SOURCE: Skystar Bio-Pharmaceutical

Skystar Bio-Pharmaceutical

August 14, 2012 16:20 ET

Skystar Bio-Pharmaceutical Reports Second Quarter 2012 Results

Revenues of $8.9 Million; Net Income of $1.7 Million; $0.23 Diluted EPS; Xi'an Veterinary Medication Facility Expected to Resume Production Third Quarter

XI'AN, CHINA--(Marketwire - Aug 14, 2012) -  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 second quarter fiscal year 2011 earnings, for the period ended June 30, 2011.

Second Quarter 2012 Highlights

  • Revenue decrease slightly 2.5% YoY to $8.9 million
    • Micro-organism products totaled $4.0 million, up 102.0% YoY
    • Veterinary medicines totaled $2.5 million, a decrease of 61.2% YoY
    • Feed additives totaled $1.3 million, up 224.2% YoY
  • Veterinary vaccines totaled $1.1 million, up 199.0% YoY
  • Gross margin of 57.8% for the second quarter of fiscal 2011 as compared to 49.0% in the year ago period
  • Net income of $1.7 million or $0.23 per fully diluted share, compared with net income of $1.5 million or $0.21 per fully diluted share in the year ago period

First Half 2012 Financial Highlights

  • First half fiscal 2012 revenue increases 3.8% YoY to $16.8 million
  • Gross margin of 56.0% for the first half of fiscal 2012 as compared to 49.8% in the year ago period
  • Net income of $3.6 million or $0.48 per fully diluted share, compared with net income of $3.4 million or $0.48 per fully diluted share in the year ago period

Management Comments
Mr. Weibing Lu, Skystar Bio-Pharmaceutical's chairman and chief executive officer, commented, "Skystar made significant progress in the second quarter of fiscal 2012 in its evolution to scale up its business. During the period, Skystar has been able to maintain fiscal profitability, control raw materials costs and operating expenses while moving forward with efforts to modernize and automate manufacturing of its veterinary vaccine, medication, probiotic and feed additives lines.

"In order to maintain revenue and profit in a 'GMP certification' year for several of Skystar's production facilities, Management has ramped sales and marketing for other parts of the business and introduced various customer concession and retention programs to compensate for a reduced supply of veterinary medicine products and not have to reduce the price of products to customers. 

"As previously announced on June 26, 2012, China's Ministry of Agriculture (MOA) experts' physically inspected the Company's Huxian veterinary medicine manufacturing plant and published its recommendation to renew Skystar's GMP certificate, valid for a period of five years. While the Company awaits post-inspection procedures from the MOA, the veterinary medicine plant in Huxian remains closed. Skystar anticipates the renewed GMP certificate will be physically received in the third quarter of 2012. During this time, the Company successfully shifted its sales strategy temporarily to other product lines, mainly probiotics and feed additives. The goal of this exercise was not only to maintain revenue guidance but to take the opportunity to further inroads in expanding the sales footprint of its probiotics line whose record sales doubled as compared to the same period a year ago.

"Operationally, the Compared pared back research and development activities, primarily moving forward with projects that were paid for already in previous years. As the GMP recertification at Huxian's veterinary medicine facility heads closer towards full production the Company anticipates increasing efforts and investment in research and development at that juncture.

"Management is excited to share its results at the half year mark. Skystar has been able to successfully implement its operational strategy as it moves towards the most profitable half of the fiscal year. We believe that the course management has plotted will position Skystar to make forecasted fiscal guidance for 2012 and to position the Company for revamped growth in fiscal 2013," concluded Mr. Lu. 

Financial Summary
Skystar reported second quarter fiscal year 2012 revenues of $8,870,848 as compared to revenues of $9,096,141 for the comparable year ago period, a decrease of $225,293 or 2.5%. This was in line with management's internal forecast due to there being no production at Huxian veterinary medication plant during the quarter for GMP re-examination. 

Cost of revenue, which consists of raw materials, direct labor, and manufacturing overhead for our four product lines, was $3,746,938 for the three months ended June 30, 2012, as compared to $4,637,007 for the three months ended June 30, 2011, a decrease of $890,069 or 19.2%, as a result of decreased sales of our veterinary medications product line.

Gross profit was $5,123,910 for the three months ended June 30, 2012, a 15.0% year over year increase as compared to $4,459,134 for the three months ended June 30, 2011. Gross margin for the period was 58% due to selling higher margin products for the period.

Operating Expenses
Research and development costs totaled $330,532 for the three months ended June 30, 2012 as compared to $1,801,551 for the three months ended June 30, 2011, a decrease of $1,471,019 or 81.7%. The decrease was primarily due to less R&D efforts undertaken during the second quarter of 2012 as compared to the same period of 2011.

