2014

Recon Technology Reports Third Quarter Fiscal 2013 Financial Results

BEIJING, May 13, 2013 /PRNewswire-FirstCall/ -- Recon Technology, Ltd. (Nasdaq: RCON) ("Recon" or the "Company"), a Chinese non-state-owned oilfield services provider to oil and gas companies and their affiliates, today reported results for its third quarter of fiscal 2013 ended March 31, 2013.

Nine Month Financial Highlights

  • Total revenue for the nine months ended March 31, 2013 increased 28% to RMB 62.5 million ($10.0 million).
  • Gross profit for the nine months ended March 31, 2013 increased 16% to RMB 20.6 million ($3.3 million).
  • Operating profit was RMB1.2 million ($0.2 million), up 214.6% compared to an operating loss of RMB1.0 million for the nine months ended March 31, 2012.
  • Net profit attributable to ordinary shareholders for the nine months ended March 31, 2013 was RMB 1.7 million ($0.3 million), or RMB 0.43 ($0.07) per diluted share, as compared to net loss attributable to ordinary shareholders for the same period of FY2012 of RMB 2.0 million, or a loss of RMB 0.48 per diluted share.

Q3 FY2013 Financial Highlights

  • Total revenue for the third quarter of FY2013 was RMB7.5 million ($1.2 million), a decrease of 42.4% from the same period of FY2012.
  • Gross margin increased to 55.4% for the third quarter of FY2013 from 47.9% for the same period of FY2012.
  • Net loss attributable to ordinary shareholders for the third quarter of FY2013 was RMB1.2 million ($0.2 million), or RMB0.32 ($0.05) per diluted share. Net income attributable to ordinary shareholders for the same period of FY2012 was RMB0.1 million or RMB0.03 per diluted share.

"Year to date in FY2013, our operating efficiency has continued to improve, which is reflected in our overall financial performance," said Mr. Yin Shenping, CEO of Recon. "The temporary revenue decline in the third quarter was mainly due to timing issues related to current project completion status, rather than any changes in business fundamentals.  As we complete outstanding projects, and assuming we obtain new contracts for our fracturing services and furnace business, we anticipate the coming quarters will reflect what we believe are positive results for our company."

Mr. Yin continued, "Since our IPO in 2009, we have successfully expanded our market penetration, including in the Sichuan Oilfield, Zhongyuan Oilfield and Jilin Oilfield. Our fracturing services were recently qualified at Sinopec, which gives us the opportunity to continue to expand this new service line beyond Sinopec's affiliate, Zhongyuan Oilfield. As we continue to capitalize on our position in China's fragmented oil services industry and broaden our integrated products and service offerings through R&D and collaboration with Chinese and international companies involved in the oilfield services industry, we believe Recon is well-positioned to continue to grow."

Q3 FY2013 Financial Results

Total revenue for the third quarter of FY2013 decreased by 42.4% to RMB7.5 million ($1.2 million) from RMB13.0 million for the same period of FY2012. The decline in revenue was mainly attributable to lower sales of automation equipment and service business as a result of unfinished projects.

Gross profit decreased to RMB4.2 million ($0.7 million) for the third quarter of FY2013, down 33.3% from the same period of FY2012. Gross margin increased to 55.4% for the third quarter of FY2013 from 47.9% for the same period of FY2012. This was mainly because software sales, which have higher gross margin, accounted for a higher percentage of total revenue during the third quarter of FY2013 compared to the same period in FY2012.

Selling and distribution expenses increased by 40.6% to RMB1.8 million ($0.3 million) for the third quarter of FY2013 from RMB1.3 million for the same period of FY2012. This increase was primarily due to increased business travelling expenses, bidding maintenance expenses. General and administrative expenses decreased by 5.4% to RMB4.0 million ($0.6 million) for the third quarter of FY2013 from RMB4.2 million for the same period of FY2012. Research and development expenses decreased by 16.6% to RMB0.6 million ($0.1 million) for the third quarter of FY2013 from RMB0.7 million for the same period of FY2012.

Loss from operations was RMB2.2 million ($0.3 million) for the third quarter of FY2013, compared to an income of RMB0.1 million for the same period of FY2012. This decrease in income from operations is attributed to the decrease in revenue and increase in SG&A expenses as a percentage of revenue.  

