SOURCE: Skystar Bio-Pharmaceuticals

Skystar Bio-Pharmaceuticals

August 14, 2013 15:00 ET

Skystar Bio-Pharmaceutical Reports Second Quarter 2013 Results

Quarterly Revenue of $11.3 Million; Net Income of $3.7 Million; $0.49 Diluted EPS

XI'AN, CHINA--(Marketwired - Aug 14, 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 reported unaudited second quarter fiscal year 2013 earnings, for the period ended June 30, 2013.

Second Quarter 2013 Highlights

  • Revenue of $11.3 million, up 27.8% YoY
    • Micro-organism products totaled $4.0 million, up 0.7% YoY
    • Veterinary medicines totaled $6.3 million, up 155.9% YoY
    • Feed additives totaled $0.5 million, a decrease of 59.4% YoY
    • Veterinary vaccines totaled $0.5 million, a decrease of 56.5% YoY
  • Gross margin of 52.6% for the second quarter of fiscal 2013 as compared to 57.8% in the year ago period
  • Net income of $3.8 million or $0.49 per fully diluted share, compared with net income of $1.7 million or $0.23 per fully diluted share in the year ago period

First Half 2013 Financial Highlights

  • First half fiscal 2013 revenue increases 0.4% YoY to $16.9 million
  • Gross margin of 50.7% for the first half of fiscal 2013 as compared to 56.0% in the year ago period
  • Net income of $4.5 million or $0.59 per fully diluted share, compared with net income of $3.6 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 is pleased to report its strongest quarterly results in the last six reporting periods. The results for this quarter were driven by a combination of increased market demand and additional sales and marketing efforts. This allowed us to take advantage of the increased manufacturing capacity as a result of the Huxian and Jingzhou veterinary medication facilities resuming operations."

"Operationally, Skystar continues to receive more product manufacturing permits from the government which has allowed sales of veterinary medications in the current reporting period to grow 156% year over year. Further, we still have additional manufacturing capacity available at the Company's Huxian and Jingzhou veterinary medication facilities. Lastly, Skystar has applied for and is awaiting governmental approval of more product manufacturing permits and plans to utilize each permit as approval is received."

"Stage two of the Company's veterinary vaccine GMP certification is under way and currently on track as planned. Stage two GMP inspection is expected to be completed by the end of third quarter fiscal 2013 and limited production runs will commence shortly thereafter. The vaccine product line is expected to contribute roughly $3-$5 million to Skystar's top line next year. Sales of the Company's feed additives and pro-biotics line are also expected to increase as we move forward with the Company's high selling season. Additionally, Skystar's Kunshan facility is near completion and it is possible that small scale production will launch by the end of the fiscal year."

"Management is very excited to move into its strongest half of the fiscal year and to share its results with investors. Skystar continues to successfully implement its operational strategy, improve its financial performance and expand its footprint with profitability in mind. With 40% of Skystar's forecasted revenues earned in its first half, the Company believes that it is well positioned to make forecasted fiscal guidance for 2013, positioning itself for solid revenue growth and expansion in fiscal 2014," concluded Mr. Lu.

Financial Summary
Skystar reported second quarter fiscal year 2013 revenues of $11.3 million as compared to revenues of $8.9 million for the comparable year ago period, an increase of $2.4 million or 27.8%. Overall sales volume increased as we begin to ramp up production and make use of the Company's facilities now that our facilities have resumed partial production.

Cost of revenue, which consists of raw materials, packing material, direct labor, and manufacturing overhead for our four product lines, was $5.4 million for the three months ended June 30, 2013, as compared to $3.7 million for the three months ended June 30, 2012, an increase of $1.6 million or 43.5%, as a result of increased veterinary medication sales.

Gross profit was $6.0 million for the three months ended June 30, 2013, a 16.3% year over year increase as compared to $5.1 million for the three months ended June 30, 2012. Gross margin for the period was 52.6%, compared to 57.8% a year ago due to the majority of revenue during the three months coming from less profitable veterinary medications as we resume the veterinary medication production at Skystar's Huxian facility.

Operating Expenses

Research and development costs totaled $93,000 for the three months ended June 30, 2013 as compared to $331,000 for the three months ended June 30, 2012, a decrease of $238,000 or 71.9%. The decrease was primarily due to newly launched R&D projects of $481,000 undertaken during the second quarter of 2013 to develop vaccine to prevent common fish skin disease which was offset against a government grant for the research.

Selling expenses totaled $629,000 for the three months ended June 30, 2013 as compared to $670,000 for the three months ended June 30, 2012, a decrease of $41,000 or 6.2%. This decrease is mainly due to the drop of sales commission costs as the result of the new commission structure to our sales personnel after the Huxian facility resumed operation.

General and administrative expenses totaled $689,000 for the three months ended June 30, 2013 as compared to $1.8 million for the three months ended June 30, 2012, a decrease of $1.1 million or 62.5%. The higher G&A expense in 2012 was mainly due to the stock based compensation expense of $1 million for the stock grants on May 4, 2012 to the Company's employees and members of the Board of Directors.

