AgJunction Reports 2014 Q1 Results

HIAWATHA, KS, May 13, 2014 /CNW/ - (TSX: AJX) -- AgJunction today reported first quarter operating results for the three months ended March 31, 2014.  All currency amounts for financial results are expressed in U.S. dollars.

In September 2013, the Company's Outback™ Ground Agriculture product line switched to a new "dealer stocking" sales model in North America where aftermarket revenues are now recorded at dealer net rather than at MSRP, which is approximately a 20% reduction in revenue on the same volume of goods sold. Although aftermarket revenues are lower under this aftermarket dealer program, there is a decrease in commission expense so that gross margin is not impacted. The new model changes the impact of seasonal timing as Outback dealers now purchase stocking inventory months earlier than in the prior model where product was shipped direct to customers from AgJunction inventory.

First Quarter Financial Review

For the first quarter ended March 31, 2014, the Company reported total revenue of $14.9 million, a 10.1% decrease from $16.6 million in the first quarter of 2013.  Strong OEM and Air results for the quarter were offset by reduced sales in our Outback and Agronomy Services product lines compared to the same quarter in 2013.

Adjusting the $5.5 million of Outback North America sales in the first quarter of 2013 for the effect of the new aftermarket dealer program, would decrease revenue by approximately $1.2 million to $4.3 million.  The adjusted comparison results in a quarter over quarter decline in Outback North America sales of 46.2%, related to an expected softening of the North American market as well as delays in buying in Canada due to an unseasonably cold and extended winter.  For total revenue, the adjusted comparison results in a quarter over quarter decline of 3.1%.

"The historical seasonality of our business has been altered as a result of the increase of our international OEM business and a transition to a dealer stocking model in our aftermarket retail business," stated Rick Heiniger, President and CEO. "Despite a soft North American market in the first quarter, we are confident in our growth prospects as markets improve.  We also believe we are witnessing a general transition in our global markets to OEM for core precision agriculture guidance technologies and are supporting this trend through our OEM partners."

Sales by business unit for the first quarter of 2014 and 2013 are as follows:

       
       
(000's) Q1 2014 Q1 2013 Change
       
Outback North America $2,327 $5,508 (57.8%)
Outback Australia 258 328 (21.3%)
OEM 8,615 7,527 14.5%
Air 3,158 2,607 21.1%
Agronomy Services 571 641 (10.9%)
       
Total $14,929 $ 16,611 (10.1%)

Sales by region for the first quarter of 2014 and 2013 are as follows:

       
       
(000's) Q1 2014 Q1 2013 Change
       
North America $ 7,460 $11,008 (32.2%)
Europe 6,203 3,655 69.7%
Australia 335 401 (16.5%)
Other     931 1,547 (39.8%)
       
  $14,929 $16,611 (10.1%)

Total international (non-North American) revenue increased 33% year-over-year to $7.5 million, growing to represent 50% of total Q1 revenue compared to 34% in 2013. European revenue increased 70% in the quarter to $6.2 million from $3.7 million in the same period in 2013 while sales to Australia and other markets, including South America and Asia, declined 17% and 40%, respectively. North American revenue represented 50% of total revenues as compared to 66% in 2013.

First quarter consolidated gross margin of $6.9 million was $0.9 million lower year-over-year due to the change in sales mix.  Gross margins, as a percentage of revenue, were 45.9% during the quarter compared to 46.6% in 2013.

As a result of management's streamlining initiatives, operating expenses were $5.5 million in the first quarter down 13% from $6.3 million in the first quarter of 2013. The decrease relates to several cost saving initiatives and efficiencies realized through the restructuring period that began in late 2013. Management is maintaining tight control of expenses, supporting the overall profitability of the streamlined operating model.

In the first quarter of 2014, the Company generated income from continuing operations of $1.3 million, or $0.02 per share (basic and diluted), compared to income from continuing operations of $1.5 million, or $0.02 per share (basic and diluted), in the first quarter of 2013.

For the first quarter of 2014 the Company realized comprehensive income of $1.3 million, or $0.02 per share (basic and diluted), compared to comprehensive income of $4.9 million or $0.07 per share (basic and diluted) in the comparable quarter of 2013.

At March 31, 2014, the Company held cash of $13.0 million compared to $2.0 million at the end of 2013. Working capital was $24.3 million, up from $22.9 million at December 31, 2013.

The Company had 72,230,969 common shares outstanding at March 31, 2014.

