SOURCE: Skystar

Skystar

April 02, 2013 05:00 ET

Skystar Bio-Pharmaceutical Reports Fiscal Year 2012 Financial Results

Fiscal Year Revenue of $33.6 Million; Fiscal Year 2013 Revenue Growth Forecasted to Be 20% to 35% Above 2012 Level

XI'AN, CHINA--(Marketwired - Apr 2, 2013) - 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 announced full financial results for fiscal year ended December 31, 2012.

Fiscal Year 2012 Summary

  • Revenues totaled $33.6 million, down 36% YoY
    • Veterinary vaccines totaled $3.6 million, up 53.1% YoY
    • Veterinary medicines totaled $10.7 million, down 68.4% YoY
    • Feed additives totaled $4.0 million, up 57.1% YoY
    • Micro-organism products totaled $15.4 million, up 8.5% YoY
  • Gross profit margin increased to 55% from 50% in the prior year
  • Net income decreased 54.5% year over year to $6.2 million or $0.83 per fully diluted share, as compared to $13.7 million or $1.90 per fully diluted share during the year ended December 31, 2011.
  • Improved cash balance to $11.3 million at the end of fiscal 2012

Management Comments
Mr. Weibing Lu, Skystar Bio-Pharmaceutical's chairman and chief executive officer, commented, "Skystar is very pleased to share its 2012 financial results with investors. Financially, Skystar successfully maintained its historically clean and stable balance sheet, in addition to finishing the year bottom line profitable. In addition, the Company generated net positive cash flow from operations, maintained liquidity, met both long and short term debt obligations in addition to increasing its cash position as compared to the beginning of fiscal 2012 and end of fiscal 2011.

"Not counting Skystar's veterinary medication manufacturing plant in Huxian, whose production line was closed for three quarters of the 2012 fiscal year, due to the Ministry of Agriculture's mandatory GMP re-certification schedule. Skystar was able to ramp sales across all of it production lines. And through the shifting of Skystar's sales and marketing efforts; Vaccine revenues grew 53% year over year; Probiotics grew by 9% year over year; and Feed additives revenues grew 57% year over year. Skystar was not only able to maintain sales of these production lines in 2012 but increase selling despite China's economic slowdown.

"Operationally, Skystar's management trimmed operating expenses in 2012 in accordance with the shutdown of its Huxian veterinary medication facility, where unfortunately revenues were down 68% from the prior fiscal year due to its aforementioned closing prior to GMP inspection. Likewise R&D projects for fiscal 2012 were also strategically reduced in order to maintain profitability without shying away from planned research and from the Company's mission to stay ahead of trends and demands in China's animal husbandry space. As a result Skystar moderately increased its customer base to 3,964 customers consisting of independent distributors, franchise distributors and direct customers.

"With respect to Skystar's manufacturing facilities; the Company currently has four manufacturing facilities:

"The Sanqiao Plant has two facilities. The Micro-Organism facility is run in cooperation with experts from Microbiology Institute of Shaanxi Province, and Northwest Agro-Forestry Sci-tech University. The Second facility manufactures feed additives. Both facilities are operational and we look forward to solid revenue contribution in 2013 with respect to this product line. 

"The Huxian Plant has two production lines for vaccines and medications. In the third quarter of fiscal of fiscal 2012, China's MOA inspected and renewed the GMP certificate for this facility's veterinary medication facility which will be valid for a period of five years. We look forward to the revenue contribution of this production facility and are eager to ramp sales of this product line. Additionally, the new vaccine facility was also inspected and received stage one GMP approval. Under China's revised inspection process, the vaccine production line is still waiting to undergo stage two of the GMP certification. Management expects the GMP certification process of the vaccine facility to be completed by the third quarter of 2013.

"The Jingzhou Plant, plant is GMP certified to produce veterinary medicines including aqua culture medicines and is fully operational.

"Skystar's probiotics plant in Kunshan was acquired in September 2011 for roughly $8 million. As of the end of 2012, the facility renovation for this facility is complete; inspection was completed and accepted in March 2013. However, the equipment installation, tooling and testing is not fully completed; thus this facility is not operational at this point," said Mr. Lu.

