Skystar Bio-Pharmaceutical Reports Second Quarter 2013 Results

Skystar Bio-Pharmaceutical Reports Second Quarter 2013 Results 
Quarterly Revenue of $11.3 Million; Net Income of $3.7 Million; $0.49
Diluted EPS 
XI'AN, CHINA -- (Marketwired) -- 08/14/13 --   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
reported unaudited second quarter fiscal year 2013 earnings, for the
period ended June 30, 2013.  
Second Quarter 2013 Highlights 


 
--  Revenue of $11.3 million, up 27.8% YoY
    --  Micro-organism products totaled $4.0 million, up 0.7% YoY
    --  Veterinary medicines totaled $6.3 million, up 155.9% YoY
    --  Feed additives totaled $0.5 million, a decrease of 59.4% YoY
    --  Veterinary vaccines totaled $0.5 million, a decrease of 56.5% YoY
--  Gross margin of 52.6% for the second quarter of fiscal 2013 as
    compared to 57.8% in the year ago period
--  Net income of $3.8 million or $0.49 per fully diluted share, compared
    with net income of $1.7 million or $0.23 per fully diluted share in
    the year ago period

  
First Half 2013 Financial Highlights 


 
--  First half fiscal 2013 revenue increases 0.4% YoY to $16.9 million
--  Gross margin of 50.7% for the first half of fiscal 2013 as compared to
    56.0% in the year ago period
--  Net income of $4.5 million or $0.59 per fully diluted share, compared
    with net income of $3.6 million or $0.48 per fully diluted share in
    the year ago period

