SOURCE: Skystar Bio-Pharmaceuticals

Skystar Bio-Pharmaceuticals

May 15, 2014 17:00 ET

Skystar Bio-Pharmaceutical Reports First Quarter Fiscal Year 2014 Financial Results

Revenue of $6.8 Million; Net Income $1 Million; $0.13 Fully Diluted EPS; Conference Call to Be Held Friday, May 16, 2014 at 7:45 AM ET

XI'AN, CHINA--(Marketwired - May 15, 2014) - Skystar Bio-Pharmaceutical Company (NASDAQ: SKBI) ("Skystar" or the "Company"), a China-based manufacturer and distributor of veterinary medicines, vaccines, micro-organisms and feed additives, today reported unaudited first quarter fiscal year 2014 earnings, for the period ended March 31, 2014.
First Quarter 2014 Summary

  • Revenue increase 23.5% YoY to $6.8 million as follows:
    • Veterinary medicines totaled $4.8 million, up 40.6% YoY
    • Pro-biotic micro-organism products totaled $1.5 million, decreasing 8.8% YoY
    • Feed additives totaled $0.3 million, increasing 15.5% YoY
    • Veterinary vaccines totaled $0.1 million, increasing 4.1% YoY
  • Gross Profit of $2.8 million increased 8.6% for the first three months of fiscal 2014 YoY
  • Gross Margin of 41.3% for the first three months of fiscal 2014, compared to 47% in the prior 2013 period
  • Net Income of $1 million or $0.13 per fully diluted share, as compared with $0.7 million or $0.09 fully diluted share YoY

Management's Comments
Mr. Weibing Lu, Chairman and Chief Executive Officer of Skystar, commented, "Skystar is pleased with unaudited first quarter results seeing increases in both year over year top and bottom line profitability. Skystar's revenue growth was driven by Veterinary medicine which grew 40% year over year with solid contributions coming from Skystar's other segments. The increased utilization rates for Skystar's veterinary medication production facility were realized following the receipt of more product permits from the Ministry of Agriculture. Skystar's YoY gross margin compression from 47% to 41% for the current reporting quarter was anticipated due to increased production coming from the lower margin veterinary medications line for which the Company recently received some product permits, and increased manufacturing overhead as we successfully completed our Huxian vaccine plant construction. We expect for manufacturing to continue to scale up throughout the year in preparation for the majority of Skystar's sales coming after the first quarter coinciding with China's celebration of the Lunar New Year holiday. Skystar expects a steady growth trajectory once all of its manufacturing plants can be completed and brought to full utilization rates," concluded Mr. Lu.

Financial Summary

For the year ended March 31, 2014, Skystar's revenues were roughly $6.8 million as compared to revenues of $5.5 million for the three months ended March 31, 2013, an increase of $1.3 million or 23.5%. Overall increase in revenue was due to increase in manufacturing at the Company's Huxian plant in combination with receiving product permits by the Ministry of Agriculture to manufacture select veterinary medications.

A breakdown of the year's revenue by production line is as follows:

- Revenue from sales of our veterinary medications increased by $1.4 million or 40.6%, from $3.4 million for the three months ended March 31, 2013 to $4.8 million for the three months ended March 31, 2014.

- Revenue from probiotic products decreased by $146,000 roughly or 8.8% from $1.7 million for the three months ended March 31, 2013 to $1.5 million for the three months ended March 31, 2014. The decrease was due to weak market demand for probiotics due to a decline in pork prices in the first quarter, which discouraged farmers from increasing their livestock farming.

- Revenue from feed additives increased by $44,000 or 15.5% from $286,000 for the three months ended March 31, 2013 to $330,000 for the three months ended March 31, 2014.

- Vaccine revenues increased by $5,000 or 4.1% from $131,000 for the three months ended March 31, 2013 to $136,000 for the three months ended March 31, 2014. Vaccine production is expected to commence production at Skystar's new facility during the second half of 2014.

