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Recon Reports FY 2015 Second Quarter Results

Performance Improved Compared to First Quarter;
Maintain Full Year Growth Outlook
Recon Technology, Ltd.
2015-02-14 06:00 2621

BEIJING, February 14, 2015 /PRNewswire/ -- Recon Technology, Ltd. (NASDAQ: RCON), ("Recon" or the "Company"), a leading independent oilfield services provider operating primarily in China, today reported its operating results for the second quarter of fiscal year 2015, which ended December 31, 2014.

Mr. Sheping Yin, Chairman and CEO of Recon stated, "Affected by the lower oil and gas price worldwide and decreased CAPEX expense of our clients, some of our projects are postponed or cancelled, and our financial performance for the first half year of fiscal 2015 may not be satisfactory. Overall, based on our reported revenue in this second quarter, our performance this quarter improved significantly compared to last quarter. The dollar amount of our current contracts on hand and actual onsite workload also increased significantly during this quarter. As such, our management continue to be optimistic for the coming year. We believe that the continued decline of oil and gas prices stimulated oil companies' demand for technology and better production management for producing wells, which is exactly the focus of our business. We believe this is a great opportunity for us and our years of investment in R&D are paying off. We remain optimistic aboutour future growth."

Three Month Financial Highlights

For the second quarter ended December, 31, 2014:

  • Revenues declined 53.9% to $3.5 million from $7.5 million* in the second fiscal quarter last year due to projects delay or cancellation. Nevertheless, management believe customer interest in Recon products and technology remain strong.
  • Net income attributable to Recon (U.S. GAAP) was $0.9 million, compared with net income of approximately $1.0 million* a year earlier.
  • With the decline in revenues, adjusted net income attributable to Recon (non-U.S. GAAP)** declined to approximately $0.3 million from approximately $1.2 million* in the same period last year.
  • Adjusted EBIDTA (non-U.S. GAAP) decreased year over year from approximately $1.6 million* in the second quarter of FY 2014 to approximately $0.6 million in second quarter of FY 2015.
  • Diluted EPS (U.S. GAAP) was $0.18 per share in the second quarter of FY 2015, compared with $0.22 per share in the second quarter of FY2014.
  • Adjusted diluted EPS** (non-U. S. GAAP) was $0.07 compared with $0.27 in the second quarter a year ago.

* Based on the exchange rate of RMB 6.1385 to US $1.00.

** Non-U.S. GAAP adjusted net income (loss) and EPS exclude certain special non-cash after tax income totaling $0.5 million, or $0.11 per share that is included in net income.

Six Month Financial Highlights

For the six-month period ended December, 31, 2014:

  • Total revenue for the six months ended December 31, 2014 decreased 55.6% to $4.2 million.
  • Net income attributable to Recon for the six months ended December 31, 2014 decreased 80.1% to $0.2 million.
  • Adjusted EBITDA for the six months ended December 31, 2014 decreased 89.1% to $0.2 million
  • Diluted EPS (U.S. GAAP) was $0.04 per share in the second quarter of FY 2015, compared with $0.23 per share in the second quarter of FY2014.
  • Adjusted diluted EPS*** (non-U.S.GAAP) was a loss of $0.02 per share compared with a net income of $0.31 per share in the same period a year ago.

*** Non-U.S. GAAP adjusted net income (loss) and EPS exclude certain special non-cash after tax income totaling $0.3 million, or $0.06 per share that are included in net income.

Other Financial and Operation Highlights

For the three months ended in December 31, 2014:

  • Gross margins increased to 42.1% from 35.7% a year earlier mainly because of the decreased hardware cost of revenue during the period compared to same period last year.
  • Operating income declined to $0.4 million from $1.3 million for the same period last year.
  • Current assets as of December 31, 2014 were approximately $22.2 million, including approximately $0.8 million in cash and $8.2 million in trade accounts receivable from non related parties.
  • The Company reported no long term debt and total current liabilities of approximately $8.0 million as of December 31, 2014.
  • Weighted average outstanding ordinary shares as of December 31, 2014 were approximately 4.82 million shares.

For the Six months ended in December 31, 2014:

  • Gross margins remained stable at 37.4% compared to 37.8% a year earlier.
  • Operating loss declined to $0.3 million compared with an operating income of $1.4 million a year ago.
  • Weighted average outstanding ordinary shares as of December 31, 2014 was approximately 4.85 million.

