Skystar Bio-Pharmaceutical Reports First Quarter 2013 Results

Skystar Bio-Pharmaceutical Reports First Quarter 2013 Results 
Conference Call to Be Held May 16, 2013 at 7:45 AM EDT 
XI'AN, CHINA -- (Marketwired) -- 05/16/13 --   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 first quarter fiscal year 2013 earnings, for the
fiscal period ended March 31, 2013.  
First Quarter 2013 Summary 


 
--  Revenue decrease 30% YoY to $5.5 million as follows:
    --  Veterinary medicines totaled $3.4 million, up 15% YoY
    --  Pro-biotic micro-organism products totaled $1.7 million,
        decreasing 47% YoY
    --  Feed additives totaled $0.3 million, decreasing 72% YoY
    --  Veterinary vaccines totaled $0.1 million, decreasing 82% YoY
--  Gross Profit of $2.6 million decreased 39% for the first three months
    of fiscal 2013 YoY
--  Gross Margin of 47% for the first three months of fiscal 2013,
    compared to 54% in the prior 2012 period
--  Net Income $0.7 million or $0.09 per fully diluted share, as compared
    with $1.9 million or $0.26 per fully diluted share YoY
--  Company reiterates Fiscal 2013 revenue guidance range of $40 million
    to $45 million

  
Management's Comments
 Mr. Weibing Lu, Chairman and Chief Executive
Officer of Skystar, commented, "The Company has achieved significant
milestones in preparing two of its manufacturing facilities to become
fully operational. The first facility based in Huxian is expected to
launch animal vaccine production once the Ministry of Agriculture
concludes its stage two GMP certification process in the third
quarter of fiscal year 2013. The second manufacturing facility in
Kunshan, which will manufacture probiotics is currently being
renovated. Probiotics production at this facility is expected to
begin in the fourth quarter of the fiscal year.  
"The first calendar quarter is normally the slowest for Skystar's
product sales mainly due to the celebrating of China's Lunar calendar
holidays in that period. Sales of Skystar's range of products in the
current first quarter have slowed beyond seasonal levels however;
this has been due to a variety of factors including the widely
publicized Swine Flu and Avian Flu outbreak in China. In addition,
while Skystar currently possesses over half of the required
production permits following GMP certification, the Company is still
awaiting approval for the remainder of such permits in order to make
full use of the newly GMP certified Huxian facility. As of current,
Skystar's remaining production permit applications are in various
stages of the approval process.  
"While the Government has effectively contained the Swine and Avian
Flu outbreaks, subsidies are already being distributed to farmers in
order to boost China's animal husbandry industry. These subsidies
will assist farmers in the replacement and rearing of animals lost
during the containment of the respective Swine and Avian Flu
outbreaks. In timing the needs of its customers, Skystar anticipates
that normal demand for its products is expected to come back later in
the year as public fear over protein consumption in China diminishes
and dissipates. By that time, Skystar expects to have the regulatory
approvals and manufacturing capability for increasing production
capacity of its products. The Company has already received several
product production permits associated with the Huxian animal
medication facility and expects more to be approved by the Ministry
of Agriculture in the near future. The Kunshan probiotics plant is
also scheduled to come online later in the year and will provide
additional incremental revenue. Skystar expects fiscal 2014 to be the
first normalized fiscal year for Skystar since 2011 when the Company
generated record revenues and had full production capacity of its
existing facilities," concluded Mr. Lu.  
Financial Summary
 For the three months ended March 31, 2013, the
Company had Revenues of roughly $5.5 million as compared to revenues
of $7.9 million for the three months ended March 31, 2012, a decrease
of $2.4 million or 30.2%.  
Cost of sales was $2.9 million for the three months ended March 31,
2013, as compared to $3.6 million for the three months ended March
31, 2012, a decrease of $0.7 million or 19.6%, as a result of
decreased sales of other Company's product lines except veterinary
medications.  
Gross profit was $2.6 million for the three months ended March 31,
2013, as compared to $4.3 million for the three months ended March
31, 2012, with gross margin of 47% as compared to 54% in the
comparable 2012 period.  
The decreased gross margins for the three months ended March 31, 2013
were mainly because the majority of the Company's revenue during the
three months came from less profitable veterinary medications product
line, while the relatively high profitable micro-organism and vaccine
product lines significantly reduced their production, and therefore
sales. 
Operating Expenses, Skystar's Research and Development were close to
nil for the three months ended March 31, 2013 primarily due to no
significant new R&D efforts being undertaken during the first quarter
of 2013. 
Selling expenses totaled $0.3 million for the three months ended
March 31, 2013 as compared to $0.7 million for the three months ended
March 31, 2012, a decrease of $0.4 million or 55.0%. This decrease is
mainly due to the drop of shipping and handling costs as the result
of reduced sales in the first quarter.  
General and administrative expenses totaled $1.2 million for the
three months ended March 31, 2013 as compared to $1.1 million for the
three months ended March 31, 2012, an increase of $0.1 million or
9.6%.  
Income from operations decreased 56.6% or $1.4 million to $1.1
million for first quarter fiscal 2013 as compared to $2.5 million in
the comparable fiscal 2013 period.  
Net income decreased 62.6% year over year to $0.7 million or $0.09
per fully diluted share, as compared to $1.9 million or $0.26 per
fully diluted share in the year ago period.  
Financial position as of March 31, 2013 Skystar had $4.0 million in
cash, current assets of $76.0 million and current liabilities of
$20.2 million, which resulted in approximately a net working capital
of $55.8 million.  
Mr. Lu concluded, "We expect that Fiscal 2013 will be an exciting
year for Skystar. Following the successful application of GMP
certifications for our various manufacturing plants, we anticipate
positioning ourselves to maximize the revenue generating potential of
the newly certified production facilities. We maintain full fiscal
year 2013 guidance which was previously announced to be in the range
of $40 to $45 million and expect to generate the majority of these
revenues in the second half of the year. We also expect that revenue
generation will be bolstered by the addition of several product
permits that have been submitted to the Ministry of Agriculture. The
product permits will allow Skystar to generate incremental revenue
that was not possible in previous quarters due to the GMP
recertification process of its manufacturing facilities. This view
also takes into consideration revenues from facilities that are in
the process of coming online following the GMP certification
process," concluded Mr. Lu.  
Conference Call Information
 The Company will host a conference call
on Thursday, May 16, 2013 to discuss its financial results for the
fiscal quarter ended March 31, 2013. Skystar's conference
 call will
begin promptly at 7:45 a.m. EDT to review fiscal first quarter 2013
financial and operational performance. Mr. Weibing Lu, Skystar's
chairman and chief executive officer, will host the call, which will
be webcast live.  
Webcast
 The webcast will be made available on the
investor relations section of the Skystar corporate website at
http://www.investorcalendar.com/IC/CEPage.asp?ID=170974.  
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 # 414186. Alternatively you
can listen to the replay online at
http://www.investorcalendar.com/IC/index.asp. 
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 275 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 ENDED MARCH 31, 2013 AND 2012             
                                 (Unaudited)                                
                                                                            
