Bought 1000 shares b4 the bell yesterday.... here we go!
Fourth Quarter Revenue of $15.8 Million Reflects 45% Growth YoY; Fiscal Year Revenue of $47.5 Million Reflects 41% Growth YoY
XI'AN, CHINA -- (Marketwire) -- 04/12/11 -- Skystar Bio-Pharmaceutical Company (NASDAQ: SKBI) ("Skystar" or the "Company"), a China-based manufacturer and distributor of veterinary medicines, vaccines, micro-organisms and feed additives, today announced fourth quarter and full financial results for fiscal year 2010, for the period ended December 31, 2010.
Fourth Quarter 2010 Highlights
-- Revenue increases 45% YoY to $15.8 million
-- Veterinary vaccines totaled $0.6 million, up 52% YoY
-- Veterinary medicines totaled $11.0 million, up 39% YoY
-- Feed additives totaled $0.6 million, up 50% YoY
-- Micro-organism products totaled $3.6 million, up 66% YoY
-- Gross margin increased from 50% for the three months ending
December 31, 2009 to 54% for the three months ended December 31, 2010
-- Net income increased 26% to $3.9 million or $0.55 per fully diluted
share, compared with $3.1 million or $0.44 per basic share in the
fourth quarter of 2009
Fiscal Year 2010 Highlights
-- Revenues totaled $47.5 million, up 40.8% YoY
-- Veterinary vaccines totaled $1.9 million, up 39.1% YoY
-- Veterinary medicines totaled $32.0 million, up 39.9% YoY
-- Feed additives totaled $1.9 million, up 38.4% YoY
-- Micro-organism products totaled $11.5 million, up 43.9% YoY
-- Gross profit margin was 53.7% in line with historical gross margin
-- Net income increased 21.9% year over year to $14.0 million or $1.98
per fully diluted share, as compared to $8.8 million or $1.62 per basic
share during the year ended December 31, 2009. Increased net cash
provided by operating activities position to $7.7 million up from
$1.3 million in the year ago period
-- Improved cash balance to $5.9 million at the end of fiscal 2010
Management Year in Review
Mr. Weibing Lu, Skystar Bio-Pharmaceutical's chairman and chief executive officer, commented, "We are pleased to announce strong financial results for the fourth quarter and full fiscal 2010 year. The Company was able to grow top line revenue by over 40% year-over-year to $47.5 million and net income by over 20% year-over-year to $14.0 million. Additionally, Skystar improved net cash from operating activities significantly to $7.7 million as compared $1.3 million in the year ago period.
"In fiscal 2010, Skystar continued to build both brand and presence across all 29 farming regions in China and was able to increase its number of customers by 36% to 2,703 customers consisting of independent distributors, franchise distributors and direct customers.
"Accordingly, a report by the World Resource institute indicated that meat intake per person has grown from 55 pounds per annum in 1990 to roughly 116 pounds in 2008. This statistical trend highlights Skystar's opportunity to service a growing industry and we expect to successfully expand sales with profitability in mind.
"In 2010, Skystar continued to utilize working capital to prepay for raw materials. This buy-forward strategy helped Skystar manage fluctuations in raw material costs. Skystar as of current has adequate working capital to fund its operations and prepayment of raw materials but will continue to seek ways to improve its working capital position. Additionally the Company will continue to utilize a buy-forward strategy in order to mitigate and better forecast raw material costs for 2011.
"In 2010, the Company increased its product line to 256 products as compared to 173 products at the end of fiscal 2009. The newly acquired Jingzhou facility contributed $1.3 million in sales revenue for fiscal 2010, nearly all of which occurred in the fourth quarter which on an annualized run rate would generate $3.0 million to $5.0 million in revenue per year.
"Skystar owns three production facilities in total: two are in Xi'an City in Shaanxi Province and one facility in Jingzhou City in Hubei Province. Both the Huxian plant and the Jingzhou plant are 'GMP' certified to produce veterinary animal medicines.
"The vaccine facility in the Huxian plant finished construction in June of 2010; equipments installations, tooling and testing of the plant's manufacturing processes was finished later in the third quarter of 2010. The Company has applied to the MOA for GMP certification and is currently waiting for the appointment date from the Ministry. The GMP approval process is taking much longer than we initially expected due to sweeping regulatory changes in the GMP certification and approval process for veterinary vaccine manufacturers. Skystar believes that its facilities will pass new GMP standards.
"The Company is still in the process of closing the Kunshan based probiotics micro-organism manufacturing plant in Jiangsu province. The Company as of current has invested roughly $8 million in connection with the acquisition. As of October 2010 the Company has received the title of land use right for the facility. Skystar expects the final stages related to clearing all necessary government approvals to close this acquisition to be completed within the first half of fiscal 2011. Skystar forecasts this production facility will contribute approximately $35 million to $39 million in 5 years."
