SOURCE: Skystar Bio-Pharmaceuticals

Skystar Bio-Pharmaceuticals

March 31, 2014 19:04 ET

Skystar Bio-Pharmaceutical Reports Fiscal Year 2013 Financial Results and Meets Full Year Guidance

Fiscal Year 2013 Revenue of $42.5 Million; $1.37 Fully Diluted EPS; Fiscal Year 2014 Revenue Forecast to Grow to Between $46 Million to $50 Million

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

Fiscal Year 2013 Financial Summary

  • Revenues totaled $42.5 million, up 26.5% YoY
    • Veterinary medicines totaled $25.5 million, up 139.4% YoY
    • Micro-organism products totaled $13.5 million, down 11.8% YoY
    • Feed additives totaled $1.8 million, down 55.5% YoY
    • Veterinary vaccines totaled $1.6 million, down 54.1% YoY
  • Gross profit totaled $21.5 million, up 16.2% YoY
  • Gross profit margin decreased to 50.6% from 55.1% in the prior year
  • Net income increased 69.5% year over year to $10.5 million or $1.37 per fully diluted share, as compared to $6.2 million or $0.83 per fully diluted share for the year ended December 31, 2012.
  • Cash balance of $8.1 million and net working capital of $63.6 million December 31, 2013

Fiscal Year 2013 Operational Highlights

  • Huxian manufacturing campus successfully completed the GMP inspection and received GMP certificate from Chinese Ministry of Agriculture (MOA) for its vaccine production lines, 58 veterinary medication product permits in use and additional 8 in application stage
  • Jingzhou manufacturing capacity continues to ramp, 27 veterinary medication product permits received and additional 26 in application stage
  • R&D begins to ramp in anticipation of full use of GMP production campuses including:
    • Culture testing kits for livestock and poultry pathogens
    • Fish, livestock, poultry immunity booster, vaccine and onsite testing kits

Management Comments

Mr. Weibing Lu, Skystar Bio-Pharmaceutical's Chairman and Chief Executive Officer, commented, "Skystar is pleased to share full year 2013 financial results with the market. 

"The journey and anticipation up until this financial reporting period has been exciting for Skystar and its stakeholders. Financially, the Company finished strongly for the year with its revenues up 26.5% year over year as a result of our resumed production at Huxian veterinary medicines facility after we successfully completed the GMP re-certification and receiving more veterinary medication product permits from the Ministry of Agriculture (MOA). Additionally, net income was up 69.5% year over year as Skystar adjusted to changing product mix with the availability of new production permits from the MOA becoming available on a rolling basis.

"From a strategic perspective, the management has been able to keep in line with China's movement towards the regulation, modernization and industrialization of food production. In 2011, the MOA participated in China's greater 'Twelfth Five-Year Plan,' initiating an overhaul of the nation's GMP veterinary inspection agencies, adopting systemic changes including tighter regulatory oversight and mechanisms for disease control. As a result, facilities producing veterinary products underwent stricter quality control standards in addition to facility supervision and inspection. The GMP inspection and subsequent ramping of Skystar's newly built GMP grade veterinary vaccine and medication facilities were delayed as a result of the MOA's evolving regulatory standards."

"Skystar today is in compliance with these government initiatives and therefore believes that the Company is in a stronger, well protected position to take advantage of market demand for its Huxian and Jingzhou facility products, including on-site disease testing kits, vaccines for disease treatment, control and prevention, and immunity enhancing booster kits which will continue to be important parts of the Company's expansion strategy. Complete details of Skystar's list of approved products are listed in the Company's most recent Annual Report on Form 10-K filing with the SEC. Skystar continues to develop its product lines, including animal feed, probiotics and soon to be launched marine aquaculture products as part of its strategy to provide a 360 degree field of products for its customers."

