Recon Technology, Ltd. Reports Fiscal Year 2015 Financial Results

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BEIJING , Sept. 25, Recon Technology, Ltd. (NASDAQ: RCON ), ("Recon" or the "Company"), a leading independent oilfield services provider operating primarily in China , today reported its financial results for the fiscal year 2015, which ended June 30, 2015.
FY2015 Financial Highlights:
Total revenues for FY2015 were RMB 51.5 million ( $8.5 million ), a decrease of 44.9% from FY2014. Gross profit for FY2015 was RMB 10.1million ( $1.7 million ), a decrease of 68.8% from FY2014. Gross margin was 19.6% for FY2015 compared to 34.7% for FY2014. Operating loss was RMB 35.5 million ( $5.8 million ) for FY2015, compared to operating income of RMB 2.8 million for FY2014. Net loss attributable to Recon for FY2015 was RMB 31.5 million ( $5.2 million ), or RMB 6.45 ($1.06) per diluted share, compared to net income attributable to Recon of RMB 0.8 million, or RMB 0.18 per diluted share, for FY2014. Adjusted EBITDA (non-GAAP) was negative RMB 10.8 million ( $1.8 million ) for FY2015, compared to positive RMB 8.8 million for FY2014. Adjusted net loss attributable to Recon was RMB 9.9 million ( $1.6 million ), or RMB 2.0 3 ( $0.33 ) per diluted shares, for FY2015, compared to adjusted net income attributable to Recon of RMB 5.1 million, or RMB 1.1 7 per diluted share, for FY2014. Mr. Shenping Yin , Chairman and CEO of Recon stated, "The past twelve months have been difficult for us as our major customers cut their capital budgets, canceled or delayed new projects in light of slowing domestic production for oil and gas and plunges in oil and gas prices. As a result, we faced continued challenges throughout the fiscal year of 2015 and saw declines in overall revenues for the first time in the Company history. While the oil and gas industry is likely to continue to face multifaceted challenges in the near term, we firmly believe that we are well prepared to withstand the storm and to capitalize on an eventual recovery of the oil and gas industry."
FY2015 Financial Results
Revenues
For the Twelve Months Ended June 30,
2014
2015
2015
%
(thousands)
RMB
RMB
USD
Change
Revenues
RMB
93,447
RMB
51,513
RMB
8,460
-44.9%
Hardware and software
86,229
48,981
8,044
-43.2%
Service
478
104
17
-78.3%
Hardware and software - related parties
6,740
2,428
399
-64.0%
Gross margin
34.7%
19.6%
NM
-15.1%
Operating (loss) margin
3.0%
-68.9%
-68.9%
NM
Net income (loss) attributable to RCON
807
(31,456)
(5,166)
NM
Diluted earnings (loss) per share
0.18
(6.45)
(1.06)
NM
For the twelve months ended June 30, 2015 , total revenues decreased by RMB 41.9 million, or 44.9%, to RMB 51.5 million ( $8.5 million ) from RMB 93.4 million for the same period of last fiscal year as a result of weakness across all of our businesses, particularly during the first half of fiscal year 2015. Revenues from non-related party hardware and software sales decreased by RMB 37.2 million, or 43.2%, to RMB 49.0 million ( $8.0 million ) for the twelve months ended June 30, 2015 , compared to RMB 86.2 million for the same period of last fiscal year. Revenues from related-party hardware and software sales decreased by RMB 4.3 million, or 64.0%, to RMB 2.4 million ( $0.4 million ) for the twelve months ended June 30, 2015 , compared to RMB 6.7 million for the same period of last fiscal year. Revenues from service decreased by RMB 0.4 million, or 78.3%, to RMB 0.1 million ( $0.02 million ) for the twelve months ended June 30, 2015 , compared to RMB 0.5 million for the same period of last fiscal year.
Gross profit and gross margin
Gross profit decreased by RMB 22.3million, or 68.8%, to RMB 10.1 million ( $1.7 million ) for the twelve months ended June 30, 2015 from RMB 32.4 million for the same period of last fiscal year. Overall gross margin was 19.6% for the twelve months ended June 30, 2015 , compared to 34.7% for the same period of last fiscal year.
