Five Points, California, USA
February 8, 2012
S&W Seed Company (Nasdaq: SANW) today announced financial results for its second fiscal quarter of 2012, which ended December 31, 2011.
Second Quarter Highlights:
- Revenues increased to $4.7 million from $910,000 in the comparable fiscal 2011 quarter marking a 420% increase;
- Seed revenues increased 689% to $4.1 million compared to $516,000 in the second quarter of fiscal 2011;
- Milling and other revenues increased 66% in the second quarter of fiscal 2012;
- First stevia revenues were recognized after pilot commercial harvest;
- EBITDA was $674,000 for the quarter, an improvement of $830,000 versus the loss in comparable period of the prior year;
- Net income totaled $443,000, an improvement of $525,000 over the loss in the comparable period of the prior year; and
- Basic and diluted earnings per share was $0.08 versus a loss of ($0.01) per share in the year ago period.
Six Months Ended December 31, 2011 Highlights:
- First half fiscal year 2012 revenues of $10.8 million compared to $1.8 million in the comparable period, a 488% increase;
- EBITDA was $1,625,000 for the first half of fiscal year 2012, an improvement of $2,084,000 versus the loss in the comparable period of the prior year; and
- Basic and diluted earnings per share for the first six months ended December 31, 2011 totaled $0.17 compared to a loss of ($0.06) per share in the comparable six month period of the prior year.
For the second quarter of fiscal year 2012, S&W reported revenue of $4.7 million versus $0.9 million in the comparable quarter last year; an increase of 420%. These results reflect both the strong demand of the company's proprietary alfalfa seed and the greatly increased price competitiveness due to the strategic decision to purchase its distributor's customer list and sell direct to dealers and large farms in key international markets. S&W reported operating income of $635,000 versus an operating loss of $216,000 in the comparable period of the prior year. Net income totaled $443,000, or $0.08 per basic and diluted share compared to a net loss of $82,000 or $(0.01) per basic and diluted share in the second quarter of the prior year.
For the six months ended December 31, 2011 S&W reported revenue of $10.8 million versus $1.8 million in the comparable period last year; an increase of 488%. S&W reported operating income of $1.5 million versus an operating loss of $573,000 in the comparable period of the prior year. Net income totaled $966,000, or $0.17 per basic and diluted share compared to a net loss of $336,000 or $(0.06) per basic and diluted share in the six months ended December 31, 2010.
The company's seed revenue totaled $4.1 million for the second quarter of fiscal year 2012 compared to $0.5 million in the prior year's second quarter. Revenue from the company's milling and processing operations totaled $654,000 in the quarter, an increase of 66% compared to $393,000 in the quarter a year ago. The increase in milling and processing revenues reflects the timing of the fall harvest, which occurred later this year than the previous year.
During the second fiscal quarter, the company recorded its first revenue from its stevia operations totaling approximately $25,000. The initial stevia harvest was conducted in a highly conservative way to preserve the plant roots in the stevia "stand", perform trial analysis and experiment with different harvesting methods. The company expects revenue from stevia to increase dramatically as the field continues to mature and the company refines its harvesting techniques.
Mark Grewal, president and chief executive officer of S&W Seed Company, commented, "We are very pleased with the continuing high demand for our proprietary alfalfa seed varieties, with record alfalfa seed revenues continuing into our second quarter. While the second quarter is typically characterized predominantly by domestic sales, in the second fiscal quarter of 2012, we had unprecedented Saudi demand. Our efforts to market directly into the Middle East were more successful than we anticipated. Dealers in the region have been rapidly selling through inventory and opening many new customer accounts in the process. We expect follow-on orders for summer 2012 plantings will be strong. We see this as a very good indication of potential future success in the region."
During the quarter, the company sold 1.1 million pounds of alfalfa seed. International sales accounted for 67% of seed sales, while domestic seed sales accounted for 33%.
According to the USDA, alfalfa hay is commanding record prices due to shortages and increased global demand. In December 2011, the USDA reported that the national average price was $199 per ton, compared with $121 per ton in the previous year. While not a direct correlation, with the significant increase in price for alfalfa hay, S&W expects increased demand for hay production in the future, which will, in S&W's opinion, also increase the demand for S&W's proprietary varieties.
Mr. Grewal continued, "Due to smaller than normal supplies of alfalfa seed in the marketplace, we continue to see strong pricing both internationally and domestically. S&W hopes to profit from favorable conditions in the market, by significantly expanding our seed production acreage in calendar 2012. The company currently has approximately 4,300 acres, secured or in the ground, for the 2012 harvest through both our contracted grower base as well as S&W farmed acreage. Although this is a 79% increase from the 2,400 acres harvested last year, we remain on the lookout for opportunities to further expand acreage where ever it makes commercial sense. This includes leasing land to farm alfalfa seed ourselves, when we believe we can profitably do so."
Mr. Grewal commented on stevia, "As we previously announced, we completed our trial harvest during September 2011 and shipped product to our partners at PureCircle during the second fiscal quarter, marking our first revenues in our stevia development program. We are very pleased that the trial results from this initial harvest exceeded the needs of PureCircle, including high percentages of the Reb-A sweetener component and low levels of moisture. We attempted to exercise the utmost prudence in our trial harvest to preserve the stand, but we hope to dramatically increase yields in future periods."
"We intend to significantly expand stevia acreage in 2012. The company is producing several million stevia plants in the greenhouse for transplantation onto between 80 and 150 additional acres. After several years of research and development and based on the results of our test harvest, we now feel sufficiently confident to start a measured expansion in our stevia leaf production program."
Matt Szot, chief financial officer of S&W Seed Company, commented, "We are pleased with the results of the second quarter. The strength in our sales highlighted the leverage of our business model, with net operating margins of 13.4% during the quarter. Additionally, our balance sheet remained strong with an orderly collections process, highlighted by an increase in our cash balances to $6.8 million and net working capital of $11.8 million. In addition to this liquidity, we also have an undrawn line of credit in the amount of $5 million with Wells Fargo."
Mr. Grewal concluded, "Fiscal year 2012 is on pace to be an excellent year for S&W Seed Company and, as we approach the end of 2012, we are optimistic about fiscal 2013. We look forward to capitalizing on our core assets to build shareholder value into the future."
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