Skystar Bio-Pharmaceutical Reports Fiscal Year 2012 Financial Results

Skystar Bio-Pharmaceutical Reports Fiscal Year 2012 Financial Results 
Fiscal Year Revenue of $33.6 Million; Fiscal Year 2013 Revenue Growth
Forecasted to Be 20% to 35% Above 2012 Level 
XI'AN, CHINA -- (Marketwired) -- 04/02/13 --   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
announced full financial results for fiscal year ended December 31,
2012.  
Fiscal Year 2012 Summary 


 
--  Revenues totaled $33.6 million, down 36% YoY
    --  Veterinary vaccines totaled $3.6 million, up 53.1% YoY
    --  Veterinary medicines totaled $10.7 million, down 68.4% YoY
    --  Feed additives totaled $4.0 million, up 57.1% YoY
    --  Micro-organism products totaled $15.4 million, up 8.5% YoY
--  Gross profit margin increased to 55% from 50% in the prior year
--  Net income decreased 54.5% year over year to $6.2 million or $0.83 per
    fully diluted share, as compared to $13.7 million or $1.90 per fully
    diluted share during the year ended December 31, 2011.
--  Improved cash balance to $11.3 million at the end of fiscal 2012

  
Management Comments
 Mr. Weibing Lu, Skystar Bio-Pharmaceutical's
chairman and chief executive officer, commented, "Skystar is very
pleased to share its 2012 financial results with investors.
Financially, Skystar successfully maintained its historically clean
and stable balance sheet, in addition to finishing the year bottom
line profitable. In addition, the Company generated net positive cash
flow from operations, maintained liquidity, met both long and short
term debt obligations in addition to increasing its cash position as
compared to the beginning of fiscal 2012 and end of fiscal 2011.  
"Not counting Skystar's veterinary medication manufacturing plant in
Huxian, whose production line was closed for three quarters of the
2012 fiscal year, due to the Ministry of Agriculture's mandatory GMP
re-certification schedule. Skystar was able to ramp sales across all
of it production lines. And through the shifting of Skystar's sales
and marketing efforts; Vaccine revenues grew 53% year over year;
Probiotics grew by 9% year over year; and Feed additives revenues
grew 57% year ove
r year. Skystar was not only able to maintain sales
of these production lines in 2012 but increase selling despite
China's economic slowdown. 
"Operationally, Skystar's management trimmed operating expenses in
2012 in accordance with the shutdown of its Huxian veterinary
medication facility, where unfortunately revenues were down 68% from
the prior fiscal year due to its aforementioned closing prior to GMP
inspection. Likewise R&D projects for fiscal 2012 were also
strategically reduced in order to maintain profitability without
shying away from planned research and from the Company's mission to
stay ahead of trends and demands in China's animal husbandry space.
As a result Skystar moderately increased its customer base to 3,964
customers consisting of independent distributors, franchise
distributors and direct customers. 
"With respect to Skystar's manufacturing facilities; the Company
currently has four manufacturing facilities: 
"The Sanqiao Plant has two facilities. The Micro-Organism facility is
run in cooperation with experts from Microbiology Institute of
Shaanxi Province, and Northwest Agro-Forestry Sci-tech University.
The Second facility manufactures feed additives. Both facilities are
operational and we look forward to solid revenue contribution in 2013
with respect to this product line.  
"The Huxian Plant has two production lines for vaccines and
medications. In the third quarter of fiscal of fiscal 2012, China's
MOA inspected and renewed the GMP certificate for this facility's
veterinary medication facility which will be valid for a period of
five years. We look forward to the revenue contribution of this
production facility and are eager to ramp sales of this product line.
Additionally, the new vaccine facility was also inspected and
received stage one GMP approval. Under China's revised inspection
process, the vaccine production line is still waiting to undergo
stage two of the GMP certification. Management expects the GMP
certification process of the vaccine facility to be completed by the
third quarter of 2013.  
"The Jingzhou Plant, plant is GMP certified to produce veterinary
medicines including aqua culture medicines and is fully operational.  
"Skystar's probiotics plant in Kunshan was acquired in September 2011
for roughly $8 million. As of the end of 2012, the facility
renovation for this facility is complete; inspection was completed
and accepted in March 2013. However, the equipment installation,