Operating income (loss) and operating (loss) margin
Selling and distribution expenses increased by RMB 6.0 million, or 113.7%, to RMB 11.3 million ( $1.9 million ) for the twelve months ended June 30, 2015 from RMB 5.3 million for the same period of last fiscal year. General and administrative expenses increased by RMB 13.9 million, or 86.1%, to RMB 30.1 million ( $5.0 million ) for the twelve months ended June 30, 2015 from RMB 16.2 million for the same period of last fiscal year. Research and development expenses decreased by RMB 3.9 million, or 48.5%, to RMB 4.2 million ( $0.7 million ) for the twelve months ended June 30, 2015 from RMB 8.1 million for the same period of last fiscal year. Total operating expenses increased by RMB 16.0 million, or 54.2%, to RMB 45.6 million ( $7.5 million ) for the twelve months ended June 30, 2015 from RMB 29.6 million for the same period of last fiscal year.
Operating loss was RMB 35.5 million ( $5.8million ) for the twelve months ended June 30, 2015 , compared to operating income of RMB 2.8 million for the same period of last fiscal year. Operating loss margin was 68.9% for the twelve months ended June 30, 2015 , compared to operating margin of 3.0% for the same period of last fiscal year.
Net income (loss)
Net loss for the twelve months ended June 30, 2015 was RMB 31.5 million ( $5.2 million ), compared to net income of RMB 1.8 million for the same period of last fiscal year. After deduction of non-controlling interest, net loss for our shareholders was RMB 31.5 million ( $5.2 million ), or RMB 6.45 ($1.06) per diluted share, for the twelve months ended June 30, 2015 , compared to net income attributable to our shareholders of RMB 0.8 million, or RMB 0.18 per diluted share, for the same period of last fiscal year.
Non-GAAP Measures
For the Twelve Months Ended June 30,
2014
2015
2015
(thousands)
RMB
RMB
USD
Net income (loss)
RMB
1,828
RMB
(31,456)
$
(5,166)
Provision for income taxes
961
(2,552)
(419)
Interest expenses and foreign currency adjustment
1,141
1,130
186
Change in fair value of warrants liability
(61)
(4,034)
(663)
Write down of accounts receivable
-
10,684
1,755
Provision for slow moving inventories
-
7,701
1,265
Loss from investment
1,535
-
-
Restricted shares issued for consulting services
408
1,585
260
Loss from warrants redemption
-
2,496
410
Stock compensation expense
2,429
3,123
513
Depreciation and amortization
596
526
86
Adjusted EBITDA
8,837
(10,797)
(1,773)
Net income (loss) attributable to RCON
807
(31,456)
(5,166)
Change in fair value of warrants liability
(61)
(4,034)
(663)
Loss from investment
1,535
-
-
Restricted shares issued for consulting services
408
1,585
260
Write down of accounts receivable
-
10,684
1,755
Provision for slow moving inventories
-
7,701
1,265
Loss from warrants redemption
-
2,496
410
Stock compensation expense
2,429
3,123
513
Adjusted net income (loss) attributalbe to RCON
5,118
(9,901)
(1,626)
Adjusted earnings per diluted share
1.17
(2.03)
(0.33)
Adjusted EBITDA (non-GAAP), which we define as net income (loss) adjusted for income tax expense, interest expense, one-time write down expenses, provision for slow moving inventories, loss from investment, non-cash stock compensation expense, depreciation and amortization, was negative RMB 10.8 million ( $1.8 million ) for the twelve months ended June 30, 2015 , compared to RMB 8.8 million for the same period of last fiscal year. Adjusted net loss attributable to our shareholders was RMB 9.9 million ( $1.6 million ), or RMB 2.03 ($0.33) per diluted shares, for the twelve months ended June 30, 2015 , compared to adjusted net income attributable to our shareholders of RMB 5.1 million, or RMB 1.16 per diluted share, for the same period of last fiscal year.
Financial Position
As of June 30, 2015 , the Company had cash and cash equivalents of RMB 12.3 million ( $2.0 million ), short-term bank loans of RMB 7.0 million ( $1.1 million ), and short-term borrowings from related parties of RMB 16.9 million ( $2.8 million ), compared to RMB 18.1 million, RMB 10.0 million, and RMB 5.2 million, respectively, at June 30, 2014 . Working capital as of June 30, 2015 was RMB 72.4 million ( $11.9 million ) as compared to RMB 83.1 million at June 30, 2014 . Net cash used in operating activities was RMB 15.1 million ( $2.5 million ) for the twelve months ended June 30, 2015 , compared to RMB 8.0 million for the same period of last fiscal year. Net cash used in investing activities was RMB 1.7 million ( $0.3 million ) for the twelve months ended June 30, 2015 , compared to RMB 0.3 million for the same period of last fiscal year. Net cash provided by financing activities was RMB 11.1 million ( $1.8 million ) for the twelve months ended June 30, 2015 , compared to RMB 14.0 million for the same period of last fiscal year. During the fiscal year twelve-month period, we repaid RMB 3.0 million ( $0.5 million ) in short term bank loans and received RMB 11.7 million ( $1.9 million ) net proceeds from a related party. In June 2015 , we had stock offerings to issue 297,197 shares of common stocks through an at-the-market offering, and received net proceeds of RMB 2.3 million ( $0.4 million ).