                                                                            
                                                      Three Months Ended    
                                                           March 31,        
                                                   ------------------------ 
                                                       2013         2012    
                                                   -----------  ----------- 
                                                                            
REVENUE, net                                       $ 5,530,741  $ 7,926,337 
                                                                            
COST OF REVENUE                                      2,930,886    3,643,658 
                                                   -----------  ----------- 
                                                                            
GROSS PROFIT                                         2,599,855    4,282,679 
                                                   -----------  ----------- 
                                                                            
OPERATING EXPENSES:                                                         
  Research and development costs                           461        3,654 
  Selling expenses                                     317,836      705,616 
  General and administrative expenses                1,211,273    1,105,435 
                                                   -----------  ----------- 
    Total operating expenses                         1,529,570    1,814,705 
                                                   -----------  ----------- 
                                                                            
INCOME FROM OPERATIONS                               1,070,285    2,467,974 
                                                                            
OTHER INCOME (EXPENSE):                                                     
  Other income (expense), net                             (187)      53,760 
  Interest (expense), net                              (40,547)    (153,612)
  Change in fair value of warrant/purchase option                           
   liability                                             4,466        5,600 
                                                   -----------  ----------- 
    Total other (expense), net                         (36,268)     (94,252)
                                                   -----------  ----------- 
                                                                            
INCOME BEFORE PROVISION FOR INCOME TAXES             1,034,017    2,373,722 
                                                                            
PROVISION FOR INCOME TAXES                             321,284      468,968 
                                                   -----------  ----------- 
                                                                            
NET INCOME                                             712,733    1,904,754 
                                                                            
OTHER COMPREHENSIVE INCOME:                                                 
  Foreign currency translation adjustment              550,883      558,757 
                                                   -----------  ----------- 
                                                                            
COMPREHENSIVE INCOME                               $ 1,263,616  $ 2,463,511 
                                                   ===========  =========== 
                                                                            
EARNINGS PER SHARE:                                                         
  Basic                                            $      0.09  $      0.26 
                                                   ===========  =========== 
  Diluted                                          $      0.09  $      0.26 
                                                   ===========  =========== 
                                                                            