tooling and testing is not fully completed; thus this facility is not
operational at this point," said Mr. Lu.  
Fiscal Year 2012 Financial Results
 In-line with revised guidance,
Skystar reported full fiscal 2012 year Revenues of $33.6 million, a
36% decrease compared to the $52.8 million in revenues reported for
the full fiscal 2011 year. Gross profit for the full fiscal 2012 year
was $18.5 million, or 55% of revenues.  
Net income decreased 54.5% year over year to $6.2 million or $0.83
per fully diluted share, as compared to $13.7 million or $1.90 per
fully diluted share in the year ago period.  
Skystar's Cost of Sales which consists of raw materials, direct
labor, and manufacturing overhead for our four product lines, was
$15.1 million for fiscal 2012 as compared to $26.6 million for the
year ago period. This decrease was mainly due to the decrease in
corresponding sales as a result of temporary suspension of production
at the Huxian facility for the first three quarters of 2012. 
Research and Development costs totaled $2.2 million for the fiscal
2012 as compared to $2.8 million for the year ago period, a decrease
of $0.6 million or 23.5%. The decrease was due to a strategic
reduction in R&D projects for the fiscal year.  
Selling expenses totaled $3.0 million for fiscal 2012 as compared to
$4.0 million in the year ago period, a decrease of $1.0 million or
25.2%. This decrease is mainly due to decreased sales commission
expenses as the Huxian veterinary medication facility was temporarily
closed for the first three quarters of 2012 resulting in a
significant decrease in veterinary medication sales in 2012. Shipping
and handling costs and travelling expenses also decreased as less
veterinary medicine sales activities during the year. 
General and Administrative $4.7 million for the year ended December
31, 2012 as compared to $4.1 million for the year ended December 31,
2011, an increase of $0.6 million or 15.8%. The increase was mainly
due to the stock based compensation expense of $1.0 million for stock
grants on May 4, 2012 to the Company's employees and members of the
Board of Directors, all of which grants were made pursuant to the
terms and provisions of the 2010 Stock Incentive Plan. 
Financial Position: as of December 31, 2012, Skystar had
approximately $11.3 million in cash, current assets of $71.6 million
and current liabilities of $17.2 million, which resulted in a net
working capital of $54.4 million.  
Business Outlook
 Mr. Lu concluded, "Fiscal 2013 will be an exciting
year for Skystar, following the successful application of GMP
certifications for our various manufacturing facilities, the Company
is another step closer to realizing the full revenue potential of its
manufacturing facilities. Skystar currently anticipates delivering a
2
0% to 35% year over year increase in top line revenue for fiscal
2013. The expected revenue range is $40 million to $45 million with
gross margin of roughly 50% for fiscal 2013. This view takes into
consideration revenues from facilities that have come online
following GMP recertification," concluded Mr. Lu.  
Conference Call Information
 The Company will host a conference call
on Tuesday, April 2, 2013 to discuss its financial results for the
year ended December 31, 2012. Skystar's conference call will begin
promptly at 7:45 a.m. EST to review fiscal year 2012 financial and
operational performance. Mr. Weibing Lu, Skystar's chairman and chief
executive officer, will host the call, which will be webcast live. 
Webcast
 The webcast will be made available on the investor
relations section of the Skystar corporate website at
http://www.skystarbio-pharmaceutical.com or
http://www.investorcalendar.com/IC/CEPage.asp?ID=170739.  
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 # 411773.  
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,
probiotics, vaccines and feed additives) and over 275 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                     
               CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME              
             (Amounts in US. Dollars, except share and amounts)             
                                                                            
                                                    Years ended December 31,
                                                   -------------------------
                                                       2012         2011    
                                                   ------------ ------------
                                                                            