Recent Development
On August 6, 2015 , the Company announced that it will set up a scientific research and training base (the "Workstation") in collaboration with the College of Information Science & Technology of Nanjing Agricultural University ("CIST-NAU"). With current enrollment of over 26,400 full-time students, including over 9,400 full-time master's and doctoral students, NAU is a premier university under the administration of Ministry of Education. Often ranked among the nation's top 100 universities, NAU is a national key university with both Project 211 and Project 985 designations.
On July 29, 2015 , the Company entered into a memorandum of understanding (the "MOU") with Qinghai Huayou Downhole Technologies Co., Ltd. ("QHHY"), a PRC corporation and oilfield service provider in Qinghai province, to acquire 100% stake in QHHY with a combination of cash and the Company stock (the "Transaction"). The terms and conditions of a definitive agreement are currently being negotiated between the two parties. Further details will be disclosed upon completion of the definitive agreement.
On June 17, 2015 , the Company announced that Wednesday, June 3 , 2015's issue of the Wall Street Journal included an article entitled, "Six Faces in the Race to Pump More Oil" (the "Article"). Mr. Shenping Yin , Chairman and Chief Executive Officer of Recon, was among the "Six Faces" featured in the Article. The Article can be found at: http://graphics.wsj.com/global-oil-men .
On June 10, 2015 , the Company announced that it had received Contractor (Subcontractor) Qualification (the "Qualification") from Jianghan Oilfield Construction Engineering Company ("JOCEC"), a subsidiary of China Petroleum & Chemical Corporation (NYSE: SNP) ("Sinopec"). The Qualification, which is valid for one year from June 4, 2015 and extendable on a yearly basis thereafter, qualifies Recon as a general contractor (subcontractor) to participate in certain construction and engineering projects at JOCEC ranging from the expansion and renovation of existing facilities to the construction of new facilities. In connection with the Qualification, the Company also announced that it has secured a contract with JOCEC worth approximately RMB 550,000.
About Recon
Recon Technology, Ltd. is China's first independent oil and gas field service company listed on NASDAQ (RCON). Working closely 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 :
Recon Technology, Ltd.
Ivy Xia
Tel: +86-10-8494-5799
Email: [email protected]
Weitian Investor Relations
Tina Xiao
Tel: +1-917-609-0333
Email: tina.xiao[email protected]
RECON TECHNOLOGY, LTD
CONSOLIDATED BALANCE SHEETS
As of June 30,
As of June 30,
As of June 30,
2014
2015
2015
ASSETS
RMB
RMB
U.S. Dollars
Current assets
Cash and cash equivalents
RMB
18,094,586
RMB
12,344,929
$
2,027,481
Notes receivable
-
4,205,530
690,699
Trade accounts receivable, net
43,553,737
52,186,397
8,570,884
Trade accounts receivable- related parties, net
7,479,298
4,769,800
783,373
Inventories, net
14,336,602
10,845,007
1,781,140
Other receivables, net
18,293,043
18,064,568
2,966,852
Other receivables- related parties
1,414,433
91,021
14,949
Purchase advances, net
25,759,065
18,622,538
3,058,490
Purchase advances- related parties
394,034
394,034
64,715
Prepaid expenses
2,634,664
826,314
135,711
Prepaid expenses - related parties
230,000
420,000
68,979
Deferred tax asset
1,209,961
1,742,098
286,115
Total current assets
133,399,423
124,512,236
20,449,388
Property and equipment, net
1,321,538
2,666,953
438,010
Long-term trade accounts receivable, net
4,440,665
729,317
Long-term trade accounts receivable - related parties, net
14,456,317
-
-
Long-term other receivable
5,353,104
2,729,033
448,205
Total Assets
RMB
154,530,382
RMB
134,348,887
$
22,064,920
LIABILITIES AND EQUITY
Current liabilities
Short-term bank loans
RMB
10,000,000
RMB
7,000,000
$
1,149,652
