BEIJING--(BUSINESS WIRE)--Origin Agritech Limited (NASDAQ: SEED) (“Origin”), a vertically–integrated supplier of hybrid crop seeds in China, today announced unaudited financial results for the three-months ended December 31, 2006. These results include, on a consolidated basis, the results of Denong Zhengcheng Seed Company, Ltd. (“Denong”), a developer, producer, and marketer of rice, cotton, corn and canola seed hybrids in the southwest region of China in which Origin owns approximately 95% equity interest. Origin prepares its financial statements in accordance with generally accepted accounting principles of the United States.
Dr. Gengchen Han, Chairman and Chief Executive Officer of Origin, commented, “Our operating results for the first quarter of fiscal 2007 reflect our commitment to operational excellence and the continued demand for our hybrid seeds. Deferred revenue, which is carried on the balance sheet, reached US$20.9 million, reflecting the value of our crop seeds after evidence of a sales arrangement is confirmed, delivery to the customer is made, and full pre-payment from the customer is received, but before the final sales price is fixed and determined. We anticipate that this deferred revenue will be recorded on the income statement during fiscal 2007. While deferred revenue increased, revenues on the income statement were, as expected, nominal during the three-month period ended December 31, 2006, although expenses continued to be incurred as part of our ongoing efforts to expand our operations in anticipation of gaining additional market share. We are supported in our growth initiatives by a strong financial position. At December 31, 2006, Origin’s balance sheet included cash, cash equivalents, and held-to-maturity investments totaling US$33.1 million, and minimal long-term debt.”
FINANCIAL RESULTS OVERVIEW
Revenue for the first quarter of fiscal 2007 amounted to US$2.47 million, primarily attributable to sales of canola seeds by Denong, which Origin acquired in 2006. Origin did not recognize any revenues for the three-months ended December 31, 2005, and net revenues for that quarter were negative because the Company paid PRC business tax amounting to US$0.20 million in that period.
Gross profit for the three-months ended December 31, 2006 was US$1.05 million compared to negative US$0.48 million in the same period of prior year.
Total operating expenses for the three-months ended December 31, 2006 increased to US$4.73 million from US$2.27 million reported for the same period in 2005. Higher operating expenses included expenses related to the acquisition of Denong, specifically, the inclusion of US$0.63 million of general and administrative expenses, and the inclusion US$0.45 million in selling and marketing expenses. In addition, research and development expenses rose by US$0.41 million due to Origin’s continued research and development activities in various areas.
The operating loss for the three-months ended December 31, 2006 increased to US$3.68 million from US$2.46 million for the same period in 2005.
Net loss for the three months ended December 31, 2006 was US$3.93 million, or US$0.16 per diluted share, as compared to a net loss of US$2.3 million, or US$0.14 per diluted share, in the same period one year ago.
Dr. Han concluded, “We entered fiscal 2007 in the strongest position in our history. We expect to bolster our product catalog, and enhance our future gross margins, through the approval and introduction of at least 8 new proprietary hybrid seeds in 2007. We are also exploring strategic acquisition opportunities, and are in various stages of discussions with potential candidates.”
BALANCE SHEET
Origin’s balance sheet at December 31, 2006 included cash and cash equivalents of US$18.37 million, investments in US Government Agency bonds amounting to US$14.68 million, working capital of US$18.14 million, and shareholders’ equity of US$54.74 million.
FISCAL 2007 GUIDANCE
Based on its current outlook, and existing and anticipated business conditions, Origin expects to report revenues for the fiscal year ending September 30, 2007 of between US$80 million and US$90 million. This guidance is based on the assumptions of continued strong performance in Origin’s base business, continued revenue growth at Denong, the introduction and growth in the sale of proprietary seeds, and is subject to certain market conditions. This guidance does not take into account any acquisitions that may occur during fiscal 2007.
CONFERENCE CALL
As previously announced, Origin will not be conducting a conference call in connection with the issuance of first quarter results. In lieu of a conference call, and in an effort to enhance the understanding of Origin's operations, investors are encouraged to visit the Company's web site at www.originseed.com.cn for a list of selected Questions and Answers related to first quarter financial results.
ABOUT ORIGIN
Origin specializes in the research, development, production, sale and distribution of hybrid crop seeds in China. The Company owns or leases facilities in, among other locations, Beijing, Gansu, Henan, Helongjiang, Liaoning, Jilin, Hainan, Sichuan, Hebei, Yunnan, Jiangsu, Shanxi, Guizhou, Hubei, Anhui, Guangxi, Hunan and Jiangxi provinces. Origin launched its first entirely internally developed seed in 2003. As of 2006, Origin had ten proprietary corn hybrids, six proprietary rice hybrids and two proprietary canola hybrids currently in the market.
