XI'AN, CHINA--(Marketwire - May 23, 2011) - 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 first quarter fiscal year 2011 earnings, for the period ended March 31, 2011.
First Quarter 2011 Highlights
-- Revenue increases 46% YoY to $7.0 million -- Veterinary vaccines totaled $0.3 million, up 30% YoY -- Veterinary medicines totaled $4.9 million, up 52% YoY -- Feed additives totaled $0.3 million, up 38% YoY -- Pro-biotic micro-organism products totaled $1.6 million, up 32% YoY -- Gross Profit $3.6 million up 39% for the first three months of fiscal 2011 YoY -- Gross Margin of 50% for the first three months of fiscal 2011, compared to 53% in the prior 2010 period -- Net Income $1.9 million or $0.27 per fully diluted share, compared with $1.1 million or $0.15 per fully diluted share in the year ago period -- Company reiterates Fiscal 2011 revenue guidance range of $60.0 million to $63.0 million
The Company notes that while the first quarter of the fiscal year is historically Skystar's slowest quarter due to the celebration of the Chinese Lunar New Year, we believe that Skystar has momentum by its side bolstered by the support of China's changing agricultural policies to standardize and industrialize its agricultural and animal husbandry industries.
As recently as April 2011, Yu Kangzhen, Chief Veterinary Officer of China, in giving a keynote speech stated the Ministry of Agriculture's (MOA) supportive stance towards 'Accelerating development of modern agriculture including efforts to develop specialized, standardized, large-scale and intensive agricultural production and operations for China.' Mr. Yu also commented that, 'It is necessary to give high priority to the expansion of standardized large-scale animal farming.' Skystar believes that its own initiatives to seek out and develop acquisitions, new products, and manufacturing expansion is in line with the modernization of China's agricultural and animal husbandry infrastructure needs.
Management's Comments
Mr. Weibing Lu, Chairman and Chief Executive Officer of Skystar, commented, "We are very pleased to deliver strong results for the start of the fiscal year 2011. Since Skystar's U.S. debut in 2006, we have maintained that product niche, manufacturing capacity and product distribution hold the keys to Skystar's success. The goals of Skystar's business plan and capital markets activity has been to develop and grow these initiatives. To date, Skystar has succeeded in its goals while delivering compounded annual revenue growth of 48% with profitability in mind.
"Part of the MOA's sweeping regulatory changes include new GMP certification standards for vaccine manufacturers, with this in mind, we expect Skystar's new expanded vaccine facility to receive GMP certification by the third quarter of fiscal 2011. The delay is due to putting the new GMP certification standards into effect in addition to the MOA's recent initiatives targeting the general standardization and safety of food production.
"Skystar believes that cash generated from ongoing operations, existing lines of credit and paid-up inventory of raw materials are adequate to fund ongoing operations and the Company's efforts towards GMP certification of the expanded vaccine facility in addition to finalizing the Company's Hubei acquisition which is expected to close before the end of the first half," concluded Mr. Lu.
Financial Summary
Gross profit for first quarter 2011 was $3.6 million, up 39% from first quarter 2010. Gross margin for the period was 50%, a slight decrease from historical year over year comparables.
Operating expenses for first quarter 2010 were $2.0 million, or 28% of total revenue, compared with $0.8 million or 17% of total revenue in the year ago period. Selling expenses, which consist of commissions, advertising and promotion expenses, freight charges, and salaries, totaled $0.4 million for the three months ended March 31, 2011 as compared to $0.1 million year over year, an increase of approximately 115.9%. This increase is a result of increased sales between the two periods and an increase in sales staff. General and administrative expenses totaled $1.3 million for the three months ended March 31, 2011, as compared to $0.6 million for the three months ended March 31, 2010, an increase of approximately 109%. General and administrative expenses for our Chinese operating entities increased due to expanded operations and asset acquisitions related to our Kunshan and Jingzhou subsidiaries.
Research and development (R&D) costs was $0.3 million, or roughly 4% of revenue in first quarter 2010, up from $0.04 million, or less than 1% of revenue during first quarter 2010. The change in R&D expense related to the unusually low cost base in the previous first quarter when there were no significant R&D expenditures at the time.
Income from operations was $1.6 million in the first quarter of fiscal year 2011, compared with $1.7 million in the same quarter a year ago, and operating margin decreased to 23% from 36% in the same period a year ago.
Net income for the first quarter of 2011 was $1.9 million, or $0.27 per fully diluted share. This compares to net income of $1.0 million, or $0.16 per fully diluted share in the same quarter of 2010.
