XI'AN, CHINA--(Marketwire - Apr 12, 2011) - 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 fourth quarter and full financial results for fiscal year 2010, for the period ended December 31, 2010.
Fourth Quarter 2010 Highlights
-- Revenue increases 45% YoY to $15.8 million
-- Veterinary vaccines totaled $0.6 million, up 52% YoY
-- Veterinary medicines totaled $11.0 million, up 39% YoY
-- Feed additives totaled $0.6 million, up 50% YoY
-- Micro-organism products totaled $3.6 million, up 66% YoY
-- Gross margin increased from 50% for the three months ending
December 31, 2009 to 54% for the three months ended December 31, 2010
-- Net income increased 26% to $3.9 million or $0.55 per fully diluted
share, compared with $3.1 million or $0.44 per basic share in the
fourth quarter of 2009
Fiscal Year 2010 Highlights
-- Revenues totaled $47.5 million, up 40.8% YoY
-- Veterinary vaccines totaled $1.9 million, up 39.1% YoY
-- Veterinary medicines totaled $32.0 million, up 39.9% YoY
-- Feed additives totaled $1.9 million, up 38.4% YoY
-- Micro-organism products totaled $11.5 million, up 43.9% YoY
-- Gross profit margin was 53.7% in line with historical gross margin
-- Net income increased 21.9% year over year to $14.0 million or $1.98
per fully diluted share, as compared to $8.8 million or $1.62 per basic
share during the year ended December 31, 2009. Increased net cash
provided by operating activities position to $7.7 million up from
$1.3 million in the year ago period
-- Improved cash balance to $5.9 million at the end of fiscal 2010
Management Year in Review
Mr. Weibing Lu, Skystar Bio-Pharmaceutical's chairman and chief executive officer, commented, "We are pleased to announce strong financial results for the fourth quarter and full fiscal 2010 year. The Company was able to grow top line revenue by over 40% year-over-year to $47.5 million and net income by over 20% year-over-year to $14.0 million. Additionally, Skystar improved net cash from operating activities significantly to $7.7 million as compared $1.3 million in the year ago period.
"In fiscal 2010, Skystar continued to build both brand and presence across all 29 farming regions in China and was able to increase its number of customers by 36% to 2,703 customers consisting of independent distributors, franchise distributors and direct customers.
"Accordingly, a report by the World Resource institute indicated that meat intake per person has grown from 55 pounds per annum in 1990 to roughly 116 pounds in 2008. This statistical trend highlights Skystar's opportunity to service a growing industry and we expect to successfully expand sales with profitability in mind.
"In 2010, Skystar continued to utilize working capital to prepay for raw materials. This buy-forward strategy helped Skystar manage fluctuations in raw material costs. Skystar as of current has adequate working capital to fund its operations and prepayment of raw materials but will continue to seek ways to improve its working capital position. Additionally the Company will continue to utilize a buy-forward strategy in order to mitigate and better forecast raw material costs for 2011.
"In 2010, the Company increased its product line to 256 products as compared to 173 products at the end of fiscal 2009. The newly acquired Jingzhou facility contributed $1.3 million in sales revenue for fiscal 2010, nearly all of which occurred in the fourth quarter which on an annualized run rate would generate $3.0 million to $5.0 million in revenue per year.
"Skystar owns three production facilities in total: two are in Xi'an City in Shaanxi Province and one facility in Jingzhou City in Hubei Province. Both the Huxian plant and the Jingzhou plant are 'GMP' certified to produce veterinary animal medicines.
"The vaccine facility in the Huxian plant finished construction in June of 2010; equipments installations, tooling and testing of the plant's manufacturing processes was finished later in the third quarter of 2010. The Company has applied to the MOA for GMP certification and is currently waiting for the appointment date from the Ministry. The GMP approval process is taking much longer than we initially expected due to sweeping regulatory changes in the GMP certification and approval process for veterinary vaccine manufacturers. Skystar believes that its facilities will pass new GMP standards.