WEIGHTED AVERAGE NUMBER OF COMMON SHARES:                                   
  Basic                                              7,613,712    7,210,256 
                                                   ===========  =========== 
  Diluted                                            7,613,712    7,210,256 
                                                   ===========  =========== 
                                                                            

 
                                                                            
                                                                            
             SKYSTAR BIO-PHARMACEUTICAL COMPANY AND SUBSIDIARIES            
                    CONDENSED CONSOLIDATED BALANCE SHEETS                   
                                                                            
                                                                            
                                                    March 31,               
                                                      2013      December 31,
                                  
                 (Unaudited)      2012    
                                                  ------------ -------------
                      ASSETS                                                
                                                                            
CURRENT ASSETS:                                                             
  Cash                                            $  3,979,494 $  11,321,848
  Accounts receivable, net of allowance for                                 
   doubtful accounts of $600,823 (Unaudited) and                            
   $247,269 as of March 31, 2013 and December 31,                           
   2012, respectively                               11,444,339    10,010,796
  Inventories                                       23,650,679    22,962,209
  Deposits, prepaid expenses and other                                      
   receivables                                       2,546,256     2,839,850
  Prepayments to suppliers                          33,284,834    23,438,735
  Loans receivable                                   1,084,945     1,078,827
                                                  ------------ -------------
    Total current assets                            75,990,547    71,652,265
                                                  ------------ -------------
                                                                            
PROPERTY, PLANT AND EQUIPMENT, NET                  28,733,056    28,867,816
                                                  ------------ -------------
                                                                            
CONSTRUCTION-IN-PROGRESS                             8,740,649     8,691,360
                                                  ------------ -------------
                                                                            
OTHER ASSETS:                                                               
  Long-term prepayments                              1,056,283     1,050,327
  Long-term prepayments for acquisitions               178,752       177,744
  Intangible assets, net                             5,289,021     5,319,831
                                                  ------------ -------------
  Total other assets                                 6,524,056     6,547,902
                                                  ------------ -------------
    Total assets                                  $119,988,308 $ 115,759,343
                                                  ============ =============
                                                                            
       LIABILITIES AND SHAREHOLDERS' EQUITY                                 
                                                                            
CURRENT LIABILITIES:                                                        
  Accounts payable                                $  5,065,400 $   4,017,530
  Other payable and accrued expenses                 3,901,488     4,374,047
  Short-term loans                                   6,862,800     4,443,600
  Deposits from customers                            1,658,365     1,621,061
  Taxes payable                                      1,672,657     1,950,757
  Due to related parties                             1,001,795       798,925
                                                  ------------ -------------
    Total current liabilities                       20,162,505    17,205,920
                                                  ------------ -------------
                                                                            
OTHER LIABILITIES:                                                          
  Long-term loan                                     1,276,800     1,269,600
  Deferred government grant                          1,069,320     1,063,290
  Purchase option liability                              1,134         5,600
                                                  ------------ -------------
  Total other liabilities                            2,347,254     2,338,490
                                                  ------------ -------------
    Total liabilities                               22,509,759    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 March 31, 2013 (Unaudited)                             
   and December 31, 2012                                 7,605         7,605
  Paid-in capital                                   37,021,085    37,021,085
  Statutory reserves                                 5,897,298     5,897,298
  Retained earnings                                 45,228,029    44,515,296
  Accumulated other comprehensive income             9,324,532     8,773,649
                                                  ------------ -------------
    Total shareholders' equity                      97,478,549    96,214,933
                                                  ------------ -------------
      Total liabilities and shareholders' equity  $119,988,308 $ 115,759,343
                                                  ============ =============
                                                                            
                                                                            
                                                                            
           SKYSTAR BIO-PHARMACEUTICAL COMPANY AND SUBSIDIARIES              
             CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS                
            FOR THE THREE MONTHS ENDED MARCH 31, 2013 AND 2012              
                               (Unaudited)                                  
                                                                            
                                                                            
                                                      Three months ended    
                                                           March 31,        
                                                   ------------------------ 
                                                       2013         2012    
                                                   -----------  ----------- 
CASH FLOWS FROM OPERATING ACTIVITIES:                                       
  Net income                                       $   712,733  $ 1,904,754 
  Adjustments to reconcile net income to net cash                           
   (used in) provided by operating activities:                              
      Depreciation                                     313,561      343,129 
      Amortization                                      60,872      100,373 
      Provision for doubtful accounts                  351,534       38,869 
      Common stock to be issued to related parties                          
       for compensation                                  4,340       40,020 
      Change in fair value of warrant/purchase                              
       option liability                                 (4,466)      (5,600)
    Change in operating assets and liabilities                              
      Accounts receivable           
                (1,725,889)  (2,415,647)
      Inventories                                     (557,269)     985,908 
      Deposits, prepaid expenses and other                                  
       receivables                                     292,476      335,498 
      Prepayments to suppliers                      (9,696,136)  (2,479,854)
      Accounts payable                               1,023,288      980,926 
      Other payables and accrued expenses             (339,030)     566,311 
      Repayment of government grants                  (159,320)           - 
      Deposits from customers                           28,061      199,329 
      Taxes payable                                   (288,655)   1,427,655 
                                                   -----------  ----------- 
  Net cash (used in) provided by operating                                  
   activities                                       (9,983,900)   2,021,671 
                                                   -----------  ----------- 
                                                                            