  
Management Comments
 Mr. Weibing Lu, Skystar Bio-Pharmaceutical's
Chairman and Chief Executive Officer, commented, "Skystar is pleased
to report its strongest quarterly results in the last six reporting
periods. The results for this quarter were driven by a combination of
increased market demand and additional sales and marketing efforts.
This allowed us to take advantage of the increased manufacturing
capacity as a result of the Huxian and Jingzhou veterinary medication
facilities resuming operations."  
"Operationally, Skystar continues to receive more product
manufacturing permits from the government which has allowed sales of
veterinary medications in the current reporting period to grow 156%
year over year. Further, we still hav
e additional manufacturing
capacity available at the Company's Huxian and Jingzhou veterinary
medication facilities. Lastly, Skystar has applied for and is
awaiting governmental approval of more product manufacturing permits
and plans to utilize each permit as approval is received."  
"Stage two of the Company's veterinary vaccine GMP certification is
under way and currently on track as planned. Stage two GMP inspection
is expected to be completed by the end of third quarter fiscal 2013
and limited production runs will commence shortly thereafter. The
vaccine product line is expected to contribute roughly $3-$5 million
to Skystar's top line next year. Sales of the Company's feed
additives and pro-biotics line are also expected to increase as we
move forward with the Company's high selling season. Additionally,
Skystar's Kunshan facility is near completion and it is possible that
small scale production will launch by the end of the fiscal year."  
"Management is very excited to move into its strongest half of the
fiscal year and to share its results with investors. Skystar
continues to successfully implement its operational strategy, improve
its financial performance and expand its footprint with profitability
in mind. With 40% of Skystar's forecasted revenues earned in its
first half, the Company believes that it is well positioned to make
forecasted fiscal guidance for 2013, positioning itself for solid
revenue growth and expansion in fiscal 2014," concluded Mr. Lu.  
Financial Summary
 Skystar reported second quarter fiscal year 2013
revenues of $11.3 million as compared to revenues of $8.9 million for
the comparable year ago period, an increase of $2.4 million or 27.8%.
Overall sales volume increased as we begin to ramp up production and
make use of the Company's facilities now that our facilities have
resumed partial production. 
Cost of revenue, which consists of raw materials, packing material,
direct labor, and manufacturing overhead for our four product lines,
was $5.4 million for the three months ended June 30, 2013, as
compared to $3.7 million for the three months ended June 30, 2012, an
increase of $1.6 million or 43.5%, as a result of increased
veterinary medication sales. 
Gross profit was $6.0 million for the three months ended June 30,
2013, a 16.3% year over year increase as compared to $5.1 million for
the three months ended June 30, 2012. Gross margin for the period wa
s
52.6%, compared to 57.8% a year ago due to the majority of revenue
during the three months coming from less profitable veterinary
medications as we resume the veterinary medication production at
Skystar's Huxian facility. 
Operating Expenses 
Research and development costs totaled $93,000 for the three months
ended June 30, 2013 as compared to $331,000 for the three months
ended June 30, 2012, a decrease of $238,000 or 71.9%. The decrease
was primarily due to newly launched R&D projects of $481,000
undertaken during the second quarter of 2013 to develop vaccine to
prevent common fish skin disease which was offset against a
government grant for the research. 
Selling expenses totaled $629,000 for the three months ended June 30,
2013 as compared to $670,000 for the three months ended June 30,
2012, a decrease of $41,000 or 6.2%. This decrease is mainly due to
the drop of sales commission costs as the result of the new
commission structure to our sales personnel after the Huxian facility
resumed operation.  
General and administrative expenses totaled $689,000 for the three
months ended June 30, 2013 as compared to $1.8 million for the three
months ended June 30, 2012, a decrease of $1.1 million or 62.5%. The
higher G&A expense in 2012 was mainly due to the stock based
compensation expense of $1 million for the stock grants on May 4,
2012 to the Company's employees and members of the Board of
Dire
ctors. 
Income from operations increased 98.7% or $2.2 million to $4.5
million for second quarter fiscal 2013 as compared to $2.3 million in
the comparable fiscal 2012 period. 
Net income increased 120.8% year over year to $3.8 million or $0.49
per fully diluted share, as compared to $1.7 million or $0.23 per
fully diluted share in the year ago period. 
As of June 30, 2013, we had cash of $6.3 million. Our total current
assets were $80 million and Skystar's total current liabilities were
$21 million which resulted in a net working capital of $59 million. 
Fiscal 2013 Guidance 
We currently reiterate our fiscal 2013 guidance to be in the range of
$40 million to $45 million for the full year.  
Conference Call & Webcast Information 
The Company will host a conference call on Wednesday August 14, 2013
to discuss its financial results for the fiscal quarter ended June
30, 2013. Skystar's conference call will begin promptly at 6:00 p.m.
ET to review fiscal second 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 at:
http://www.investorcalendar.com/IC/CEPage.asp?ID=171457. 
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 # 419303. Alternatively you
can listen to the replay online at http://www.investorcalendar.com. 
To be added to the Company's email distribution for future news
releases, please send your request to skystar@grayling.com. 
About Skystar Bio-Pharmaceutical Company
 Skystar is a China-based
developer and distributor of veterinary healthcare and medical care
products. Skystar has four product lines (veterinary medicines,
micro-organisms, vaccines and feed additives) and over 284 products.
Skystar has formed strategic sales distribution networks covering 29
provinces throughout China. For additional information, please visit
http://www.skystarbio-pharmaceutical.com. 
Financial Tables Follow 


 
                                                                            
                                                                            
                                                                            
            SKYSTAR BIO-PHARMACEUTICAL COMPANY AND SUBSIDIARIES             
         CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME          
      FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2013 AND 2012      
                                (Unaudited)                                 
                                                                            
                            For Three Months Ended    For Six Months Ended  
                                   June 30,                 June 30,        
                           -----------------------  ----------------------- 
                               2013        2012         2013        2012    
                           -----------  ----------  ----------- ----------- 
                                                                            
REVENUE, NET               $11,335,145  $8,870,848  $16,865,886 $16,797,185 
                                                                            
COST OF REVENUE              5,377,824   3,746,938    8,308,710   7,390,596 
                           -----------  ----------  ----------- ----------- 
                                                                            
GROSS PROFIT                 5,957,321   5,123,910    8,557,176   9,406,589 
                           -----------  ----------  ----------- ----------- 
                                                                            