"The Company is still in the process of closing the Kunshan based probiotics micro-organism manufacturing plant in Jiangsu province. The Company as of current has invested roughly $8 million in connection with the acquisition. As of October 2010 the Company has received the title of land use right for the facility. Skystar expects the final stages related to clearing all necessary government approvals to close this acquisition to be completed within the first half of fiscal 2011. Skystar forecasts this production facility will contribute approximately $35 million to $39 million in 5 years."
Key Fiscal 2010 Business Highlights
-- Started production in the newly acquired Jingzhou facility and seeing
positive contributions to earnings
-- Increased customer count and started production of new products
-- Inducted in Forbes, "Asia's 200 Best Companies Under a Billion" list
-- Secured low interest $3.0 million dollar line of credit and loan
facility of $0.7 million in China
-- Appointed Crowe Horwath as new independent auditor
-- Completed the build-out of the new vaccine facility
Fourth Quarter 2010 Results
Skystar's revenue for the fourth quarter 2010 was $15.8 million, up 45% from fourth quarter 2009.
Gross profit for fourth quarter 2010 was $8.5 million, up 57% from fourth quarter 2009. Gross margin for the period was 54%, slightly higher than historical comparables.
Operating expenses for fourth quarter 2010 were $2.8 million, or 18% of total revenue, compared with $1.6 million, or 15% of total revenue for fourth quarter 2009.
Research and development (R&D) costs increased to $0.2 million, or 2.0% of revenue in fourth quarter 2010, up from $0.3 million, or 3% of revenue during fourth quarter 2009. Skystar continues to anticipate that its research and development costs will increase in future periods as it invests in improvement of existing products and development of new products and product lines.
Selling expenses totaled $0.8 million, or 5.0% of revenue, for fourth quarter 2010, compared with $0.7 million, or 7% of revenue, in fourth quarter 2008. General and administrative expenses were $1.7 million, or 11% of revenue, in fourth quarter 2009, compared with $0.6 million, or 7% of revenue, in fourth quarter 2010.
Operating income increased by 53% year over year to $5.8 million in the fourth quarter of fiscal year 2010, compared with $3.8 million in the same quarter a year ago, and operating margin increased to 36% from 34% in the fourth quarter of 2009.
Net income for the fourth quarter of 2010 was $3.9 million. This compares to net income of $2.6 million in the same quarter of 2009.
Full Year 2010 Results
Skystar reported revenues of $47.5 million for the full fiscal 2010 year, a 40.8% increase compared to the $33.8 million in revenues reported for the full fiscal 2009 year. Gross profit for the full fiscal 2010 year was $25.5 million, or 53.7% of revenues.
Net income for the 2010 full fiscal year was $14.0 million, or $1.97 per diluted share, compared to net income of $8.9 million, or $1.62 per diluted share, for the full 2009 fiscal year.
Total operating expenses increased 33.7% as a result of Skystar's increased footprint; however, as a percentage of revenue decreased to 15.6% from 16.5% in the year prior. Research and Development costs for fiscal 2010 were $0.7 million as compared to $1.1 million in fiscal 2009. Selling expense as a percentage of revenue decreased due to localization of Skystar's sales force and expanded distributorships. General and administrative expenses for our Chinese operating entities increased due to expanded operations and asset acquisitions related to our Kunshan and with the Jingzhou-related acquisition. Approximately $0.4 million was charged to general and administrative expenses for expenses related to the Kunshan acquisition. Approximately $0.6 million was charged to the general and administrative expenses for expenses related to the Jingzhou acquisition.
As of December 31, 2010, Skystar had approximately $5.9 million in cash and restricted cash, current assets of $44.7 million and total liabilities of $9.8 million, which resulted in a net working capital of $37.3 million.
