omniture

Origin Agritech Limited Reports Unaudited Financial Results for the Third Quarter Fiscal 2016

2016-08-11 18:30 2331

BEIJING, August 11, 2016 /PRNewswire/ --

--3Q16 Total Net Revenue Increases 12.1% YoY--
--3Q16 Non-GAAP Operating Loss Narrows YoY--
--Achieves Positive Operating Cash Flow in 3Q16--

Origin Agritech Limited (NASDAQ: SEED, "Origin" or the "Company"), a technology-focused supplier of crop seeds in China today announced its unaudited financial results for the third quarter of fiscal 2016 ended June 30, 2016 ("GAAP").

Mr. Shashank Aurora, Chief Financial Officer of Origin, commented, "The sum of recognized revenue and deferred revenue as of June 30, 2016 was RMB473.9 million, or US$71.5 million, an increase of 6.0% compared to RMB447.1 million for the same period one year ago, driven by ongoing development and strong interest in our corn seed products and biotechnologies. The majority of deferred revenue will be recognized in the fourth fiscal quarter of 2016. Excluding one-time items, we narrowed both our loss from operations and net loss compared to last quarter as well as to the prior year. In our Seed Production & Distribution segment, we managed our inventory downward in the quarter as we improved our forecasting capabilities and better aligned seed production with demand. This helped generate healthy cash flow from operations, freed up working capital and reduced our debt. We continue to optimize our cost structure based on the exciting market opportunities that lie ahead."

Dr. William S. Niebur, Chief Executive Officer of Origin, commented, "We are making steady progress with our efforts to become a more globally focused seed and biotechnology company that bases its development in China and provides solutions to farmers around the world. We have recently added several important executive team members, including a new Chief Financial Officer and a new Chief Technology Officer who will drive the evolution of our current business model to enable expansion globally. Additionally, as a part of our strategic partnership approach, we announced a collaboration and commercial licensing agreement with a major multinational seed company in the third fiscal quarter to develop new GM crops for farmers in China. This agreement has great potential to modernize China's agricultural system and enhance food security, both major priorities for the government. We have a healthy pipeline of new seed products and traits for future release and are committed to pursuing new domestic and international partnership opportunities to maximize revenue and profit growth in the years ahead."

Third Quarter Fiscal 2016 Financial Results

Total net revenue for the third fiscal quarter of 2016 increased by 12.1% to RMB82.6 million (US$12.5 million) from RMB73.7 million in the prior year period. The increase in seed revenue was primarily driven by increased sales of corn seed hybrid Liyu-16 and was also partially impacted by lower discard sales from the rice business. While the total planted corn acres in China are expected to decline by 10% in the calendar year of 2016, which may affect the Company's full year volume and revenue, the Company has been able to maintain a consistent market share in the corn seed business in China.

The following table shows the Company's year-over-year change in net revenue for each segment:

(in thousands RMB)

Q3 FY2016

Q3 FY2015

% of change

Seed production & distribution

82,329

73,697

11.7

%

Biotech & Product Development

278

-

100.0

%

Segment total net revenues

82,607

73,697

12.1

%

Net revenue from the Seed Production and Distribution segment increased 11.7% to RMB82.3 million (US$12.4 million), compared to RMB73.7 million in the prior year period.

Net revenue from the Biotech and Product Development segment was RMB0.3 million in the third fiscal quarter of 2016, while there was no such segment recognized in the prior year period. The revenue from this segment represents fees for services from the Company's collaborators.

Deferred revenues increased 4.8% to RMB391.3 million (US$59.0 million) as of June 30, 2016, compared with RMB373.4 million as of June 30, 2015. Deferred revenues mainly reflect the value of Origin's crop seeds after: a) sales arrangement is confirmed; b) delivery to the customer is made; and c) pre-payment from the customer is received, but before the final sales price is fixed and determined. The final sales price is primarily determined by sales incentives that are offered to the Company's customers. It is expected that the majority of these deferred revenues will be recorded on the income statement during the fourth fiscal quarter of 2016. Final sales will be known when seed returns are completed in fourth fiscal quarter.

The sum of recognized revenue and deferred revenue as of June 30, 2016 was RMB473.9 million (US$71.5 million), an increase of 6.0% compared to RMB447.1 million for the same period in fiscal year 2015. The sum of recognized revenue for the first nine months ended June 30, 2016 and the deferred revenue as of June 30, 2016 was RMB485.3 million (US$73.2 million), an increase of 4.0% compared to RMB466.5 million for the same period in fiscal year 2015.