Net loss attributable to ordinary shareholders was RMB1.2 million ($0.2 million) for the third quarter of FY2013 versus net income of RMB0.1 million for the same period of FY2012. Diluted loss per share was RMB0.32 ($0.05) for the third quarter of FY2013, compared to diluted earnings per share of RMB0.03 ($0.005) for the same period of FY2012.

Adjusted EBITDA was (RMB0.1) million for the third quarter of FY2013, compared to RMB1.0 million for the same period of FY2012.



For the Three Months Ended



March 31,

Reconciliation of Adjusted EBITDA


2012



2013



2013

 to Net Income (Loss)


RMB



RMB



USD










Net income (loss)

RMB

259,106


 RMB

(1,248,860)


$

(198,812)

Provision for income taxes


132,883



(152,382)



(24,258)

Interest expense


225,718



618,473



98,458

Stock compensation expense


259,164



451,572



71,888

Depreciation, amortization and accretion


86,685



395,535



62,967










Adjusted EBITDA

RMB

954,305


 RMB

64,338


$

10,243

As of March 31, 2013, cash and cash equivalents were RMB6.5 million ($1 million). Cash and cash equivalents consist of cash on hand, demand deposits and highly liquid short-term debt investments with stated maturities of no more than six months.

Year-to-Date FY2013 Financial Results

Total revenue for the nine months ended March 31, 2013 increased by 28.1% to RMB62.5 million ($10.0 million) from RMB48.8 million for the same period of FY2012, primarily driven by increased sales from the Hardware business as well as the Fracturing Service business.

Gross profit increased to RMB20.6 million ($3.3 million) for the nine months ended March 31, 2013, up 15.7% from the same period of FY2012. Gross margin decreased to 33.0% for the nine months ended March 31, 2013 from 36.5% for the same period of FY 2012. This was mainly related to margin contraction in our furnace business as a result of higher material and labor costs.

Selling and distribution expenses increased by 32.7% to RMB4.7 million ($0.7 million) for the nine months ended March 31, 2013 from RMB3.5 million for the same period FY 2012. This increase was primarily due to increased shipping costs and maintenance expenses. General and administrative expenses decreased by 15.5% to RMB8.5 million ($1.3 million) for the nine months ended March 31, 2013 from RMB10.0 million for the same period FY 2012. Research and development expenses were RMB6.3 million ($1 million) for the nine months ended March 31, 2013, up 18.2% from the same period of FY2012. Overall, operating expenses were RMB19.4 million ($3.1 million) for the nine months ended March 31, 2013, up 3.0% from the same period of FY2012.

Income from operations was RMB1.2 million ($0.2 million) for the nine months ended March 31, 2013, compared to a loss of RMB1.0 million for the same period of FY2012. This increase in income from operations can be attributed primarily to an increase in total revenue and decrease in general and administrative expenses as a percentage of total revenue.

Net income attributable to ordinary shareholders was RMB1.7 million ($0.3 million) for the nine months ended March 31, 2013, an improvement of RMB3.6 million from net loss of RMB1.9 million for the same period of FY2012. Diluted earnings per share was RMB0.43 ($0.07) for the nine months ended March 31, 2013, compared to diluted loss per share of RMB0.48 for the same period of FY2012.

Adjusted EBITDA was RMB5.9 million ($0.9 million) for the nine months ended March 31, 2013, 1,750.7% increased compared to RMB0.3 million for the same period of FY2012.



For the Nine Months Ended



March 31,

Reconciliation of Adjusted EBITDA


2012



2013



2013

 to Net Income (Loss)


RMB



RMB



USD










Net income (loss)

RMB

(1,564,708)


 RMB

2,300,423


$

366,218

Provision for income taxes


345,964



302,550



48,164

Interest expense


502,013



1,494,887



237,979

Stock compensation expense


784,010



1,358,726



216,303

Depreciation, amortization and accretion


252,842



467,914



74,490










Adjusted EBITDA

RMB

320,121


 RMB

5,924,500


$

943,154

For the nine months ended March 31, 2012, net cash provided by operating activities was RMB17.3 million ($2.8 million). This was an increase of RMB26.5 million ($4.2 million) compared to net cash used in operating activities of RMB9.2 million for the same period of FY2012.  