Selection of New Auditor in Fiscal 2010
In fiscal 2010, Skystar interviewed several top tier audit firms in its selection of a new independent auditor. Our new auditor for the 2010 10-K audit is Crowe Horwath LLP in the US. It is the ninth largest accounting firm in the US and also one of the ten accounting firms in the US that is subject to the PCAOB inspection every year. Crowe Horwath, LLP is a leading member of Crowe Horwath International which is the ninth largest accounting network in the world.
Business Outlook
Presently, Skystar anticipates delivering top line revenue in the range of $60.0 to $63.0 million with a gross margin of 50% to 55% for 2011.
Skystar in 2010 saw significant inflation pressures building in China. However, the Company had been able to secure favorable pricing by prepaying for raw materials to major suppliers. The Company anticipates that inflationary pressures will continue in 2011. As a result, the Company is continuing with its buy-forward strategy to suppliers in order to have better control of costs for raw materials.
Mr. Lu concluded, "We are excited with the momentum that Skystar has built as a leader in China's animal healthcare space and as the only U.S. listed pureplay animal healthcare stock. We fully anticipate our current acquisitions and expanded manufacturing facilities to ramp up, bear fruit and further improve Skystar's profitability."
CONFERENCE CALL & WEBCAST INFORMATION
Skystar will host a conference call on Tuesday, April 12th at 8:00 a.m. ET to review the Company's fourth quarter and full fiscal year financial and operational performance. Mr. Weibing Lu, Skystar Bio-Pharmaceutical chairman and chief executive officer, will host the call, which will be webcast live.
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. Telephone access to the conference call will be available in North America by dialing +1 (877) 407-9210 or internationally by dialing +1 (201) 689-8049.
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, using replay account code # 286 and conference ID # 369346. An archived replay of the conference webcast will also be available on the investor relations section of the Skystar Corporate website at http://www.skystarbio-pharmaceutical.com. 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 five product lines (veterinary medicines, pro-biotic micro-organisms, vaccines, feed additives and aquaculture) and over 256 products with more in development. Skystar has formed strategic sales distribution networks covering all 29 provinces throughout China. For additional information, please visit http://www.skystarbio-pharmaceutical.com.
Financial tables follow
SKYSTAR BIO-PHARMACEUTICAL COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME
Years ended December 31,
---------------------------
2010 2009
------------ ------------
REVENUE, NET $ 47,556,383 $ 33,778,305
COST OF REVENUE 22,011,588 16,520,989
------------ ------------
GROSS PROFIT 25,544,795 17,257,316
------------ ------------
OPERATING EXPENSES:
Research and development 684,778 1,167,937
Selling expenses 2,124,952 1,928,441
General and administrative 4,625,092 2,466,470
------------ ------------
Total operating expenses 7,434,822 5,562,848
------------ ------------
INCOME FROM OPERATIONS 18,109,973 11,694,468
------------ ------------
OTHER INCOME (EXPENSE):
Other income (expense), net (49,202) 117,873
Interest income (expense), net (58,846) (62,590)
Change in fair value of warrants (612,883) (868,445)
------------ ------------
Total other expense, net (720,931) (813,162)
------------ ------------
INCOME BEFORE PROVISION FOR INCOME TAXES 17,389,042 10,881,306
PROVISION FOR INCOME TAXES 3,297,758 2,029,374
------------ ------------
NET INCOME 14,091,284 8,851,932
OTHER COMPREHENSIVE (LOSS) INCOME :
Foreign currency translation adjustment 2,281,504 13,914
------------ ------------
COMPREHENSIVE INCOME $ 16,372,788 $ 8,865,846
============ ============
EARNINGS PER SHARE:
Basic $ 1.98 $ 1.65
============ ============
Diluted $ 1.97 $ 1.62
============ ============
WEIGHTED AVERAGE NUMBER OF COMMON SHARES:
