SOURCE: Skystar Bio-Pharmaceuticals

Skystar Bio-Pharmaceuticals

November 15, 2013 05:00 ET

Skystar Bio-Pharmaceutical Reports Third Quarter 2013 Results

Revenues Increase 79% YoY to $16.0 Million; Net Income of $3.7 Million; $0.49 Diluted EPS

XI'AN, CHINA--(Marketwired - Nov 15, 2013) - Skystar Bio-Pharmaceutical Company (NASDAQ: SKBI) ("Skystar" or the "Company"), a China-based manufacturer and distributor of veterinary medicine, vaccines, micro-organisms and feed additives, today reported unaudited third quarter fiscal year 2013 earnings, for the period ended September 30, 2013.

Third Quarter 2013 Highlights

  • Revenues increase 79% YoY to $16.0 million
    • Micro-organism products totaled $4.9 million, up 0.5% YoY
    • Veterinary medicine totaled $9.8 million, an increase of 451.8% YoY
    • Feed additives totaled $610,082 decreasing 48.7% YoY
    • Veterinary vaccines totaled $607,208, a decrease of 41.6% YoY
  • Gross margin of 51.4% for the third quarter of fiscal 2013 as compared to 58.9% in the year ago period
  • Net income of $3.7 million or $0.49 per fully diluted share, compared with net income of $2.7 million or $0.36 per fully diluted share in the year ago period
  • Fiscal 2013 guidance reiterated at $40 million to $45 million

Third Quarter 2013 Financial Highlights

  • First nine months 2013 revenue increases 27.7% YoY to $32.9 million
  • Gross margin of 51.0% for the first nine months of fiscal 2013 as compared to 57.0% in the year ago period
  • Net income of $8.2 million or $1.08 per fully diluted share, compared with net income of $6.3 million or $0.85 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 delivered strong top line and bottom line performance for the period as a result of Skystar's operational strategy. Adjustments to operations include redirecting sales and marketing efforts to create awareness and demand for newly available products as manufacturing capabilities come online. Additionally, since completing the approval process and obtaining production permits for Skystar's veterinary medication lines earlier in 2013, the MOA has granted roughly 45% of Skystar's submitted permits to manufacture individual veterinary medications. Skystar is also making significant progress in completing the complex two stage GMP inspection process that the Ministry of Agriculture (MOA) requires for to operate the Company's newly completed and modern Vaccine manufacturing facility."

"With this in mind, Skystar's current results reflect a significant ramp up of production and sales of its veterinary medications line since earning GMP approval for its production facilities in Huxian and Jingzhou, China. In order to ensure a successful re-launch of Skystar's high growth veterinary medication business, sales resources have been shifted away from probiotics, feed additives and vaccines and onto medications. This operational strategy has played an important role in Skystar's strong veterinary medication sales as revenues from this product line increased a dramatic 452% year over year through Skystar's seasonally strongest quarter. Currently, both veterinary medication manufacturing facilities are operating at near or above 50% capacity."

"With regard to Skystar's veterinary vaccine line, as explained in the Company's Quarterly Report on Form 10-Q, China's Ministry of Agriculture is currently in the process of completing Stage 2 of the GMP inspection of the newly built veterinary vaccine manufacturing facility in Huxian, China. The Company expects Stage 2 of the GMP inspection to be completed by the fourth quarter of 2013. The GMP certification process will be completed shortly thereafter. The newly built and largely automated vaccine manufacturing facility will allow the Company to mass produce vaccines without sacrificing quality control."

"Moving forward into fiscal 2014, the operational changes occurring over the next several quarters are expected to increase Skystar's ability to generate revenues and profits. As more manufacturing capabilities come online, the Company will initiate the appropriate sales and marketing efforts to support its growing number of products and production base."

"It has always been management's mission to grow revenues without sacrificing profitability. Since Skystar's listing on NASDAQ, the Company has been historically profitable to date and plans to continue that mission in the quarters ahead," concluded Mr. Lu. 

Financial Summary
For the three months ended September 30, 2013, we had revenues of $15,992,408 as compared to revenues of $8,933,005 for the three months ended September 30, 2012, an increase of $7,059,403 or 79.0%. We generated revenue from sales of four product lines: veterinary medications, micro-organism, feed additives and vaccines. Third Quarter Fiscal 2013 revenue breakdown by product line is as follows:

  • Micro-organism: $4,946,687
  • Veterinary medications: $9,828,431
  • Feed Additives: $610,082
  • Vaccines: $607,208

Cost of revenue, which consists of raw materials, direct labor, and manufacturing overhead for our four product lines, was $7,778,691 for the three months ended September 30, 2013, as compared to $3,670,230 for the three months ended in the year ago period, an increase of 111.9% or $4,108,461.

Gross profit, was $8,213,717 for the three months ended September 30, 2013, a 56.1% year over year increase as compared to $5,262,775 for the three months ended September 30, 2012. Gross margin for the period was 51% due to higher costs in manufacturing veterinary medications.