Income from operations increased 98.7% or $2.2 million to $4.5 million for second quarter fiscal 2013 as compared to $2.3 million in the comparable fiscal 2012 period.

Net income increased 120.8% year over year to $3.8 million or $0.49 per fully diluted share, as compared to $1.7 million or $0.23 per fully diluted share in the year ago period.

As of June 30, 2013, we had cash of $6.3 million. Our total current assets were $80 million and Skystar's total current liabilities were $21 million which resulted in a net working capital of $59 million.

Fiscal 2013 Guidance

We currently reiterate our fiscal 2013 guidance to be in the range of $40 million to $45 million for the full year.

Conference Call & Webcast Information

The Company will host a conference call on Wednesday August 14, 2013 to discuss its financial results for the fiscal quarter ended June 30, 2013. Skystar's conference call will begin promptly at 6:00 p.m. ET to review fiscal second quarter 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
The webcast will be made available at: http://www.investorcalendar.com/IC/CEPage.asp?ID=171457.

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 # 419303. Alternatively you can listen to the replay online at http://www.investorcalendar.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.

Financial Tables Follow

   
   
   
SKYSTAR BIO-PHARMACEUTICAL COMPANY AND SUBSIDIARIES  
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME  
FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2013 AND 2012  
(Unaudited)  
                       
    For Three Months Ended June 30,     For Six Months Ended June 30,  
    2013     2012     2013   2012  
                       
REVENUE, NET   $ 11,335,145     $ 8,870,848     $ 16,865,886   $ 16,797,185  
                               
COST OF REVENUE     5,377,824       3,746,938       8,308,710     7,390,596  
                               
GROSS PROFIT     5,957,321       5,123,910       8,557,176     9,406,589  
                               
OPERATING EXPENSES:                              
Research and development     92,926       330,532       93,387     334,186  
Selling expenses     629,337       670,567       947,173     1,376,183  
General and administrative     688,810       1,834,280       1,900,083     2,939,715  
Total operating expenses     1,411,073       2,835,379       2,940,643     4,650,084  
                               
INCOME FROM OPERATIONS     4,546,248       2,288,531       5,616,533     4,756,505  
                               
OTHER INCOME (EXPENSE):                              
Other income (expense), net     (3,662 )     2,238       (3,849     55,998  
Interest (expense), net     (96,082 )     (25,929 )     (136,629     (179,541 )
                               
Change in fair value of warrant/purchase option liability     1,134       16,800       5,600     22,400  
Total other (expense), net     (98,610 )     (6,891 )     (134,878     (101,143 )
                               
INCOME BEFORE PROVISION FOR INCOME TAXES     4,447,638       2,281,640       5,481,655     4,655,362  
                               
PROVISION FOR INCOME TAXES     696,757       582,774       1,018,041     1,051,742  
                               
NET INCOME     3,750,881       1,698,866       4,463,614     3,603,620  
                               
OTHER COMPREHENSIVE INCOME                              
                               
Foreign currency translation adjustment     1,512,244       123,715       2,063,127     682,472  
                               
COMPREHENSIVE INCOME   $ 5,263,125     $ 1,822,581     $ 6, 526,741   $ 4,286,092  
                               
EARNINGS PER SHARE:                              
Basic   $ 0.49     $ 0.23     $ 0.59   $ 0.48  
Diluted   $ 0.49     $ 0.23     $ 0.59   $ 0.48  
                               
WEIGHTED AVERAGE NUMBER OF COMMON SHARES:                              
Basic     7,615,719       7,461,227       7,614,721     7,454,837  
Diluted     7,615,719       7,461,227       7,614,721     7,454,837  
                               
                               
                               
 
 
 
SKYSTAR BIO-PHARMACEUTICAL COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
         
    30-Jun-13
(Unaudited)
  December 31,
2012
ASSETS        
CURRENT ASSETS:            
  Cash   $ 6,312,367   $ 11,321,848
  Restricted cash     81,000     -
  Accounts receivable, net of allowance for doubtful accounts of $552,764 and $247,269 as of June 30, 2013 (Unaudited) and December 31, 2012, respectively     11,932,235     10,010,796
  Inventories     26,500,125     22,962,209
  Deposits, prepaid expenses and other receivables     2,543,351     2,839,850
  Prepayments to suppliers     32,360,468     23,438,735
  Loans receivable     194,400     1,078,827
    Total current assets     79,923,946     71,652,265
             
PROPERTY, PLANT AND EQUIPMENT, NET     28,848,808     28,867,816
             
CONSTRUCTION-IN-PROGRESS     9,038,656     8,691,360
             
OTHER ASSETS:            
  Long-term prepayments     1,072,167     1,050,327
  Long-term prepayments for acquisitions     181,440     177,744
  Intangible assets, net     5,306,659     5,319,831
    Total other assets     6,560,266     6,547,902
      Total assets   $ 124,371,676   $ 115,759,343
             
LIABILITIES AND SHAREHOLDERS' EQUITY            
CURRENT LIABILITIES:            
  Accounts payable   $ 1,551,941   $ 4,017,530
  Other payables and accrued expenses     4,448,667     4,374,047
  Short-term loans     10,530,000     4,443,600
  Deposits from customers     2,012,453     1,621,061
  Taxes payable     1,379,353     1,950,757
  Due to related parties     1,108,188     798,925
    Total current liabilities     21,030,602     17,205,920
             
