From the Wires
Skystar Bio-Pharmaceutical Announces Results for Third Quarter Fiscal Year 2012
Veterinary Medication Facility Resumes Production and Distribution; Veterinary Vaccine Facility Receives Initial GMP Certification
Nov. 15, 2012 05:30 AM
XI'AN, CHINA -- (Marketwire) -- 11/15/12 -- 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 third quarter fiscal year 2012 earnings, for the period ended September 30, 2012.
Third Quarter 2012 Highlights
- Revenue decrease 57% YoY to $8.9 million
- Veterinary vaccines totaled $1.0 million, up 19% YoY
- Veterinary medicines totaled $1.8 million, down 86% YoY
- Feed additives totaled $1.2 million, up 13% YoY
- Probiotics products totaled $4.9 million, down 18% YoY
- Gross margin of 59% for the third quarter of fiscal 2011 as compared to 52% in the year ago period
- GAAP net income declined 65% to $2.7 million or $0.36 per fully diluted share, compared with net income of $7.7 million or $1.08 per fully diluted share in the year ago period
- Fiscal 2012 top line revenue guidance range revised from $33 million to $38 million reflecting inactivity of the veterinary medications facility due to timing of its GMP re-certification process.
Nine Month 2012 Highlights
- Net revenue declined 31% YoY to $25.7 million
- Gross profit of $14.7 million for the nine months of fiscal 2012 as compared to $18.9 million in the year ago period
- GAAP net income $6.3 million, compared with GAAP net income of $11.2 million in the year ago period
Mr. Weibing Lu, Skystar Bio-Pharmaceutical's Chairman and Chief Executive Officer, commented, "Skystar has made significant strides in moving its infrastructure forward in support of manufacturing capacity for the Company's veterinary medication and vaccine lines providing a solid outlook in the medium and long term.
"Skystar has resumed production and distribution of its primary veterinary medicine following GMP recertification by the Ministry of Agriculture. In addition, Skystar's animal and aquaculture vaccine production facility passed initial GMP certification, and, when it operates and reaches its full production levels, is expected to generate at minimum $15 million in annual sales.
"Once operational, the much anticipated vaccine facility will allow Skystar to mass produce vaccines currently produced by hand in large quality controlled batches. Both the certification of the veterinary medicine and vaccine plants are significant milestones for Skystar and are vital in supporting the Company's growth in upcoming years."
Mr. Lu concluded, "In terms of Skystar's performance for the 3rd quarter of 2012, it is noteworthy that, in spite of China's 'soft' economic performance which is partly attributable to fiscal policies designed to control inflation, Skystar has been able to maintain and, at times, marginally increase sales pricing for its products. With this in mind, Skystar's 3rd quarter revenue and bottom line largely reflect a revenue drop in its veterinary medication business in the 3rd quarter, which accounts for nearly 60% of Skystar's revenues in any given period. This is a short term effect related to the closure of Skystar's veterinary medication facility during the pendency of the GMP recertification process. Now that Skystar has resumed production at this facility, Skystar can continue its commitment to maintaining bottom line profitability in its organic business in order to fund growth and expansion initiatives internally for years to come."
Forecast
With the loss of revenue from the veterinary medication plant for all of the third quarter, Skystar's seasonally strongest quarter, the Company is recasting guidance to be in the range of $33 million to $38 million for fiscal 2012.
Financial Summary
Revenues for third quarter 2012, decreased 57% to $8.9 million as compared to $20.9 million in the year ago period.
Gross profit third quarter 2012 was roughly $5.3 million, down 52% from third quarter 2011.
Gross margin for the period was higher at 59% compared to 52% in the year ago period, due to the change in available product mix for sale.
Total operating expenses for third quarter 2012 was $1.6 million, or 18% of total revenue, compared with $1.9 million or 9% of total revenue in the year ago period.
Research and development costs totaled roughly $200,000 for the period, as compared to roughly $91,000 for the three months ended September 30, 2011, an increase of 118%.
Selling expenses totaled $690,000 for third quarter 2012 as compared to $1.2 million for the comparable year ago period this was a decrease of roughly $480,000 or 41%.
General and administrative expenses totaled $730,000 in the third quarter of 2012 as compared to $602,000 for the year ago period, an increase of $128,000 or 21%.
Operating income decreased 59% year over year and was $3.6 million in the third quarter of fiscal 2012 as compared to $9.0 million in the year ago period, operating margin remained level at 41% as compared to 43% from the year ago period.
Net income for the third quarter of 2012 was $2.7 million, or $0.36 per fully diluted share. This compares to net income of $7.7 million or $1.08 per fully diluted share in the same quarter of 2011.
As of September 30, 2012, Skystar had approximately $2.7 million in cash and current assets of $73 million and current liabilities of $20 million.