OPERATING EXPENSES:                                                         
Research and development        92,926     330,532       93,387     334,186 
Selling expenses               629,337     670,567      947,173   1,376,183 
General and administrative     688,810   1,834,280    1,900,083   2,939,715 
                           -----------  ----------  ----------- ----------- 
Total operating expenses     1,411,073   2,835,379    2,940,643   4,650,084 
                           -----------  ----------  ----------- ----------- 
                                                                            
INCOME FROM OPERATIONS       4,546,248   2,288,531    5,616,533   4,756,505 
                           -----------  ----------  ----------- ----------- 
                                                                            
OTHER INCOME (EXPENSE):                                                     
Other income (expense),                                                     
 net                            (3,662)      2,238       (3,849      55,998 
Interest (expense), net        (96,082)    (25,929)    (136,629    (179,541)
                                                                            
Change in fair value of                                                     
 warrant/purchase option                                                    
 liability                       1,134      16,800        5,600      22,400 
                           -----------  ----------  ----------- ----------- 
Total other (expense), net     (98,610)     (6,891)    (134,878    (101,143)
                           -----------  ----------  ----------- ----------- 
                                                                            
INCOME BEFORE PROVISION                                                     
 FOR INCOME TAXES            4,447,638   2,281,640    5,481,655   4,655,362 
                                                                            
PROVISION FOR INCOME TAXES     696,757     582,774    1,018,041   1,051,742 
                           -----------  ----------  ----------- ----------- 
                                                                            
NET INCOME                   3,750,881   1,698,866    4,463,614   3,603,620 
                                                                            
OTHER COMPREHENSIVE INCOME                                                  
                                                                            
Foreign currency                                                            
 translation adjustment      1,512,244     123,715    2,063,127     682,472 
                           -----------  ----------  ----------- ----------- 
                                                                            
COMPREHENSIVE INCOME       $ 5,263,125  $1,822,581  $6, 526,741 $ 4,286,092 
                           ===========  ==========  =========== =========== 
                                                                            
EARNINGS PER SHARE:                                                         
Basic                      $      0.49  $     0.23  $      0.59 $      0.48 
                           ===========  ==========  =========== =========== 
Diluted                    $      0.49  $     0.23  $      0.59 $      0.48 
                           ===========  ==========  =========== =========== 
                                                                            
WEIGHTED AVERAGE NUMBER OF                                                  
 COMMON SHARES:                                                             
Basic                        7,615,719   7,461,227    7,614,721   7,454,837 
                           ===========  ==========  =========== =========== 
Diluted                      7,615,719   7,461,227    7,614,721   7,454,837 
                           ===========  ==========  =========== =========== 
                                                                            
                                                                            
                                                                            
                                                                            
                                                                            
                                                                            
             SKYSTAR BIO-PHARMACEUTICAL COMPANY AND SUBSIDIARIES            
                    CONDENSED CONSOLIDATED BALANCE SHEETS                   
                                                                            
                 
                                    30-Jun-13  December 31,
                                                    (Unaudited)     2012    
                                                   ------------ ------------
                      ASSETS                                                
CURRENT ASSETS:                                                             
  Cash                                             $  6,312,367 $ 11,321,848
  Restricted cash                                        81,000            -
  Accounts receivable, net of allowance for                                 
   doubtful accounts of $552,764 and $247,269 as                            
   of June 30, 2013 (Unaudited) and December 31,                            
   2012, respectively                                11,932,235   10,010,796
  Inventories                                        26,500,125   22,962,209
  Deposits, prepaid expenses and other receivables    2,543,351    2,839,850
  Prepayments to suppliers                           32,360,468   23,438,735
  Loans receivable                                      194,400    1,078,827
                                                   ------------ ------------
    Total current assets                             79,923,946   71,652,265
                                                   ------------ ------------
                                                                            
PROPERTY, PLANT AND EQUIPMENT, NET                   28,848,808   28,867,816
                                                   ------------ ------------
                                                                            