Trade accounts payable
11,413,505
13,627,088
2,238,058
Trade accounts payable- related parties
-
3,528,705
579,540
Other payables
1,765,079
2,103,057
345,398
Other payable- related parties
3,306,024
4,309,702
707,808
Deferred revenue
4,419,824
2,285,529
375,366
Advances from customers
801,385
529,700
86,996
Accrued payroll and employees' welfare
417,624
246,789
40,532
Accrued expenses
203,051
199,166
32,715
Taxes payable
7,589,846
1,153,216
189,400
Short-term borrowings - related parties
5,207,728
16,916,905
2,778,364
Deferred tax liability
180,186
180,186
29,593
Warrants liability
5,021,621
-
-
Total current liabilities
50,325,873
52,080,043
8,553,422
Equity
Common stock, ($ 0.0185 U.S. dollar par value, 25,000,000
and 100,000,000 shares authorized as of June 30, 2014 and
2015 respectively ; 4,717,336 and 5,427,946 shares issued and
outstanding as of June 30, 2014 and June 30, 2015,
respectively)
616,865
697,217
114,508
Additional paid-in capital
83,061,058
92,541,687
15,198,674
Appropriated retained earnings
4,148,929
4,148,929
681,403
Unappropriated retained earnings
8,431,453
(23,024,935)
(3,781,526)
Accumulated other comprehensive loss
(279,275)
(317,551)
(52,155)
Total shareholders' equity
95,979,030
74,045,347
12,160,904
Non-controlling interest
8,225,479
8,223,497
1,350,594
Total equity
104,204,509
82,268,844
13,511,498
Total Liabilities and Equity
RMB
154,530,382
RMB
134,348,887
$
22,064,920
The accompanying notes are an integral part of these consolidated financial statements
RECON TECHNOLOGY, LTD
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
For the years ended
June 30,
2014
2015
2015
RMB
RMB
USD
Revenues
Hardware and software
RMB
86,229,283
RMB
48,980,953
$
8,044,435
Service
477,778
103,774
17,043
Hardware and software - related parties
6,740,047
2,428,173
398,793
Total revenues
93,447,108
51,512,900
8,460,271
Cost of revenues
Hardware and software
RMB
57,333,670
RMB
33,672,729
$
5,530,273
Service
77,107
-
0
Hardware and software - related parties
3,619,470
27,161
4,461
Provision for slow moving inventories
-
7,700,837
1,264,755
Total cost of revenues
61,030,247
41,400,727
6,799,489
Gross profit
32,416,861
10,112,173
1,660,782
Selling and distribution expenses
5,293,343
11,312,452
1,857,912
General and administrative expenses
16,198,947
30,147,141
4,951,245
Research and development expenses
8,094,333
4,168,813
684,669
Operating expenses
29,586,623
45,628,406
7,493,826
2,830,238
(35,516,233)
(5,833,044)
Other income (expenses)
Subsidy income
1,250,509
781,457
128,343
Interest income
384,182
293,499
48,203
Interest expense
(952,574)
(1,110,451)
(182,376)
Loss from investment
(1,535,250)
-
-
Change in fair value of warrants liability
60,647
4,034,272
662,573
Loss from foreign currency exchange
(188,495)
(19,190)
(3,152)
Loss from warrants redemption
-
(2,496,375)
(409,995)
Other expense
939,699
24,558
4,033
Income (loss) before income tax
2,788,956
(34,008,463)
(5,585,415)
Provision (benefit) for income tax
961,136
(2,552,075)
(419,143)
Net Income (loss)
1,827,820
(31,456,388)
(5,166,272)
Less: Net income attributable to non-controlling interest
1,020,632
-
-
Net Income (loss) attributable to Recon Technology, Ltd
RMB
807,188
RMB
(31,456,388)
$
(5,166,272)
Comprehensive income (loss)
Net income (loss)
1,827,820
(31,456,388)
(5,166,272)
Foreign currency translation adjustment
17,783
(38,276)
(6,286)
Comprehensive income (loss)
1,845,603
(31,494,664)
(5,172,558)
Less: Comprehensive income attributable to non-controlling interest
1,022,410
(1,982)
(326)
Comprehensive income (loss) attributable to Recon Technology, Ltd
RMB
823,193
RMB
(31,492,682)
$
(5,172,232)
Earnings (loss) per common share - basic
RMB
0.19
RMB
(6.45)
$
(1.06)
Earnings (loss) per common share - diluted
RMB
0.18
RMB
(6.45)
$
(1.06)
Weighted - average shares -basic
4,303,955
4,876,504
4,876,504
Weighted - average shares - diluted
4,368,162