OTHER LIABILITIES:            
  Long-term loan     -     1,269,600
  Deferred government grant     599,400     1,063,290
  Purchase option liability     -     5,600
    Total other liabilities     599,400     2,338,490
      Total liabilities     21,630,002     19,544,410
             
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 June 30, 2013 (Unaudited) and December 31, 2012     7,605     7,605
  Paid-in capital     37,021,085     37,021,085
  Statutory reserves     5,897,298     5,897,298
  Retained earnings     48,978,910     44,515,296
  Accumulated other comprehensive income     10,836,776     8,773,649
    Total shareholders' equity     102,741,674     96,214,933
      Total liabilities and shareholders' equity   $ 124,371,676   $ 115,759,343
                   
                   
                   
SKYSTAR BIO-PHARMACEUTICAL COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 2013
(UNAUDITED)
 
  Common stock         Retained earnings          
  Shares   Amount     Paid-in
capital
    Statutory
reserves
    Unrestricted     Accumulated other comprehensive income   Total
BALANCE, January 1, 2013 7,604,800   $ 7,605   $ 37,021,085   $ 5,897,298   $ 44,515,296   $ 8,773,649   $ 96,214,933
Foreign currency translation -     -     -     -     -     2,063,127     2,063,127
Net income -     -     -     -     4,463,614     -     4,463,614
                                       
BALANCE, June 30, 2013 7,604,800   $ 7,605   $ 37,021,085   $ 5,897,298   $ 48,978,910   $ 10,836,776   $ 102,741,674
                                       
                                       
                                       
SKYSTAR BIO-PHARMACEUTICAL COMPANY AND SUBSIDIARIES  
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  
FOR THE SIX MONTHS ENDED JUNE 30, 2013 AND 2012  
(Unaudited)  
             
    Six months ended June 30,  
    2013     2012  
CASH FLOWS FROM OPERATING ACTIVITIES:                
Net income   $ 4,463,614     $ 3,603,620  
Adjustments to reconcile net income to net cash provided by (used in) operating activities:                
  Depreciation     630,522       635,856  
  Amortization     122,478       200,570  
  Provision for doubtful accounts     297,164       101,246  
  Change in fair value of warrant/purchase option liability     (5,600 )     (22,400 )
  Loss on sale of office equipment     1,740       -  
  Common stock to be issued to related parties for compensation     8,680       56,817  
  Common stock issued under 2010 stock incentive plan     -       981,094  
Change in operating assets and liabilities                
  Accounts receivable     (1,992,249 )     (7,381,238 )
  Inventories     (3,027,946 )     1,678,678  
  Deposits, prepaid expenses and other receivables     332,707       649,485  
  Prepayments to supppliers     (8,344,799 )     (7,121,001 )
  Accounts payable     (2,675,933 )     1614377  
  Other payables and accrued expenses     144,475       99,033  
  Deposits from customers     353,886       (38,170 )
  Taxes payable     (605,471 )     2,778,594  
  Deferred government grants     (641,120 )     (317,320 )
  Net cash used in operating activities     (10,937,852 )     (2,480,759 )
                 
CASH FLOWS FROM INVESTING ACTIVITIES:                
Payments of long-term prepayments     -       (349,464 )
Refund of long-term prepayments     -       475,980  
Loan to third parties     -       (1,942,963 )
Repayment of loans from third parties     897,232       -  
Placement of restricted cash     (80,140 )     -  
Purchases of property, plant and equipment     (4,008 )     (127,531 )
Proceeds from sale of plant and equipment     160       -  
Payments on construction-in-progress     (10,931 )     (79,806 )
  Net cash (used in) provided by investing activities     802,313       (2,023,784 )
                 
CASH FLOWS FROM FINANCING ACTIVITIES:                
Proceeds from short-term loans     8,815,400       63,464  
Repayment of short-term loans     (2,885,040 )     (666,372 )
Repayment of long-term loan     (1,282,240 )     -  
Due to related parties     303,328       280,901  
  Net cash (used in) provided by financing activities     4,951,448       (322,007 )
                 
EFFECT OF EXCHANGE RATE CHANGES ON CASH     174,610       119,563  
                 
DECREASE IN CASH     (5,009,481 )     (4,706,987 )
                 
CASH, beginning of period     11,321,848       7,048,968  
                 
CASH, end of period   $ 6,312,367     $ 2,341,981  
                 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:                
Cash paid for interest   $ 304,766     $ 309,010  
Cash paid for income taxes   $ 328,574     $ 88,054  
Non-cash investing and financing activities                
Long-term prepayment transferred to construction-in-progress   $ -     $ 666,372  
Construction-in-progress transferred to property, plant and equipment   $ -     $ 3,630  
Shares issued to settle payables to related parties   $ -     $ 199,239  
                 

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, including, among others, the Company's ability to realize the expected sales, to add planned manufacturing capacities, to commercialize on the business and opportunities resulting from additional government permits, 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.

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