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S&W Seed Company announces results for the second quarter of fiscal year 2014


Five Points, California, USA
February 13, 2014

S&W Seed Company (Nasdaq: SANW) today announced financial results for its second quarter of fiscal 2014 ended December 31, 2013.

Second Quarter Overview:

  • Second quarter revenues were within management's range at $11.5 million, compared to $13.7 million in the comparable quarter of fiscal 2013;
  • Gross margins improved to 20.7% during the second quarter compared to 11.6% for the second quarter of the prior fiscal year, and also improved quarter over quarter from 18.6% in the first quarter of fiscal 2014;
  • 3rd consecutive quarter of year-over-year improvement in gross margins;
  • Second quarter Adjusted EBITDA (see Table A) totaled $883,000, an improvement of $366,000 compared to the second quarter of last year;
  • Net income per basic and diluted share of $0.01 for the second quarter compared to $0.02 per basic and diluted share in the period a year ago

Quarterly Results

For the second fiscal quarter ended December 31, 2013, S&W reported revenues of $11.5 million versus $13.7 million in the comparable period of the prior year. Revenues during the quarter were within the company's stated range and primarily driven by growth in Northern Africa and Mexico.

Gross margins improved to 20.7% during the second quarter compared to 11.6% in last year's second quarter. In the second quarter of last year, the company recorded a $0.3 million inventory valuation reserve for stevia due to the company's evaluation of its projected yields and agronomic practices. Gross margins improved for the third consecutive quarter as a result of success the company is achieving in trying to capture the most value possible for its seed inventory through a series of initiatives, including its optimization program.

Selling, general and administrative expenses ("SG&A") for the first quarter totaled $1,471,000 compared to $1,065,000 for the comparable period of the prior year, and decreased 8% from the $1,594,000 incurred in the most recent first quarter of fiscal 2014. The increase in SG&A expense versus the prior year was primarily due to the acquisition of SGI which closed on April 1, 2013 and therefore was not included in the second quarter results in the comparable period of the prior year. Non-cash stock-based compensation totaled $222,000 in the current quarter versus $99,000 in the comparable period in the prior year.

Net income for the second quarter of fiscal 2014 was $110,000, or $0.01 per basic and diluted common share, compared to net income of $147,000, or $0.02 per basic and diluted common share during the second quarter of last year.

Adjusted EBITDA, a non-GAAP metric (see Table A), for the second quarter of fiscal 2014 improved to $883,000 compared to $516,000 in the second quarter of fiscal 2013.

Outlook
Based upon the evaluation of information currently available to management, the company is narrowing its estimates of annual revenues to be in the range of $52 to $58 million as the company focuses its operations on improving gross margins, as well as a shift of anticipated shipments to the following year. Revenues for the third quarter of fiscal year 2014 are expected to be approximately $7 million.

Management Discussion
Mark Grewal, president and chief executive officer of S&W Seed Company, commented, "We continue to focus on our strategy of improving gross margins, which resulted in our third consecutive quarter of gross margin improvement when compared to the year ago period. While we are pleased with the near term improvements, we are very focused on our long-term gross margin expansion initiatives by: increasing acreage of S&W varieties in Australia where the cost of production is lower than California; increasing our optimization program whereby we are creating unique proprietary blends and product offerings; converting fields in the Imperial Valley away from non-proprietary varieties to S&W's elite varieties; and continuing to communicate the value capture opportunity of our elite proprietary varieties."

Mr. Grewal expanded, "Revenues during the quarter were within the company's stated range and were driven by growth in Northern Africa and Mexico, offset by decreased sales to Saudi Arabia. We continue to evaluate the market conditions in Saudi Arabia, and believe that inventories are being diminished in the channel heading into the fall planting season. We will continue to be striving to obtain the most value for our seed possible and believe we are uniquely positioned with our seed inventories."

Matthew Szot, chief financial officer of S&W Seed Company, commented, "A number of the opportunities for growth and gross margin expansion are being made possible due to our recent strategic acquisitions. In particular, we believe that our strategy to move into Australia will be one that has the ability to dramatically transform the capabilities of S&W over the next number of years due to the decreased cost of production. We are already benefitting from the synergies of optimizing our group inventory, and look forward to the coming years as we increase our proprietary S&W seed production in Australia."

Mr. Grewal concluded, "My 30+ years of experience, and conversations with a number of folks in the industry, leads me to believe that we are appropriately positioned to take advantage of opportunities in the marketplace over the next number of quarters, but more importantly the next number of years. The fourth quarter of this year should be a record quarter for S&W due to the strength of our seed inventories heading into the all important fall planting period. Overall, we have assembled a great set of alfalfa seed assets and believe there is a great opportunity to expand upon them in the future with a strong development pipeline."
 



More news from: S&W Seed Company


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

Published: February 13, 2014

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