Total operating expenses in the third quarter of fiscal year 2016 were RMB28.9 million (US$4.4 million), up 54.5% from RMB18.7 million in the same quarter of fiscal year 2015. The increase was primarily due to the timing difference associated with the recognition of marketing expenses and a one-time stock compensation expense. Excluding certain one-time expenses, total operating expenses for the nine months in fiscal year 2016 were RMB74.8million, which is similar to the RMB73.8 million amount for the first nine months in fiscal year 2015.

Loss from operations for the third quarter of fiscal year 2016 was RMB15.1 million (US$2.3 million) compare to RMB8.4 million in the same quarter of fiscal year 2015. Excluding the impact of one-time items, including stock-based compensation expense and Other Income, the operating loss decreased to RMB10.2 million from RMB13.4 million in the same quarter of fiscal year 2015.

Net loss attributable to the Company was RMB18.2 million (US$2.7 million), or net loss per diluted share of RMB0.8 (US$0.12) in the third quarter of fiscal year 2016, compared to a net loss of RMB11.9 million, or net loss per diluted share of RMB0.52 in the same quarter of fiscal year 2015. Excluding the impact of the aforementioned one-time items, the net loss attributable to the Company decreased to RMB13.3 million, or net loss per diluted share of RMB0.58, from RMB16.9 million, or net loss per diluted share of RMB0.74 in the same quarter of fiscal year 2015, respectively.

Balance Sheet

As of June 30, 2016, the Company had cash and cash equivalents of RMB25.9 million (US$3.9 million). Shareholders' equity attributable to the Company was RMB168.7 million (US$25.4 million).

Total borrowing was RMB256.9 million (US$38.7 million), including short-term borrowings of RMB210.0 million (US$31.7 million) and long-term borrowing of RMB46.9 million (US$7million), representing a decrease of RMB17.5 million compared to the same period last year. Short-term borrowing was mainly for working capital, while long-term borrowing was mainly used in relation to the corn seed production facilities in Xinjiang Origin and the Company's working capital. The decrease in debt was mostly due to the positive cash flow generated for fiscal year 2015, primarily in the fourth fiscal quarter as well as for the full 2015 fiscal year. The Company also generated positive operating cash flow in its third fiscal quarter in 2016.

Advances from customers were RMB47.3 million (US$7.1 million) as of June 30, 2016. These advances represent cash receipts for orders in the upcoming selling season.

Inventory decreased by RMB90.6 million as of June 30, 2016 compared to the same period in the previous fiscal year, mainly due to improved forecast demand efforts by management and from lower production.

Conference Call

The Company will host a teleconference on August 11, 2016, at 8:30 a.m. ET / 8:30 p.m. Beijing time to discuss the results. To participate in the call, please dial the following numbers approximately 5 minutes prior to the scheduled start time.

US Toll Free: 1-888-346-8982
International Toll: 1-412-902-4272
Mainland China Toll Free: 4001-201203
Hong Kong Toll Free: 800-905945

A replay of the call will be available shortly after the conference call through August 18, 2015. The dial-in numbers for the replay are:

US Toll Free: 1-877-344-7529
International Toll: 1-412-317-0088
Replay Access Code: 10091059

About Origin

Origin Agritech Limited, founded in 1997 and headquartered in Zhong-Guan-Cun (ZGC) Life Science Park in Beijing, is China's leading agricultural biotechnology company, specializing in crop seed breeding and genetic improvement, seed production, processing, distribution, and related technical services. Leading the development of crop seed biotechnologies, Origin Agritech's phytase corn was the first transgenic corn to receive the Bio-Safety Certificate from China's Ministry of Agriculture. Over the years, Origin has established a robust biotechnology seed pipeline including products with glyphosate tolerance and pest resistance (Bt) traits. Origin operates production centers, processing centers and breeding stations nationwide with sales centers located in key crop-planting regions. Product lines are vertically integrated for corn, rice and canola seeds. For further information, please visit the Company's website at: http://www.originseed.com.cn or http://www.originseed.com.cn/en/.