Fiscal Year 2012 Financial Results
In-line with revised guidance, Skystar reported full fiscal 2012 year Revenues of $33.6 million, a 36% decrease compared to the $52.8 million in revenues reported for the full fiscal 2011 year. Gross profit for the full fiscal 2012 year was $18.5 million, or 55% of revenues.

Net income decreased 54.5% year over year to $6.2 million or $0.83 per fully diluted share, as compared to $13.7 million or $1.90 per fully diluted share in the year ago period.

Skystar's Cost of Sales which consists of raw materials, direct labor, and manufacturing overhead for our four product lines, was $15.1 million for fiscal 2012 as compared to $26.6 million for the year ago period. This decrease was mainly due to the decrease in corresponding sales as a result of temporary suspension of production at the Huxian facility for the first three quarters of 2012.

Research and Development costs totaled $2.2 million for the fiscal 2012 as compared to $2.8 million for the year ago period, a decrease of $0.6 million or 23.5%. The decrease was due to a strategic reduction in R&D projects for the fiscal year.

Selling expenses totaled $3.0 million for fiscal 2012 as compared to $4.0 million in the year ago period, a decrease of $1.0 million or 25.2%. This decrease is mainly due to decreased sales commission expenses as the Huxian veterinary medication facility was temporarily closed for the first three quarters of 2012 resulting in a significant decrease in veterinary medication sales in 2012. Shipping and handling costs and travelling expenses also decreased as less veterinary medicine sales activities during the year.

General and Administrative $4.7 million for the year ended December 31, 2012 as compared to $4.1 million for the year ended December 31, 2011, an increase of $0.6 million or 15.8%. The increase was mainly due to the stock based compensation expense of $1.0 million for stock grants on May 4, 2012 to the Company's employees and members of the Board of Directors, all of which grants were made pursuant to the terms and provisions of the 2010 Stock Incentive Plan.

Financial Position: as of December 31, 2012, Skystar had approximately $11.3 million in cash, current assets of $71.6 million and current liabilities of $17.2 million, which resulted in a net working capital of $54.4 million.

Business Outlook
Mr. Lu concluded, "Fiscal 2013 will be an exciting year for Skystar, following the successful application of GMP certifications for our various manufacturing facilities, the Company is another step closer to realizing the full revenue potential of its manufacturing facilities. Skystar currently anticipates delivering a 20% to 35% year over year increase in top line revenue for fiscal 2013. The expected revenue range is $40 million to $45 million with gross margin of roughly 50% for fiscal 2013. This view takes into consideration revenues from facilities that have come online following GMP recertification," concluded Mr. Lu. 

Conference Call Information
The Company will host a conference call on Tuesday, April 2, 2013 to discuss its financial results for the year ended December 31, 2012. Skystar's conference call will begin promptly at 7:45 a.m. EST to review fiscal year 2012 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.skystarbio-pharmaceutical.com or http://www.investorcalendar.com/IC/CEPage.asp?ID=170739.

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 # 411773.

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, probiotics, vaccines and feed additives) and over 275 products. Skystar has formed strategic sales distribution networks covering 29 provinces throughout China. For additional information, please visit http://www.skystarbio-pharmaceutical.com

 
 
 
SKYSTAR BIO-PHARMACEUTICAL COMPANY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Amounts in US. Dollars, except share and amounts)
             
    Years ended December 31,
    2012   2011
             
REVENUE, net   $ 33,586,791   $ 52,788,279
             
COST OF REVENUE     15,095,004     26,562,748
             
GROSS PROFIT     18,491,787     26,225,531
             
OPERATING EXPENSES:            
  Research and development     2,154,241     2,814,328
  Selling expenses     3,040,036     4,062,126
  General and administrative     4,746,529     4,099,153
    Total operating expenses     9,940,806     10,975,607
             
INCOME FROM OPERATIONS     8,550,981     15,249,924
             
OTHER INCOME (EXPENSE):            
  Other income, net     498,614     43,696
  Interest expense, net     (706,842)     (140,920)
  Change in fair value of warrant/purchase option liability     37,800     1,376,239
    Total other income (expense), net     (170,428)     1,279,015
             