REVENUE, net                                       $ 33,586,791 $ 52,788,279
                                                                            
COST OF REVENUE                                      15,095,004   26,562,748
                                                    -----------  -----------
                                                                            
GROSS PROFIT                                         18,491,787   26,225,531
                                                    -----------  -----------
                                                                            
OPERATING EXPENSES:                                                         
  Research and development                            2,154,241    2,814,328
  Selling expenses                                    3,040,036    4,062,126
  General and administrative                          4,746,529    4,099,153
                                                    -----------  -----------
    Total operating expenses                          9,940,806   10,975,607
                                                    -----------  -----------
                                                                            
INCOME FROM OPERATIONS                                8,550,981   15,249,924
                                                    -----------  -----------
                                                                            
OTHER INCOME (EXPENSE):                                                     
  Other income, net                                     498,614       43,696
  Interest expense, net                               (706,842)    (140,920)
  Change in fair value of warrant/purchase option                           
   liability                                             37,800    1,376,239
                                                    -----------  -----------
    Total other income (expense), net                 (170,428)    1,279,015
                                                    -----------  -----------
                                                                            
INCOME BEFORE PROVISION FOR INCOME TAXES              8,380,553   16,528,939
                                                                            
PROVISION FOR INCOME TAXES                            2,168,125    2,871,299
                                                    -----------  -----------
                                                                            
NET INCOME                                            6,212,428   13,657,640
                                                                            
OTHER COMPREHENSIVE INCOME :                                                
  Foreign currency translation adjustment               662,542    2,955,344
                                                    -----------  -----------
                                                                            
COMPREHENSIVE INCOME                               $  6,874,970 $ 16,612,984
                                                    ===========  ===========
                                                                            
EARNINGS PER SHARE:                                                         
  Basic                                            $       0.83 $       1.90
                                                    ===========  ===========
  Diluted                                          $       0.83 $       1.90
                                                    ===========  ===========
                                                                            
WEIGHTED AVERAGE NUMBER OF COMMON SHARES:                                   
  Basic                                               7,471,350    7,182,969
                                                    ===========  ===========
  Diluted                                             7,471,350    7,184,484
                                                    ===========  ===========
                                                                            
                                                                            
                                                                            
                     SKYSTAR BIO-PHARMACEUTICAL COMPANY                     
                         CONSOLIDATED BALANCE SHEETS                        
             (Amoun
ts in US. Dollars, except share and amounts)             
                                                                            
                                                  December 31,  December 31,
                                                      2012          2011    
                                                  ------------  ------------
                     ASSETS                                                 
                                                                            
CURRENT ASSETS:                                                             
  Cash                                           $  11,321,848 $   7,048,968
  Accounts receivable, net of allowance for                                 
   doubtful accounts of $247,269 and $438,678,                              
   respectively                                     10,010,796     3,391,493
  Inventories                                       22,962,209    14,851,159
  Deposits, prepaid expenses and other                                      
   receivables                                       2,839,850     3,421,487
  Prepayments to suppliers                          23,438,735    29,226,961
  Loans receivable                                   1,078,827       964,088
                                                  ------------  ------------
    Total current assets                            71,652,265    58,904,156
                                                  ------------  ------------
                                                                            
PROPERTY, PLANT AND EQUIPMENT, NET                  28,867,816    28,376,559
                                                                            
CONSTRUCTION-IN-PROGRESS                             8,691,360     8,839,055
                                                                            
OTHER ASSETS:                                                               
  Long-term prepayments                              1,050,327     1,512,817
  Long-term prepayments for acquisitions               177,744       569,788
  Intangible assets, net                             5,319,831     5,674,206
    Total other assets                               6,547,902     7,756,811
                                                  ------------  ------------
      Total assets                               $ 115,759,343 $ 103,876,581
                                                  ============  ============
                                                                            