Non-GAAP Disclosure

We also present "non-GAAP financial measures" as defined by applicable U.S. securities regulations, which are more thoroughly explained and reconciled below to the most comparable measures reported under GAAP. You are reminded that the presentation of these non-GAAP financial measures should not be viewed in isolation or as a substitute for our financial results prepared in accordance with GAAP. We believe that both management and investors may benefit from referring to these non-GAAP financial measures in assessing our performance and when planning and forecasting future periods. These non-GAAP financial measures also facilitate management's internal comparisons to the Company's historical performance and liquidity. We believe these non-GAAP financial measures are useful to investors in allowing for greater transparency with respect to supplemental information used by management in its financial and operational decision making. These non-GAAP financial measures have limitations, however, because they do not include all items of income and expenses that impact the Company's operations. You are also reminded that these non-GAAP financial measures are not uniformly defined by all companies, including those in the agricultural biotech and seed production industry, and may not be comparable to similarly titled measures presented by other companies.

(in thousands RMB, except per share data)

Q3FY2015


Q3FY2016


% of change



















Total operating expenses


18,731



28,950



54.5%

Non-GAAP operating expenses


23,505



23,807



1.3%










Loss from operations


8,418



15,137



79.8%



















Non-GAAP operating loss


13,192



9,994



-24.2%

Net loss attributable to the Company


11,897



18,213



53.1%

Non-GAAP net loss attributable to the Company


16,671



13,070



-21.6%

EPS attributable to the Company - basic


(0.52)



(0.80)



53.8%

EPS attributable to the Company - diluted


(0.52)



(0.80)



53.8%

EPS attributable to the Company excluding one-time items
- basic


(0.74)



(0.58)



-21.6%

EPS attributable to the Company excluding one-time items
- diluted


(0.74)



(0.58)



-21.6%

We have presented the non-GAAP operating expenses, non-GAAP operating loss, non-GAAP net loss attributable to the Company and related EPS calculations to exclude a one-time expense for stock based compensation and the reversal of a tax liability that has expired. We believe that these non-GAAP financial presentations provide meaningful supplementary information about our performance by excluding certain expenses that may not be indicative of our operating performance. Management uses selected non-GAAP measures to gain better understanding of the Company's comparative operating performance from period to period. Management believes that the non-GAAP information, when read in conjunction with the Company's GAAP information provides useful information to investors by offering them the ability to make more meaningful period to period comparison of the Company's operating results and allows them to better identify trends in the Company's underlying business and performance.

Forward Looking Statement

This release contains forward-looking statements. 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 to be filed. We undertake no obligation to revise or update publicly any forward-looking statements for any reasons.


UNAUDITED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(In thousands, except share data)



Three Months ended June 30,





2015





2016






RMB




RMB




US$















Revenues



73,697




82,607




12,455


Cost of revenues



(63,384)




(68,794)




(10,372)


Gross profit



10,313




13,813




2,083


Operating expenses:













Selling and marketing



(6,771)




(8,330)




(1,256)


General and administrative



(9,748)




(14,087)




(2,124)


Research and development



(8,804)




(8,588)




(1,295)


Other operating income, net



6,592




2,055




310


Total operating expenses



(18,731)




(28,950)




(4,365)















Loss from operations



(8,418)




(15,137)




(2,282)



Interest expense



(4,695)




(3,460)




(522)


Interest income



93




83




13


Loss before income tax expense



(13,020)




(18,514)




(2,791)


Income tax expense













Current



(24)




(13)




(2)


Deferred



-




-




-


Income tax expense



(24)




(13)




(2)



Net loss



(13,044)




(18,527)




(2,793)


Less: Net loss attributable to the non-controlling interests



(1,147)




(314)




(47)















Net loss attributable to Origin Agritech Limited



(11,897)




(18,213)




(2,746)



Other comprehensive loss













Net loss



(13,044)




(18,527)




(2,793)


Foreign currency translation difference



329




(2,257)




(340)


Comprehensive loss



(12,715)




(20,784)




(3,133)


Less: Comprehensive loss attributable to non-controlling interests



(1,147)




(314)




(47)


Comprehensive loss attributable to Origin Agritech Limited



(11,568)




(20,470)




(3,086)















Net loss attributable to Origin Agritech Limited per share - basic



(0.52)




(0.80)




(0.12)


Net loss attributable to Origin Agritech Limited per share - diluted



(0.52)




(0.80)




(0.12)