Selling expenses totaled $670,567 for the three months ended June 30, 2012 as compared to $609,826 for the three months ended June 30, 2011, an increase of $60,741 or 10.0%. This increase is primarily a result of increased shipping and handling costs related to delivering our products to customers as we continued to expand our market to remote areas, and to increased number of units to be shipped. Shipping and handling costs totaled $463,630 and $350,054 for the three months ended June 30, 2012 and 2011, respectively, an increase of $113,576 or 32.4%.

General and administrative expenses totaled $1,834,280 for the three months ended June 30, 2012 as compared to $515,293 for the three months ended June 30, 2011, an increase of $1,318,987 or 256.0%.

As of June 30, 2012, we had cash of $2,341,981. Our total current assets were $68,680,543, and our total current liabilities were $19,159,602, which resulted in a net working capital of $49,520,941.

Fiscal 2011 Guidance
We currently reiterate our fiscal 2012 guidance to be in the range of $53 million to $57 million for the full year.

Conference Call & Webcast Information
Skystar will host a conference call at 7:45 a.m. ET on Wednesday, August 15, 2012 to review the Company's second quarter 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=169508.

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, using replay account code # 286 and conference ID # 398886.

An archived replay of the conference webcast will also be available on 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 four product lines (veterinary medicines, micro-organisms, vaccines and feed additives) and over 284 products. Skystar has formed strategic sales distribution networks covering 29 provinces throughout China. For additional information, please visit http://www.skystarbio-pharmaceutical.com.

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 receive timely certification and related government approvals, 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.

Financial Tables Follow

 
 
SKYSTAR BIO-PHARMACEUTICAL COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
         
    June 30,
2012
  December 31,
2011
    (Unaudited)    
ASSETS            
CURRENT ASSETS:            
  Cash   $ 2,341,981   $ 7,048,968
  Accounts receivable, net of allowance for doubtful accounts of $542,888 and $438,678 as of June 30, 2012 and December 31, 2011, respectively     10,687,845     3,391,493
  Inventories     13,277,963     14,851,159
  Deposits, prepaid expenses and other receivables     2,772,002     3,421,487
  Prepayments for raw materials purchasing     36,688,923     29,226,961
  Loans receivable     2,911,829     964,088
    Total current assets     68,680,543     58,904,156
             
PROPERTY, PLANT AND EQUIPMENT, NET     28,070,683     28,376,559
             
CONSTRUCTION-IN-PROGRESS     9,553,513     8,839,055
             
OTHER ASSETS:            
  Long-term prepayments     1,207,154     1,512,817
  Long-term prepayments for acquisitions     177,520     569,788
  Intangible assets, net     5,513,494     5,674,206
    Total other assets     6,898,168     7,756,811
      Total assets   $ 113,202,907   $ 103,876,581
             
LIABILITIES AND SHAREHOLDERS' EQUITY            
             
CURRENT LIABILITIES:            
  Accounts payable   $ 2,626,855   $ 1,047,067
  Other payables and accrued expenses     5,039,774     5,274,598
  Short-term loans     6,815,500     7,366,320
  Deposits from customers     1,404,409     1,432,529
  Taxes payable     2,936,992     160,081
  Due to related parties     336,072     56,273
    Total current liabilities     19,159,602     15,336,868
             
OTHER LIABILITIES:            
  Deferred government grant     396,250     393,500
  Warrant/purchase option liability     21,000     43,400
    Total other liabilities     417,250     436,900
      Total liabilities     19,576,852     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 June 30, 2012 (Unaudited) and December 31, 2011     7,605     7,162
  Paid-in capital     37,021,085     35,784,378
  Statutory reserves     5,708,135     5,708,135
  Retained earnings     42,095,651     38,492,031
  Accumulated other comprehensive income     8,793,579     8,111,107
    Total shareholders' equity     93,626,055     88,102,813
      Total liabilities and shareholders' equity   $ 113,202,907   $ 103,876,581
                   
                   
                   
SKYSTAR BIO-PHARMACEUTICAL COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2012 AND 2011
(Unaudited)
                 
    For Three Months Ended June 30,   For Six Months Ended June 30,
    2012   2011   2012   2011
                         
REVENUE, NET   $ 8,870,848   $ 9,096,141   $ 16,797,185   $ 16,183,095
                         
COST OF REVENUE     3,746,938     4,637,007     7,390,596     8,128,353
                         
GROSS PROFIT     5,123,910     4,459,134     9,406,589     8,054,742
                         
OPERATING EXPENSES:                        
Research and development     330,532     1,801,551     334,186     2,089,023
Selling expenses     670,567     609,826     1,376,183     979,230
General and administrative     1,834,280     515,293     2,939,715     1,810,091
Total operating expenses     2,835,379     2,926,670     4,650,084     4,878,344
                         
INCOME FROM OPERATIONS     2,288,531     1,532,464     4,756,505     3,176,398
                         
OTHER INCOME (EXPENSE):                        
Other income (expense), net     2,238     (4,549)     55,998     (4,367)
Interest income (expense), net     (25,929)     (98,973)     (179,541)     (69,301)
Change in fair value of warrant/purchase option liability     16,800     360,153     22,400     1,095,647
Total other income (expense), net     (6,891)     256,631     (101,143)     1,021,979
                         