INCOME BEFORE PROVISION FOR INCOME TAXES     8,380,553     16,528,939
             
PROVISION FOR INCOME TAXES     2,168,125     2,871,299
             
NET INCOME     6,212,428     13,657,640
             
OTHER COMPREHENSIVE INCOME :            
  Foreign currency translation adjustment     662,542     2,955,344
             
COMPREHENSIVE INCOME   $ 6,874,970   $ 16,612,984
             
EARNINGS PER SHARE:            
  Basic   $ 0.83   $ 1.90
  Diluted   $ 0.83   $ 1.90
             
WEIGHTED AVERAGE NUMBER OF COMMON SHARES:            
  Basic     7,471,350     7,182,969
  Diluted     7,471,350     7,184,484
 
 
 
SKYSTAR BIO-PHARMACEUTICAL COMPANY
CONSOLIDATED BALANCE SHEETS
(Amounts in US. Dollars, except share and amounts)
             
      December 31,     December 31,
      2012     2011
ASSETS            
             
CURRENT ASSETS:            
  Cash   $ 11,321,848   $ 7,048,968
  Accounts receivable, net of allowance for doubtful accounts of $247,269 and $438,678, respectively     10,010,796     3,391,493
  Inventories     22,962,209     14,851,159
  Deposits, prepaid expenses and other receivables     2,839,850     3,421,487
  Prepayments to suppliers     23,438,735     29,226,961
  Loans receivable     1,078,827     964,088
    Total current assets     71,652,265     58,904,156
             
PROPERTY, PLANT AND EQUIPMENT, NET     28,867,816     28,376,559
             
CONSTRUCTION-IN-PROGRESS     8,691,360     8,839,055
             
OTHER ASSETS:            
  Long-term prepayments     1,050,327     1,512,817
  Long-term prepayments for acquisitions     177,744     569,788
  Intangible assets, net     5,319,831     5,674,206
    Total other assets     6,547,902     7,756,811
      Total assets   $ 115,759,343   $ 103,876,581
             
LIABILITIES AND SHAREHOLDERS' EQUITY            
             
CURRENT LIABILITIES:            
  Accounts payable   $ 4,017,530   $ 1,047,067
  Other payable and accrued expenses     4,374,047     5,274,598
  Short-term loans     4,443,600     7,366,320
  Deposits from customers     1,621,061     1,432,529
  Taxes payable     1,950,757     160,081
  Due to related parties     798,925     56,273
    Total current liabilities     17,205,920     15,336,868
             
OTHER LIABILITIES:            
  Long-term loan     1,269,600     -
  Deferred government grants     1,063,290     393,500
  Warrant/purchase option liability     5,600     43,400
    Total other liabilities     2,338,490     436,900
      Total liabilities     19,544,410     15,773,768
             
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 and 7,161,919 shares issued and            
  outstanding as of December 31, 2012 and 2011, respectively     7,605     7,162
  Paid-in capital     37,021,085     35,784,378
  Statutory reserves     5,897,298     5,708,135
  Retained earnings     44,515,296     38,492,031
  Accumulated other comprehensive income     8,773,649     8,111,107
    Total shareholders' equity     96,214,933     88,102,813
      Total liabilities and shareholders' equity   $ 115,759,343   $ 103,876,581
   
   
   
SKYSTAR BIO-PHARMACEUTICAL COMPANY  
CONSOLIDATED STATEMENTS OF CASH FLOWS  
(Amounts in US. Dollars, except share and amounts)  
               
