October 01, 2012 at 06:30 AM EDT
Recon Reports fiscal year 2012 Financial Results

BEIJING, Oct. 1, 2012 /PRNewswire-FirstCall/ -- Recon Technology, Ltd. (Nasdaq: RCON), an oilfield services provider that operates primarily in the People's Republic of China (the "Company"), today announced its financial results for fiscal year 2012 ended June 30, 2012.

Fiscal Year 2012 Highlights

  • Total revenues increased by 18.61% in fiscal year 2012 to RMB 75.54 million ($11.95 million), due to the company's move into the horizontal fracturing business and development of overseas business.
  • Gross profits increased 20.05% in fiscal year 2012 were RMB24.27 million ($3.84 million).
  • Gross margin was 32.13%, compared to 31.75% in FY 2011.
  • Operating loss in fiscal year 2012 decreased by 81.93% to RMB3.54 mullion ($560 thousand) from FY 2011.
  • Comprehensive loss attributable to Recon in fiscal year 2012 was RMB3.82 million ($605 thousand), an 86.84% decrease from FY2011. 
  • Diluted Losses per Share attributable to Recon for fiscal year 2012 was  RMB0.97 ($0.15), a reduction of 86.8% from diluted losses per share of RMB7.35 in 2011.
  • Adjust EBITDA in fiscal year 2012 was a loss of RMB1.29 million ($204 thousand), an improvement of 92.28% from FY 2011.

"I'm pleased that we closed the year with improved operating results," said Mr. Yin Shenping, CEO of Recon, "The high-end segment of China's oilfield service industry has opened more to private companies, and we believe there are opportunities for Chinese oilfield services companies, especially experienced companies that can provide all-in-one solutions for customers. As a small company, Recon now is more focused on oilfield automation and production stimulation-related services. But we also seek to extend our business on the industrial chain by providing more integrated services and incremental measures and growing our business from a predominantly up-ground business to include some down-hole services as well. We believe our experience and reputation will help us remain competitive in this arena."

Fiscal Year 2012 Results

Total revenues for the year ended June 30, 2012 were RMB75.54 million ($11.95 million), an increase of RMB11.85 million or 18.61%. The deconsolidation of ENI was responsible for a decrease of RMB18.68 million in hardware and hardware-related revenues. Excluding the effect of deconsolidating ENI, our operating revenue increased by RMB30.54 million, or 67.85%

Gross profit increased by RMB4.05 million ($641 thousand), or 20.05%, to RMB24.27 million ($3.84 million) for fiscal year 2012. Gross profit as a percentage of revenues increased slightly from 31.75% to 32.13%.

Selling and distribution expenses decreased by RMB2.68 million, or 34.67%, from RMB7.74 million for the year ended June 30, 2011 to RMB 5.05 million ($780 thousand) for the same period of 2012 as a result of focusing our selling efforts on a more limited number of clients. 

General and administrative expenses decreased by RMB9.30 million ($1.47 million), or 29.01%, from RMB32.06 million in FY2011 to RMB22.76 million ($3.60 million) in the same period of 2012, which was mainly attributable to deconsolidation of ENI during the fiscal year 2011, offset by increase in expenses in research and development activities, staff wages, in order to retain talented staff and SOX compliance services.

Loss from operations was RMB3.54 million ($560 thousand) for FY2012, an improvement of RMB16.03 million, or 81.93%, from a loss of RM19.57 million for 2011. This improvement in operations is attributed primarily to the deconsolidation of ENI, increase in revenues and reduction in expenses during this year.

Net loss attributable to ordinary shareholders was RMB3.82 million ($605 thousand) for the year ended June 30, 2012, an improvement of RMB25.22 million or 86.84%, from a loss of RMB29.04 million for same period of 2011.

As of June 30, 2012, cash and cash equivalents was RMB3.53 million ($553 thousand). Except for RMB6.89 million ($1.09 million) of short-term borrowings and RMB23 million ($3.64 million) short-term bank loan, there were no other financing activities and contingent liabilities.

Net cash used in operating activities was RMB21.87 million ($3.46 million) for the year ended June 30, 2012, an increase of RMB15.54 million ($2.46 million) from RMB6.33 million for the same period of 2011. The increase in the use of cash in the current period was due to an increase in trade accounts receivable and purchase advances, which resulted from increased business activities, offset by the increased in inventory turnover and accounts payable.

Net cash provided in financing activities was RMB22.74 million ($3.60 million) for the year ended June 30, 2012, compared to net cash provided by financing activities amounting to RMB2.62 million for the same period of 2011. The increase in net cash provided by financing activities was mainly due to the increase of bank loans and short-term borrowings from related parties to supplement our working capital.