Basic 7,105,789 5,374,452
============ ============
Diluted 7,138,279 5,459,528
============ ============
SKYSTAR BIO-PHARMACEUTICAL COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
December 31, December 31,
2010 2009
------------ ------------
CURRENT ASSETS:
Cash $ 5,887,831 $ 11,699,398
Accounts receivable, net of allowance for
doubtful accounts of $339,031 and $327,857
respectively 4,977,850 4,383,187
Inventories 7,202,223 4,074,645
Deposits and prepaid expenses 17,074,000 11,900,314
Loans receivable 8,040,100 -
Other receivables 1,558,775 490,712
------------ ------------
Total current assets 44,740,779 32,548,256
------------ ------------
PLANT AND EQUIPMENT, NET 22,613,113 8,829,058
CONSTRUCTION-IN-PROGRESS 1,590,720 9,389,120
OTHER ASSETS:
Long-term prepayments 1,454,226 1,173,427
Long-term prepayments for asset acquisitions 4,806,352 6,806,880
Intangible assets, net 6,043,941 1,860,172
------------ ------------
Total other assets 12,304,519 9,840,479
------------ ------------
Total assets $ 81,249,131 $ 60,606,913
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 201,850 $ 297,567
Other payable and accrued expenses 1,845,051 917,284
Short-term loans 3,025,884 220,050
Short-term loans from shareholders - 110,025
Deposits from customers 1,260,030 1,275,958
Taxes payable 749,836 722,106
Shares to be issued to related parties 53,050 327,374
Due to related parties 217,912 185,024
------------ ------------
Total current liabilities 7,353,613 4,055,388
------------ ------------
OTHER LIABILITIES:
Deferred government grant 986,050 1,100,250
Warrant liability 1,419,639 1,538,686
------------ ------------
Total other liabilities 2,405,689 2,638,936
------------ ------------
Total liabilities 9,759,302 6,694,324
------------ ------------
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, 7,161,919 and 6,989,640
shares issued and outstanding respectively 7,162 6,989
Paid-in capital 35,784,376 34,580,096
Statutory reserves 5,695,236 3,879,077
Retained earnings 24,847,289 12,574,906
Accumulated other comprehensive income 5,155,766 2,871,521
------------ ------------
Total shareholders' equity 71,489,829 53,912,589
------------ ------------
Total liabilities and shareholders'
equity $ 81,249,131 $ 60,606,913
============ ============
SKYSTAR BIO-PHARMACEUTICAL COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Preferred stock Common stock
------------------ ----------------- Paid-in
Shares Amount Shares Amount capital
---------- ------ --------- ------- ------------
BALANCE, January 1,
2009, as adjusted 2,000,000 2,000 3,733,038 3,733 15,237,267
Shares issued for
services 12,438 12 63,002
Cancellation of
preferred stock (2,000,000) (2,000) 2,000
Fractional shares due
to the ten-for-one
reverse split 1,772 2 (2)
Shares issued for
cash 3,220,000 3,220 19,070,461
Cashless exercise of
warrants 22,392 22 207,368
Foreign currency
translation
Net income
Appropriation to
statutory reserves
---------- ------ --------- ------- ------------
BALANCE, December 31,
2009 - $ - 6,989,640 $ 6,989 $ 34,580,096
========== ====== ========= ======= ============
Cumulative effect of
reclassification of
warrants
Shares issued for
services 64,380 66 472,459
Cashless exercise of
warrants 107,899 107 1,511,496
Reclassification of
purchase option to
derivative liability (779,674)
Foreign currency
translation
Net income
Appropriation to
statutory reserves
---------- ------ --------- ------- ------------
BALANCE, December 31,
2010 - $ - 7,161,919 $ 7,162 $ 35,784,377
========== ====== ========= ======= ============
Retained earnings Accumulated
------------------------ other
Statutory comprehensive
reserves Unrestricted income Total
----------- ------------ ----------- ------------
BALANCE, January 1,
2009, as adjusted 2,952,710 4,649,341 2,857,607 25,702,658
Shares issued for
services 63,014
Cancellation of
preferred stock -
Fractional shares due
to the ten-for-one
reverse split -
Shares issued for
cash 19,073,681
Cashless exercise of
warrants 207,390
Foreign currency
translation 13,914 13,914