CONSTRUCTION-IN-PROGRESS                              9,038,656    8,691,360
                                                   ------------ ------------
                                                                            
OTHER ASSETS:                                                               
  Long-term prepayments                               1,072,167    1,050,327
  Long-term prepayments for acquisitions                181,440      177,744
  Intangible assets, net                              5,306,659    5,319,831
                                                   ------------ ------------
    Total other assets                                6,560,266    6,547,902
                                                   ------------ ------------
      Total assets                                 $124,371,676 $115,759,343
                                                   ============ ============
                                                                            
       LIABILITIES AND SHAREHOLDERS' EQUITY                                 
CURRENT LIABILITIES:                                                        
  Accounts payable                                 $  1,551,941 $  4,017,530
  Other payables and accrued expenses                 4,448,667    4,374,047
  Short-term loans                                   10,530,000    4,443,600
  Deposits from customers                             2,012,453    1,621,061
  Taxes payable                                       1,379,353    1,950,757
  Due to related parties                              1,108,188      798,925
                                                   ------------ ------------
    Total current liabilities                        21,030,602   17,205,920
                                                   ------------ ------------
                                                                            
OTHER LIABILITIES:                                                          
  Long-term loan                                              -    1,269,600
  Deferred government grant                             599,400    1,063,290
  Purchase option liability                                   -        5,600
                                                   ------------ ------------
    Total other liabilities                             599,400    2,338,490
                                                   ------------ ------------
      Total liabilities                              21,630,002   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 June 30, 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                                  48,978,910   44,515,296
  Accumulated other comprehensive income             10,836,776    8,773,649
                                                   ------------ ------------
    Total shareholders' equity                      102,741,674   96,214,933
                                                   ------------ ------------
      Total liabilities and shareholders' equity   $124,371,676 $115,759,343
                                                   ============ ============
                                                                            
                                                                            
                                                                            
 SKYSTAR BIO-PHARMACEUTICAL COMPANY AND SUBSIDIARIES 
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
        FOR THE SIX MONTHS ENDED JUNE 30, 2013       
                     (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, June 30,                                         
 2013                  7,604,800 $      7,605 $ 37,021,085
                    ============ ============ ============
                                                          
                                                          
                                                          
 
                                                                            
                          Retained earnings                                 
                     ---------------------------                            
                                                   Accumulated              
                                                      other                 
                       Statutory                  comprehensive             
                        reserves    Unrestricted      income        Total   
                     ------------ -------------- -------------- ------------
BALANCE, January 1,                                                         
 2013                $  5,897,298 $   44,515,296 $    8,773,649 $ 96,214,933
Foreign currency                                                            
 translation                    -              -      2,063,127    2,063,127
Net income                      -      4,463,614              -    4,463,614
                     ------------ -------------- -------------- ------------
                                                                            
BALANCE, June 30,                                                           
 2013                $  5,897,298 $   48,978,910 $   10,836,776 $102,741,674
                     ============ ============== ============== ============
                                                                            
                                                                            
                                                                            
            SKYSTAR BIO-PHARMACEUTICAL COMPANY AND SUBSIDIARIES             
              CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS               
              FOR THE SIX MONTHS ENDED JUNE 30, 2013 AND 2012               
                                (Unaudited)                                 
                                                                            
