Fourth Quarter 2009 Highlights
-- Revenue increases 31% YoY to $10.9 million
-- Veterinary vaccines totaled $0.4 million, up 33% YoY
-- Veterinary medicines totaled $7.9 million, up 29% YoY
-- Feed additives totaled $0.4 million, up 1% YoY
-- Micro-organism products totaled $2.2 million, up 46% YoY
-- Gross margin increased from 46% for the three months ending
December 31, 2008 to 50% for the three months ended December 31, 2009
-- Adjusted net income increased 88% to 3.1 million or $0.44 per basic
share, compared with $1.7 million or $0.44 per basic share in the
fourth quarter of 2008 (1)(2)
-- 2 potential acquisition targets identified
Fiscal Year 2009 Highlights
-- Revenues totaled $33.8 million, up 32% YoY
-- Veterinary vaccines totaled $1.4 million, up 44% YoY
-- Veterinary medicines totaled $23.0 million, up 31% YoY
-- Feed additives totaled $1.4 million, up 19% YoY
-- Micro-organism products totaled $8.0 million, up 37% YoY
-- Gross margin was 51% in line with the year ended December 31, 2008
margin
-- Adjusted net income increased 46% to 9.7 million or $1.81 per basic
share, compared with $6.6 million or $1.82 per basic share during the
year ended December 31, 2008 (1)(2)
(1) Net income applicable to common shares for the fourth quarter of 2008
and year ended December 31, 2008 has been restated to reflect the
two-for-one forward split effectuated on November 16, 2009 of the
company's common stock and 10 for 1 reverse split effectuated on
May 19, 2009
(2) Adjusted net income is a non-GAAP measurement that the Company uses as
a metric to provide information about its operating trends and is an
important metric in evaluating its business. Skystar defines adjusted
net income as net income before non-cash charges of benefits incurred
in the change of the fair value of the Company's warrants under
EITF 07-5 and the non-cash charges incurred during 2008 relating to
the conversion of the remaining debt and certain warrants from the
Company's February 2007 offering.
Mr. Weibing Lu, Skystar Bio-Pharmaceutical's chairman and chief executive
officer, commented, "Our mission remains to build long term shareholder
value by positioning Skystar as a leader in China's rapidly growing animal
health industry. Fiscal 2009 proved to be a remarkable year for Skystar as
the Company successfully completed a $21.0 million capital raise and
transitioned onto the Nasdaq Capital Market. We are continuing towards our
goal of expanding the Company's manufacturing capabilities, funding
research & development and sourcing potential acquisitions while
maintaining profitability and consistent revenue growth for our
shareholders."
"During 2009, Skystar launched over 40 products. Our four main product
lines are comprised of: veterinary vaccines, veterinary medicines,
micro-organisms and feed additives which represent a complete approach to
managing the animal husbandry needs of our customer base. Currently, our
customer base includes government entities and livestock farmers which we
sell to directly and through distributors. Our products include but are not
limited to vitamin supplements, antibiotics and anti-parasitic de-wormers
that are economically packaged for ease of use by the typical small-scale
producer of farmed poultry and livestock that we sell to."
"Skystar has completed the building of its new micro-organism facility and
moves forward in the building of its new vaccine manufacturing plant which
is expected to be completed in the first half of fiscal 2010. Demand for
Skystar's products currently outweigh supply, and our recently completed
micro-organism facility, as well as the new vaccine manufacturing facility
being constructed and certified in accordance with GMP standards, will
propel Skystar into a new era of growth. As previously announced, global
demand for seafood is growing, and we believe that our revised blueprint
for the vaccine manufacturing facility accommodating a separate
manufacturing line for the production of aquaculture (fish-farming)
products will contribute $8 to $15 million annually within three to five
years. We still anticipate our total 2010 revenues to be between $44 and
$46 million with a gross margin between 48% and 52%. Our revenue guidance
does not include any additional revenue that would result from the
completion of acquisitions."
"As of December 31, 2009, Skystar has made deposits for 2 potential
acquisitions for a total deposit amount of $6,802,704 (RMB 46,400,000).
