Chai-Na-Ta Corp. Reports 2001 Second Quarter Results.Business Editors LANGLEY Lang·ley , Mount A peak, 4,227.9 m (14,026 ft) high, in the Sierra Nevada of southern California. lang·ley n. pl. , British Columbia--(BUSINESS WIRE)--Aug. 27, 2001 Chai-Na-Ta Corp. (OTCBB OTCBB See OTC Bulletin Board (OTCBB). : CCCFF) (TSE See Tokyo Stock Exchange. TSE 1. See Tokyo Stock Exchange (TSE). 2. See Toronto Stock Exchange (TSE). : CC.) today reported that revenue nearly doubled to $5,280,000 in the second quarter ended June June: see month. 30, 2001 from $2,747,000 in the 2000 second quarter ended May 31, 2000. The net loss was $261,000 ($0.02 per share) in the 2001 second quarter compared to net earnings of $12,506,000 ($1.64 per share) in the 2000 second quarter. Second quarter 2001 results included other loss of $30,000. In the second quarter of fiscal 2000, other income of $11,749,000 primarily comprised debt forgiveness Forgiveness Angelica, Suor is forgiven by the Virgin Mary for ill-considered suicide. [Ital. Opera: Puccini, Suor Angelica, Westerman, 364] Bishop of Digne net of restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). costs, which was the major contributor to net earnings. "As we have said previously, Chai-Na-Ta's gain on debt forgiveness in 2000 will distort bottom line financial comparisons for the next several years. We nonetheless continue to anticipate performance around the breakeven breakeven 1. The level of output or sales necessary to cover fixed expenses. Companies in industries that have high fixed costs and, consequently, high breakevens, such as automobile and steel manufacturing, are likely to exhibit large fluctuations level in 2001 and a profitable year in 2002," said William William, crown prince of Germany William or Frederick William, 1882–1951, crown prince of Germany, son of William II. In World War I he commanded (1914) an army on the Western Front and was nominal commander in the German attack Zen Zen Important school of Buddhism that claims to transmit the experience of enlightenment achieved by the Buddha Gautama. Arising as Chan in China in the 6th century (introduced by Bodhidharma), it divided into two schools, the Southern school, which believed in sudden , Chai-Na-Ta's Chairman and Chief Executive Officer. Revenue was $7,796,000 in the six months ended June 30, 2001 compared to $11,287,000 in the first half of fiscal 2000. The revenue decrease between periods resulted from Chai-Na-Ta's decision to change its sales strategy in 2001 by spreading its sales more evenly over the year. "In fact, nearly all of Chai-Na-Ta's crop sales in fiscal 2000 were completed by the end of May, whereas we expect meaningful sales volume in each of the final two quarters of this year," Mr. Zen commented. Sales, general and administrative expenses in the six months ended June 30, 2001 were lower than in the first six months of fiscal 2000, principally due to the increasing efficiency of Chai-Na-Ta's operations. The net loss in first six months of 2001 was $95,000 ($0.01 per share) compared to net earnings of $10,219,000 ($1.61 per share) in the first six months of fiscal 2000. First half 2001 results included other loss of $17,000. In the comparable period of fiscal 2000, other income of $11,711,000 primarily comprised income from debt forgiveness net of restructuring costs, which was the major contributor to net earnings. Working capital decreased to $8,797,000 million at the end of the 2001 second quarter from $13,987,000 at December December: see month. 31, 2000. This was mainly due to inventory sales and increases in non-current crop expenditures in the latest six-month period, as well as the repayment Repayment The act of paying back a debt. Notes: Everyone has to repay their debts eventually. See also: Debt, Defeasance, Loan of term debt in the 2001 first quarter. "We have reduced our debt and achieved attractive levels of working capital. Chai-Na-Ta's financial position is strong," Mr. Zen said. "Prices are averaging about the mid-teen levels and should increase following the harvest (tool, networking) Harvest - A highly scalable, customisable system for discovering resources on the Internet. Version: 1.3. http://tardis.ed.ac.uk/harvest/. season in October October: see month. . As a result of unfavorable weather conditions in Ontario Ontario, city, United States Ontario, city (1990 pop. 133,179), San Bernardino co., S Calif., near Los Angeles, in a region of vineyards; inc. 1891. and Wisconsin Wisconsin, state, United States Wisconsin (wĭskŏn`sən, –sĭn), upper midwestern state of the United States. It is bounded by Lake Superior and the Upper Peninsula of Michigan, from which it is divided by the Menominee , and the exit of a number of smaller growers Growers are the people, animals, plants, and various living creatures that assist in the growing of plants and other living creatures. More specifically, the term "growers" refers to individual people who put forth effort to grow plants for food and medicinal use, including the from the industry, overall industry production in 2001 will be below last year's level, which is positive for the pricing outlook. "In order to ensure the strongest foundation for pursuing our long-range long-range adj. 1. Of, suitable for, or reaching long distances: long-range missiles. 2. Requiring or involving an extended span of time: long-range planning. goals, we place strong emphasis on enhancing our market leadership in our core business of ginseng ginseng (jĭn`sĕng), common name for the Araliaceae, a family of tropical herbs, shrubs, and trees that are often prickly and sometimes grow as climbing forms. farming," said Mr. Zen. "We currently have in excess of 1,300 acres under cultivation cultivation, tilling or manipulation of the soil, done primarily to eliminate weeds that compete with crops for water and nutrients. Cultivation may be used in crusted soils to increase soil aeration and infiltration of water; it may also be used to move soil to or . Despite cutting costs, during each of the last several years we continued to maintain an acreage that will produce an average yield of about one million pounds per year." Chai-Na-Ta Corp., based in Langley, British Columbia Langley, British Columbia can mean the following:
named after North America. North American blastomycosis see North American blastomycosis. North American cattle tick see boophilusannulatus. ginseng. The Company farms, processes and distributes North American ginseng as bulk root, and supplies processed extract To decompress. WinZip and other decompression utilities use the term to mean "pulling out" the original files from the compressed archive. See WinZip and data compression. powder powder, any mass of fine particles or dust prepared by various mechanical means, e.g., grinding of solid substances, or by chemical means, e.g., precipitation from solutions. In a special sense, the word is applied to powdered propellant explosives, e.g. for the manufacture of value-added val·ue-add·ed adj. Of or relating to the estimated value that is added to a product or material at each stage of its manufacture or distribution: ginseng-based products. This news release contains forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. that reflect the Company's expectations regarding future events. These forward-looking statements involve risks and uncertainties, and actual events could differ materially from those projected. Such risks and uncertainties include, but are not limited to, the success of the Company's ongoing research programs, general business conditions, and other risks as outlined in the Company's periodic filings, Annual Report, and Form 20-F. FINANCIAL RESULTS AND MANAGEMENT DISCUSSION AND ANALYSIS OPERATION RESULTS The second quarter of 2001 is for the three months ending June 30, 2001, compared with the second quarter of 2000 for the three months ending May 31, 2000. Revenue increased 92% to $5.3 million in the second quarter of 2001 from $2.7 million in the second quarter of 2000. However, revenue decreased 31% to $7.8 million for the six months ended June 30, 2001 from $11.3 million for the six months ended May 31, 2000, a direct result of the Company's strategy of spreading its sales more evenly through the year. Approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 54% of the 2000 harvest root was sold as at June 30, 2001. The Company recorded a gross margin of 19% in the second quarter of 2001, compared to a gross margin of 31% in the second quarter of 2000. For the six months ended June 30, 2001 the Company recorded a gross margin of 22%, as compared to a gross margin of 4% for the six months ended May 31, 2000. Continuous effort has been made to keep expenses to a minimum. As a result, selling, general and administrative expenses were $1.7 million for the six months ended June 30, 2001, a decrease of 14% over the six months ended May 31, 2000. The Company recorded a net loss of $0.1 million for the six months ended June 30, 2001 as compared to a net earnings of $10.5 million for the six months ended May 31, 2000, which includes gains on financial restructuring and debt forgiveness of $12.6 million. FINANCIAL POSITION The cash surplus from operations was $2.7 million for the six months ended June 30, 2001 compared to a surplus of $3.8 million for the six months ended May 31, 2000. Working capital totaled $8.8 million at June 30, 2001, down from $14.0 million at December 31, 2000. This reduction is mainly due to the sale of inventory and increase in non-current crop cost expenditures during the first two quarters of 2001, as well as the repayment of term debt in the first quarter. OUTLOOK The Company currently has more than 1,300 acres under cultivation and expects to plant over 300 acres in 2001, ensuring a constant volume of the harvest in the forthcoming years. As a result of the previously depressed Depressed A description of a market, security, or product that is experiencing weak demand and lowering prices. Notes: A depressed market, security, or product implies that prices and volume are low. There are many reasons for a depressed market, security, or product. pricing for ginseng, some growers were forced to leave the industry. This industry-wide downturn Downturn The transition point between a rising, expanding economy to a falling, contracting one. downturn A decline in security prices or economic activity following a period of rising or stable prices or activity. in production will help apply upward pressure on the price of ginseng. In addition, China is expected to participate in the World Trade Organization in 2002 and the Company anticipates ginseng demand will increase. The Company is well positioned to take advantage of these opportunities to enhance the value of the Company. ABOUT CHAI-NA-TA Chai-Na-Ta Corp., based in Langley, British Columbia, is the world's largest supplier of North American ginseng. The Company farms, processes and distributes North American ginseng as bulk root, and supplies processed extract powder for the manufacture of value-added ginseng-based products. This quarterly report contains forward-looking statements that reflect the Company's expectations regarding future events. These forward-looking statements involve risks and uncertainties, and actual events could differ materially from those projected. Such risks and uncertainties include, but are not limited to, the success of the Company's ongoing research programs, general business conditions, and other risks as outlined in the Company's periodic filings, Annual Report, and Form 20-F. William Zen, Chairman & CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board.