"In fourth quarter of 2013, the Skystar vaccine plant in Huxian received a physical GMP certification from the MOA which, in turn, will allow the Company to apply for product permits for its vaccine line. The Huxian vaccine facility is expected to generate an estimated $15 million to $17 million of additional revenue with gross margins near 70% on an annual full production basis. Skystar anticipates launching three to five new vaccine products in 2014, with a total of 20 to 30 vaccine products in total over the next 5 years. Currently, Skystar is awaiting approval for five vaccine product permits to be granted on a rolling basis," he concluded.

Production Facility Update
The Company currently has four manufacturing facilities.

The veterinary medication and vaccine manufacturing facilities in Huxian both have physical GMP certificates issued by China's Ministry of Agriculture (MOA). Both GMP certificates are valid for five years from the date of issuance. The facility has 58 production permits and 8 in application. The Company also has submitted 5 veterinary vaccine production permits to the Chinese Ministry of Agriculture this year which are awaiting approval before Skystar can begin production of vaccines at the Huxian facility.

The Sanqiao Plant housing Skystar's Micro-Organism facility run in cooperation with experts Microbiology Institute of Shaanxi Province and Northwest Agro-Forestry Sci-tech University and a feed additive manufacturing facility are currently in operation.   

Lastly, Skystar's Kunshan Plant slated for microorganism (probiotics) production is currently undergoing equipment installation, tooling and testing. Efforts to complete this facility are progressing well however this facility is not operational at this point.

Fiscal Year 2013 Financial Results

In-line with revised guidance, Skystar reported full fiscal 2013 year:

Revenues totaled $42.5 million, a 26.5% increase compared to the $33.6 million in revenues reported for the full fiscal 2012 year. 

Gross Profit totaled $21.5 million, up 16.2% as compared to $18.5 million for the year ago period.

Gross Margin was 50.6% down from 55.1% for the year ago period mainly because the majority of our revenue during the year came from less profitable veterinary medications product lines.

Total Cost of Sales was $21.0 million, up 39.1% as compared to $15.0 million for the year ago period, as a result of increased sales of our veterinary medications product line.

Operating Expenses was $8.4 million or 19.7% of revenues as compared to $9.9 million or 29.6% of total revenues in the year ago period.

Research and Development costs totaled $1.0 million for the fiscal 2013 as compared to $2.2 million for the year ago period, a decrease of $1.2 million or 55.6%. The decrease was primarily due to less initial R&D start up efforts for new projects undertaken in 2013 and offset with government subsidies.

Selling expenses totaled $3.5 million for fiscal 2013 as compared to $3.0 million in the year ago period, an increase of $0.5 million or 16.9%. This increase is mainly due to the increase of sales commissions as the result of increased sales this year.

General and Administrative $3.9 million for the year ended December 31, 2013 as compared to $4.7 million for the year ended December 31, 2012, a decrease of $0.8 million or 16.4%. The higher G&A expenses last year were mainly due to the stock based compensation expense of approximately $1 million for the stock grants on May 4, 2012 pursuant to the 2010 Stock Incentive Plan.

Net income increased 69.5% year over year to $10.5 million or $1.37 per fully diluted share, as compared to $6.2 million or $0.83 per fully diluted share in the year ago period.

Financial Position: as of December 31, 2013, Skystar had approximately $8.1 million in cash, current assets of $88.2 million and current liabilities of $24.6 million, which resulted in a net working capital of $63.6 million.

Business Outlook
"Having cleared the MOA's GMP certification procedures under the agency's new regulatory standards established in 2011, Skystar anticipates growing revenues and profitability of its core product lines as well as new areas of product development, such as marine aquaculture. As such, Skystar is optimizing facility planning and resources to accommodate additional anticipated capacity coming online as more drug control numbers receive approval on an ongoing basis," continued Mr. Lu. 

"Additionally, the Company believes that the regulatory changes, including annual compulsory animal vaccinations, stricter animal bio-pharmaceutical manufacturing regulations, and industry standardization have become limiting factors to new competition and ultimately will benefit Skystar that was an early entrant in the animal husbandry space.

