Recon Reports FY 2015 Second Quarter Results

BEIJINGFeb. 13, 2015 /PRNewswire/ -- Recon Technology, Ltd. (NASDAQ: RCON), ("Recon" or the "Company"), a leading independent oilfield services provider operating primarily inChina, 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 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 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 inTurkmenistan. 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


-