Conference Call - May 14, 2014 at 11:00AM Eastern Time

A conference call and webcast has been scheduled for May 14, 2014 at 11:00 a.m. Eastern Time to discuss the financial results and provide an update on operations. To participate in the conference call, please dial +1 (647) 427-7450 or 1 (888) 231-8191 approximately 10 minutes before the conference call and provide Conference ID: 34957200.  A recording of the call will be available through July 31, 2014. Please dial +1(416) 849-0833 or 1 (855) 859-2056 and enter passcode 34957200 to listen to the rebroadcast.

The call will be webcasted live and archived on the Company's web site at http://www.corp.agjunction.com/InvestorCenter/ConferenceCallsOtherEvents.aspx

About AgJunction

AgJunction provides innovative hardware and software applications for precision agriculture worldwide. The Company holds numerous patents and markets its products and services under leading brand names including Outback Guidance®, Satloc®, and AgJunction® Cloud Services. AgJunction supports advanced farming practices and enables seamless data connectivity among growers and their agricultural service providers. The Company is headquartered in Hiawatha, Kansas, with facilities in Arizona, Pennsylvania, Manitoba and Queensland. AgJunction is listed on the Toronto Stock Exchange (TSX) under the symbol "AJX" and is one of the TSX Cleantech designated companies. For more information, please go to www.corp.agjunction.com.

The above disclosure contains certain forward-looking statements that involve substantial known and unknown risks and uncertainties. These forward-looking statements are subject to numerous risks and uncertainties, certain of which are beyond AgJunction's control, including: the impact of general economic conditions, industry conditions, increased competition, the lack of availability of qualified personnel or management, fluctuations in foreign exchange or interest rates, stock market volatility and market valuations of companies with respect to the announced transactions and the final valuations thereof, and obtaining required approvals of regulatory authorities. AgJunction' actual results, performance or achievement could differ materially from those expressed in, or implied by these forward-looking statements and, accordingly, no assurances can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do so, what benefits, including the amount of proceed, that AgJunction will derive therefrom.

AgJunction Inc.            
Condensed Consolidated Statements of Financial Position            
(Expressed in U.S. dollars)            
      March 31,   December 31,
      2014   2013
      (Unaudited)      
Assets            
               
Current assets:            
  Cash and cash equivalents    $ 13,018,972   $ 2,044,278
  Short-term investments     50,665     8,100,751
    Accounts receivable, net of bad debt provisions of $716,949
and $803,410 as of March 31, 2014 December 31, 2013, respectively
              6,978,523     11,170,370
  Inventories      12,015,337     10,040,812
  Prepayments and deposits     698,232     708,489
        32,761,729     32,064,700
               
Property, plant and equipment      3,097,802     3,166,482
Intangible assets      7,705,148     7,489,245
Goodwill      21,230,519     21,230,519
      $ 64,795,198   $ 63,950,946
               
Liabilities and Shareholders' Equity            
               
Current liabilities:            
  Accounts payable and accrued liabilities      $    5,568,053   $   5,381,864
  Provisions (note 7)      896,554     796,318
  Deferred revenue     1,999,805     2,439,317
  Finance lease      17,947     19,978
  Current portion of acquisition consideration     -     400,000
  Collateralized borrowing     -     162,388
        8,482,359     9,199,865
               
Deferred revenue     554,296     494,568
Finance Lease     15,283     18,104
               
Shareholders' equity:            
  Share capital (note 3)     122,385,765     121,096,751
  Equity reserve     5,043,822     6,091,297
               
Accumulated deficit     (71,686,327)     (72,949,639)
        55,743,260     54,238,409
               
      $ 64,795,198   $ 63,950,946

 

AgJunction Inc.            
Condensed Consolidated Statements of Comprehensive Income          
               
Three months ended March 31, 2014 and 2013            
(Unaudited - expressed in U.S. dollars)            
      2014   2013
               
Sales   $ 14,928,593   $ 16,610,757
               
Cost of sales     8,078,937     8,863,006
        6,849,656     7,747,751
               
Expenses:            
  Research and development     1,962,570     2,288,086
  Sales and marketing     1,699,537     2,349,434
  General and administrative     1,868,838     1,542,977
  Restructuring costs     -     156,483
        5,530,945     6,336,980
                
Operating income     1,318,711     1,410,771
               
Foreign exchange (gain) loss     28,905     (52,593)
Interest and other (income)     (5,068)     (6,981)
Loss on disposal of property, plant and equipment     10,273     -
       34,110     (59,574)
                
Income before income taxes     1,284,601     1,470,345
               
Income taxes     21,289     -
Net income from continuing operations     1,263,312     1,470,345
               
(Gain) loss from discontinued operations, net of tax     -     (3,473,899)
Net income     1,263,312     4,944,244
             
Other comprehensive income     -     -
Total comprehensive income   $  1,263,312   $ 4,944,244
               