4,876,504
4,876,504
The accompanying notes are an integral part of these consolidated financial statements
RECON TECHNOLOGY, LTD
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended
2014
2015
2015
RMB
RMB
U.S. Dollars
Cash flows from operating activities:
Net income (loss)
RMB
1,827,820
RMB
(31,456,388)
$
(5,166,272)
Adjustments to reconcile net income (loss) to net cash used
in operating activities:
Depreciation
595,647
526,046
86,396
Loss (Gain) from disposal of equipment
128,902
(193,657)
(31,805)
Provision for doubtful accounts
1,518,778
3,252,868
534,238
Provision for slow moving inventories
-
7,700,836
1,264,754
Share based compensation
2,429,028
3,123,417
512,977
Loss from investment
1,535,250
-
-
Deferred tax benefit (provision)
(23,054)
(532,136)
(87,396)
Change in fair value of warrants liability
(60,647)
(4,034,272)
(662,573)
Restricted shares issued for services
407,593
1,585,462
260,390
Loss from warrants redemption
-
2,496,375
409,995
Income tax benefit
-
(2,111,281)
(346,748)
Changes in operating assets and liabilities:
Trade accounts receivable
(5,291,233)
(3,245,218)
(532,982)
Trade accounts receivable-related parties
(3,819,299)
4,315,755
708,803
Inventories
(1,065,532)
(4,209,241)
(691,309)
Notes receivable
2,578,855
(4,205,530)
(690,699)
Other receivable, net
(981,099)
2,481,328
407,522
Other receivables related parties, net
(671,905)
1,323,412
217,352
Purchase advance, net
(6,879,156)
3,271,935
537,369
Tax recoverable
575,650
-
-
Prepaid expense
(146,708)
1,808,350
296,996
Prepaid expense - related party, net
136,000
(190,000)
(31,205)
Trade accounts payable
4,029,340
2,213,583
363,550
Trade accounts payable-related parties
(3,994,718)
3,528,705
579,540
Other payables
(199,612)
337,978
55,508
Other payables-related parties
(933,651)
1,003,678
164,840
Deferred income
1,038,442
(2,134,295)
(350,528)
Advances from customers
330,685
(271,685)
(44,620)
Accrued payroll and employees' welfare
(1,575,159)
(170,835)
(28,057)
Accrued expenses
(285,679)
5,291
869
Taxes payable
835,418
(1,322,818)
(217,254)
Net cash used in operating activities
(7,960,044)
(15,102,337)
(2,480,349)
Cash flows from investing activities:
Purchase of property and equipment
(477,957)
(2,078,204)
(341,316)
Proceeds from disposal of equipment
141,716
400,400
65,760
Net cash used in investing activities
(336,241)
(1,677,804)
(275,556)
Cash flows from financing activities:
Proceeds from short-term bank loans
23,500,000
7,000,000
1,149,652
Repayments of short-term bank loans
(23,500,000)
(10,000,000)
(1,642,360)
Proceeds from short-term borrowings-related parties
5,007,728
18,250,000
2,997,307
Repayment of short-term borrowings
(570,375)
-
-
Repayment of short-term borrowings-related parties
(5,303,279)
(6,550,000)
(1,075,746)
Proceeds from sale of common stock, net of issuance costs
12,132,882
2,392,027
392,857
Proceeds from stock options exercised
2,704,909
-
-
Net cash provided by financing activities
13,971,865
11,092,027
1,821,710
Effect of exchange rate fluctuation on cash and cash
equivalents
68,614
(61,543)
(10,106)
Net decrease in cash and cash equivalents
5,744,194
(5,749,657)
(944,301)
Cash and cash equivalents at beginning of year
12,350,392
18,094,586
2,971,782
Cash and cash equivalents at end of year
RMB
18,094,586
RMB
12,344,929
$
2,027,481
-
-
Supplemental cash flow information
Cash paid during the period for interest
RMB
939,416
RMB
1,060,529
$
174,177
Cash paid during the period for taxes
RMB
704,982
RMB
881,794
$
144,822
Non-cash investing and financing activities
Issuance of common stock to prepay professional services
RMB
1,002,721
RMB
-
$
-
Issuance of common stock to redeem warrants
RMB
-
RMB
3,462,438
$
568,657
The accompanying notes are an integral part of these consolidated financial statements
releases/recon-technology-ltd-reports-fiscal-year-2015-financial-results-300149079.html
SOURCE Recon Technology, Ltd.