Key Fiscal 2010 Business Highlights
-- Started production in the newly acquired Jingzhou facility and seeing
positive contributions to earnings
-- Increased customer count and started production of new products
-- Inducted in Forbes, "Asia's 200 Best Companies Under a Billion" list
-- Secured low interest $3.0 million dollar line of credit and loan
facility of $0.7 million in China
-- Appointed Crowe Horwath as new independent auditor
-- Completed the build-out of the new vaccine facility
Fourth Quarter 2010 Results
Skystar's revenue for the fourth quarter 2010 was $15.8 million, up 45% from fourth quarter 2009.
Gross profit for fourth quarter 2010 was $8.5 million, up 57% from fourth quarter 2009. Gross margin for the period was 54%, slightly higher than historical comparables.
Operating expenses for fourth quarter 2010 were $2.8 million, or 18% of total revenue, compared with $1.6 million, or 15% of total revenue for fourth quarter 2009.
Research and development (R&D) costs increased to $0.2 million, or 2.0% of revenue in fourth quarter 2010, up from $0.3 million, or 3% of revenue during fourth quarter 2009. 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 $0.8 million, or 5.0% of revenue, for fourth quarter 2010, compared with $0.7 million, or 7% of revenue, in fourth quarter 2008. General and administrative expenses were $1.7 million, or 11% of revenue, in fourth quarter 2009, compared with $0.6 million, or 7% of revenue, in fourth quarter 2010.
Operating income increased by 53% year over year to $5.8 million in the fourth quarter of fiscal year 2010, compared with $3.8 million in the same quarter a year ago, and operating margin increased to 36% from 34% in the fourth quarter of 2009.
Net income for the fourth quarter of 2010 was $3.9 million. This compares to net income of $2.6 million in the same quarter of 2009.
Full Year 2010 Results
Skystar reported revenues of $47.5 million for the full fiscal 2010 year, a 40.8% increase compared to the $33.8 million in revenues reported for the full fiscal 2009 year. Gross profit for the full fiscal 2010 year was $25.5 million, or 53.7% of revenues.
Net income for the 2010 full fiscal year was $14.0 million, or $1.97 per diluted share, compared to net income of $8.9 million, or $1.62 per diluted share, for the full 2009 fiscal year.
Total operating expenses increased 33.7% as a result of Skystar's increased footprint; however, as a percentage of revenue decreased to 15.6% from 16.5% in the year prior. Research and Development costs for fiscal 2010 were $0.7 million as compared to $1.1 million in fiscal 2009. Selling expense as a percentage of revenue decreased due to localization of Skystar's sales force and expanded distributorships. General and administrative expenses for our Chinese operating entities increased due to expanded operations and asset acquisitions related to our Kunshan and with the Jingzhou-related acquisition. Approximately $0.4 million was charged to general and administrative expenses for expenses related to the Kunshan acquisition. Approximately $0.6 million was charged to the general and administrative expenses for expenses related to the Jingzhou acquisition.
As of December 31, 2010, Skystar had approximately $5.9 million in cash and restricted cash, current assets of $44.7 million and total liabilities of $9.8 million, which resulted in a net working capital of $37.3 million.
Selection of New Auditor in Fiscal 2010
In fiscal 2010, Skystar interviewed several top tier audit firms in its selection of a new independent auditor. Our new auditor for the 2010 10-K audit is Crowe Horwath LLP in the US. It is the ninth largest accounting firm in the US and also one of the ten accounting firms in the US that is subject to the PCAOB inspection every year. Crowe Horwath, LLP is a leading member of Crowe Horwath International which is the ninth largest accounting network in the world.
Business Outlook
Presently, Skystar anticipates delivering top line revenue in the range of $60.0 to $63.0 million with a gross margin of 50% to 55% for 2011.
Skystar in 2010 saw significant inflation pressures building in China. However, the Company had been able to secure favorable pricing by prepaying for raw materials to major suppliers. The Company anticipates that inflationary pressures will continue in 2011. As a result, the Company is continuing with its buy-forward strategy to suppliers in order to have better control of costs for raw materials.
Mr. Lu concluded, "We are excited with the momentum that Skystar has built as a leader in China's animal healthcare space and as the only U.S. listed pureplay animal healthcare stock. We fully anticipate our current acquisitions and expanded manufacturing facilities to ramp up, bear fruit and further improve Skystar's profitability."
CONFERENCE CALL & WEBCAST INFORMATION
Skystar will host a conference call on Tuesday, April 12th 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.