  Year ended December 31,  
  2012     2011  
CASH FLOWS FROM OPERATING ACTIVITIES:              
Net income $ 6,212,428     $ 13,657,640  
Adjustments to reconcile net income to net cash provided by (used in) operating activities:              
  Depreciation   1,035,829       1,347,090  
  Amortization   401,114       524,662  
  (Reversal of) provision for doubtful accounts   (194,971 )     85,561  
  Provision for obsolete inventories   -       7,562  
  Common stock to be issued to related parties for compensation   86,162       146,189  
  Common stock issued under 2010 stock incentive plan   1,037,911       -  
  Change in fair value of warrant/purchase option liability   (37,800 )     (1,376,239 )
  Change in operating assets and liabilities              
  Accounts receivable   (6,394,244 )     1,660,343  
  Inventories   (7,985,875 )     (7,482,193 )
  Deposits, prepaid expenses and other receivables   1,651,478       162,188  
  Prepayments to suppliers   6,027,718       (12,298,451 )
  Accounts payable   2,307,066       724,579  
  Other payables and accrued expenses   (500,127 )     1,667,267  
  Deposits from customers   176,645       123,215  
  Taxes payable   1,788,790       (608,350 )
  Net cash provided by (used in) operating activities   5,612,124       (1,658,937 )
               
CASH FLOWS FROM INVESTING ACTIVITIES:              
  Purchases of property, plant and equipment   (163,049 )     (524,574 )
  Payments on construction-in-progress   (393,032 )     (7,028,129 )
  Long-term prepayments   (358,077 )     (1,365,671 )
  Refund of long-term prepayments   475,950       -  
  Loans to third parties   (2,023,393 )     (3,849,994 )
  Collection of loans to third parties   1,916,651       11,113,731  
    Net cash used in investing activities   (544,950 )     (1,654,637 )
               
CASH FLOWS FROM FINANCING ACTIVITIES:              
  Proceeds from short-term and long-term loans   5,774,860       10,856,498  
  Repayment of short-term loans   (7,488,280 )     (6,695,279 )
  Proceeds from government grants   666,330       -  
  Repayment of government grants   (475,950 )     -  
  Due to (from) related parties   743,755       (75,505 )
    Net cash (used in) provided by financing activities   (779,285 )     4,085,714  
               
EFFECT OF EXCHANGE RATE CHANGES ON CASH   (15,009 )     388,997  
               
INCREASE IN CASH   4,272,880       1,161,137  
               
CASH, beginning of year   7,048,968       5,887,831  
               
CASH, end of year $ 11,321,848     $ 7,048,968  
               
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:              
  Cash paid for interest $ 647,249     $ 362,713  
  Cash paid for income taxes $ 972,739     $ 5,366,046  
Non-cash investing and financing activities              
  Long-term prepayment transferred to construction-in-progress $ 1,004,635     $ 3,895,580  
  Long term prepayment transferred to plant and equipment $ -       4,752,513  
  Construction-in-progress transferred to property, plant and equipment $ 1,129,588     $ 813,562  
  Share issued to settle payables to related parties $ 199,239     $ -  
 
 
 
SKYSTAR BIO-PHARMACEUTICAL COMPANY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Amounts in US. Dollars, except share and amounts)
                               
                          Accumulated    
                Retained earnings     other    
    Common stock   Paid-in   Statutory         comprehensive    
    Shares   Amount   capital   reserves   Unrestricted     income   Total
                                           
BALANCE, January 1, 2011   7,161,919   $ 7,162   $ 35,784,378   $ 5,695,236   $ 24,847,290     $ 5,155,763   $ 71,489,829
                                           
  Foreign currency translation                                   2,955,344     2,955,344
  Net income                           13,657,640             13,657,640
  Appropriation to statutory reserves                     12,899     (12,899 )           -
                                           
BALANCE, December 31, 2011   7,161,919   $ 7,162   $ 35,784,378   $ 5,708,135   $ 38,492,031     $ 8,111,107   $ 88,102,813
                                           
  Share issued under 2010 stock incentive plan   442,881     443     1,236,707                         1,237,150
  Foreign currency translation                                   662,542     662,542
  Net income                           6,212,428             6,212,428
  Appropriation to statutory reserves                     189,163     (189,163 )            
                                           
BALANCE, December 31, 2012   7,604,800   $ 7,605   $ 37,021,085   $ 5,897,298   $ 44,515,296     $ 8,773,649   $ 96,214,933

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 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 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.

Contact Information

  • Contacts:

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

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