Message #10 From:
NewsBot Date: November 27, 2006 05:15:00 AM
SEED News Origin Agritech Limited Reports Unaudited Financial Results for the Six Months Ended June 30, 2006
SAN DIEGO & 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
six-months ended June 30, 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, and rape 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.
FINANCIAL RESULTS
For the six-months ended June 30, 2006, Origin reported net revenues of
$65.3 million, compared to net revenues of $25.2 million for the same
period in 2005. This increase was primarily due to the continued
expansion of Origin’s business, as evidenced
by, among other factors, the delivery of 43.4 million kilograms of crop
seed between July 2005 and June 2006 without taking into account the
delivery by Denong, a 16.8% increase over the 37.1 million kilograms of
seed delivered during the period between July 2004 and June 2005; the
recognition of $22.8 million in deferred revenues during the six months
ended June 30, 2006 as compared to the recognition of $4.6 million of
deferred revenue in the comparable prior year period; and the inclusion
of $19.2 million of revenue contributed by Denong in the six-month
period ended June 30, 2006.
Gross profit for the six-months ended June 30, 2006 increased to
$20.0 million, up 110.7% from $9.5 million for the same period in 2005.
Gross margin for the six months ended June 30, 2006 was 30.6% compared
to 37.7% in the same period in 2005. This decline was the result of the
inclusion of the results of Denong, the gross margin of which was 14.8%
for the six months ended June 30, 2006.
Total operating expenses for the six months totaled $8.5 million, an
increase of 112.0% from $4.0 million reported for the same period in
2005. Specifically:
General and administrative expenses for the six months ended June 30,
2006 were $2.7 million, an increase of 52.2% from $1.8 million for the
same period in 2005. This increase is primarily due to the inclusion
of $0.7 million of general and administrative expenses attributable to
Denong.
Selling and marketing expenses for the six months ended June 30, 2006
increased by 160.9% to $4.7 million from $1.8 million for the same
period in 2005. This increase is primarily due to the inclusion of
$1.5 million in selling expenses related to Denong. Additionally,
transportation fees increased by $0.50 million as a result of a higher
volume of goods delivered, and advertising expenses rose by $0.3
million.
Research and development (“R&D”)
expenses for the six-months ended June 30, 2006 were $1.1 million, an
increase of 149.1% from $0.4 million for the same period in 2005. This
increase is primarily due to the increase of $ 0.3 million of R&D
expenses of Origin and to the inclusion of $ 0.4 million of R&D
expenses related to Denong.
Operating income for the six-months ended June 30, 2006 rose 109.8% to
$11.5 million from $5.5 million for the same period in 2005.
Net income for the six months ended June 30, 2006 was $13.5 million, or
$0.57 per diluted share on approximately 23.9 million shares
outstanding, an increase of 160.9% from $5.2 million, or $0.52 per
diluted share on a weighted average basis on approximately 10.0 million
shares outstanding, for the same period in 2005.
ADDITIONAL BUSINESS HIGHLIGHTS
As previously announced, Origin and its affiliates experienced a number
of material business developments since the beginning of 2006, including:
On January 24, 2006 Beijing Origin Seed Limited (“Beijing
Origin”), a subsidiary of Origin, acquired
a 52.21% controlling interest in Denong. On October 18, 2006, Beijing
Origin acquired an additional 42.42% equity interest in Denong,
bringing its total ownership to approximately 95% for which it paid
approximately $6.2 million in cash.
On January 24, 2006, Beijing Origin and Jilin Jinong Hi-tech Limited (“Jinong”)
jointly established Jilin Changrong High-tech Seed Limited, or Jilin
Changrong, with Beijing Origin owning 33.5% of Jilin Changrong. Jilin
Changrong engages in the research, development, production, sale and
distribution of hybrid corn seed in the northeast region of China.
On June 8, 2006, Beijing Origin entered into an agreement with Wanmeng
Investment Limited to acquire an additional 19% equity interest in
Biocentury Transgene (China) Co., Ltd (“Biocentury”).
The transaction was approved by the relevant government authorities on
October 19, 2006. Together with the 15% equity interest previously
acquired, Beijing Origin currently owns 34% of Biocentury. Biocentury
is one of the leading biotechnology companies in China focused on
producing precursors for the genetically modified seed industry.