Conference Call & Webcast Information
The Company will host a conference call on Thursday, November 15, 2012 to discuss the quarter. Skystar's conference call will begin promptly at 7:45 a.m. ET to discuss third quarter financial results 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=170249.
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 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.
SKYSTAR BIO-PHARMACEUTICAL COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011
(Unaudited)
For Three Months Ended For Nine Months Ended
September 30, September 30,
----------------------- ------------------------
2012 2011 2012 2011
---------- ----------- ----------- -----------
REVENUE, NET $8,933,005 $20,903,063 $25,730,190 $37,086,158
COST OF REVENUE 3,670,230 10,057,212 11,060,826 18,185,565
---------- ----------- ----------- -----------
GROSS PROFIT 5,262,775 10,845,851 14,669,364 18,900,593
---------- ----------- ----------- -----------
OPERATING EXPENSES:
Research and development
costs 198,838 91,124 533,024 2,180,147
Selling expenses 692,009 1,174,928 2,068,192 2,154,158
General and administrative
expenses 730,539 602,248 3,670,254 2,412,339
---------- ----------- ----------- -----------
Total operating expenses 1,621,386 1,868,300 6,271,470 6,746,644
---------- ----------- ----------- -----------
INCOME FROM OPERATIONS 3,641,389 8,977,551 8,397,894 12,153,949
---------- ----------- ----------- -----------
OTHER INCOME (EXPENSE):
Other income (expense),
net (734) 9,421 55,264 5,054
Interest income (expense),
net (199,238) 15,036 (378,779) (54,265)
Change in fair value of
warrant/purchase option
liability 7,000 171,765 29,400 1,267,412
---------- ----------- ----------- -----------
Total other income
(expense), net (192,972) 196,222 (294,115) 1,218,201
---------- ----------- ----------- -----------
INCOME BEFORE PROVISION
FOR INCOME TAXES 3,448,417 9,173,773 8,103,779 13,372,150
PROVISION FOR INCOME TAXES 717,163 1,446,112 1,768,905 2,205,267
---------- ----------- ----------- -----------
NET INCOME 2,731,254 7,727,661 6,334,874 11,166,883
OTHER COMPREHENSIVE INCOME
Foreign currency
translation adjustment (198,269) 898,786 484,203 2,494,959
---------- ----------- ----------- -----------
COMPREHENSIVE INCOME $2,532,985 $ 8,626,447 $ 6,819,077 $13,661,842
========== =========== =========== ===========
EARNINGS PER SHARE:
Basic $ 0.36 $ 1.08 $ 0.85 $ 1.56
========== =========== =========== ===========
Diluted $ 0.36 $ 1.08 $ 0.85 $ 1.56
========== =========== =========== ===========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES:
Basic 7,604,800 7,172,354 7,426,082 7,171,530
========== =========== =========== ===========
Diluted 7,604,800 7,172,354 7,426,082 7,174,668
========== =========== =========== ===========
SKYSTAR BIO-PHARMACEUTICAL COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, December 31,
2012 2011
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash $ 2,668,532 $ 7,048,968
Accounts receivable, net of allowance for
doubtful accounts of $472,483 and $438,678
as of September 30, 2012 and December 31,
2011, respectively 15,457,752 3,391,493
Inventories 15,272,511 14,851,159
Deposits, prepaid expenses and other
receivables 3,139,404 3,421,487
Prepayments to suppliers 34,834,548 29,226,961
Loans receivable 2,106,998 964,088
-------------- --------------
Total current assets 73,479,745 58,904,156
-------------- --------------
PROPERTY, PLANT AND EQUIPMENT, NET 28,904,306 28,376,559
CONSTRUCTION-IN-PROGRESS 8,686,322 8,839,055
OTHER ASSETS:
Long-term prepayments 1,033,875 1,512,817
Long-term prepayments for acquisitions 177,296 569,788
Intangible assets, net 5,406,479 5,674,206
-------------- --------------
Total other assets 6,617,650 7,756,811
-------------- --------------
Total assets $ 117,688,023 $ 103,876,581
============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 4,123,218 $ 1,047,067
Other payables and accrued expenses 3,575,584 5,274,598
Short-term loans 9,181,400 7,366,320
Deposits from customers 1,347,993 1,432,529
Taxes payable 1,238,105 160,081
Due to related parties 386,533 56,273
-------------- --------------
Total current liabilities 19,852,833 15,336,868
-------------- --------------
OTHER LIABILITIES:
Long-term loan 1,266,400 -
Deferred government grant 395,750 393,500
Warrant/purchase option liability 14,000 43,400
-------------- --------------
Total other liabilities 1,676,150 436,900
-------------- --------------
Total liabilities 21,528,983 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
September 30, 2012 (Unaudited) and December
31, 2011, respectively 7,605 7,162
Paid-in capital 37,021,085 35,784,378
Statutory reserves 5,708,135 5,708,135
Retained earnings 44,826,905 38,492,031
Accumulated other comprehensive income 8,595,310 8,111,107
-------------- --------------
Total shareholders' equity 96,159,040 88,102,813
-------------- --------------
Total liabilities and shareholders'
equity $ 117,688,023 $ 103,876,581
============== ==============
SKYSTAR BIO-PHARMACEUTICAL COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011
(Unaudited)
Nine months ended
September 30,
