Origin Agritech Limited Reports Unaudited Second Quarter Financial Results For Three Months Ended March 31, 2012

Origin Agritech Limited (NASDAQ: SEED) (“Origin”, the “Company”, “us” or “our”) , a technology-focused supplier of hybrid and genetically modified crop seeds in China, today announced unaudited financial results for the second quarter ended March 31, 2012. Origin prepares its financial statements in accordance with generally accepted accounting principles (GAAP) of the United States.

FINANCIAL RESULTS OVERVIEW

During the second quarter of fiscal 2012, the Company generated revenues of RMB14.74 million (US$2.34 million), compared with RMB1.09 million for the three months ended March 31, 2011. Revenues generated in the second quarter were mainly a result of scrap sales. As a reminder, the majority of Origin’s revenues are recorded in the fiscal third quarter as a result of our revenue recognition policy.

Deferred revenues were RMB480.70 million (US$76.37 million) as of March 31, 2012 compared with RMB443.56 million on March 31, 2011. Deferred revenues reflect the value of Origin’s crop seeds a) after 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 Origin gives to its customers. It is expected that the majority of these deferred revenues will be recorded on the income statement in the fiscal 2012 third quarter ending June 30, 2012.

After the divestiture of Jilin Changrong Hi-tech Seed Company Limited (“Jilin Changrong”) in fiscal year 2011, Changchun Origin Seed Technology Development Limited (“Changchun Origin”) started operation in the same Northeastern region in fiscal year 2012. Jilin Changrong was a former subsidiary of the Company and Changchun Origin is a current subsidiary of the Company. Excluding Jilin Changrong’s deferred revenues as of March 31, 2011 and Changchun Origin’s deferred revenues and a deferred government subsidy as of March 31, 2012, deferred revenues increased 30.91% year-over-year from RMB326.38 million as of March 31, 2011 to RMB427.36 million as of March 31, 2012. This year-over-year increase in deferred revenues was mainly due to corn seed shipping volume increase during the current planting season. The table below lists the deferred revenues with and without the Jilin Changrong and Changchun Origin contributions.
 

Deferred Revenues, in thousands of RMB
       

Deferred Revenuesexcluding deferredgovernment subsidy
     

Deferred Revenues excluding JilinChangrong and Changchun Origin anddeferred government subsidy
As of March 31, 2011       443,560       326,379
As of March 31, 2012       455,798       427,360
Year-over-year change       2.8%       30.91%

Gross loss for the second quarter of fiscal 2012 was RMB2.95 million (US$0.47 million) compared with gross loss of RMB7.04 million in the second quarter of fiscal 2011. Negative gross margin was a result of scrap sales of some corn and rice seed products, and pesticide during the second quarter.

Total net operating expenses for the three months ended March 31, 2012 were RMB35.33 million (US$5.61 million) compared with RMB31.99 million during the same period in 2011. Selling and marketing expenses were RMB10.34 million (US$1.64 million) for the second quarter of fiscal 2012 compared with RMB7.71 million during the same period last year. The increase in selling and marketing expenses was mainly due to business expansion in corn business and increase in staff’s salary. General and administrative (“G&A”) expenses were RMB17.96 million (US$2.85 million) for the second quarter ended March 31, 2012, increased 7.0% from RMB16.78 million for the three months ended March 31, 2011. The increase in G&A expenses was largely due to increase in salary expense. Research and development (“R&D”) expenses decreased to RMB7.57 million (US$1.20 million) from RMB9.80 million during the second quarter of fiscal 2011 as certain R&D projects didn’t happen this quarter. Changes in the operating expenses were also impacted by the ongoing resources reallocation and restructuring activities across the organization.

Operating loss for the second quarter of 2012 amounted to RMB38.27 million (US$6.08 million) compared with an operating loss of RMB39.02 million for the same period in 2011.

Net loss for the second quarter of 2012 was RMB37.07 million (US$5.89 million), or RMB-1.58 (US$-0.25) per diluted share, as compared to a net loss of RMB35.13 million, or RMB-1.36 (US$-0.21) per diluted share in the same period one year ago.

BALANCE SHEET

As of March 31, 2012, cash and cash equivalents were RMB165.25 million (US$26.25 million), and shareholders' equity was RMB190.39 million (US$30.25 million). Short term borrowings were RMB41.00 million (US$6.51 million).

Advances from customers were RMB284.00 million (US$45.12 million) as of March 31, 2012 compared with RMB301.10 million on March 31, 2011. These represent advance cash receipts from customers for future orders.

About Origin

Founded in 1997 and headquartered in Beijing, Origin Agritech Limited (NASDAQ GS: SEED) is China’s leading, vertically-integrated agricultural biotechnology company specializing in research, development and production to supply the growing populations of China. Origin develops, grows, processes, and markets high quality, hybrid crop seeds to farmers throughout China and parts of Southeast Asia via a network of approximately 3,800 first-level distributors and 65,000 second-level distributors and retailers, and possesses a pipeline of genetically modified seed products including glyphosate resistant corn and Bt Corn. The first genetically modified corn seed product for China, Phytase corn, was approved in November 2009 of which Origin possesses exclusive rights. For further information, please log on www.originagritech.com.

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. We undertake no obligation to revise or update publicly any forward-looking statements for any reason.
 