Shares used in calculating basic and diluted net loss per share



22,738,541




22,853,541




22,853,541


UNAUDITED CONSOLIDATED BALANCE SHEETS


(In thousands, except share data)




6/30/2015


9/30/2015


6/30/2016


6/30/2016



RMB


RMB


RMB


US$

ASSETS









Current Assets









Cash and cash equivalents


22,414


66,025


25,912


3,907

Restricted cash


-


-


20,280


3,058

Accounts receivable


6,590


2,051


2,124


320

Due from related parties


4,750


-


1,000


151

Advances to suppliers


14,865


10,484


8,612


1,298

Advances to growers


18,727


20,796


24,271


3,659

Inventories


595,577


439,562


504,877


76,123

Income tax recoverable


48


48


48


7

Other current assets


6,377


4,793


5,199


784

Total current assets


669,348


543,759


592,323


89,307

Restricted cash


20,000


20,280


-


-

Land use rights, net


30,061


31,722


30,600


4,614

Plant and equipment, net


325,353


324,905


312,982


47,190

Equity investments


18,721


18,721


18,721


2,823

Goodwill


11,973


11,973


11,973


1,805

Acquired intangible assets, net


36,266


31,390


27,923


4,210

Other assets


2,579


3,079


2,278


343

Total assets


1,114,301


985,829


996,800


150,292

LIABILITIES AND EQUITY









Current liabilities









Short-term borrowings


210,000


220,000


210,000


31,663

Current portion of long-term borrowings


16,750


24,000


26,420


3,983

Accounts payable


10,817


4,389


6,985


1,053

Due to growers


8,829


17,337


6,623


999

Due to related parties


11,468


42,284


19,667


2,965

Advances from customers


128,083


264,547


47,280


7,129

Deferred revenues


373,383


11,248


391,311


59,000

Income tax payable


-


37


-


-

Other payables and accrued expenses


45,624


50,298


38,303


5,775

Total current liabilities


804,954


634,140


746,589


112,567

Long-term borrowings


47,679


40,972


20,500


3,091

Other long-term liability


18,201


19,939


16,953


2,556

Total liabilities


870,834


695,051


784,042


118,214










Shareholders' equity:









Preferred stock (no par value; 1,000,000 shares authorized, none issued)


-







Common stock (no par value; 60,000,000 shares authorized,









24,016,163, 24,091,163 and 24,151,163 shares issued as of June 30, 2015, September 30, 2015 and June 30, 2016, respectively;






22,738,541, 22,813,541 and 22,873,541 shares outstanding as of






June 30, 2015, September 30, 2015 and June 30, 2016, respectively)


-


-





Additional paid-in capital


402,272


402,500


408,572


61,602

Accumulated deficit


(170,316)


(116,808)


(191,903)


(28,934)

Treasury stock at cost (1,277,622, 1,277,622 and 1,277,622 shares


(37,445)


(37,445)


(37,445)


(5,646)

as of June 30, 2015, September 30, 2015 and June 30, 2016, respectively)









Accumulated other comprehensive loss


(4,199)


(7,053)


(10,552)


(1,590)

Total Origin Agritech Limited shareholders' equity


190,312


241,194


168,672


25,432










Non-controlling interests


53,155


49,584


44,086


6,646

Total equity


243,467


290,778


212,758


32,078










Total liabilities and equity


1,114,301


985,829


996,800


150,292











UNAUDITED SEGMENT INFORMATION

Contributions of the major activities and profitability information of the Company's reportable segments for the three months ended June 30, 2015and 2016 are as follows:


(In thousands)


Three Months ended June 30,





2015




2016





RMB




RMB




US$


Segment net revenues













Seed Production &Distribution



73,697




82,329




12,413


Biotech &Product Development



-




278




42


Segment total net revenues



73,697




82,607




12,455


Inter-segment sales eliminations



-




-




-


Reconciliation to consolidated revenues



73,697




82,607




12,455















Segment operating (income) loss













Seed Production &Distribution



(1,194)




2,726




411


Biotech &Product Development



5,814




6,346




957


Total segment operating loss



4,620




9,072




1,368


Unallocated corporate operating expenses, net



3,798




6,065




914


Reconciliation to consolidated loss from operations



8,418




15,137




2,282


To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/origin-agritech-limited-reports-unaudited-financial-results-for-the-third-quarter-fiscal-2016-300312337.html

Source: Origin Agritech Limited
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