Net income 8,851,932 8,851,932
Appropriation to
statutory reserves 926,367 (926,367) -
----------- ------------ ----------- ------------
BALANCE, December 31,
2009 $ 3,879,077 $ 12,574,906 $ 2,871,521 $ 53,912,589
=========== ============ =========== ============
Cumulative effect of
reclassification of
warrants
Shares issued for
services 472,525
Cashless exercise of
warrants 1,511,603
Reclassification of
purchase option to
derivative liability (779,674)
Foreign currency
translation 2,281,504 2,281,504
Net income 14,091,284 14,091,284
Appropriation to
statutory reserves 1,816,159 (1,818,900) 2,741 -
----------- ------------ ----------- ------------
BALANCE, December 31,
2010 $ 5,695,236 $ 24,847,290 $ 5,155,766 $ 71,489,831
=========== ============ =========== ============
SKYSTAR BIO-PHARMACEUTICAL COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31,
---------------------------
2010 2009
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income available to shareholders $ 14,091,284 $ 8,851,932
Adjustments to reconcile net income to net
cash used in operating activities:
Depreciation 847,662 566,230
Amortization 423,195 212,826
Common stock issued for services 472,525 63,014
Common stock to be issued to related
parties for compensation - 232,170
Change in fair value of warrant liability
and equity accounts 612,883 868,445
Change in operating assets and
liabilities
Accounts receivable (434,233) (1,957,883)
Inventories (2,914,627) (987,977)
Deposits and prepaid expenses (4,654,016) (7,310,495)
Other receivables (725,280) (705,365)
Accounts payable (103,235) (249,709)
Accrued expenses 83,014 55,140
Deposits from customers (57,945) 851,170
Taxes payable 3,041 509,132
Other payables 75,408 267,097
------------ ------------
Net cash provided by operating
activities 7,719,676 1,265,727
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from short-term investment - 351,864
Refund of long-term prepayments - 2,713,950
Prepayment for assets acquisition (4,451,544) (6,802,704)
Loans to third parties (7,840,820) (2,580,336)
Proceeds from loans receivable - 2,875,242
Purchases of intangible assets - (1,172,880)
Purchases of plant and equipment (4,126,954) (529,470)
Payments on construction-in-progress - (2,709,105)
------------ ------------
Net cash used in investing activities (16,419,318) (7,853,439)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Decrease in restricted cash 153 80,684
Proceeds from short-term loans 2,728,975 219,915
Repayment for short-term loans (110,955) (747,711)
Proceeds from equity offering - 18,411,496
Repayment to shareholders and directors - (307,881)
Proceeds from shareholders and directors - 109,958
Due (from) to related parties 31,374 (57,223)
------------ ------------
Net cash provided by financing
activities 2,649,547 17,709,238
------------ ------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH 238,528 1,463
------------ ------------
(DECREASE) INCREASE IN CASH (5,811,567) 11,122,989
CASH, beginning of year 11,699,398 576,409
------------ ------------
CASH, end of year $ 5,887,831 $ 11,699,398
============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for interest $ 55,439 $ 73,085
============ ============
Cash paid for income taxes $ 3,130,855 $ 2,095,704
============ ============
Non-cash investing and financing activities
Long-term prepayment transferred to
construction-in-progress $ 915,130 $ 190,458
============ ============
Construction-in-progress transferred to
property, plant and equipment $ 10,838,131 $ 1,818,403
============ ============
Cashless exercise of warrants $ 1,511,604 $ 207,390
============ ============
Expense paid thorugh contribution
receivable $ - $ 662,185
============ ============
Reclassification from equity to warrant
liability $ 779,674 $ -
============ ============
Long term prepayment transferred to Land
Use Rights $ 4,441,437 $ -
============ ============
Long term prepayment transferred to
property, plant and equipment $ 1,952,463 $ -
============ ============
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 christopher.chu@grayling.com