Skystar Bio-Pharmaceutical Announces Results for Third Quarter

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 
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 certifica
tion, 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 expense
s 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 ris
ks 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. 
Contacts:
Grayling Investor Relations
Christopher Chu 
(646) 284-9426
Christopher.chu@grayling.com  
Skystar Bio-Pharmaceutical Company
Scott Cramer Director 
Director Corporate Development and U.S. Representative
(407) 645-4433  
 
 
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