Net cash used in investing activities was RMB840 thousand ($133 thousand) for the year ended June 30, 2012, a decrease of RMB1.59 million from RMB2.43 million for the same period of 2011. The decrease was mainly caused by a loss on cash due to the deconsolidation of ENI amounting to RMB2.56 million in the fiscal 2011, while there was no such loss for the same period of 2012.

About Recon Technology, Ltd.

Recon Technology, Ltd. is a non-state-owned oil field service company in China. The company has been providing software, equipment and services designed to increase the efficiency and automation in oil and gas exploration, extraction, production and refinery for Chinese oil and gas fields for more than 10 years. More information may be found at http://www.recon.cn or via e-mail at info@recon.cn.

This news release contains forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements that are other than statements of historical facts. These statements are subject to uncertainties and risks 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.

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.

Investor Contact:
Recon Technology, Ltd.
Tel: +86-10-8494-5799

 

RECON TECHNOLOGY, LTD.

CONSOLIDATED BALANCE SHEETS











 

As of June 30,


 

As of June 30,


 

As of June 30,


2011


2012


2012

ASSETS

RMB


RMB


U.S. Dollars

Current assets









Cash and cash equivalents

RMB

3,485,944


RMB

3,533,283


$

559,090

Notes receivable


1,276,574



-



-

Trade accounts receivable, net


22,329,705



61,993,942



9,809,634

Trade accounts receivable- related parties, net


25,983,172



20,394,749



3,227,170

Inventories, net


22,576,094



24,281,300



3,842,160

Other receivables, net


6,128,794



8,074,096



1,277,608

Other receivables- related parties


4,383,000



17,729



2,805

Purchase advances, net


12,152,896



16,250,616



2,571,422

Purchase advances- related parties


989,828



1,093,534



173,036

Tax recoverable


-



2,790,722



441,591

Prepaid expenses


1,016,299



535,336



84,709

Deferred tax asset


458,133



1,106,801



175,135

Total current assets


100,780,439



140,072,108



22,164,360










Property and equipment, net


1,132,425



1,774,820



280,839

Long-term other receivable


12,971,481



10,302,349



1,630,196

Total Assets

RMB

114,884,345


RMB

152,149,277


$

24,075,395










LIABILITIES AND EQUITY









Current liabilities









Short-term bank loan

RMB

5,000,000


RMB

23,000,000


$

3,639,413

Trade accounts payable


6,320,488



11,905,560



1,883,881

Trade accounts payable- related parties


-



5,339,231



844,855

Other payables


1,960,924



2,341,826



370,560

Other payable- related parties


61,477



1,099,259



173,942

Deferred revenue


2,420,497



3,291,073



520,764

Advances from customers


782,945



936,124



148,128

Accrued payroll and employees' welfare


157,824



949,579



150,257

Accrued expenses


345,015



476,416



75,384

Taxes payable


7,192,123



9,681,620



1,531,975

Short-term borrowings


1,743,286



2,767,066



437,848

Short-term borrowings- related parties


911,399



4,123,306



652,453

Total current liabilities


26,895,978



65,911,060



10,429,460

Total Liabilities


26,895,978



65,911,060



10,429,460










Commitments and Contingency


















Equity









Common shares, ($ 0.0185 U.S. dollar par value, 25,000,000 shares authorized; 3,951,811 shares issued and outstanding as of June 30, 2011 and 2012)


529,979



529,979



83,861

Additional paid-in capital


65,877,686



67,643,791



10,703,640

Appropriated retained earnings


2,058,429



2,378,961



376,436

Unappropriated retained earnings


13,495,199



9,354,535



1,480,218

Accumulated other comprehensive loss


(288,897)



(290,496)



(45,967)

Total controlling shareholders' equity


81,672,396



79,616,770



12,598,188

Non-controlling interest


6,315,971



6,621,447



1,047,747

Total equity


87,988,367



86,238,217



13,645,935

Total Liabilities and Equity

RMB

114,884,345


RMB

152,149,277


$

24,075,395










 

RECON TECHNOLOGY, LTD.










CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME













For the year ended June 30,




2011



2012


2012




RMB



RMB


U.S. Dollars












Revenues










Hardware

RMB

41,677,918


RMB

49,693,929


$

7,863,337


Service


-



13,985,465



2,212,995


Software


2,111,111



3,952,991



625,503


Hardware - related parties


19,899,438



7,909,994



1,251,641


Total revenues


63,688,467



75,542,379



11,953,476












Cost of revenues


43,469,506



51,269,950



8,112,719


Gross margin


20,218,961



24,272,429



3,840,757






















Selling and distribution expenses


7,736,091



5,054,219



799,756


General and administrative expenses


32,055,652



22,755,891



3,600,787


Operating expenses


39,791,743



27,810,110



4,400,543






















Loss from operations


(19,572,782)



(3,537,681)



(559,786)












Other income (expenses)










Subsidy income


822,545



554,856



87,798


Interest income


1,463



335,517



53,091


Interest expense


(600,500)