Gross profit for the quarter was up $223,000 or 8.6% from $2.6 million for the three months ended March31, 2013 to $2.8 million for the three months ended March 31, 2014. Gross margin was 41.3%, down from 47% in the same year ago period. The decreased gross margin was mainly because the majority of our revenue during the year came from less profitable veterinary medications product lines.

Operating expenses for the quarter increased 8% to $1.6 million or 24% of total revenue, compared with $1.5 million for the same year ago period.

Research and development costs were insignificant for both the first quarter of 2014 and 2013 as there was no significant R&D effort undertaken during the first quarter because of the Chinese New Year. Research and development costs are expected to increase as new projects begin throughout the remainder of fiscal 2014.

 Selling expenses totaled $370,000 for the three months ended March 31, 2014 as compared to $317,000 for the three months ended March 31, 2013, an increase of 16.5%.

General and administrative expenses totaled $1.3 million for the three months ended March 31, 2014 as compared to $1.2 million for the three months ended March 31, 2013, an increase 5.4%.

Operating income for March 31, 2014 was $1.2 million up $100,000 or 9.5% from the prior year. Operating margin was 17% versus 19% in the year ago period.

 Net income for the quarter was $975,000 million or $0.13 per fully diluted share. This compares to net income of $713,000 or $0.09 per fully diluted share for the year ago period.

As of March 31, 2014, Skystar had approximately $6.9 million in cash, current assets of $88.4 million and total current liabilities of $23.7 million which resulted in net working capital of $64.7 million.

Mr. Lu concluded, "Skystar has reported a strong start to the fiscal 2014 reporting cycle. The Company believes that it has built a strong framework as the only U.S. listed animal pharmaceutical play in China. The completed and newly GMP certified manufacturing facility in Huxian gives Skystar the ability to produce veterinary medicines and vaccines utilizing modern batch processes, increasing production efficiencies and volume of product produced. More importantly, the Company has been able to launch and expand infrastructure within the tougher regulatory framework of China's new requirements for GMP production facilities. These modern manufacturing standards and rules help to ensure the safety of China's food supply as agriculture and animal husbandry standards in China move towards modern standards and industrialization," concluded Mr. Lu.

Business Outlook
Skystar currently maintains business outlook and anticipates delivering an 8% to 18% year over year increase in top line revenue for fiscal 2014 as compared to the prior year. The expected revenue range is $46 million to $50 million with gross margin of roughly 50% for fiscal 2014.

Conference Call Information
The Company will host a conference call on Friday, May 16, 2014 to discuss its financial results for the year ended March 31, 2014. Skystar's conference call will begin promptly at 7:45 a.m. EST to review first quarter fiscal 2014 financial and operational performance. Mr. Weibing Lu, Skystar's chairman and chief executive officer, will host the call, which will be webcast live.

Webcast will be made available on the investor relations section of the Skystar corporate website at http://www.investorcalendar.com/IC/CEPage.asp?ID=172772.

Phone dial-in 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 # 13582730.

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

About Skystar Bio-Pharmaceutical Company

Skystar is a China-based developer, manufacturer and distributor of veterinary healthcare and medical care products. Skystar has four product lines: veterinary medicines, probiotics, vaccines and feed additives formulated and packaged in house across several modern manufacturing and distributions facilities. Skystar's distribution network includes almost 3,000 distribution agents of which 360 are franchised stores with exclusivity agreements covering 29 provinces throughout China. For additional information, please visit http://www.skystarbio-pharmaceutical.com.

Financial Statements

   
SKYSTAR BIO-PHARMACEUTICAL COMPANY AND SUBSIDIARIES  
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME  
FOR THE THREE MONTHS ENDED MARCH 31, 2014 AND 2013  
(Unaudited)  
                 
      Three Months Ended  
      March 31,  
      2014       2013  
                 
REVENUE, net   $ 6,832,588     $ 5,530,741  
                 
COST OF REVENUE     4,009,403       2,930,886  
                 
GROSS PROFIT     2,823,185       2,599,855  
                 
OPERATING EXPENSES:                
  Research and development costs     4,213       461  
  Selling expenses     370,208       317,836  
  General and administrative expenses     1,276,417       1,211,273  
    Total operating expenses     1,650,838       1,529,570  
                 