As of March 31, 2010, Skystar had approximately $7.4 million in cash and restricted cash, current assets of $49.1 million and current liabilities of $10.9 million.
Outlook
The Company reiterates Fiscal year 2011 revenue guidance to be in the range of $60 million to $63 million for the full year.
Conference Call & Webcast Information
Skystar will host a conference call at 7:45 a.m. ET on Tuesday, May 24, 2011 to review the Company's first quarter financial and operational performance. Mr. Weibing Lu, Skystar Bio-Pharmaceutical chairman and chief executive officer, will host the call, which will be webcast live.
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. Telephone access to the conference call will also be available in North America by dialing +1 (877) 407-9210 or internationally by dialing +1 (201) 689-8049.
An audio replay of the conference call will be available approximately two hours following the conclusion of the call and for the following 30 day period. To access the replay in North America, dial +1 (877) 660-6853 or, when calling internationally, dial +1 (201) 612-7415, using replay account code # 286 and conference ID # 372960. An archived replay of the conference webcast will also be available on investor relations section of the Skystar corporate website at http://www.skystarbio-pharmaceutical.com.
To be added to the Company's email distribution for future news releases, please send your request to skystar@grayling.com.
About Skystar Bio-Pharmaceutical Company
Skystar is a China-based developer and distributor of veterinary healthcare and medical care products. Skystar has four product lines (veterinary medicines, micro-organisms, vaccines and feed additives) and 256 products. Skystar has formed strategic sales distribution networks covering 29 provinces throughout China. For additional information, please visit http://www.skystarbio-pharmaceutical.com.
SKYSTAR BIO-PHARMACEUTICAL COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME
For Three Months Ended
March 31,
------------------------
2011 2010
----------- -----------
REVENUE, net $ 7,086,954 $ 4,869,243
COST OF REVENUE 3,491,346 2,291,219
----------- -----------
GROSS PROFIT 3,595,608 2,578,024
----------- -----------
OPERATING EXPENSES:
Research and development 287,472 43,995
Selling expenses 369,404 171,134
General and administrative 1,294,798 619,550
----------- -----------
Total operating expenses 1,951,674 834,679
----------- -----------
INCOME FROM OPERATIONS 1,643,934 1,743,345
----------- -----------
OTHER INCOME:
Other income (expense), net 182 417
Interest income (expense), net 29,672 (4,816)
Change in fair value of warrants 735,494 (317,380)
----------- -----------
Total other expense, net 765,348 (321,779)
----------- -----------
INCOME BEFORE PROVISION FOR INCOME TAXES 2,409,282 1,421,566
PROVISION FOR INCOME TAXES 477,450 325,319
----------- -----------
NET INCOME 1,931,832 1,096,247
OTHER COMPREHENSIVE INCOME (LOSS):
Foreign currency translation adjustment 465,593 (40,816)
----------- -----------
COMPREHENSIVE INCOME $ 2,397,425 $ 1,055,431
=========== ===========
EARNINGS PER SHARE:
Basic $ 0.27 $ 0.16
=========== ===========
Diluted $ 0.27 $ 0.15
=========== ===========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES:
Basic 7,166,919 7,061,530
=========== ===========
Diluted 7,179,309 7,140,140
=========== ===========
SKYSTAR BIO-PHARMACEUTICAL COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
March 31, December 31,
2011 2010
------------ ------------
CURRENT ASSETS:
Cash $ 7,403,389 $ 5,887,831
Accounts receivable, net of allowance for
doubtful accounts of $341,266 (Unaudited)
and $339,031 as of March 31, 2011 and
December 31, 2010, respectively 5,770,607 4,977,850
Inventories 14,099,464 7,202,223
Deposits and prepaid expenses 18,631,564 17,074,000
Loans receivable 458,100 8,040,100
Other receivables 2,735,617 1,558,775
------------ ------------
Total current assets 49,098,741 44,740,779
------------ ------------
PLANT AND EQUIPMENT, NET 22,450,965 22,613,113
CONSTRUCTION-IN-PROGRESS 2,660,880 1,590,720
OTHER ASSETS:
Long-term prepayments 1,493,794 1,454,226
Long-term prepayments for acquisitions 4,838,035 4,806,352
Intangible assets, net 5,890,246 6,043,941
------------ ------------
Total other assets 12,222,075 12,304,519
------------ ------------
Total assets $ 86,432,661 $ 81,249,131
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 401,132 $ 201,850
Other payable and accrued expenses 2,189,747 1,845,051
Short-term loans 4,307,133 3,025,884
Deposits from customers 1,283,376 1,260,030