                                                  Six months ended June 30, 
                                                 -------------------------- 
                                                     2013          2012     
                                                 ------------  ------------ 
CASH FLOWS FROM OPERATING ACTIVITIES:                                       
Net income                                       $  4,463,614  $  3,603,620 
Adjustments to reconcile net income to net cash                             
 provided by (used in) operating activities:                                
  Depreciation                                        630,522       635,856 
  Amortization                                        122,478       200,570 
  Provision for doubtful accounts                     297,164       101,246 
  Change in fair value of warrant/purchase                                  
   option liability                                    (5,600)      (22,400)
  Loss on sale of office equipment                      1,740             - 
  Common stock to be issued to related parties                              
   for compensation                                     8,680        56,817 
  Common stock issued under 2010 stock incentive                            
   plan                                                     -       981,094 
Change in operating assets and liabilities                                  
  Accounts receivable                              (1,992,249)   (7,381,238)
  Inventories                                      (3,027,946)    1,678,678 
  Deposits, prepaid expenses and other                                      
   receivables                                        332,707       649,485 
  Prepayments to supppliers                        (8,344,799)   (7,121,001)
  Accounts payable                                 (2,675,933)      1614377 
  Other payables and accrued expenses                 144,475        99,033 
  Deposits from customers                             353,886       (38,170)
  Taxes payable                                      (605,471)    2,778,594 
  Deferred government grants                         (641,120)     (317,320)
 
                                                ------------  ------------ 
  Net cash used in operating activities           (10,937,852)   (2,480,759)
                                                 ------------  ------------ 
                                                                            
CASH FLOWS FROM INVESTING ACTIVITIES:                                       
Payments of long-term prepayments                           -      (349,464)
Refund of long-term prepayments                             -       475,980 
Loan to third parties                                       -    (1,942,963)
Repayment of loans from third parties                 897,232             - 
Placement of restricted cash                          (80,140)            - 
Purchases of property, plant and equipment             (4,008)     (127,531)
Proceeds from sale of plant and equipment                 160             - 
Payments on construction-in-progress                  (10,931)      (79,806)
                                                 ------------  ------------ 
  Net cash (used in) provided by investing                                  
   activities                                         802,313    (2,023,784)
                                                 ------------  ------------ 
                                                                            
CASH FLOWS FROM FINANCING ACTIVITIES:                                       
Proceeds from short-term loans                      8,815,400        63,464 
Repayment of short-term loans                      (2,885,040)     (666,372)
Repayment of long-term loan                        (1,282,240)            - 
Due to related parties                                303,328       280,901 
                                                 ------------  ------------ 
  Net cash (used in) provided by financing                                  
   activities                                       4,951,448      (322,007)
                                                 ------------  ------------ 
                                                                            
EFFECT OF EXCHANGE RATE CHANGES ON CASH               174,610       119,563 
                                                 ------------  ------------ 
                                                                            
DECREASE IN CASH                                   (5,009,481)   (4,706,987)
                                                                            
CASH, beginning of period                          11,321,848     7,048,968 
                                                 ------------  ------------ 
                                                                            
CASH, end of period                              $  6,312,367  $  2,341,981 
                                                 ============  ============ 
                                                                            
SUPPLEMENTAL DISCLOSURE OF CASH FLOW                                        
 INFORMATION:                                                               
Cash paid for interest                           $    304,766  $    309,010 
                                                 ============  ============ 
Cash paid for income taxes                       $    328,574  $     88,054 
                                                 ============  ============ 
Non-cash investing and financing activities                                 
Long-term prepayment transferred to                                         
 construction-in-progress                        $          -  $    666,372 
                                                 ============  ============ 
Construction-in-progress transferred to                                     
 property, plant and equipment                   $          -  $      3,630 
                                                 ============  ============ 
Shares issued to settle payables to related                                 
 parties                                         $          -  $    199,239 
                                                 ============  ============ 

 
Safe Harbor Statement under the Private Securities Litigation Reform
Act of 1995
 Certain of the statements made in the press release
constitute forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. These statements
can be identified by the use of forward-looking terminology such as
"believe," "expect," "may," "will," "should," "project," "plan,"
"seek," "intend," or "anticipate" or the negative thereof or
comparable terminology. Such statements typically involve risks and
uncertainties, including, among others, the Company's ability to
realize the expected sales, to add planned manufacturing capacities,
to commercialize on the business and opportunities resulting from
additional government permits, 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,
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 and U.S. Representative 
(407) 645-4433  
Grayling  
Investor Relations 
Christopher Chu 
(646) 284-9426 
christopher.chu@grayling.com 
 
 
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