"In terms of financial forecast, Skystar currently anticipates delivering a 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," concluded Mr. Lu.  

Conference Call Information
The Company will host a conference call on Tuesday, April 1, 2014 to discuss its financial results for the year ended December 31, 2013. Skystar's conference call will begin promptly at 7:45 a.m. EDT to review fiscal year 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 will be made available on the investor relations section of the Skystar corporate website at

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 # 13579251.

To be added to the Company's email distribution for future news releases, please send your request to

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

Financial Statements

(Amounts in U.S. Dollars, except share and amounts)  
  Years ended December 31,  
  2013     2012  
REVENUE, net $ 42,483,716     $ 33,586,791  
COST OF REVENUE   20,992,962       15,095,004  
GROSS PROFIT   21,490,754       18,491,787  
  Research and development   956,028       2,154,241  
  Selling expenses   3,552,878       3,040,036  
  General and administrative   3,968,984       4,746,529  
    Total operating expenses   8,477,890       9,940,806  
INCOME FROM OPERATIONS   13,012,864       8,550,981  
OTHER INCOME (EXPENSE):              
  Other income, net   48,401       458,681  
  Interest income   539,587       97,591  
  Interest expense   (612,452 )     (764,500 )
  Change in fair value of purchase option liability   (56,840 )     37,800  
    Total other income (expense), net   (81,304 )     (170,428 )
INCOME BEFORE PROVISION FOR INCOME TAXES   12,931,560       8,380,553  
PROVISION FOR INCOME TAXES   2,401,308       2,168,125  
NET INCOME   10,530,252       6,212,428  
  Foreign currency translation adjustment   3,037,734       662,542  
COMPREHENSIVE INCOME $ 13,567,986     $ 6,874,970  
EARNINGS PER SHARE:              
  Basic $ 1.38     $ 0.83  
  Diluted $ 1.37     $ 0.83  
  Basic   7,651,640       7,471,350  
  Diluted   7,656,086       7,471,350  
(Amounts in U.S. Dollars, except share and amounts)
    December 31,   December 31,
    2013   2012
  Cash $ 8,142,296   $ 11,321,848
  Accounts receivable, net of allowance for doubtful accounts of $602,243 and $247,269, respectively   11,009,498     10,010,796
  Inventories   25,903,586     22,962,209
  Deposits, prepaid expenses and other receivables   2,134,163     2,839,850
  Prepayments to suppliers   41,061,144     23,438,735
  Loans receivable   -     1,078,827
  Deferred tax assets   364,425     -
    Total current assets   88,615,112     71,652,265
PROPERTY, PLANT AND EQUIPMENT, NET   28,269,155     28,867,816
CONSTRUCTION-IN-PROGRESS   9,284,947     8,691,360
OTHER ASSETS:          
  Long-term prepayments   4,633,614     1,050,327
  Long-term prepayments for acquisitions   183,344     177,744
  Intangible assets, net   5,237,255     5,319,831
    Total other assets   10,054,213     6,547,902
      Total assets $ 136,223,427   $ 115,759,343
  Accounts payable $ 3,303,531   $ 4,017,530
  Other payables and accrued expenses   6,467,605     4,374,047
  Short-term loans   10,640,500     4,443,600
  Deposits from customers   1,877,211     1,621,061
  Taxes payable   1,315,486     1,950,757
  Due to related parties   1,361,548     798,925
    Total current liabilities   24,965,881     17,205,920
  Long-term loan   -     1,269,600
  Deferred government grants   802,130     1,063,290
  Purchase option liability   62,440     5,600
  Total other liabilities   864,570     2,338,490
    Total liabilities   25,830,451     19,544,410
  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 December 31, 2013 and 2012   7,605     7,605
  Paid-in capital   37,631,142     37,021,085
  Statutory reserves   5,952,692     5,897,298
  Retained earnings   54,990,154     44,515,296
  Accumulated other comprehensive income   11,811,383     8,773,649
    Total shareholders' equity   110,392,976     96,214,933
      Total liabilities and shareholders' equity $ 136,223,427   $ 115,759,343