Net cash used in financing activities amounted to RMB14.1 million ($2.2 million) for the nine months ended March 31, 2013, compared to net cash provided by financing activities of RMB8.8 million for the same period of FY2012. During the fiscal 2013 nine-month period, we repaid RMB21.7 million ($3.4 million) commercial bank loan and received a RMB8.35 million ($1.3 million) loan from two banks, which was guaranteed by one of our shareholders.

Net cash used in investing activities was RMB0.5 million ($0.1 million) for the nine months ended March 31, 2013, compared to RMB0.6 million for the same period of FY2012. The slight decrease was mainly due to approximately RMB0.2 million increase in proceeds from disposal of fixed assets and offset by approximately RMB0.1 million increase in purchase of property and equipment.

About Recon Technology, Ltd.

Recon Technology, Ltd. is a non-state-owned oil field service company in China. The company has been providing software, equipment and services designed to increase the efficiency and automation in oil and gas exploration, extraction, production and refinery for Chinese oil and gas fields for more than 10 years. More information may be found at http://www.recon.cn or e-mail: info@recon.cn.

This news release contains forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements that are other than statements of historical facts. These statements are subject to uncertainties and risks including, but not limited to, product and service demand and acceptance, changes in technology, economic conditions, the impact of competition and pricing, government regulation, and other risks contained in reports filed by the company with the Securities and Exchange Commission.

All such forward-looking statements, whether written or oral, and whether made by or on behalf of the company, are expressly qualified by the cautionary statements and any other cautionary statements which may accompany the forward-looking statements. In addition, the company disclaims any obligation to update any forward-looking statements to reflect events or circumstances after the date hereof.

Contact:      

At the Company:
Recon Technology, Ltd.
Tel: +86-10-8494-5799
Email: info@recon.cn
Web: http://www.recon.cn

Investor Relations:
Tina Xiao
Weitian Group LLC
Email: tina.xiao@weitian-ir.com
Web: http://www.weitian-ir.com

 

RECON TECHNOLOGY, LTD

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS











As of June 30,


As of March 31,


As of March 31,


2012


2013


2013

ASSETS

RMB


RMB


U.S. Dollars

Current assets









Cash and cash equivalents 

 

RMB

3,533,283


 

RMB

6,452,691


$

1,027,237

Trade accounts receivable, net 


61,993,942



49,012,257



7,802,512

Trade accounts receivable- related parties, net


20,394,749



17,693,490



2,816,717

Inventories, net


24,281,300



14,884,099



2,369,476

Other receivables, net 


8,074,096



17,858,793



2,843,033

Other receivables- related parties


17,729



1,056,696



168,221

Purchase advances, net


16,250,616



21,687,064



3,452,475

Purchase advances- related parties


1,093,534



1,394,034



221,923

Tax recoverable


2,790,722



-



-

Prepaid expenses 


535,336



809,686



128,898

Deferred tax asset


1,106,801



1,094,438



174,229

Total current assets


140,072,108



131,943,248



21,004,721










Property and equipment, net


1,774,820



1,795,564



285,845

Long-term other receivable


10,302,349



5,228,053



832,280

Total Assets

RMB

152,149,277


RMB

138,966,865


$

22,122,846










LIABILITIES AND EQUITY 









Current liabilities









Short-term bank loans

RMB

23,000,000


RMB

9,697,048


$

1,543,723

Trade accounts payable


11,905,560



6,262,528



996,964

Trade accounts payable- related parties


5,339,231



5,449,388



867,516

Other payables 


2,341,826



2,290,687



364,666

Other payable- related parties


1,099,259



5,998,879



954,992

Deferred revenue


3,291,073



3,135,904



499,221

Advances from customers


936,124



1,181,120



188,029

Accrued payroll and employees' welfare


949,579



1,663,438



264,811

Accrued expenses


476,416



343,163



54,630

Taxes payable


9,681,620



6,693,590



1,065,587

Short-term borrowings- related parties


4,123,306



5,751,381



915,592

Short-term borrowings- other


2,767,066



570,375



90,801

Total current liabilities


65,911,060



49,037,501



7,806,532










Commitments and Contingency


















Equity 









Common stock, ($ 0.0185 U.S. dollar par value, 25,000,000
shares authorized; 3,951,811 shares issued and outstanding as
of June 30, 2012 and March 31, 2013)