INCOME FROM OPERATIONS     1,172,347       1,070,285  
                 
OTHER INCOME (EXPENSE):                
  Other income (expense), net     154,919       (187 )
  Interest income     170,665       148,845  
  Interest expense     (75,934 )     (189,392 )
  Change in fair value of purchase option liability     (16,520 )     4,466  
    Total other income (expense), net     233,130       (36,268 )
                 
INCOME BEFORE PROVISION FOR INCOME TAXES     1,405,477       1,034,017  
                 
PROVISION FOR INCOME TAXES     430,027       321,284  
                 
NET INCOME     975,450       712,733  
                 
OTHER COMPREHENSIVE INCOME :                
  Foreign currency translation adjustment     (966,949 )     550,883  
                 
COMPREHENSIVE INCOME   $ 8,501     $ 1,263,616  
                 
EARNINGS PER SHARE:                
  Basic   $ 0.13     $ 0.09  
  Diluted   $ 0.13     $ 0.09  
                 
WEIGHTED AVERAGE NUMBER OF COMMON SHARES:                
  Basic     7,676,268       7,613,712  
  Diluted     7,700,734       7,613,712  
                 
                 
 
SKYSTAR BIO-PHARMACEUTICAL COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
             
ASSETS
      March 31,     December 31,
      2014     2013
      (Unaudited)      
             
CURRENT ASSETS:            
  Cash   $ 6,848,905   $ 8,142,296
  Accounts receivable, net of allowance for doubtful accounts of $960,578 (Unaudited) and $602,243 as of March 31, 2014 and December 31, 2013, respectively     12,663,549     11,009,498
  Inventories     25,265,783     25,903,586
  Deposits, prepaid expenses and other receivables     1,608,405     2,134,163
  Prepayments to suppliers     40,541,475     41,061,144
  Loans receivable     1,046,835     -
  Deferred tax assets     403,372     364,425
    Total current assets     88,378,324     88,615,112
             
PROPERTY, PLANT AND EQUIPMENT, NET     30,417,653     28,269,155
             
CONSTRUCTION-IN-PROGRESS     6,470,772     9,284,947
             
OTHER ASSETS:            
  Long-term prepayments     4,592,751     4,633,614
  Long-term prepayments for acquisitions     -     183,344
  Intangible assets, net     5,130,454     5,237,255
    Total other assets     9,723,205     10,054,213
      Total assets   $ 134,989,954   $ 136,223,427
             
LIABILITIES AND SHAREHOLDERS' EQUITY
             
CURRENT LIABILITIES:            
  Accounts payable   $ 4,615,614   $ 3,303,531
  Other payables and accrued expenses     6,551,419     6,467,605
  Short-term loans     5,680,500     10,640,500
  Deposits from customers     1,991,907     1,877,211
  Taxes payable     2,852,844     1,315,486
  Due to related parties     1,962,238     1,361,548
    Total current liabilities     23,654,522     24,965,881
             
OTHER LIABILITIES:            
  Deferred government grant     795,270     802,130
  Purchase option liability     78,960     62,440
    Total other liabilities     874,230     864,570
      Total liabilities     24,528,752     25,830,451
             
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 31,2014 (Unaudited) and December 31, 2013     7,605     7,605
  Paid-in capital     37,690,867     37,631,142
  Statutory reserves     5,952,692     5,952,692
  Retained earnings     55,965,604     54,990,154
  Accumulated other comprehensive income     10,844,434     11,811,383
      Total shareholders' equity     110,461,202     110,392,976
        Total liabilities and shareholders' equity   $ 134,989,954   $ 136,223,427
             
             
   
SKYSTAR BIO-PHARMACEUTICAL COMPANY AND SUBSIDIARIES  
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  
FOR THE THREE MONTHS ENDED MARCH 31,2014 AND 2013  
(Unaudited)  
                 
