SANW S and W Seed Company

FIVE POINTS, Calif., Feb. 14, 2011 /PRNewswire/ -- S&W Seed Company (Nasdaq: SANW) today announced its fiscal second quarter results for the three and six months ended December 31, 2010.  

Commenting on the results, Mark Grewal, President and Chief Executive Officer of S&W Seed, stated, "Domestic alfalfa hay prices have recently increased, due to limited supply and renewed demand from California dairies.  Internationally, an uptrend in alfalfa seed pricing appears to be taking place in the Middle East.  Our decision not to discount our seed in the Saudi Arabian market, as others seem to have done, looks to have been correct.  Our expectation is that the export market for our proprietary alfalfa varieties will continue to rebound and that demand for our inventory – much of it purchased from growers at less than current cost – will be strong; thus, our decision to remain patient and hold our seed in reserve will hopefully result in higher margins.  In addition, S&W's domestic sales and marketing efforts are proving fruitful with growth opportunities now emerging in Texas, Arizona and New Mexico."

Continuing, Grewal said, "We are also pleased with the progress we continue to make with our U.S. stevia cultivation program.  Last week, we took delivery of stevia seed from our Chinese suppliers, positioning us well to begin transitioning our stevia program from research production phase to full crop production.  If all goes as anticipated with the seed germination process, we expect our first large scale stevia plantings to occur late next month or early in April, which should give us up to three or four cutting cycles this calendar year and allow us to begin booking revenues from contracted sales of dried stevia leaf to PureCircle by late summer."

"On the mergers and acquisitions front, our management team is working to advance and/or conclude negotiations with strong acquisition candidates – any one of which would be accretive to our earnings, and provide S&W with critical sales, distribution and marketing advantages both domestically and in key export markets.  We are very excited about the growth potential these companies represent for us and hope to have details to share about one or more deals being consummated in the coming months," concluded Grewal.

Financial Highlights When Comparing Three Months Ended December 31, 2010 to Three Months Ended December 31, 2009:

• Total revenues decreased 70% to $909,656 from $3,027,426.
  • Revenues from alfalfa seed sales totaled $516,613, down from $2,943,321.  The decline was due to the fact that the Company's distributor, Genetics International, who sells into the Saudi Arabian market, has continued to refrain from participating in "commodity type" price discounting that is occurring within certain export markets, namely Saudi Arabia, due to what S&W and Genetics International believe are temporary factors that they anticipate will correct by the fall of this year.  Consequently, all revenues booked during the three month period, ended December 31, 2010, reflected sales to the domestic market.
  • Revenues from seed cleaning and processing climbed 367% to $393,043 from $84,105.  The increase is largely attributable to the timing of the 2010 harvest, which occurred later in the first half of the fiscal year due to an unusually cool and wet summer in the San Joaquin Valley of California, combined with an increase in the number of customers for which the Company now provides seed milling services.
• Gross profit margin on sales improved to 51% from 20%, due primarily to increased sales of higher margin milling services.
• Total operating expenses rose 198% to $679,007 from $227,931.  The increase was due to higher expenses relating to the expansion of the Company's sales, marketing and support teams; increased investment in domestic advertising and marketing initiatives; ongoing investment in the development of S&W's new U.S. stevia initiative; ongoing costs of developing new alfalfa seed varieties; and the costs associated with becoming a fully reporting, publicly traded company.  
• The net loss was $82,197, or $0.01 loss per basic and diluted common share, compared to net income of $321,475, or 0.11 earnings per basic and diluted common share.  

Financial Highlights When Comparing Six Months Ended December 31, 2010 to Six Months Ended December 31, 2009:

• Total revenues were $1,842,799, a 60% decrease from $4,661,198.
  • For the reason noted above, revenues from alfalfa seeds totaled $1,195,739, down from $4,076,111.
  • As anticipated, revenues from seed milling and related services normalized and increased 11% to $647,060 from $585,087.
• Gross profit margin on sales rose to 45% from 31%, due to higher margin sales of seed cleaning and processing services.
• Total operating expenses increased 218% to $1,407,238 from $443,122.
• The net loss totaled $336,276, or $0.06 loss per basic and diluted share, compared to net income of $849,730, or $0.28 earnings per basic and diluted share.  

As of December 31, 2010, assets totaled $17.52 million; working capital was $11.86 million; there was zero long term debt and stockholders' equity totaled $14.98 million.  

For more detailed information regarding S&W's second quarter results for Fiscal 2011, please refer to the related 10-Q which will be filed with the U.S. Securities and Exchange Commission later today.

About S&W Seed Company

Founded in 1980 and headquartered in the Central Valley of California, S&W Seed Company is a leading provider of warm climate, high yield alfalfa seed varieties, including varieties that can thrive in poor, saline soils, as verified over decades of university-sponsored trials.  S&W also offers seed cleaning and processing at its 40-acre facility in Five Points, California.  In fiscal 2010, the Company launched a business expansion initiative centered on mass producing stevia leaf in the U.S. in response to growing global demand for the all-natural, zero calorie sweetener from the food and beverage industry.  For more information, please visit www.swseedco.com.

Safe Harbor Statement

This release contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended and such forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. "Forward-looking statements" describe future expectations, plans, results, or strategies and are generally preceded by words such as "may," "future," "plan" or "planned," "will" or "should," "expected," "anticipates," "draft," "eventually" or "projected."  You are cautioned that such statements are subject to a multitude of risks and uncertainties that could cause future circumstances, events, or results to differ materially from those projected in the forward-looking statements, including the risks that actual results may differ materially from those projected in the forward-looking statements as a result of various factors and other risks identified in the Company's 10-K for the fiscal year ended June 30, 2010, and other filings made by the Company with the Securities and Exchange Commission.

SOURCE S&W Seed Company