Outlook

Mr. Yin commented further, "Most of our peer companies need to undertake heavy burden of depreciation and amortization due to their excessive investment in the past few years and are suffering from heavy losses now. Compared to them, as a light asset service company, we believe our burden is smaller and have more flexibility to adjust and satisfy our clients' requirements. As our clients, CNPC and Sinopec, launched their reform of intelligent oilfield construction, we see continuing opportunity to expand our share of our customers' budgets with products and services that improve their productivity, safety and reduce their producing costs. The trend is that more and more oil and gas companies prefer to use highly automated and cost efficient equipment, including our customers. It not only saves costs, but also improves safety. We think we can help our customers' needs with our products and will continue to seek additional opportunities to expand our role on their behalf. We believe that our efforts will be reflected in our financial performance in the coming years."

Broaden Oversea Market Share

"As part of our growth strategies previously announced," Mr. Yin continued, "one of them is to follow our customers overseas to broaden our oversea market share, as we successfully did in Turkmenistan. We will keep implementing our growth strategies and update our progress once we have more detailed information."

About Recon

Recon Technology, Ltd. is China's first independent oil and gas field service company listed on NASDAQ (RCON). Closely working with leading global partners, Recon has achieved rapid growth supplying China's largest oil and gas exploration companies, including Sinopec and China National Petroleum Corporation, with advanced automated technologies, efficient gathering and transportation equipment and reservoir stimulation measures. The solutions Recon provides are aimed at increasing gas and petroleum extraction levels, reducing impurities, improving safety and lowering production costs. For additional information, please visit www.recon.cn.

Cautionary Statements

Statements made in this release with respect to Recon's current plans, estimates, strategies and beliefs and other statements that are not historical facts are forward-looking statements about the future performance of Recon. Forward-looking statements include, but are not limited to, those statements using words such as "believe," "expect," "plans," "strategy," "prospects," "forecast," "estimate," "project," "anticipate," "aim," "intend," "seek," "may," "might," "could" or "should," and words of similar meaning in connection with a discussion of future operations, financial performance, events or conditions. From time to time, oral or written forward-looking statements may also be included in other materials released to the public. These statements are based on management's assumptions, judgments and beliefs in light of the information currently available to it. Recon cautions investors that a number of important risks and uncertainties could cause actual results to differ materially from those discussed in the forward-looking statements, 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. Therefore investors should not place undue reliance on such forward-looking statements. Actual results may differ significantly from those set forth in the forward-looking statements.

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://recon.investorroom.com

RECON TECHNOLOGY, LTD

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS


As of June 30,

As of December 31,

As of December 31,

2014

2014

2014

ASSETS

RMB

RMB

USD

Current assets







Cash and cash equivalents


18,094,586

4,947,964

806,054

Notes receivable

-

2,977,565

485,064

Trade accounts receivable, net


43,553,737

50,350,533

8,202,416

Trade accounts receivable- related parties, net

7,479,298

2,980,821

485,594

Inventories, net

14,336,602

19,170,009

3,122,914

Other receivables, net


18,293,043

27,201,739

4,431,333

Other receivables- related parties

1,414,433

-

-

Purchase advances, net

25,759,065

22,116,442

3,602,906

Purchase advances- related parties

394,034

394,034

64,191

Prepaid expenses


2,634,664

4,762,485

775,840

Prepaid expenses - related parties

230,000

-

-

Deferred tax asset

1,209,961

1,237,938

201,668

Total current assets

133,399,423

136,139,530

22,177,980









Property and equipment, net

1,321,538

1,368,636

222,959

Long-term trade accounts receivable, net

-

14,545,865

2,369,612

Long-term trade accounts receivable - related parties, net

14,456,317

-

-

Long-term other receivable

5,353,104

4,053,933

660,411

Total Assets

154,530,382

156,107,964

25,430,962









LIABILITIES AND EQUITY









Current liabilities







Short-term bank loans

10,000,000

8,000,000

1,303,250

Trade accounts payable

11,413,505

12,602,016

2,052,947

Other payables


1,765,079

1,627,676

265,159

Other payable- related parties

3,306,024

3,596,762

585,935

Deferred revenue

4,419,824

3,196,427

520,718

Advances from customers

801,385

384,200

62,589

Accrued payroll and employees' welfare

417,624

284,937

46,418

Accrued expenses

203,051

212,378

34,597

Taxes payable

7,589,846

8,369,413

1,363,430

Short-term borrowings- related parties

5,207,728

9,631,504

1,569,032

Deferred tax liability

180,186

180,186

29,353

Warrants liability


5,021,621

930,480

151,581

Total current liabilities

50,325,873

49,015,979

7,985,009


















Commitments and Contingency
















Equity









Common stock, ($ 0.0185 U.S. dollar par value, 25,000,000 shares authorized; 4,717,336 and 4,726,711 shares issued and outstanding as of June 30, 2014 and December 31, 2014, respectively)