CONFERENCE CALL
Origin will host a conference call today at 9:00 am Eastern Time to
discuss these results. Interested parties may participate in the call by
dialing (888) 751-6344 (Domestic) or (706) 679-3079 (International)
approximately 10 minutes before the call is scheduled to begin and ask
to be connected to the Origin Agritech conference call. A recorded
replay of the call will be available until 11:59 pm Eastern Time
December 4, 2006. Listeners may dial (800) 642-1687 (Domestic) or (706)
645-9291 (International) and use the code 2917002 for the replay. In
addition, to the conference call will broadcast live over the internet.
To listen to the live call on the internet, please go to http://audioevent.mshow.com/314852/
at least 15 minutes early to register, download and install any
necessary audio software. The internet audio stream will be available
until December 27, 2006.
ABOUT ORIGIN
Founded in 1997, Origin specializes in the research, development,
production, sale and distribution of hybrid corn, rice and cotton seeds
in China. The Company owns or leases facilities in, among other
locations, Beijing, Gansu, Henan, Helongjiang, Liaoning, Jilin, Hainan
and Sichuan provinces, and also has an office in San Diego, CA. Origin
launched its first entirely internally developed seed in 2003 and in
2004 introduced two new proprietary corn hybrids to the market. In 2005
Origin had three new proprietary corn hybrids and one new proprietary
cotton hybrid approved by the government registration office in China.
Origin anticipates that it will introduce close to 49 new proprietary
products into the Chinese government testing and approval cycle in 2006.
FORWARD LOOKING STATEMENT
Any forward looking statements contained in the press release may fall
within the definition of "forward-looking statements" under the Private
Securities Litigation Reform Act of 1995. Forward looking statements are
statements that are not historical facts. Such forward-looking
statements, based upon the current beliefs and expectations of Origin’s
management, are subject to risks and uncertainties, which could cause
actual results to differ from the forward looking statements. These
risks are detailed in Origin’s filings with
the Securities and Exchange Commission. The information set forth herein
should be read in light of such risks. Origin assumes no obligation to
update the information contained in this press release or filings.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share data)
Six months ended June 30,
2005
2006
US$
US$
(unaudited)
(unaudited)
Revenues
25,198
65,331
Cost of revenues
(15,700)
(45,317)
Gross profit
9,498
20,014
Operating expenses:
Selling and marketing
(1,813)
(4,731)
General and administrative
(1,751)
(2,665)
Research and development
(435)
(1,083)
Total operating expenses
(3,999)
(8,479)
Other operating income
Income from operations
5,499
11,535
Interest expense
(193)
(349)
Equity in earnings of associated company
102
1,758
Interest income
36
871
Other income
2
371
Income before income taxes and minority interests
5,445
14,186
Income tax expense:
Current
(189)
(117)
Deferred
10
96
Income tax expense
(179)
(21)
Income before minority interests
5,266
14,165
Minority interests
(80)
(631)
Net income
5,186
13,534
Net income per share-basic
0.52
0.58
Shares used in calculating basic net income per share
10,000,000
23,453,077
Net income per share-diluted
0.52
0.57
Shares used in calculating diluted net income per share
10,000,000
23,877,911
Cash dividend per share
0.73
-
CONSOLIDATED BALANCE SHEETS
(In thousands)
As of December 31
As of June 30
2005
2006
US$
US$
Assets
(audited)
(unaudited)
Current assets:
Cash and cash equivalents
29,471
7,183
Held-to-maturity investments, at amortized cost
25,071
Accounts receivable
1,937
Due from related parties
418
991
Advances to suppliers
4,786
1,816
Advances to growers
-
955
Inventories
44,077
39,163
Income tax recoverable
417
328
Prepaid expenses and other current assets
1,280
3,708
Total current assets
80,449
81,152
Land use rights, net
2,059
2,129
Plant and equipment, net
13,010
15,597
Long-term investments
2,086
5,018
Goodwill
1,363
Due from related parties-long term
813
Acquired intangible assets, net
592
4,032
Deferred income tax assets
41
469
Other assets
744
173
Total assets
98,981
110,746
Liabilities, minority interests and shareholders' equity
Current liabilities:
Short-term borrowings
7,807
13,293
Accounts payable
3,572
7,413
Due to growers
8,203
-
Due to related parties
240
1,531
Advances from customers
12,731
15,512
Deferred revenues
22,501
590
Income tax payable
4,864
4,889
Other payables and accrued expenses
1,993
2,986
Total current liabilities
61,911
46,214
Long-term borrowings
233
235
Other long-term liability
356
484
Total liabilities
62,500
46,933
Minority interests
401
2,350
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
30,494
42,466
Retained earnings
5,634
19,222
Accumulated other comprehensive loss
(48)
(225)
Total shareholders' equity
36,080
61,463
Total liabilities, minority interests and shareholders' equity