Due diligence of these targets are currently under way. We anticipate that
these acquisitions would be treated as asset purchases. The acquisition
targets are being reviewed under confidentiality agreements; however, we
note that an appraisal report was obtained in January 2010 for one of the
targets and we expect to complete our due diligence by June 2010. The
targets in question were selected because of the ability to achieve GMP
certifications quickly," concluded Mr. Lu.
Key Fiscal 2009 Business Highlights
-- In June of 2009 the Company commenced trading on the Nasdaq Capital
Market
-- Skystar raised a gross amount of $21.0 million via registered follow-on
offering; use of proceeds to go towards research and development,
accretive acquisitions, CAPEX for new manufacturing facility and
working capital
-- Commenced pre-production of field trials for Met-Enk to boost immune
system and treat viral diseases in livestock
-- Commenced manufacturing and marketing of SkySwing series of poultry
products
-- Awarded High-Technology Enterprise certificate by Shaanxi Province
Ministry of Science and Technology, Shaanxi Province Ministry of
Finance and Shaanxi Province State Administration of Taxation,
extending our preferential tax treatment of 15%.
-- Secured two local government contracts in Hubei and Yunnan provinces
for Praziquantel tablets, an anti-parasitic for the treatment and
prevention of Schistosomiasis in livestock
-- Expanded micro-organism product line with three new products
-- Gained exclusive rights to sell and market aquaculture vaccines
Skystar's revenue for the fourth quarter 2009 was $10.9 million, up 31%
from fourth quarter 2008.
Gross profit for fourth quarter 2009 was $5.4 million, up 40% from fourth
quarter 2008. Gross margin for the period was 50%, in line with historical
year over year comparables.
Operating expenses for fourth quarter 2009 were $1.6 million, or 15% of
total revenue, compared with $2.0 million, or 23% of total revenue for
fourth quarter 2008.
Research and development (R&D) costs increased to $0.3 million, or 3% of
revenue in fourth quarter 2009, up from 0.2 million, or 2% of revenue
during fourth quarter 2008. Skystar continues to anticipate that its
research and development costs will increase in future periods as it
invests in improvement of existing products and development of new products
and product lines.
Selling expenses totaled $0.7 million, or 7% of revenue, for fourth quarter
2009, compared with $0.3 million, or 4% of revenue, in fourth quarter 2008.
General and administrative expenses were $0.6 million, or 7% of revenue, in
fourth quarter 2009, compared with $1.4 million, or 17% of revenue, in
fourth quarter 2008.
Operating income increased by 96% year over year to $3.8 million in the
fourth quarter of fiscal year 2009, compared with $2.0 million in the same
quarter a year ago, and operating margin increased to 34% from 23% in the
fourth quarter of 2008.
Net income for the fourth quarter of 2009 was $2.6 million, or $0.37 per
basic share. This compares to a net income of $1.6 million, or $0.44 per
basic share in the same quarter of 2008. Skystar's adjusted net income for
the fourth quarter of 2009 was $3.1 million, or $0.44 per basic share,
compared with $1.6 million, or $0.44 per basic share, in the fourth quarter
of 2008 (See "About Non-GAAP Financial Measures" toward the end of this
release.)
Skystar reported revenues of $33.8 million for the full fiscal 2009 year, a
32% increase compared to the $25.6 million in revenues reported for the
full fiscal 2008 year. Gross profit for the full fiscal 2009 year was $17.3
million, or 51% of revenues.
Net income for the 2009 full fiscal year was $8.9 million, or $1.62 per
diluted share, compared to net income of $5.6 million, or $1.53 per diluted
share, for the full 2008 fiscal year. Skystar's adjusted net income for
the year ended December 31, 2009 was $9.7 million, or $1.81 per basic
share, compared with $6.6 million or $1.82 per basic share for the year
ended December 31, 2008. (See "About Non-GAAP Financial Measures" toward
the end of this release.)
As of December 31, 2009, Skystar had approximately $11.7 million in cash
and restricted cash, current assets of $32.5 million and current
liabilities of $4.1 million.
2010 Outlook
The first half of the year is seasonally slower for Skystar; as such,
management believes that the Company will be able to provide a more
accurate shareholder update later in the year. Presently, Skystar
anticipates delivering top line revenue in the range of $44 to $46 million
with a gross margin of 48% to 52% for 2010.
