Recon Technology Reports Third Quarter Fiscal 2013 Financial Results

13 May, 2013, 09:31 ET from Recon Technology, Ltd.

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.



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