Operating Expenses
Research and development costs totaled $324,353 for the three months ended September 30, 2013as compared to $198,838 for the year ago period; this was an 63% increase in R&D expense due to increased efforts to develop in demand products.

Selling expenses totaled $1,266,444 for the three months ended September 30, 2013 as compared to $692,009 for the three months ended September 30, 2012, an increase of $574,435 or 83.0%. This increase was mainly due to the increase of sales commission and shipping and handling costs as the result of significantly increased veterinary medication sales during the third quarter.

General and administrative expenses totaled $1,885,219 for the three months ended September 30, 2013 as compared to $730,539 for the three months ended September 30, 2012, an increase of $1,154,680 or 158.1%. The increased G&A expense was mainly due to the additional allowance for doubtful accounts of $976,894 accrued during the third quarter for our increased accounts receivable balance partially because of our high sales results and the favorable payment terms we have given customers during the quarter.

As of September 30, 2013, we had unrestricted cash of $4.5 million. Our total current assets were $88.6 million, and our total current liabilities were $28.4 million, which resulted in a net working capital of $60.2 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 Information
The Company will host a conference call Friday, November 15, 2013 to discuss its third quarter financial results. Skystar's conference call will begin promptly at 7:45 a.m. ET. 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=171912.

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 # 13572867. 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 NINE MONTHS ENDED SEPTEMBER 30, 2013 AND 2012  
(Unaudited)  
                         
    For Three Months Ended     For Nine Months Ended  
September 30,     September 30,  
    2013     2012     2013     2012  
REVENUE, NET   $ 15,992,408     $ 8,933,005     $ 32,858,294     $ 25,730,190  
                                 
COST OF REVENUE     7,778,691       3,670,230       16,087,401       11,060,826  
                                 
GROSS PROFIT     8,213,717       5,262,775       16,770,893       14,669,364  
                                 
OPERATING EXPENSES:                                
Research and development     324,353       198,838       417,740       533,024  
Selling expenses     1,266,444       692,009       2,213,617       2,068,192  
General and administrative     1,885,219       730,539       3,785,302       3,670,254  
Total operating expenses     3,476,016       1,621,386       6,416,659       6,271,470  
                                 
INCOME FROM OPERATIONS     4,737,701       3,641,389       10,354,234       8,397,894  
                                 
OTHER INCOME (EXPENSE):                                
Other income (expense), net     32,757       (734 )     28,908       55,264  
Interest (expense), net     (48,526 )     (199,238 )     (185,155 )     (378,779 )
Change in fair value of warrant/purchase option liability     (205,758 )     7,000       (200,158 )     29,400  
Total other (expense), net     (221,527 )     (192,972 )     (356,405 )     (294,115 )
                                 
INCOME BEFORE PROVISION FOR INCOME TAXES     4,516,174       3,448,417       9,997,829       8,103,779  
                                 
PROVISION FOR INCOME TAXES     781,977       717,163       1,800,018       1,768,905  
                                 
NET INCOME     3,734,197       2,731,254       8,197,811       6,334,874  
                                 
OTHER COMPREHENSIVE INCOME                                
Foreign currency translation adjustment     513,281       (198,269 )     2,576,408       484,203  
                                 
COMPREHENSIVE INCOME   $ 4,247,478     $ 2,532,985     $ 10,774,219     $ 6,819,077  
                                 
EARNINGS PER SHARE:                                
Basic   $ 0.49     $ 0.36     $ 1.08     $ 0.85  
Diluted   $ 0.49     $ 0.36     $ 1.08     $ 0.85  
                                 
WEIGHTED AVERAGE NUMBER OF COMMON SHARES:                                
Basic     7,617,726       7,604,800       7,615,733       7,426,082  
Diluted     7,617,726       7,604,800       7,615,733       7,426,082  
                                 
                                 
                                 
SKYSTAR BIO-PHARMACEUTICAL COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
         
    30-Sep-13   December 31,
(Unaudited)   2012
ASSETS        
CURRENT ASSETS:            
  Cash   $ 4,456,619   $ 11,321,848
  Restricted cash     60,310     -
  Accounts receivable, net of allowance for doubtful accounts of $1,544,175 and $247,269 as of September 30, 2013 (Unaudited) and December 31, 2012, respectively     26,901,414     10,010,796
  Inventories     27,407,862     22,962,209
  Deposits, prepaid expenses and other receivables     1,782,705     2,839,850
  Prepayments to suppliers     27,671,219     23,438,735
  Loans receivable     -     1,078,827
  Deferred tax assets     343,922     -
    Total current assets     88,624,051     71,652,265
PROPERTY, PLANT AND EQUIPMENT, NET     28,572,754     28,867,816
CONSTRUCTION-IN-PROGRESS     9,106,056     8,691,360
OTHER ASSETS:            
  Long-term prepayments     4,622,340     1,050,327
  Long-term prepayments for acquisitions     182,560     177,744
  Intangible assets, net     5,277,138     5,319,831
    Total other assets     10,082,038     6,547,902
      Total assets   $ 136,384,899   $ 115,759,343
             