Taxes payable 2,326,549 749,836
Shares to be issued to related parties 79,575 53,050
Due to related parties 281,200 217,912
------------ ------------
Total current liabilities 10,868,712 7,353,613
------------ ------------
OTHER LIABILITIES:
Deferred government grant 992,550 986,050
Warrant liability 684,145 1,419,639
------------ ------------
Total other liabilities 1,676,695 2,405,689
------------ ------------
Total liabilities 12,545,407 9,759,302
------------ ------------
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, 7,161,919 and 6,989,640
shares issued and outstanding as of December
31, 2010 and December 31, 2009, respectively 7,162 7,162
Paid-in capital 35,784,378 35,784,378
Statutory reserves 5,695,236 5,695,236
Retained earnings 26,779,122 24,847,290
Accumulated other comprehensive income 5,621,356 5,155,763
------------ ------------
Total shareholders' equity 73,887,254 71,489,829
------------ ------------
Total liabilities and shareholders' equity $ 86,432,661 $ 81,249,131
============ ============
SKYSTAR BIO-PHARMACEUTICAL COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Common stock
----------------------- Paid-in
Shares Amount capital
----------- ----------- -----------
BALANCE, December 31, 2010 7,161,919 $ 7,162 $35,784,378
Foreign currency
translation
Net income
----------- ----------- -----------
BALANCE, March 31, 2011 7,161,919 $ 7,162 $35,784,378
=========== =========== ===========
Retained earnings Accumulated
----------------------- other
Statutory comprehensive
reserves Unrestricted income Total
----------- ----------- ----------- -----------
BALANCE, December 31, 2010 $ 5,695,236 $24,847,290 $ 5,155,763 $71,489,829
Foreign currency
translation 465,593 465,593
Net income 1,931,832 1,931,832
----------- ----------- ----------- -----------
BALANCE, March 31, 2011 $ 5,695,236 $26,779,122 $ 5,621,356 $73,887,254
=========== =========== =========== ===========
SKYSTAR BIO-PHARMACEUTICAL COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2011 AND 2010
Three months ended
March 31,
------------------------
2011 2010
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,931,832 $ 1,096,247
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 332,428 123,484
Amortization 230,922 91,370
Common stock issued for services - 16,245
Common stock to be issued to related parties
for compensation - 27,025
Change in fair value of warrant liability (735,494) 317,380
Change in operating assets and liabilities
Accounts receivable (757,356) 935,790
Inventories (6,826,437) (921,558)
Deposits and prepaid expenses (1,440,749) (272,640)
Other receivables (1,162,594) (81,901)
Accounts payable 197,277 123,423
Accrued expenses 470,501 (223,979)
Deposits from customers 14,989 573,897
Taxes payable 1,566,418 102,941
Other payables (110,052) 1,233
----------- -----------
Net cash (used in) provided by operating
activities (6,288,315) 1,908,957
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments of long-term prepayments (451,722) -
Prepayment for potential acquisition - (5,499,375)
Collection of loans to third parties 7,609,000 -
Purchases of intangible assets (38,045) -
Purchases of plant and equipment (22,275) (1,451,016)
Payments on construction-in-progress (634,222) (404,990)
----------- -----------
Net cash provided by (used in) investing
activities 6,462,736 (7,355,381)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short-term loans 1,257,007 -
Repayment for short-term loans - (219,975)
Due (from) to related parties 62,834 (78,269)
----------- -----------
Net cash provided by (used in) financing
activities 1,319,841 (298,244)
----------- -----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH 21,296 (43,315)
----------- -----------
INCREASE (DECREASE) IN CASH 1,515,558 (5,787,983)
CASH, beginning 5,887,831 11,699,398
----------- -----------
CASH, ending $ 7,403,389 $ 5,911,415
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest $ 54,409 $ 5,210
=========== ===========
Cash paid for income taxes $ - $ -
=========== ===========
Non-cash investing and financing activities
Long-term prepayment transferred to
construction-in-progress $ 421,843 $ -
=========== ===========
Long-term prepayment transferred to property,
plant and equipment - 439,777
=========== ===========
Construction-in-progress transferred to
property, plant and equipment - 52,463
=========== ===========
Cashless exercise of warrants $ - $ 1,345,496
=========== ===========
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.
Contact Information:
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