      LIABILITIES AND SHAREHOLDERS' EQUITY                                  
                                                                            
CURRENT LIABILITIES:                                                        
  Accounts payable                               $   4,017,530 $   1,047,067
  Other payable and accrued expenses                 4,374,047     5,274,598
  Short-term loans                                   4,443,600     7,366,320
  Deposits from customers                            1,621,061     1,432,529
  Taxes payable                                      1,950,757       160,081
  Due to related parties                               798,925        56,273
                                                  ------------  ------------
    Total current liabilities                       17,205,920    15,336,868
                                                  ------------  ------------
                                                                            
OTHER LIABILITIES:                                                          
  Long-term loan                                     1,269,600             -
  Deferred government grants                         1,063,290       393,500
  Warrant/purchase option liability                      5,600        43,400
    Total other liabilities                          2,338,490       436,900
                                                  ------------  ------------
      Total liabilities                             19,544,410    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 December 31, 2012 and 2011,                             
   respectively                                          7,605         7,162
  Paid-in capital                                   37,021,085    35,784,378
  Statutory reserves                                 5,897,298     5,708,135
  Retained earnings                                 44,515,296    38,492,031
  Accumulated other comprehensive income             8,773,649     8,111,107
                                                  ------------  ------------
    Total shareholders' equity                      96,214,933    88,102,813
                                                  ------------  ------------
      Total liabilities and shareholders' equity $ 115,759,343 $ 103,876,581
                                                  ============  ============
                                                                            
                                                                            
                                                                            
                     SKYSTAR BIO-PHARMACEUTICAL COMPANY                     
                   CONSOLIDATED STATEMENTS OF CASH FLOWS                    
             (Amounts in US. Dollars, except share and amounts)             
                                                                            
                                                   Year ended December 31,  
                                                      2012         2011     
                                                  -----------  ------------ 
CASH FLOWS FROM OPERATING ACTIVITIES:                                       
Net income                                        $ 6,212,428  $ 13,657,640 
Adjustments to reconcile net income to net cash                             
 provided by (used in) operating activities:                                
 Depreciation                                       1,035,829     1,347,090 
 Amortization                                         401,114       524,662 
 (Reversal of) provision for doubtful accounts       (194,971)       85,561 
 Provision for obsolete inventories                         -         7,562 
 Common stock to be issued to related parties for                           
  compensation                                         86,162       146,189 
 Common stock issued under 2010 stock incentive                             
  plan                                              1,037,911             - 
 Change in fair value of warrant/purchase option                            
  liability                                           (37,800)   (1,376,239)
 Change in operating assets and liabilities                                 
 Accounts receivable                               (6,394,244)    1,660,343 
 Inventories                                       (7,985,875)   (7,482,193)
 Deposits, prepaid ex
penses and other receivables   1,651,478       162,188 
 Prepayments to suppliers                           6,027,718   (12,298,451)
 Accounts payable                                   2,307,066       724,579 
 Other payables and accrued expenses                 (500,127)    1,667,267 
 Deposits from customers                              176,645       123,215 
 Taxes payable                                      1,788,790      (608,350)
                                                   ----------   ----------- 
 Net cash provided by (used in) operating                                   
  activities                                        5,612,124    (1,658,937)
                                                   ----------   ----------- 
                                                                            
CASH FLOWS FROM INVESTING ACTIVITIES:                                       
 Purchases of property, plant and equipment          (163,049)     (524,574)
 Payments on construction-in-progress                (393,032)   (7,028,129)
 Long-term prepayments                               (358,077)   (1,365,671)
 Refund of long-term prepayments                      475,950             - 
 Loans to third parties                            (2,023,393)   (3,849,994)
 Collection of loans to third parties               1,916,651    11,113,731 
                                                   ----------   ----------- 
  Net cash used in investing activities              (544,950)   (1,654,637)
                                                   ----------   ----------- 
                                                                            