616,865

617,943

100,665

Additional paid-in capital

83,061,058

84,343,979

13,740,161

Appropriated retained earnings

4,148,929

4,631,899

754,565

Unappropriated retained earnings

8,431,453

9,112,314

1,484,453

Accumulated other comprehensive loss

(279,275)

(274,549)

(44,727)

Total shareholders' equity

95,979,030

98,431,586

16,035,117

Non-controlling interest

8,225,479

8,660,399

1,410,836

Total equity

104,204,509

107,091,985

17,445,953

Total Liabilities and Equity

154,530,382

156,107,964

25,430,962

RECON TECHNOLOGY, LTD

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME





For the six months ended

For the three months ended

December 31,

December 31,

2013

2014

2014

2013

2014

2014

RMB

RMB

USD

RMB

RMB

USD


















Revenues
















Hardware and software

55,339,141

24,761,080

4,033,735

44,242,049

20,515,571

3,342,115

Service

397,589

103,774

16,905

397,589

45,283

7,377

Hardware and software - related parties

2,042,306

768,118

125,131

1,626,688

768,118

125,131

Total revenues

57,779,036

25,632,972

4,175,771

46,266,326

21,328,972

3,474,623


















Cost of revenues
















Hardware and software

35,599,656

16,022,965

2,610,241

29,480,982

12,334,279

2,009,331

Service

34,946

-

-

34,946

-

-

Hardware and software - related parties

328,922

16,762

2,731

225,986

16,762

2,731

Total cost of revenues

35,963,524

16,039,727

2,612,972

29,741,914

12,351,041

2,012,062

Gross profit

21,815,512

9,593,245

1,562,799

16,524,412

8,977,931

1,462,561




































Selling and distribution expenses

3,604,440

1,955,260

318,524

2,250,518

1,254,470

204,361

General and administrative expenses

6,457,563

7,796,731

1,270,136

3,715,640

4,093,440

666,847

Research and development expenses

3,353,997

1,899,957

309,515

2,661,397

1,243,228

202,530

Operating expenses

13,416,000

11,651,948

1,898,175

8,627,555

6,591,138

1,073,738




































Income ？？？loss？？？ from operations

8,399,512

(2,058,703)

(335,376)

7,896,857

2,386,793

388,823


















Other income (expenses)
















Subsidy income

1,018,313

484,318

78,898

684,601

269,615

43,922

Interest income

204,970

157,468

25,653

101,769

74,436

12,126

Interest expense

(479,648)

(468,956)

(76,396)

(258,389)

(227,112)

(36,998)

Loss from investment

(735,080)

-

-

(360,466)

-

-

Change in fair value of warrants liability

556

4,077,517

664,253

556

3,803,118

619,552

Loss from foreign currency exchange

(119,392)

(20,880)

(3,401)

(213,692)

(18,806)

(3,064)

Other expense

(43,946)

76,672

12,490

(19,632)