529,979



529,979



84,370

Additional paid-in capital


67,643,791



69,053,281



10,992,945

Appropriated retained earnings


2,378,961



2,378,961



378,719

Unappropriated retained earnings


9,354,535



11,051,996



1,759,424

Accumulated other comprehensive loss


(290,496)



(307,385)



(48,936)

Total controlling shareholders' equity


79,616,770



82,706,832



13,166,522

Non-controlling interest


6,621,447



7,222,532



1,149,792

Total equity


86,238,217



89,929,364



14,316,314

Total Liabilities and Equity

RMB

152,149,277


RMB

138,966,865


$

22,122,846

 

 

 

RECON TECHNOLOGY, LTD

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)




















For the nine months ended


For the three months ended


March 31,


March 31,


2012


2013


2013


2012


2013


2013


RMB


RMB


USD


RMB


RMB


USD



















Revenues


















Hardware

RMB

30,162,440


RMB

30,766,627


$

4,897,897


RMB

6,997,916


RMB

4,161,583


$

662,504

Service


5,547,005



20,567,637



3,274,267



1,990,000



62,678



9,978

Software


3,952,991



5,192,712



826,654



-



-



-

Software - related parties


-



2,273,504



361,931



-



2,273,504



361,931

Hardware - related parties


9,143,503



3,736,107



594,770



4,031,206



1,004,030



159,837

Total revenues


48,805,939



62,536,587



9,955,519



13,019,122



7,501,795



1,194,250



















Cost of revenues


30,979,868



41,915,938



6,672,812



6,786,052



3,346,344



532,722

Gross profit


17,826,071



20,620,649



3,282,707



6,233,070



4,155,451



661,528





































Selling and distribution expenses


3,537,806



4,693,193



747,133



1,273,126



1,790,199



284,991

General and administrative expenses


10,008,519



8,452,540



1,345,603



4,193,772



3,966,782



631,492

Research and development expenses


5,318,048



6,284,834



1,000,515



662,743



552,645



87,978

Operating expenses


18,864,373



19,430,567



3,093,251



6,129,641



6,309,626



1,004,461





































Income (loss) from operations


(1,038,302)



1,190,082



189,456



103,429



(2,154,175)



(342,933)



















Other income (expenses)


















Subsidy income


554,856



2,143,669



341,262



540,756



1,343,669



213,906

Interest income


3,089



443,391



70,586



286



137,803



21,938

Interest expense


(502,013)



(1,494,887)



(237,979)



(225,718)



(618,473)



(98,458)

Gain from foreign currency exchange


-



339,876



54,107



-



(185)



(29)

Other income (expense)


(236,374)



(19,158)



(3,050)



(26,764)



(109,881)



(17,493)



















Income (loss) before income tax


(1,218,744)



2,602,973



414,382



391,989



(1,401,242)



(223,069)

Provision (benefit) for income tax


345,964



302,550



48,164



132,883



(152,382)



(24,258)

Net Income (loss)


(1,564,708)



2,300,423



366,218



259,106



(1,248,860)



(198,811)



















Less: Net income attributable to non-controlling interest


325,867



602,961



95,988



140,410



(2,127)



(339)

Net Income (loss) attributable to Recon Technology, Ltd

RMB

(1,890,575)


RMB

1,697,462


$

270,230


RMB

118,696


RMB

(1,246,733)


$

(198,472)



















Comprehensive income (loss)


















Net income (loss)


(1,564,708)



2,300,423



366,218



259,106



(1,248,860)



(198,811)

Foreign currency translation adjustment


(119,795)



(16,889)



(2,689)



(119,973)



(717)



(114)

Comprehensive income (loss)


(1,684,503)



2,283,534



363,529



139,133



(1,249,577)



(198,925)