2012 2011
------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 6,334,874 $ 11,166,883
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation 920,444 709,749
Amortization 300,589 432,098
Provision for doubtful accounts 31,340
Change in fair value of warrant/purchase
option liability (29,400) (1,267,412)
Common stock to be issued to related parties
for compensation 72,965
Common stock issued under 2010 stock
incentive plan 1,037,911
Change in operating assets and liabilities
Accounts receivable (12,094,949) (4,566,868)
Inventories (336,902) (6,890,055)
Deposits, prepaid expenses and other
receivables 404,130 151,534
Prepayments to suppliers (5,426,601) (8,750,609)
Accounts payable 3,112,002 1,073,204
Other payables and accrued expenses (1,361,439) 710,264
Deposits from customers (92,856) 123,582
Taxes payable 1,078,604 4,234,408
------------- -------------
Net cash used in operating activities (6,122,253) (2,800,257)
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments of long-term prepayments (343,960) (357,226)
Refund of long-term prepayments 475,560
Loans to third parties (1,941,248) (2,885,501)
Collection of loans to third parties 802,270 11,054,921
Purchases of property, plant and equipment (157,782) (58,560)
Purchases of intangible assets (46,496)
Payments on construction-in-progress (182,774) (7,316,494)
------------- -------------
Net cash (used in) provided by investing
activities (1,347,934) 390,644
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short-term loans 4,503,728 3,277,016
Repayment of short-term loans (2,726,544) (3,043,340)
Proceeds from long-term loan 1,266,400
Repayment of government grants (317,040)
Due to related parties 331,158 4,960
------------- -------------
Net cash provided by financing activities 3,057,702 238,636
------------- -------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH 32,049 66,298
------------- -------------
DECREASE IN CASH (4,380,436) (2,104,679)
CASH, beginning of period 7,048,968 5,887,831
------------- -------------
CASH, end of period $ 2,668,532 $ 3,783,152
============= =============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for interest $ 508,667 $ 266,797
============= =============
Cash paid for income taxes $ 971,784 $ 1,271,193
============= =============
Non-cash investing and financing activities
Long-term prepayments transferred to
construction-in-progress $ 832,230 $ 5,497,461
============= =============
Long-term prepayments transferred to plant and
equipment $ 4,727,364
============= =============
Construction-in-progress transferred to
property, plant and equipment $ 1,128,662 $
============= =============
Share issued to settle payables to related
parties $ 199,239 $
============= =============
SKYSTAR BIO-PHARMACEUTICAL COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(Unaudited)
Common stock
------------------
Paid-in
Shares Amount capital
---------- ------- -----------
BALANCE, December 31,
2011 7,161,919 $ 7,162 $35,784,378
Share issued under 2010
stock incentive plan 442,881 443 1,236,707
Foreign currency
translation
Net income
---------- ------- -----------
BALANCE, September 30,
2012 7,604,800 $ 7,605 $37,021,085
========== ======= ===========
Retained earnings
-------------------------
Accumulated
other
Statutory comprehensive
reserves Unrestricted income Total
----------- ------------- ------------- -----------
BALANCE, December 31,
2011 $ 5,708,135 $ 38,492,031 $ 8,111,107 $88,102,813
Share issued under 2010
stock incentive plan 1,237,150
Foreign currency
translation 484,203 484,203
Net income 6,334,874 6,334,874
----------- ------------- ------------- -----------
BALANCE, September 30,
2012 $ 5,708,135 $ 44,826,905 $ 8,595,310 $96,159,040
=========== ============= ============= ===========
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, its ability to increase production at its existing and future facilities, its ability to maintain and meet forecast production and other performance parameters, 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 subject to known and unknown risks and uncertainties that could cause actual events to differ from the forward-looking statements. More information about some of these risks and uncertainties may be found in the reports filed with the Securities and Exchange Commission by the Company. The Company operates in a highly competitive and changing business and regulatory environment, thus new or unforeseen risks may arise. Accordingly, investors should not place any reliance on forward-looking statements as a prediction of actual results. Except as is expressly required by the federal securities laws, the Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, changed circumstances or future events or for any other reason. Additional risks that could affect our future operating results are more fully described in our U.S. Securities and Exchange Commission filings, including the Company's most recently filed Quarterly Report for the quarter ended September 30, 2012 and other subsequent filings. These filings are available at www.sec.gov.
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