(Amounts in U.S. Dollars)  
  Years ended December 31,  
  2013     2012  
  Net income $ 10,530,252     $ 6,212,428  
  Adjustments to reconcile net income to net cash provided by (used in) operating activities:              
      Depreciation   1,467,261       1,035,829  
      Amortization   246,896       401,114  
      (Reversal of) provision for doubtful accounts   342,623       (194,971 )
      Common stock to be issued to related parties for compensation   143,549       86,162  
      Common stock issued under 2010 stock incentive plan   -       1,037,911  
      Change in fair value of warrant/purchase option liability   56,840       (37,800 )
      Gain on disposal of property, plant and equipment   1,754       -  
      Deferred tax assets   (359,638 )     -  
    Change in operating assets and liabilities              
      Accounts receivable   (1,016,951 )     (6,394,244 )
      Inventories   (2,188,799 )     (7,985,875 )
      Deposits, prepaid expenses and other receivables   763,031       1,651,478  
      Prepayments to suppliers   (16,662,199 )     6,027,718  
      Accounts payable   (984,623 )     2,307,066  
      Other payables and accrued expenses   2,136,675       (500,127 )
      Deferred government grants   (452,340 )     190,380  
      Deposits from customers   202,383       176,645  
      Taxes payable   (687,582 )     1,788,790  
      Due to related parties   1,037,488       743,755  
        Net cash (used in) provided by operating activities   (5,423,380 )     6,546,259  
  Purchases of property, plant and equipment   (19,825 )     (163,049 )
  Sale of property, plant and equipment   162       -  
  Payments on construction-in-progress   (148,968 )     (393,032 )
  Payments on long-term prepayments   (3,515,071 )     (358,077 )
  Refund of long-term prepayments   -       475,950  
  Loans to third parties   -       (2,023,393 )
  Collection of loans to third parties   1,098,201       1,916,651  
        Net cash used in investing activities   (2,585,501 )     (544,950 )
  Proceeds from short-term loans   10,500,750       5,774,860  
  Repayment of short-term and long term loans   (5,815,800 )     (7,488,280 )
        Net cash provided by (used in) financing activities   4,684,950       (1,713,420 )
(DECREASE) INCREASE IN CASH   (3,179,552 )     4,272,880  
CASH, beginning of year   11,321,848       7,048,968  
CASH, end of year $ 8,142,296     $ 11,321,848  
  Cash paid for interest $ 644,489     $ 647,249  
  Cash paid for income taxes $ 1,105,002     $ 972,739  
  Non-cash investing and financing activities              
    Long-term prepayment transferred to construction-in-progress $ 11,502     $ 1,004,635  
    Consideration for property, plant and equipment offset against due to related parties $ 486,427     $ -  
    Construction-in-progress transferred to property, plant and equipment $ -     $ 1,129,588  
    Shares issued to settle payables to related parties $ -     $ 199,239  
(Amounts in U.S. Dollars, except share and amounts)
                  Retained earnings     Accumulated    
      Common stock   Paid-in   Statutory         other comprehensive    
      Shares   Amount   capital   reserves   Unrestricted     income   Total
BALANCE, January 1, 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
  Foreign currency translation     -     -     -     -     -       3,037,734     3,037,734
  Share-based compensation     -     -     172,891     -     -       -     172,891
  Contribution from a shareholder     -     -     437,166     -     -       -     437,166
  Net income     -     -     -     -     10,530,252       -     10,530,252
  Appropriation to statutory reserves     -     -     -     55,394     (55,394 )     -     -
BALANCE, December 31, 2013     7,604,800   $ 7,605   $ 37,631,142   $ 5,952,692   $ 54,990,154     $ 11,811,383   $ 110,392,976

 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, expectations relating to the plant productions 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

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