CASH FLOWS FROM INVESTING ACTIVITIES:                                       
    Loans receivables                                        -      (11,515)
    Purchases of plant and equipment                         -      (54,965)
    Payments on construction-in-progress                     -      (44,940)
                                                   -----------  ----------- 
  Net cash used in investing activities                      -     (111,420)
                                                   -----------  ----------- 
                                                                            
CASH FLOWS FROM FINANCING ACTIVITIES:                                       
    Proceeds from short-term loan                    4,779,600       63,520 
    Repayment of short-term loan                    (2,389,800)           - 
    Due to related parties                             201,325      326,061 
                                                   -----------  ----------- 
  Net cash provided by financing activities          2,591,125      389,581 
                                                   -----------  ----------- 
                                                                            
EFFECT OF EXCHANGE RATE CHANGES ON CASH                 50,421       37,784 
                                                   -----------  ----------- 
                                                                            
(DECREASE) INCREASE IN CASH                         (7,342,354)   2,337,616 
                                                                            
CASH, beginning of period                           11,321,848    7,048,968 
                                                   -----------  ----------- 
                                                                            
CASH, end of period                                $ 3,979,494  $ 9,386,584 
                                                   ===========  =========== 
                                                                            
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:                           
  Cash paid for interest                           $   181,426  $   152,583 
                                                   ===========  =========== 
  Cash paid for income taxes                       $         -  $         - 
                                                   ===========  =========== 
                                                                            
  Non-cash investing and financing activities                               
    Construction-in-progress transferred to                                 
     property, plant and equipment                 $         -  $     3,633 
                                                   ===========  =========== 
    Long-term prepayments transferred to                                    
     construction-in-progress                      $         -  $   333,480 
                                                   ===========  =========== 
                                                                            
                                                                            
                                                                            
             SKYSTAR BIO-PHARMACEUTICAL COMPANY AND SUBSIDIARIES            
          CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY         
                                 (UNAUDITED)                                
                                                           
                            Common stock                   
                        --------------------               
                                                Paid-in    
                           Shares    Amount     capital    
                        ----------- -------- ------------  
                                                           
BALANCE, January 1,                                        
 2013                     7,604,800 $  7,605 $ 37,021,085  
                                                           
  Foreign currency                                         
   translation                    -        -            -  
  Net income                      -        -            -  
                        ----------- -------- ------------  
                                                           
BALANCE, March 31, 2013   7,604,800 $  7,605 $ 37,021,085  
                        =========== ======== ============  
                                                           
                                                           
 
                                                                            
                            Retained earnings                               
                        -------------------------                           
                                                    Accumulated             
                         Statutory                     other                
                          reserves   Unrestricted  comprehensive    Total   
                                                      income                
                        ----------- ------------- -------------- -----------
                                                                            
BALANCE, January 1,                                                         
 2013                   $ 5,897,298 $  44,515,296 $    8,773,649 $96,214,933
                                                                            
  Foreign currency                                                          
   translation                    -             -        550,883     550,883
  Net income                      -       712,733              -     712,733
                        ----------- ------------- -------------- -----------
                                                                            
BALANCE, March 31, 2013 $ 5,897,298 $  45,228,029 $    9,324,532 $97,478,549
                        =========== ============= ============== ===========

 
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 r
esults
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 pass the
final stages of the GMP inspection for its Huxian Vaccine Facility,
to complete renovations at the Kunshan plant, timing of such
expectations and renovations, the Company's ability to ramp up its
production to the anticipated levels, the potential risks and public
and/or governmental response to variety of risks, including the Avian
Influenza, 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 unless
expressly required under the law, the Company is under no obligation
to revise any forward looking statements for any reason. 
Contacts: 
Skystar Bio-Pharmaceutical Company
Scott Cramer
Director - Director Corporate Development and U.S. Representative
(407) 645-4433 
Grayling  
Investor Relations
Christopher Chu
(646) 284-9426
christopher.chu@grayling.com 
 
 
Press spacebar to pause and continue. Press esc to stop.