CONFERENCE CALL & WEBCAST INFORMATION
Following the distribution of the fourth quarter and fiscal year 2009
financial results, Skystar will host a conference call at 8:00 a.m. ET to
review the Company's fourth quarter and full fiscal year 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.
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 # 348085. An archived replay of the conference
webcast will also be available on investor relations section of the Skystar
corporate website at http://www.skystarbio-pharmaceutical.com.
To be added to the Company's email distribution for future news releases,
please send your request to skystar@grayling.com.
About Skystar Bio-Pharmaceutical Company
Skystar is a China-based developer and distributor of veterinary healthcare
and medical care products. Skystar has four product lines (veterinary
medicines, micro-organisms, vaccines and feed additives) and over 170
products. Skystar has formed strategic sales distribution networks covering
29 provinces throughout China. For additional information, please visit
http://www.skystarbio-pharmaceutical.com.
About Non-GAAP Financial Measures
This press release contains non-GAAP financial measures for the change in
the fair value of the Company's warrants under EITF 07-5. The Company
believes that these non-GAAP financial measures are useful to investors
because they exclude non-cash charges that our management excludes when it
internally evaluates the performance of the Company's business and makes
operating decisions, including internal budgeting, and performance
measurement, because these measures provide a consistent method of
comparison to historical periods. Moreover, management believes these
non-GAAP measures reflect the essential operating activities of Skystar.
Accordingly, management excludes the change in the fair value of the
Company's warrants under EITF 07-5 when making operational decisions. The
Company believes that providing the non-GAAP measures that management uses
to its investors is useful to investors for a number of reasons. The
non-GAAP measures provide a consistent basis for investors to understand
the Company's financial performance in comparison to historical periods. In
addition, it allows investors to evaluate the Company's performance using
the same methodology and information as that used by our management.
Non-GAAP measures are subject to inherent limitations because they do not
include all of the expenses included under GAAP and because they involve
the exercise of judgment of which charges are excluded from the non-GAAP
financial measure. However, our management compensates for these
limitations by providing the relevant disclosure of the items excluded.
Financial Tables Follow
The following table provides the non-GAAP financial measure and the related
GAAP measure and provides a reconciliation of the non-GAAP measure to the
equivalent GAAP measure.
Adjusted Net income
Three Three
months months Year Year
ended ended ended ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
2009 2008 2009 2008
--------- --------- --------- ---------
GAAP Net Income 2,556,751 1,639,873 8,851,932 5,596,183
GAAP Basic Earnings Per Share 0.37 0.44 1.65 1.53
Additions
Change in fair value of warrants
(2009) 519,113 - 868,445 -
Amortization of deferred financing
costs (2008) - - - 101,815
Amortizaiton of deferred discount
on debentures (2008) - - - 680,446
Inducement cost for debentures
converted (2008) - - 257,775
--------- --------- --------- ---------
Total additions 519,113 - 868,445 1,040,036
Non-GAAP Net Income 3,075,864 1,639,873 9,720,377 6,636,219
Non GAAP Basic Earnings Per Share 0.44 0.44 1.81 1.82
Shares used in computing net income
per basic share 6,981,094 3,732,045 5,374,452 3,645,746
SKYSTAR BIO-PHARMACEUTICAL COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME
Years ended December 31,
--------------------------
2009 2008
------------ ------------
REVENUE, NET $ 33,778,305 $ 25,584,446
COST OF REVENUE 16,520,989 12,808,896
------------ ------------
GROSS PROFIT 17,257,316 12,775,550
------------ ------------
OPERATING EXPENSES:
Research and development 1,167,937 549,236
Selling expenses 1,928,441 1,381,807
General and administrative 2,466,470 2,663,520
------------ ------------
Total operating expenses 5,562,848 4,594,563
------------ ------------
INCOME FROM OPERATIONS 11,694,468 8,180,987
------------ ------------
OTHER INCOME (EXPENSE):
Other income (expense), net 117,873 30,906
Interest income (expense), net (62,590) (329,167)
Inducement cost for debentures converted - (756,855)
Change in fair value of warrants (868,445) -
------------ ------------
Total other expense, net (813,162) (1,055,116)
------------ ------------
INCOME BEFORE PROVISION FOR INCOME TAXES 10,881,306 7,125,871
PROVISION FOR INCOME TAXES 2,029,374 1,529,688
------------ ------------
NET INCOME 8,851,932 5,596,183
OTHER COMPREHENSIVE (LOSS) INCOME:
Foreign currency translation adjustment 13,914 1,415,005
------------ ------------
COMPREHENSIVE INCOME $ 8,865,846 $ 7,011,188
============ ============
EARNINGS PER SHARE:
Basic $ 1.65 $ 1.53
============ ============
Diluted $ 1.62 $ 1.53
============ ============
WEIGHTED AVERAGE NUMBER OF COMMON SHARES:
Basic 5,374,452 3,645,746
============ ============
Diluted 5,459,528 3,649,396
============ ============
SKYSTAR BIO-PHARMACEUTICAL COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, December 31,
ASSETS 2009 2008
------------- -------------
CURRENT ASSETS:
Cash $ 11,699,398 $ 576,409
Restricted cash - 80,885
Short-term investments - 352,080
Accounts receivable, net of allowance for
doubtful accounts of $327,857 and
$327,857 as of December 31, 2009 and 2008,
respectively 4,383,187 2,424,102
Inventories 4,074,645 3,086,060
Deposits and prepaid expenses 11,900,314 4,878,851
Loans receivable - 295,087
Other receivables 490,712 85,099
------------- -------------
Total current assets 32,548,256 11,778,573
------------- -------------
PLANT AND EQUIPMENT, NET 8,829,058 7,413,689
CONSTRUCTION-IN-PROGRESS 9,389,120 6,516,630
OTHER ASSETS:
Long-term prepayments 7,980,307 5,207,117
Intangible assets, net 1,860,172 899,529
------------- -------------
Total other assets 9,840,479 6,106,646
------------- -------------
Total assets $ 60,606,913 $ 31,815,538
============= =============
LIABILITIES AND CHANGES IN EQUITY
CURRENT LIABILITIES:
Accounts payable $ 297,567 $ 547,430
Other payable and accrued expenses 917,284 1,556,973
Short-term loans 220,050 748,170
Short-term loans from shareholders 110,025 308,070
Deposits from customers 1,275,958 424,266
Taxes payable 722,106 212,661
Shares to be issued to related parties 327,374 95,204
Due to related parties 185,024 242,225
------------- -------------
Total current liabilities 4,055,388 4,134,999
------------- -------------
OTHER LIABILITIES:
Deferred government grant 1,100,250 1,100,250
Warrant liability 1,538,686 -
------------- -------------
Total other liabilities 2,638,936 1,100,250
------------- -------------
Total liabilities 6,694,324 5,235,249
------------- -------------
COMMITMENTS AND CONTINGENCIES
CHANGES IN EQUITY:
Preferred stock, $0.001 par value, 50,000,000
Series "A" shares authorized and
2,000,000 shares issued and outstanding as of
December 31, 2008
48,000,000 Series "B" shares authorized, Nil
Series "B" shares issued and outstanding as
of December 31, 2008 - 2,000
Common stock, $0.001 par value, 40,000,000
shares authorized, 6,989,640 and 3,733,038
shares issued and outstanding as of
December 31, 2009 and December 31, 2008,
respectively 6,989 3,733
Paid-in capital 34,580,096 16,345,775
Statutory reserves 3,879,077 2,952,710
Retained earnings 12,574,906 4,418,464
Accumulated other comprehensive income 2,871,521 2,857,607
------------- -------------
Total shareholders' equity 53,912,589 26,580,289
------------- -------------
Total liabilities and shareholders'
equity $ 60,606,913 $ 31,815,538
============= =============
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 - U.S. Representative (407) 645-4433 Grayling Investor Relations Leslie Wolf-Creutzfeldt (646) 284-9472 leslie.wolf-creutzfeldt@grayling.com or Christopher Chu (646) 284-9426 christopher.chu@grayling.com