      Three Months Ended  
      March 31,  
      2014       2013  
CASH FLOWS FROM OPERATING ACTIVITIES:                
  Net income   $ 975,450     $ 712,733  
  Adjustments to reconcile net income to net cash (used in) provided by operating activities:                
      Depreciation     400,291       313,561  
      Amortization     62,477       60,872  
      Provision for doubtful accounts     366,218       351,534  
      Share based compensation     59,725       4,340  
      Change in fair value of purchase option liability     16,520       (4,466 )
      Deferred tax assets     (42,380 )     -  
    Change in operating assets and liabilities                
      Accounts receivable     (2,127,566 )     (1,725,889 )
      Inventories     419,398       (557,269 )
      Deposits, prepaid expenses and other receivables     513,005       292,476  
      Prepayments to suppliers     169,771       (9,696,136 )
      Accounts payable     1,350,410       1,023,288  
      Other payables and accrued expenses     135,167       (339,030 )
      Deferred government grants     -       (159,320 )
      Deposits from customers     131,733       28,061  
      Taxes payable     1,560,250       (288,655 )
      Due to related parties     606,813       201,325  
        Net cash provided by (used in) operating activities     4,597,282       (9,782,575 )
                 
CASH FLOWS FROM INVESTING ACTIVITIES:                
  Refund of long-term prepayments     184,387       -  
  Loans to third parties     (1,054,704 )     -  
  Payments on construction-in-progress     (53,195 )     -  
Net cash used in investing activities     (923,512 )     -  
                 
CASH FLOWS FROM FINANCING ACTIVITIES:                
  Proceeds from short-term loans     -       4,779,600  
  Repayment of short-term loans     (4,905,600 )     (2,389,800 )
  Net cash (used in) provided by financing activities     (4,905,600 )     2,389,800  
                 
EFFECT OF EXCHANGE RATE CHANGES ON CASH     (61,561 )     50,421  
                 
DECREASE IN CASH     (1,293,391 )     (7,342,354 )
                 
CASH, beginning of period     8,142,296       11,321,848  
                 
CASH, end of period   $ 6,848,905     $ 3,979,494  
                 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:                
  Cash paid for income tax   $ -     $ -  
  Cash paid for interest   $ 129,129     $ 181,426  
  Non-cash investing activities                
  Construction-in-progress transferred to property, plant and equipment   $ 2,787,566     $ -  
                   
                   
 
SKYSTAR BIO-PHARMACEUTICAL COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31,2014
(Unaudited)
 
                      Retained earnings     Accumulated          
    Common stock     Paid-in     Statutory           other comprehensive          
    Shares     Amount     capital     reserves     Unrestricted     income       Total  
BALANCE,January 1, 2014   7,604,800   $ 7,605   $ 37,631,142   $ 5,952,692   $ 54,990,154   $ 11,811,383     $ 110,392,976  
                                             
Foreign currency translation   -     -     -     -     -     (966,949 )     (966,949 )
Share-based compensation   -     -     59,725     -     -     -       59,725  
Net income   -     -     -           975,450     -       975,450  
                                             
BALANCE, March 31, 2014   7,604,800   $ 7,605   $ 37,690,867   $ 5,952,692   $ 55,965,604   $ 10,844,434     $ 110,461,202  
                                             

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

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 include, without limitation, the Company's financial projections, and revenue guidance, expectations relating to scaling up of the production and the plant production capabilities, statements relating to the timing of various regulatory certifications, 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 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. These forward-looking statements are based upon our current expectations and projections about future events and generally relate to our plans, objectives and expectations for the development of our business. Although management believes that the plans and objectives reflected in or suggested by these forward-looking statements are reasonable, all forward-looking statements involve risks and uncertainties and actual future results may be materially different from the plans, objectives and expectations expressed in this press release. Accordingly, investors should not place any reliance on forward-looking statements as a prediction of actual results.

Contact Information

  • Contacts:

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

    Grayling
    Investor Relations
    Christopher Chu
    (908) 251-9869
    Email Contact