FORWARD LOOKING STATEMENTS
This release contains forward-looking statements. These statements include, without limitation, statements regarding our expectations (such as our anticipated range of revenues for the fiscal year 2007), assumptions, beliefs, intentions or strategies regarding the future. All forward-looking statements included in this release are based on information available to us on the date hereof. These statements involve known and unknown risks, uncertainties and other factors, which may cause our actual results to differ materially from those implied by the forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,”“will,”“should,”“could,”“expects,”“plans,”“anticipates,”“believes,”“estimates,”“predicts,”“potential,”“targets,”“goals,”“projects,”“continue,” or variations of such words, similar expressions, or the negative of these terms or other comparable terminology. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements. Neither we nor any other person can assume responsibility for the accuracy and completeness of forward-looking statements. Important factors that may cause actual results to differ from expectations include, but are not limited to, those risk factors discussed in Origin’s filings with the SEC including its annual report on Form 20-F filed with the SEC on February 15, 2007. We undertake no obligation to revise or update publicly any forward-looking statements for any reason.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share data)
Three months ended December 31,
2005
2006
US$
US$
(unaudited)
(unaudited)
Revenues
(135)
2,465
Cost of revenues
(340)
(1,418)
Gross profit
(475)
1,047
Operating expenses:
Selling and marketing
(997)
(1,529)
General and administrative
(1,149)
(2,663)
Research and development
(126)
(536)
Total operating expenses
(2,272)
(4,728)
Other operating income
285
-
Income from operations
(2,462)
(3,681)
Interest expense
(48)
(545)
Equity in earnings of associated company
71
(579)
Interest income
58
299
Other income
30
6
Income before income taxes and minority interests
(2,351)
(4,500)
Income tax expense:
Current
31
(481)
Deferred
(56)
1,037
Income tax expense
(25)
556
Income before minority interests
(2,376)
(3,944)
Minority interests
80
15
Net income
(2,296)
(3,929)
Net income per share-basic
(0.15)
(0.17)
Shares used in calculating basic net income per share
14,814,918
23,472,910
Net income per share-diluted
(0.14)
(0.16)
Shares used in calculating diluted net income per share
16,534,536
25,040,085
Cash dividend per share
-
-
CONSOLIDATED BALANCE SHEETS
(In thousands)
As of September, 30
As of December 31
2006
2006
US$
US$
Assets
(audited)
(unaudited)
Current assets:
Cash and cash equivalents
17,833
18,371
Held-to-maturity investments, at amortized cost
18,575
14,682
Accounts receivable
1,577
2,422
Due from related parties
869
1,097
Advances to suppliers
451
2,776
Advances to growers
6,230
1,121
Inventories
43,468
86,748
Income tax recoverable
277
90
Prepaid expenses and other current assets
1,615
1,962
Total current assets
90,895
129,269
Land use rights, net
2,141
2,154
Plant and equipment, net
15,869
16,114
Long-term investments
4,920
9,409
Goodwill
1,379
1,397
Due from related parties-long term
822
833
Acquired intangible assets, net
3,780
4,140
Deferred income tax assets
511
1,555
Other assets
4,191
2,272
Total assets
124,508
167,143
Liabilities, minority interests and shareholders' equity
Current liabilities:
Short-term borrowings
32,009
38,569
Accounts payable
2,785
10,263
Due to growers
4,908
10,658
Due to related parties
1,308
5,363
Advances from customers
9,633
13,276
Deferred revenues
3,049
20,904
Income tax payable
4,942
5,028
Other payables and accrued expenses
5,840
7,070
Total current liabilities
64,474
111,131
Long-term borrowings
238
241
Other long-term liability
127
311
Total liabilities
64,839
111,683
Minority interests
1,651
722
Commitments and contingencies
Shareholders' equity:
Preferred stock (no par value, 1,000,000 shares authorized; none issued)
Common stock (US$1 par value; 10,000 shares authorized, issued and outstanding in 2004; no par value; 60,000,000 shares authorized, 18,203,193 shares issued and outstanding in 2005, and 23,453,077 shares issued and outstanding in 2006)
-
-
Additional paid-in capital
43,119
43,840
Retained earnings
15,410
11,678
Accumulated other comprehensive loss
(511)
(780)
Total shareholders' equity
58,018
54,738
Total liabilities, minority interests and shareholders' equity