 
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(In thousands, except share data)
     

Three Months ended March 31,
2011   2012
RMB   US$ RMB   US$
 
Revenues

 

1,085

 

165

 

14,736

 

2,339
Cost of revenues   (8,124 )   (1,239 )   (17,684 )   (2,807 )
 
Gross profit   (7,039 )   (1,074 )   (2,948 )   (468 )
Operating expenses:
Selling and marketing (7,708 ) (1,176 ) (10,340 ) (1,641 )
General and administrative (16,778 ) (2,559 ) (17,959 ) (2,851 )
Research and development (9,797 ) (1,494 ) (7,567 ) (1,201 )
Other operating income, net 2,298 350 540 87
       
Total operating expenses   (31,985 )   (4,879 )   (35,326 )   (5,606 )
 
Loss from operations   (39,024 )   (5,953 )   (38,274 )   (6,074 )

Interest expense
(290 ) (44 ) (1,779 ) (282 )
Share of net income of equity investment (492 ) (75 ) 2,366 376

Interest income
  197     30       839     133  

Loss before income taxes
(39,609 ) (6,042 ) (36,848 ) (5,847 )
Income tax credit (expense)

Current
(2,521 ) (385 ) (222 ) (35 )

Deferred
  7,001     1,068     -     -  
Income tax credit (expense)   4,480     683     (222 )   (35 )
Net loss (35,129 ) (5,359 ) (37,070 ) (5,882 )
Less: Net loss attributable to the non-controlling interests   (3,404 )   (519 )   (21 )   (3 )
 
Net loss attributable to Origin Agritech Limited   (31,725 )   (4,840 )   (37,049 ) (5,879 )
Other comprehensive income (loss)
Net loss (35,129 ) (5,359 ) (37,070 ) (5,882 )

Foreign currency translation difference
  559     72     375     60  
Comprehensive loss (34,570 ) (5,287 ) (36,695 ) (5,822 )
Less: Comprehensive loss attributable to non-controlling interests   (3,404 )   (519 )  

(21

)
  (3 )
Comprehensive loss attributable to Origin Agritech Limited   (31,166 )   (4,768 )   (36,674 )   (5,819 )
Net loss per share – basic

(1.36

)
(0.21 )

(1.58

)
(0.25 )
 
Net loss per share – diluted   (1.36 )   (0.21 )   (1.58 )   (0.25 )
Shares used in calculating basic net loss per share 23,313,970 23,313,970 23,382,812 23,382,812
       
Shares used in calculating diluted net loss per share 23,313,970 23,313,970 23,382,812 23,382,812

   
UNAUDITED CONSOLIDATED BALANCE SHEETS(In thousands, except share data)
 
  March 31     September 30     March 31

2011 RMB
  2011 RMB   2012 RMB   2012 US$
Assets

 
Current assets:
Cash and cash equivalents

 

230,684

 

129,942

 

165,245

 

26,253
Accounts receivable 12,793 6,616 10,111 1,606
Dividend Receivable - - 2,100 334
Due from related parties 167 5,183 - -
Advances to suppliers 6,265 12,418 16,796 2,668
Advances to growers 10,257 78,623 17,257 2,742
Inventories 569,639 210,826 569,826 90,531
Income tax recoverable 2,745 2,155 2,138 340
Other current assets   15,831     65,055     13,606     2,162  
Total current assets 848,381 510,818 797,079 126,636
Land use rights, net 20,656 33,094 31,400 4,989
Plant and equipment, net 169,230 190,094 196,819 31,269
Equity investments 24,035 20,503 21,433 3,405
Goodwill 16,665 11,973 11,973 1,902
Acquired intangible assets, net 33,581 29,232 29,507 4,688
Deferred income tax assets 20,079 3,028 3,028 481
Other assets   10,741     19,640     61,417     9,757  
Total assets   1,143,368     818,382     1,152,656     183,127  
Liabilities and equity
Current liabilities:
Short-term borrowings 20,000 20,000 41,000 6,514
Accounts payable 14,828 5,740 12,518 1,989
Due to growers 6,644 7,947 4,878 775
Due to related parties 4,308 1,728 3,461 550
Advances from customers 301,096 397,933 283,997 45,120
Deferred revenues 443,560 19,812 480,698 76,370
Income tax payable 44,075 39,060 39,060 6,205
Other payables and accrued expenses   30,395     40,351     39,563     6,286  
Total current liabilities 864,906 532,571 905,175 143,809
Other long-term liabilities   6,247     -     -     -  
Total liabilities 871,153 532,571 905,175 143,809

 

Shareholders’ equity:
Preferred stock (no par value; 1,000,000 shares authorized, none issued) - - - -
Common stock (no par value; 60,000,000 shares authorized, 23,357,612, 23,382,812 and 23,382,812 shares issued and outstanding as of March 31, 2011, September 30, 2011 and March 31, 2012 respectively) - - - -
Additional paid-in capital 389,331 394,344 396,371 62,973
Retained deficit (129,966 ) (99,533 ) (171,073 ) (27,179 )
Treasury stock at cost (498,851 shares) (29,377 ) (29,377 ) (29,377 ) (4,667 )
Accumulated other comprehensive loss   (8,099 )   (6,397 )   (5,530 )   (879 )
Total Origin Agritech Limited shareholders' equity 221,889 259,037 190,391 30,248
Non-controlling interests 50,326 26,774 57,090 9,070
Total equity   272,215     285,811     247,481     39,318  
Total liabilities and equity   1,143,368     818,382     1,152,656     183,127  

Copyright Business Wire 2010

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