Consolidated Interim Financial Statements
Balance Sheets
---------------------------------------------------------------
Unaudited in thousands of Canadian dollars
June 30 Dec 31
2001 2000
$ $
---------------------------------------------------------------
CURRENT ASSETS
Cash 657 609
Accounts Receivable 704 688
Inventory 5,620 11,507
Ginseng crops 10,251 9,290
Prepaid and other current assets 952 1,048
---------------------------------------------------------------
18,184 23,142
Ginseng crops 14,738 11,625
Capital assets 8,692 9,535
Other assets 108 108
---------------------------------------------------------------
41,722 44,410
---------------------------------------------------------------
CURRENT LIABILITIES
Line of Credit 540 390
Short-term borrowings 6,141 5,910
Accounts payable and
accrued liabilities 2,181 2,321
Current portion of term debt 525 534
---------------------------------------------------------------
9,387 9,155
Term debt 289 3,153
Deferred gain 434 434
Future income taxes 1,462 1,462
---------------------------------------------------------------
11,572 14,204
SHAREHOLDERS' EQUITY
Share capital 38,200 38,200
Cumulative translation adjustment (181) (220)
Deficit (7,869) (7,774)
---------------------------------------------------------------
30,150 30,206
---------------------------------------------------------------
41,722 44,410
---------------------------------------------------------------
Statements of Earnings
--------------------------------------------------------------------
Unaudited in thousands of Canadian dollars
Three months Six months
ended ended
June 30 May 31 June 30 May 31
2001 2000 2001 2000
$ $ $ $
--------------------------------------------------------------------
Revenue 5,280 2,747 7,796 11,287
Cost of Sales 4,284 1,883 6,094 10,786
--------------------------------------------------------------------
Gross Profit 996 864 1,702 501
--------------------------------------------------------------------
Selling, general, and
administrative
expenses 1,184 828 1,671 1,934
Interest and financing
charges 43 (721) 109 59
--------------------------------------------------------------------
1,227 107 1,780 1,993
--------------------------------------------------------------------
Operating income (loss) (231) 757 (78) (1,492)
Other income (loss) (30) 11,749 (17) 11,711
--------------------------------------------------------------------
NET EARNINGS(LOSS)
FOR THE PERIOD (261) 12,506 (95) 10,219
--------------------------------------------------------------------
Basic earnings(loss)
per share $(0.02) $1.64 $(0.01) $1.61
--------------------------------------------------------------------
Fully diluted earnings
(loss) per share $(0.02) $0.93 $(0.01) $1.11
--------------------------------------------------------------------
Weighted average number
of shares used to
calculate
Basic earnings
per share 14,264,508 7,637,279 14,264,508 6,339,049
Fully diluted
earnings per
share 34,663,657 13,402,256 34,663,657 9,237,289
--------------------------------------------------------------------
Statements of Retained Earnings (Deficits)
--------------------------------------------------------------------
Unaudited in thousands of Canadian dollars
Three months Six months
ended ended
June 30 May 31 June 30 May 31
2001 2000 2001 2000
$ $ $ $
--------------------------------------------------------------------
Balance, beginning
of period (7,608) (17,974) (7,774) (15,687)
Net income (loss) for
the period (261) 12,506 (95) 10,219
--------------------------------------------------------------------
Balance, end of period (7,869) (5,468) (7,869) (5,468)
--------------------------------------------------------------------
Consolidated Statements of Cash Flows
--------------------------------------------------------------------
Unaudited in thousands of Canadian dollars
Three months Six months
ended ended
June 30 May 31 June 30 May 31
2001 2000 2001 2000
$ $ $ $
--------------------------------------------------------------------
OPERATING ACTIVITIES
Net earnings (loss)
for the period (261) 12,506 (95) 10,219
Items not affecting cash
Depreciation and