Less: Comprehensive income attributable to non-controlling interest


313,888



601,084



95,690



128,449



(2,207)



(351)

Comprehensive income (loss) attributable to Recon
Technology, Ltd

RMB

(1,998,391)


RMB

1,682,450


$

267,839


 RMB 

10,684


RMB

(1,247,370)


$

(198,574)



















Earning (loss) per common share - basic and diluted

RMB

(0.48)


RMB

0.43


$

0.07


RMB

0.03


RMB

(0.32)


$

(0.05)

Weighted - average shares -basic and diluted


3,951,811



3,951,811



3,951,811



3,951,811



3,951,811



3,951,811

 

RECON TECHNOLOGY, LTD 

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS 











For the nine months ended March 31,


2012


2013


2013


RMB


RMB


U.S. Dollars










Cash flows from operating activities:









Net income (loss)

RMB

(1,564,708)


RMB

2,300,423


$

366,218

Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:









Depreciation


252,842



467,914



74,490

Loss from disposal of  equipment


18,887



26,845



4,274

Provision/(recovery of) for doubtful accounts


1,695,435



(82,420)



(13,121)

Stock based compensation


784,010



1,358,726



216,303

Deferred tax (benefit)/provision 


(315,125)



12,363



1,968

Changes in operating assets and liabilities:









Trade accounts receivable


(16,718,352)



13,156,606



2,094,467

Trade accounts receivable-related parties


-



2,701,259



430,027

Notes receivable


1,276,574



-



-

Other receivable, net


2,301,650



(4,641,896)



(738,968)

Other receivables related parties, net


-



(1,038,967)



(165,398)

Purchase advance, net


(10,691,586)



(5,597,453)



(891,087)

Purchase advance-related party, net


-



(300,500)



(47,838)

Tax recoverable


-



2,790,722



444,269

Prepaid expense


(1,409,973)



(274,350)



(43,675)

Inventories


6,586,927



9,397,201



1,495,988

Trade accounts payable


6,462,714



(5,643,032)



(898,343)

Trade accounts payable-related parties


-



110,157



17,536

Other payables


2,087,020



(51,139)



(8,141)

Other payables-related parties


-



4,899,620



779,996

Deferred income


(899,460)



(155,169)



(24,702)

Advances from customers


30,705



244,996



39,002

Accrued payroll and employees' welfare


(41,042)



713,859



113,643

Accrued expenses


(34,268)



(133,253)



(21,213)

Taxes payable


934,906



(2,988,030)



(475,680)

Net cash provided by (used in) operating activities


(9,242,844)



17,274,482



2,750,015










Cash flows from investing activities:









Purchase of property and equipment


(564,831)



(676,504)



(107,696)

Proceeds from disposal of equipment


4,900



161,000



25,630

Net cash used in investing activities


(559,931)



(515,504)



(82,066)










Cash flows from financing activities:









Proceeds from short-term bank loans


9,000,000



8,350,000



1,329,279

Repayments of short-term bank loans


(5,000,000)



(21,652,952)



(3,447,044)

Proceeds from short-term borrowings


574,597



-



-

Proceeds from borrowings-related parties


4,198,901



3,658,102



582,352

Repayment of  short-term borrowings


(500,000)



(2,275,764)



(362,290)

Repayment of short-term borrowings-related parties


-



(2,232,477)



(355,399)

Capital contribution in VIE


500,000



20,000



3,184

Net cash provided by (used in) financing activities


8,773,498



(14,133,091)



(2,249,918)










Effect of exchange rate fluctuation on cash and cash equivalents


(100,863)



293,521



46,724










Net increase (decrease in) cash and cash equivalents


(1,130,140)



2,919,408



464,755

Cash and cash equivalents at beginning of period


3,485,944



3,533,283



562,482

Cash and cash equivalents at end of period

RMB

2,355,804


RMB

6,452,691


$

1,027,237



















Supplemental cash flow information









Cash paid during the period for interest

RMB

334,014


RMB

1,356,581


$

215,961

Cash paid during the period for taxes

RMB

481,723


RMB

832,028


$

132,455



















SOURCE Recon Technology, Ltd.



RELATED LINKS
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http://www.weitian-ir.com

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