LIABILITIES AND SHAREHOLDERS' EQUITY            
CURRENT LIABILITIES:            
  Accounts payable   $ 3,762,362   $ 4,017,530
  Other payables and accrued expenses     5,726,029     4,374,047
  Short-term loans     10,595,000     4,443,600
  Deposits from customers     1,589,449     1,621,061
  Taxes payable     4,973,402     1,950,757
  Due to related parties     1,741,820     798,925
    Total current liabilities     28,388,062     17,205,920
OTHER LIABILITIES:            
  Long-term loan     -     1,269,600
  Deferred government grant     798,700     1,063,290
  Purchase option liability     205,758     5,600
  Total other liabilities     1,004,458     2,338,490
    Total liabilities     29,392,520     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 September 30, 2013 (Unaudited) and December 31, 2012     7,605     7,605
  Paid-in capital     37,024,312     37,021,085
  Statutory reserves     5,897,298     5,897,298
  Retained earnings     52,713,107     44,515,296
  Accumulated other comprehensive income     11,350,057     8,773,649
    Total shareholders' equity     106,992,379     96,214,933
      Total liabilities and shareholders' equity   $ 136,384,899   $ 115,759,343
             
             
             
SKYSTAR BIO-PHARMACEUTICAL COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 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
                                         
  Net income   -     -     -     -     8,197,811     -     8,197,811
  Share-based compensation   -     -     3,227     -     -     -     3,227
  Foreign currency translation   -     -     -     -     -     2,576,408     2,576,408
                                         
BALANCE, September 30, 2013   7,604,800   $ 7,605   $ 37,024,312   $ 5,897,298   $ 52,713,107   $ 11,350,057   $ 106,992,379
                                         
                                         
                                         
SKYSTAR BIO-PHARMACEUTICAL COMPANY AND SUBSIDIARIES  
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2013 AND 2012  
(Unaudited)  
   
    Nine months ended September 30,  
    2013     2012  
CASH FLOWS FROM OPERATING ACTIVITIES:                
  Net income   $ 8,197,811     $ 6,334,874  
  Adjustments to reconcile net income to net cash provided by (used in) operating activities:                
    Depreciation     1,086,914       920,444  
    Amortization     184,496       300,589  
    Provision for doubtful accounts     1,274,058       31,340  
    Change in fair value of warrant/purchase option liability     200,158       (29,400 )
    Loss on disposal of office equipment     1,748       -  
    Common stock to be issued to related parties for compensation     3,227       -  
    Common stock issued under 2010 stock incentive plan     -       1,037,911  
    Deferred tax assets     (339,618 )     -  
  Change in operating assets and liabilities                
    Accounts receivable     (17,685,435 )     (12,094,949 )
    Inventories     (3,775,636 )     (336,902 )
    Deposits, prepaid expenses and other receivables     1,099,950       404,130  
    Prepayments to suppliers     (3,552,385 )     (5,426,601 )
    Accounts payable     (513,989 )     3,112,002  
    Other payables and accrued expenses     1,391,003       (1,361,439 )
    Deposits from customers     (74,589 )     (92,856 )
    Taxes payable     2,932,621       1,078,604  
    Deferred government grants     (450,688 )     (317,040 )
      Net cash used in operating activities     (10,020,354 )     (6,439,293 )
                 
CASH FLOWS FROM INVESTING ACTIVITIES:                
  Payments of long-term prepayments     (3,510,666 )     (343,960 )
  Refund of long-term prepayments     -       475,560  
  Loan to third parties     -       (1,941,248 )
  Repayment of loans from third parties     1,094,190       802,270  
  Placement of restricted cash     (59,555 )     -  
  Purchases of property, plant and equipment     (9,290 )     (157,782 )
  Proceeds from sale of plant and equipment     161       -  
  Payments on construction-in-progress     (10,977 )     (182,774 )
    Net cash used in investing activities     (2,496,137 )     (1,347,934 )
                 
CASH FLOWS FROM FINANCING ACTIVITIES:                
  Proceeds from short-term loans     10,462,400       4,503,728  
  Repayment of short-term loans     (4,506,880 )     (2,726,544 )
  Proceeds from long-term loan     -       1,266,400  
  Repayment of long-term loan     (1,287,680 )     -  
  Due to related parties     928,312       331,158  
    Net cash provided by financing activities     5,596,152       3,374,742  
                 
EFFECT OF EXCHANGE RATE CHANGES ON CASH     55,110       32,049  
                 
DECREASE IN CASH     (6,865,229 )     (4,380,436 )
CASH, beginning of period     11,321,848       7,048,968  
                 
CASH, end of period   $ 4,456,619     $ 2,668,532  
                 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:                
  Cash paid for interest   $ 454,336     $ 508,667  
  Cash paid for income taxes   $ 329,968     $ 971,784  
  Non-cash investing and financing activities                
  Long-term prepayment transferred to construction-in-progress   $ 22,438     $ 832,230  
  Construction-in-progress transferred to property, plant and equipment   $ -     $ 1,128,662  
  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 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, the Company's expectations relating to completion of the GMP process, adding and launching additional facilities, and ramping up sales efforts, 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