               
Earnings per share:            
  Basic and diluted income per share    $ 0.02   $ 0.07
               
  Basic and diluted income per share from continuing operations     $   0.02   $ 0.02
               
  Basic and diluted gain per share from discontinued operations      $ 0.00     $ 0.05

 

AgJunction Inc.                              
Condensed Consolidated Statements of Changes in Equity                          
                                 
(Expressed in U.S. dollars)                              
      Share   Equity   Accumulated   Total   Number of
      capital   reserve   Deficit   equity   shares
                                 
Balance at December 31, 2012     119,341,668     7,182,124     (78,125,725)     48,398,067     66,404,215
                     
  Comprehensive income     -     -     4,944,244     4,944,244     -
    Issue of common shares for business acquisition, net of share issue cost         1,007,000         (1,007,000)         -         -          2,723,705
  Share-based payment transactions     -     70,000     -     70,000     -
  Stock options exercised     34,796     -     -     34,796     52,951
  Transfer from equity reserve on                              
  exercise of stock options     14,896     (14,896)     -     -     -
Balance at March 31, 2013 (unaudited)   $ 120,398,360   $ 6,230,228   $ (73,181,481)   $ 53,447,107     69,180,871
                                 
                                 
Balance at December 31, 2013     121,096,751     6,091,297     (72,949,639)     54,238,409     69,805,628
                                 
  Comprehensive income     -     -     1,263,312     1,263,312     -
    Issue of common shares for business acquisition, net of share issue cost       1,007,000       (1,007,000)     -         -       2,178,964
  Share-based payment transactions     -     49,449     -     49,449     -
  Stock options exercised     192,090     -     -     192,090     246,377
  Transfer from equity reserve on exercise of stock options     89,924       (89,924)       -       -       -
Balance at March 31, 2014 (unaudited)   $ 122,385,765   $ 5,043,822   $ (71,686,327)   $ 55,743,260     72,230,969

 

AgJunction Inc.            
Condensed Consolidated Statements of Cash Flows            
             
Three months ended March 31, 2014 and 2013            
(Unaudited - expressed in U.S. dollars)            
    2014   2013
Cash flows from (used in) operating activities:            
  Net income from continuing operations   $ 1,263,312   $ 1,470,345
  Items not involving cash:            
    Depreciation     150,086     209,044
    Amortization     257,955     256,214
    Share-based payment transactions     49,449     70,000
    Allowance on trade receivables     91,325     31,012
    Net realizable value write down (gain) of inventory     (28,230)     106,034
    Loss on disposal of property, plant and equipment     10,273     -
      1,794,170     2,142,649
  Change in non-cash operating working capital:        
    Accounts receivable     4,100,522     (1,614,440)
    Inventories     (1,946,295)     3,423,455
    Prepaid expenses and deposits     10,257     152,845
    Accounts payable and accrued liabilities     248,289     (1,203,467)
    Provisions     100,236     (504,570)
    Deferred revenue     (379,784)     192,082
    Income taxes paid     (62,100)     -
      2,071,125     445,905
                 
  Cash used in discontinued operations     -     (2,756,261)
Cash flows from (used in) operating activities     3,865,295     (167,707)
                 
Cash flows from (used in) financing activities:            
  Payment of finance lease liability     (4,852)     (22,652)
  Interest received, net of bank charges     39,065     -
  Bank loan repayment     -     (550,000)
  Repayment of debt     -     (1,140,699)
  Issue of share capital, net     192,090     34,796
      226,303     (1,678,555)
                 
  Cash used in discontinued operations     (162,388)     -
Cash flow from (used in) financing activities     63,915     (1,678,555)
             
Cash flows used in investing activities:            
  Acquisition of short-term investments     -     (8,000,000)
  Proceeds from redemption of short-term investments     8,011,021     -
  Purchase of property, plant and equipment     (91,679)     (237,203)
  Intangible asset addition     (643,362)     (600,000)
  R&D expense reimbursement     169,504     293,991
  Payment of acquisition consideration     (400,000)     (500,000)
  Proceeds from sale of assets, net of cost     -     13,811,503
Cash flows from investing activities     7,045,484     4,768,291
             
Increase in cash position     10,974,694     2,922,029
             
Cash and cash equivalents, beginning of year     2,044,278     2,645,605
Cash and cash equivalents, end of year   $ 13,018,972   $ 5,567,634

 

SOURCE Agjunction Inc.

For further information:

Wes Dittmer
Chief Financial Officer
AgJunction Inc.
(785) 742-5149
WDittmer@agjunction.com

Cory Pala
Investor Relations
e.vestor Communications Inc.
(416) 657-2400
Cory.Pala@evestor.com