INCOME BEFORE PROVISION FOR INCOME TAXES     2,281,640     1,789,095     4,655,362     4,198,377
                         
PROVISION FOR INCOME TAXES     582,774     281,705     1,051,742     759,155
                         
NET INCOME     1,698,866     1,507,390     3,603,620     3,439,222
                         
OTHER COMPREHENSIVE INCOME                        
Foreign currency translation adjustment     123,715     1,130,579     682,472     1,596,172
                         
COMPREHENSIVE INCOME   $ 1,822,581   $ 2,637,969   $ 4,286,092   $ 5,035,394
                         
EARNINGS PER SHARE:                        
Basic   $ 0.23   $ 0.21   $ 0.48   $ 0.48
Diluted   $ 0.23   $ 0.21   $ 0.48   $ 0.48
                         
WEIGHTED AVERAGE NUMBER OF COMMON SHARES:                        
Basic     7,461,227     7,169,419     7,454,837     7,168,176
Diluted     7,461,227     7,169,419     7,454,837     7,174,888
                         
                         
                         
SKYSTAR BIO-PHARMACEUTICAL COMPANY AND SUBSIDIARIES  
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  
FOR THE SIX MONTHS ENDED JUNE 30, 2012 AND 2011  
(Unaudited)  
             
    Six months ended  
June 30,  
    2012     2011  
CASH FLOWS FROM OPERATING ACTIVITIES:                
  Net income   $ 3,603,620     $ 3,439,222  
  Adjustments to reconcile net income to net cash provided by (used in) operating activities:                
  Depreciation     635,856       498,760  
  Amortization     200,570       385,722  
  Provision for doubtful accounts     101,246       -  
  Change in fair value of warrant/purchase option liability     (22,400 )     (1,095,647 )
  Common stock to be issued to related parties for compensation     -       26,525  
  Common stock issued under 2010 stock incentive plan     1,037,911       -  
  Change in operating assets and liabilities                
  Accounts receivable     (7,381,238 )     1,085,951  
  Inventories     1,678,678       (8,711,510 )
  Deposits, prepaid expenses and other receivables     649,485       (919,717 )
  Prepayments for raw materials purchasing     (7,121,001 )     1,654,995  
  Accounts payable     1,614,377       577,915  
  Other payables and accrued expenses     99,033       (449,155 )
  Deposits from customers     (38,170 )     286,977  
  Taxes payable     2,778,594       (702,883 )
  Net cash used in operating activities     (2,163,439 )     (3,922,845 )
                 
CASH FLOWS FROM INVESTING ACTIVITIES:                
  Payments of long-term prepayments     (349,464 )     (307,642 )
  Refund of long-term prepayments     475,980       -  
  Loan to third parties     (1,942,963 )     (2,847,846 )
  Collection of loan to third parties     -       8,871,193  
  Purchases of property, plant and equipment     (127,531 )     (46,186 )
  Purchases of intangible assets     -       (51,222 )
  Payments on construction-in-progress     (79,806 )     (4,013,980 )
  Net cash (used in) provided by investing activities     (2,023,784 )     1,604,317  
                 
CASH FLOWS FROM FINANCING ACTIVITIES:                
  Proceeds from short-term loans     63,464       1,724,019  
  Repayment of short-term loans     (666,372 )     (612,440 )
  Repayment of government grants     (317,320 )     -  
  Due to related parties     280,901       190,630  
  Net cash (used in) provided by financing activities     (639,327 )     1,302,209  
                 
EFFECT OF EXCHANGE RATE CHANGES ON CASH     119,563       174,990  
                 
DECREASE IN CASH     (4,706,987 )     (841,329 )
                 
CASH, beginning of period     7,048,968       5,887,831  
                 
CASH, end of period   $ 2,341,981     $ 5,046,502  
                 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:                
  Cash paid for interest   $ 309,010     $ 119,128  
  Cash paid for income taxes   $ 88,054     $ 1,262,699  
  Non-cash investing and financing activities                
  Long-term prepayment transferred to construction-in-progress   $ 666,372     $ 571,692  
  Construction-in-progress transferred to property, plant and equipment   $ 3,630     $ -  
  Share issued to settle payables to related parties   $ 199,239     $ -  
                   
                   
                   
SKYSTAR BIO-PHARMACEUTICAL COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(UNAUDITED)
                               
                  Retained earnings        
    Common stock                      
    Shares   Amount   Paid-in capital     Statutory reserves   Unrestricted   Accumulated other comprehensive income   Total
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   -     -     -       -     -     682,472     682,472
  Net income   -     -     -       -     3,603,620     -     3,603,620
                                           
BALANCE, June 30, 2012   7,604,800   $ 7,605   $ 37,021,085     $ 5,708,135   $ 42,095,651   $ 8,793,579   $ 93,626,055

Contact Information

  • Contacts:

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

    Grayling

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