Five Points, California, USA
November 13, 2012

S&W Seed Company (Nasdaq: SANW) today announced financial results for its first quarter of fiscal year 2013 ended September 30, 2012.

First Quarter Fiscal Year 2013 and Other Highlights:

• Record quarterly revenues of $6.7 million;
• Diluted EPS of $0.01 during the quarter compared to $0.09 a year ago affected by lower gross margins on seed sales due to higher costs of production on fields operating less than one year;
• Completed acquisition of Imperial Valley Seeds ("IVS") on October 1, 2012 to significantly expand production capabilities and diversify sales channels; IVS had audited revenues of $16.3 million and $1.7 million of pre-tax income for the 12 months ended December 31, 2011;
• Announced agreement with Monsanto and Forage Genetics, Inc. ("FGI") on October 2, 2012 to incorporate the Roundup Ready® trait into specific S&W-developed varieties;
• Acquired rights to dormant alfalfa genetics to expand the company's addressable market;
• Company expects revenues for the second quarter of fiscal year 2013 to have approximately $5 million in contribution from IVS.

For the first fiscal quarter ended September 30, 2012, S&W reported revenues of $6.7 million versus $6.1 million in the prior year; an increase of 10%. Revenues for the quarter were restricted by limited seed available for shipment due to the timing of the 2012 fall harvest as well as lower beginning inventory balances. Due to continued strong demand for seed, the company anticipates that it will see continued sell through of seed in the second quarter that was not available for shipment during the first quarter.

Gross profits decreased to $1.1 million during the first quarter of fiscal 2013 compared to $1.8 million in the quarter a year ago. The decrease in gross profits was primarily affected by higher costs of production on fields operating less than one year, as well as delayed follow through in selling price increases intended to partially offset the overall increases in cost of production. The company is already obtaining additional increases in average pricing compared with that obtained in the first quarter and anticipates that it will be able to obtain higher gross margins in its core business for the remainder of the year.

As a result of the effect on gross profits described above, S&W reported operating income of $155,000 for the quarter versus $879,000 in the comparable quarter in the prior year. Net income for the quarter totaled $89,000, or $0.01 per basic and diluted share, compared to a net income of $523,000, or $0.09 per basic and diluted share, in the fiscal quarter ended September 30, 2011.

Mark Grewal, president and chief executive officer of S&W Seed Company, commented, "The strategic actions we have taken during the course of the last few months have positioned S&W to become one of the leaders in the alfalfa seed industry for years to come. Our acquisition of IVS brings an established grower base for production, customer channels, and management infrastructure that will significantly benefit S&W. Our agreement with Monsanto and FGI will allow us to meet the needs of our domestic customers who desire the benefits of biotechnology along with our high yielding, salt tolerant traits. Finally, our acquisition of certain dormant alfalfa varieties will allow us to expand into a previously untapped marketplace. Overall, this has been a transformational few months and we are dedicated to leveraging these recent developments to continue driving shareholder value for years to come."

The company has recently completed the audit on IVS. For the 12 months ended December 31, 2011, IVS had revenues of $16.3 million and income before taxes of $1.7 million. The company anticipates that the operations of IVS, which were acquired on October 1, 2012 through the acquisition of substantially all of IVS' assets, will contribute approximately $5 million in revenues during the company's second fiscal quarter of 2013. The $5 million contribution will be in addition to the company's existing business operations.

The company's seed and crop revenue totaled $6.4 million for first quarter compared to $5.9 million in the comparable quarter last year. Revenue from the company's milling and processing operations totaled $364,000 for the quarter, compared to $230,000 in the prior year. International sales accounted for 78% of revenue, while domestic sales accounted for 22%.

Mr. Grewal commented on the quarterly results, "We continued to see robust demand for our products during the first quarter; however we remained limited by our overall seed available for sale due to the overall acreage dedicated to production. We continue to put in place initiatives to meet the growing demand for alfalfa seed, including our acquisition of IVS as well as additional expansion of farmland dedicated to the production of alfalfa seed. The near-term challenges to production growth temporarily impacted us during the quarter as certain first year fields yielded less than we had originally anticipated. We believe that as our overall acreage continues to increase, fluctuations in yields at certain fields will have less of an impact on the overall costs of production. We have also taken action during the second quarter by increasing the pricing of our varieties to partially offset our increases in the cost of production."

Mr. Grewal commented on advancements in the company's stevia development program, "We have completed the in-field portions of the harvest on our first generation field and a portion of our second generation field. We are in the process of drying and de-stemming the leaf and expect to ship the dried stevia leaf to our partners at PureCircle soon."

Matthew Szot, chief financial officer of S&W Seed Company, commented, "The acquisition of IVS, including the established contracted grower base, diversified sales channels, and management that accompanies it is precisely the type of acquisition that we have discussed looking for. We believe that the acquisition will be immediately accretive to our overall operations. Going forward, we will continue to be active in our discussions with agricultural operations that can benefit from the platform that we are creating at S&W."

Mr. Grewal concluded, "I am excited about the developments during the last quarter and year and look forward to capitalizing off these developments in the years to come. We are building a strong infrastructure to support the continuation of the rapid expansion that has occurred. We appreciate the support of our customers, partners and shareholders and look forward to the future with great expectations."
 

Website: http://www.swseedco.com/

Published: November 13, 2012