amortization 20 123 47 246
Gain on forgiveness of
debt - (12,624) - (12,624)
--------------------------------------------------------------------
Net earnings after items
not affecting cash (241) 5 (48) (2,159)
Changes in non-cash
operating assets and
liabilities (Note 2) 3,505 1,905 5,062 7,976
Changes in non-current
cash crop costs (1,495) (564) (2,352) (1,975)
--------------------------------------------------------------------
1,769 1,346 2,662 3,842
--------------------------------------------------------------------
FINANCING ACTIVITIES
Line of credit (2,430) (2,566) 150 (4,917)
Short-term borrowing (860) 10 231 5
Issuance of share capital - 5,000 - 5,000
Issuance (repayment) of
long term debt (34) 93 (2,873) (42)
Joint venture capital
returned to co-venturer - - - (390)
--------------------------------------------------------------------
(3,324) 2,537 (2,492) (344)
--------------------------------------------------------------------
INVESTING ACTIVITIES
Investments - (544) - (544)
Purchase of capital
assets, net (54) (104) (161) (26)
Decrease in other assets - 550 - 452
Deferred translation
gain (loss) 111 (303) 39 (86)
--------------------------------------------------------------------
57 (401) (122) (204)
--------------------------------------------------------------------
NET CASH INFLOW
(OUTFLOW) (1,498) 3,482 48 3,294
CASH AND CASH
EQUIVALENTS BEGINNING
OF THE PERIOD 2,155 446 609 634
--------------------------------------------------------------------
CASH AND CASH
EQUIVALENTS END
OF PERIOD 657 3,928 657 3,928
--------------------------------------------------------------------
On behalf of the Board:
William Zen, Director
Anita Wong, Director
Notes to the Interim Consolidated Financial Statements 1. Summary
of Significant Accounting Policies These consolidated financial
statements have been prepared in accordance with the Canadian
Institute of Chartered Accountants' ("CICA") recommendations for the
preparation of interim financial statements. Certain information and
note disclosures normally included in the Company's annual
consolidated financial statements are not presented. These interim
consolidated financial statements and notes should be read in
conjunction with the Company's annual consolidated financial
statements for the period ended December 31, 2000. These interim
consolidated financial statements are not necessarily indicative of
the results to be expected for the year ending December 31, 2001.
2. Changes in Non-Cash Operating Assets and Liabilities
--------------------------------------------------------------------
Unaudited in thousands of Canadian dollars
Three months Six months
ended ended
June 30 May 31 June 30 May 31
2001 2000 2001 2000
$ $ $ $
--------------------------------------------------------------------
Accounts receivable (58) 1,714 (16) 892
Inventory 4,434 2,155 5,887 9,538
Ginseng Crops (536) (909) (765) (909)
Prepaid and other
current assets 85 (169) 96 (396)
Accounts Payable (420) (886) (140) (1,149)
--------------------------------------------------------------------
3,505 1,905 5,062 7,976
--------------------------------------------------------------------
3. Reconciliation of Earnings to U.S. GAAP
--------------------------------------------------------------------
Unaudited in thousands of Canadian dollars
Three months Six months
ended ended
June 30 May 31 June 30 May 31
2001 2000 2001 2000
$ $ $ $
--------------------------------------------------------------------
Net Earnings (loss)
under Canadian GAAP (261) 12,506 (95) 10,219
Adjustments to reflect
GAAP differences:
Accounting for
interest 364 290 438 -
Financial
instruments 34 27 65 67
--------------------------------------------------------------------
Net earnings per
US GAAP 137 12,823 408 10,286
--------------------------------------------------------------------
Basic earnings per
share - US GAAP $0.01 $1.68 $0.03 $1.62
--------------------------------------------------------------------
Fully diluted earnings
per share - US GAAP $ - $0.96 $0.01 $1.11
--------------------------------------------------------------------
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