90,692

14,774


















Income before income tax

8,245,285

2,247,436

366,121

7,831,604

6,378,736

1,039,135

Provision for income tax

1,459,189

648,932

105,715

1,251,862

618,687

100,788

Net Income


6,786,096

1,598,504

260,406

6,579,742

5,760,049

938,347


















Less: Net income attributable to non-controlling interest

924,981

434,673

70,811

765,071

434,673

70,811

Net Income attributable to Recon Technology, Ltd

5,861,115

1,163,831

189,595

5,814,671

5,325,376

867,536


















Comprehensive income
















Net income


6,786,096

1,598,504

260,406

6,579,742

5,760,049

938,347

Foreign currency translation adjustment

77,277

4,726

770

82,881

5,528

901

Comprehensive income

6,863,373

1,603,230

261,176

6,662,623

5,765,577

939,248

Less: Comprehensive income attributable to non-controlling interest

932,709

434,920

70,851

773,360

434,961

70,858

Comprehensive income attributable to Recon Technology, Ltd

5,930,664

1,168,310

190,325

5,889,263

5,330,616

868,390


















Earnings per common share - basic


1.44

0.25

0.04

1.40

1.13

0.18

Earnings per common share - diluted

1.44

0.24

0.04

1.38

1.10

0.18

Weighted - average shares -basic


4,056,963

4,741,911

4,741,911

4,162,115

4,726,711

4,726,711

Weighted - average shares -diluted

4,056,963

4,846,270

4,846,270

4,224,560

4,820,817

4,820,817

RECON TECHNOLOGY, LTD

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASHFLOWS



For six months ended December 31,

2013

2014

2014

RMB

RMB

USD









Cash flows from operating activities:







Net income

6,786,096

1,598,504

260,406

Adjustments to reconcile net income to net cash used in operating activities:







Depreciation

301,341

274,511

44,720

Gain from disposal of equipment

-

(149,480)

(24,351)

Provision for doubtful accounts

378,584

104,589

17,038

Share based compensation

895,509

1,115,030

181,645

Loss from investment

735,080

-

-

Deferred tax benefit

(32,211)

(27,977)

(4,558)

Change in fair value of warrants liability

(556)

(4,077,517)

(664,253)

Restricted shares issued for services

407,972

1,171,331

190,817

Changes in operating assets and liabilities:







Notes receivable

2,578,855

(2,977,565)

(485,064)

Trade accounts receivable

(27,881,579)

(8,572,529)

(1,396,519)

Trade accounts receivable-related parties

610,501

6,104,734

994,499

Inventories

(8,799,658)

(4,833,407)

(787,392)

Other receivable, net

1,830,372

(7,635,508)

(1,243,873)

Other receivables related parties, net

147,224

1,414,433

230,420

Purchase advance, net

472,846

2,641,583

430,330

Tax recoverable

575,650

-

-

Prepaid expense

1,223,568

(2,127,821)

(346,635)

Prepaid expense - related party, net

-

230,000

37,468

Trade accounts payable

15,717,487

1,188,511

193,616

Trade accounts payable-related parties

(3,994,718)

-

-

Other payables

(556,242)

(137,403)

(22,384)

Other payables-related parties

(723,453)

290,738

47,363

Deferred income

544,754

(1,223,397)

(199,299)

Advances from customers

83,462

(417,185)

(67,962)

Accrued payroll and employees' welfare

(1,639,401)

(132,687)

(21,616)

Accrued expenses

269,270

9,327

1,519

Taxes payable

3,292,976

779,567

126,996

Net cash used in operating activities

(6,776,271)

(15,389,618)

(2,507,069)









Cash flows from investing activities:







Purchase of property and equipment

(36,495)

(514,009)

(83,735)

Proceeds from disposal of equipment

-

341,880

55,694

Net cash used in investing activities

(36,495)

(172,129)

(28,041)









Cash flows from financing activities:







Proceeds from short-term bank loans

15,400,000

-

-

Repayments of short-term bank loans

(6,040,000)

(2,000,000)

(325,812)

Proceeds from short-term borrowings-related parties

-

9,400,000

1,531,319

Repayment of short-term borrowings

(110,375)

-

-

Repayment of short-term borrowings-related parties

(5,303,279)

(5,000,000)

(814,531)

Proceeds from sale of common stock, net of issuance costs

12,132,882

-

-

Net cash provided by financing activities

16,079,228

2,400,000

390,976









Effect of exchange rate fluctuation on cash and cash equivalents

116,711

15,125

2,467









Net increase (decrease) in cash and cash equivalents

9,383,173

(13,146,622)

(2,141,667)

Cash and cash equivalents at beginning of period

12,350,392

18,094,586

2,947,721

Cash and cash equivalents at end of period

21,733,565

4,947,964

806,054


















Supplemental cash flow information







Cash paid during the period for interest

689,828

510,956

83,238

Cash paid during the period for taxes

-

203,073

33,082









Non-cash investing and financing activities







Cancelation of prior issuance of 40,625 shares of common stock for professional services

-

1,002,721

163,350

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/recon-reports-fy-2015-second-quarter-results-300035958.html

Source: Recon Technology, Ltd.
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