(962,824)



(152,353)


Gain or loss from currency exchange


35,846



(46,303)



(7,327)


Other income (expense)


279,664



(78,097)



(12,358)


Loss on deconsolidation


(8,989,614)



-



-


Loss before income taxes


(28,023,378)



(3,734,532)



(590,935)


Benefit (provision) for income taxes


(665,146)



220,050



34,820


Net loss


(28,688,524)



(3,514,482)



(556,115)


Less: Net income attributable to non-controlling interest


347,851



305,653



48,365


Net loss attributable to Recon Technology, Ltd

RMB

(29,036,375)


RMB

(3,820,135)


$

(604,480)


Comprehensive Loss










Net loss


(28,688,524)



(3,514,482)



(556,115)


Foreign currency translation adjustment


(211,900)



(1,599)



(253)


Comprehensive loss


(28,900,424)



(3,516,081)



(556,368)


Comprehensive income attributable to non-controlling interest


324,307



305,830



48,393


Comprehensive loss attributable to Recon Technology, Ltd

RMB

(29,224,731)


RMB

(3,821,911)


$

(604,761)












Loss per common share - basic and diluted

RMB

(7.35)


RMB

(0.97)


$

(0.15)












Weighted - average shares -basic and diluted


3,951,811



3,951,811



3,951,811


 

RECON TECHNOLOGY, LTD.









CONSOLIDATED STATEMENTS OF CASH FLOWS

















For the year ended June 30,


2011


2012


2012


RMB


RMB


U.S. Dollars










Cash flows from operating activities:









Net loss

RMB

(28,688,524)


RMB

(3,514,482)


$

(556,115)

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




Loss on deconsolidation


8,989,614



-



-

Depreciation


361,837



197,873



31,310

Provision for doubtful accounts





3,919,052



620,133

Stock based payments


1,420,588



1,239,788



196,178

Deferred tax benefit


(182,173)



(648,668)



(102,642)

Changes in operating assets and liabilities:









Trade accounts receivable


7,406,206



(42,916,527)



(6,790,912)

Trade accounts receivable-related parties


9,947,112



5,588,423



884,286

Notes receivbale


(1,276,574)



1,276,574



201,999

Other receivable, net


3,987,998



447,706



70,843

Other receivables related parties, net


(1,226,488)



4,365,271



690,740

Purchase advance, net


18,150,896



(4,488,357)



(710,217)

Purchase advance-related party, net


8,947,200



(103,706)



(16,410)

Tax recorvable


-



(2,790,722)



(441,591)

Prepaid expense


(269,661)



480,963



76,105

Inventories


(23,287,337)



(1,705,206)



(269,824)

Trade accounts payable


(4,747,743)



5,585,072



883,756

Trade accounts payable-related parties


-



5,339,231



844,855

Other payables


(1,183,142)



380,902



60,272

Other payables-related parties


133,206



1,037,782



164,214

Deferred income


(1,795,986)



870,576



137,756

Advances from customers


334,678



153,179



24,238

Accrued payroll and employees' welfare


(176,235)



791,755



125,284

Accrued expenses


54,212



131,401



20,792

Taxes payable


(3,231,315)



2,489,497



393,926

Net cash used in operating activities


(6,331,632)



(21,872,623)



(3,461,024)










Cash flows from investing activities:









Purchase of property and equipment


(173,089)



(840,268)



(132,960)

Cash effect of deconsolidating VIE


(2,256,305)



-



-

Net cash used in investing activities


(2,429,394)



(840,268)



(132,960)










Cash flows from financing activities:









Proceeds from short-term bank loan


5,000,000



23,000,000



3,639,413

Repayments of short-term bank loan


-



(5,000,000)



(791,177)

Proceeds from other receivables-loans


3,216,000







Proceeds from short-term borrowings


168,317



2,153,780



340,804

Proceeds from short-term borrowings-related party





4,991,907



789,896

Repayments of  short-term borrowings


(5,343,082)



(1,130,000)



(178,806)

Repayments of short-term borrowings-related party


(2,700,000)



(1,780,000)



(281,659)

Capital contribution in VIE


-



500,000



79,118

Net cash provided by financing activities


341,235



22,735,687



3,597,589










Effect of exchange rate fluctuation on cash and cash equivalents


(237,222)



24,543



3,884










Net increase (decrease) in cash and cash equivalent


(8,657,013)



47,340



7,490

Cash and cash equivalents at beginning of year


12,142,957



3,485,944



551,600

Cash and cash equivalents at end of year

RMB

3,485,944


RMB

3,533,284


$

559,090



















Supplemental cash flow information









Cash paid during the year for interest

RMB

401,529


RMB

442,719


$

70,054

Cash paid during the year for taxes

RMB

3,700,671


RMB

494,087


$

78,182










 

SOURCE Recon Technology, Ltd.

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