negative thereof or comparable terminology. Such statements typically involve risks and uncertainties and may include financial projections or information regarding the progress of new product 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 Company's ability to pass the final stages of the GMP inspection for its Huxian Vaccine Facility, to complete renovations at the Kunshan plant, timing of such expectations and renovations, the Company's ability to ramp up its production to the anticipated levels, the potential risks and public and/or governmental response to variety of risks, including the Avian Influenza, the effect of changing economic conditions in The People's Republic of China, 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 unless expressly required under the law, the Company is under no obligation to revise any forward looking statements for any reason.

Contact Information

  • Contacts:

    Skystar Bio-Pharmaceutical Company
    Scott Cramer
    Director - Director Corporate Development and U.S. Representative
    (407) 645-4433

    Grayling

    Investor Relations
    Christopher Chu
    (646) 284-9426
    Email Contact