CASH FLOWS FROM FINANCING ACTIVITIES:                                       
 Proceeds from short-term and long-term loans       5,774,860    10,856,498 
 Repayment of short-term loans                     (7,488,280)   (6,695,279)
 Proceeds from government grants                      666,330             - 
 Repayment of government grants                      (475,950)  -           
 Due to (from) related parties                        743,755       (75,505)
                                                   ----------   ----------- 
  Net cash (used in) provided by financing                                  
   activities                                        (779,285)    4,085,714 
                                                   ----------   ----------- 
                                                                            
EFFECT OF EXCHANGE RATE CHANGES ON CASH               (15,009)      388,997 
                                                   ----------   ----------- 
                                                                            
INCREASE IN CASH                                    4,272,880     1,161,137 
                                                                            
CASH, beginning of year                             7,048,968     5,887,831 
                                                   ----------   ----------- 
                                                                            
CASH, end of year                                 $11,321,848  $  7,048,968 
                                                   ==========   =========== 
                                                                            
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:                           
 Cash paid for interest                           $   647,249  $    362,713 
                                                   ==========   =========== 
 Cash paid for income taxes                       $   972,739  $  5,366,046 
                                                   ==========   =========== 
Non-cash investing and financing activities                                 
 Long-term prepayment transferred to construction-                          
  in-progress                                     $ 1,004,635  $  3,895,580 
                                                   ==========   =========== 
 Long term prepayment transferred to plant and                              
  equipment                                       $         -     4,752,513 
                                                   ==========   =========== 
 Construction-in-progress transferred to property,                          
  plant and equipment                             $ 1,129,588  $    813,562 
                                                   ==========   =========== 
 Share issued to settle payables to related                                 
  parties                                         $   199,239  $          - 
                                                   ==========   =========== 
                                                  
                                                  
                                                  
        SKYSTAR BIO-PHARMACEUTICAL COMPANY        
  CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY 
(Amounts in US. Dollars, except share and amounts)
                                                      
                                                      
                                                      
                                                      
                           Common stock     Paid-in   
                         ----------------             
                           Shares  Amount   capital   
                         --------- ------ ----------- 
                                                      
BALANCE, January 1, 2011 7,161,919 $7,162 $35,784,378 
                                                      
 Foreign currency                                     
  translation                                         
 Net income                                           
 Appropriation to                                     
  statutory reserves                                  
                                                      
                         --------- ------ ----------- 
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                                           
 Appropriation to                                     
  statutory reserves                                  
                                                      
                         --------- ------ ----------- 
BALANCE, December 31,                                 
 2012                    7,604,800 $7,605 $37,021,085 
                         ========= ====== =========== 
 
                                                                            
                                                    Accumulated             
                            Retained earnings          other                
                        ------------------------                            
                         Statutory                 comprehensive            
                                                                            
                         reserves   Unrestricted      income        Total   
                        ---------- -------------  -------------- -----------
                                                                            
BALANCE, January 1, 2011$5,695,236 $  24,847,290  $    5,155,763 $71,489,829
                                                                            
 Foreign currency                                                           
  translation                                          2,955,344   2,955,344
 Net income                           13,657,640                  13,657,640
 Appropriation to                                                           
  statutory reserves        12,899       (12,
899)                          -
                                                                            
                        ---------- -------------  -------------- -----------
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                                            662,542     662,542
 Net income                            6,212,428                   6,212,428
 Appropriation to                                                           
  statutory reserves       189,163      (189,163)                           
                                                                            
                        ---------- -------------  -------------- -----------
BALANCE, December 31,                                                       
 2012                   $5,897,298 $  44,515,296  $    8,773,649 $96,214,933
                        ========== =============  ============== ===========

 
Safe Harbor Statement under the Private Securities Litigation Reform
Act of 1995 
 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 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. 
Contacts: 
Skystar Bio-Pharmaceutical Company
Scott Cramer
Director - Corporate Development & U.S. Representative
(407) 645-4433 
Grayling 
Investor Relations
Christopher Chu 
(646) 284-9426
christopher.chu@grayling.com 
 
 
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