Hemisphere GPS Reports 2013 Q1 Results

HIAWATHA, KS, May 8, 2013 /CNW/ - (TSX: HEM)-- Hemisphere GPS today reported financial results for the first quarter ended March 31, 2013. All currency amounts are expressed in U.S. dollars.

On September 5, 2012, Hemisphere GPS announced a corporate restructuring to focus exclusively on its agriculture business. The Company plans to change its corporate name to "AgJunction Inc." at its 2013 annual shareholders meeting next week in Scottsdale, AZ, May 15 (subject to shareholder approval). Coinciding with the name change, the Company plans to change its ticker symbol from "HEM" to "AJX".

On January 31, 2013 the Company announced the sale of its non-agriculture business for cash of $14.96M million. As part of the transaction the Company transferred $9.2 million of net assets to the purchaser and incurred $1.1 million in transaction-related costs resulting in gain on the sale of $4.6 million.

All manufacturing activities previously conducted in Calgary have been outsourced and the Calgary office will be closed before the end of June 2013. Head office and key functions have been relocated to the Company's Hiawatha, Kansas location which has a lower cost environment and is centrally located in the U.S. corn-belt which represents the Company's largest market.

The majority of the restructuring costs were accrued for in the fourth quarter of 2012.  Restructuring costs incurred in the first quarter of 2013 were $0.2 million. Total cash costs associated with the restructuring were $0.8M in the first quarter. All restructuring activities are expected to be completed prior to the end of June 2013.

"Our first step in the restructuring process - to become a focused pure-play agricultural company - is complete," stated Hemisphere GPS CEO, Rick Heiniger. "The second phase of our restructuring is underway; simplifying and streamlining operations and the overall business model. To that end, our new management team is hard at work scrutinizing every aspect of the business."

First Quarter Financial Review

To increase clarity of results for continuing operations of the agriculture business after divesting the non-agriculture business, and in accordance with International Financial Reporting Standards (IFRS), the Company has reported the divested components of its business as "discontinued operations" in a separate line item in both the current and prior comparative periods.

For the first quarter ended March 31, 2013, the Company's agricultural business reported revenues of $16.6 million, a decrease of 13% from $19 million in the first quarter of 2012. The decline in revenue is primarily the result of a two-month delay in the North American launch of the Company's new Outback STX Guidance System as wet weather conditions delayed in-field test completion in early 2013. Management estimates that this delay reduced total first quarter sales by approximately $3 million, of which a portion will be realized in the subsequent quarters of 2013. North American revenue declined by 24% from the first quarter of 2012, while non-North American sales grew by 15% due to robust OEM sales. North American sales were 73% of total sales and sales to non-North American customers represented 27%.

"We had a good quarter from the standpoint of OEM and Cloud Services sales, but offset by lower revenue in U.S. Outback sales.  We officially announced the availability of the Outback STX yesterday, a replacement for the successful Outback S3. Pre-sales of the STX have been encouraging and I am confident we are meeting the needs of a growing segment of auto-steer customers," said Mr. Heiniger.

First quarter gross margin contribution was 47% or $7.7 million, compared to 47% and $9.0 million for the first quarter of 2012. Gross margin has generally been trending upward.

Operating expenses, prior to restructuring costs, decreased to $6.2 million compared to $6.5 million, prior to acquisition costs, in the first quarter of 2012, with research and development expenditures of $2.3 million unchanged year-over-year. Sales and marketing expenses of $2.3 million, declined by $0.7 million, or 28%, compared to $3 million during the first quarter of 2012, due to lower salary costs partly associated with the corporate restructuring, and more efficient spending at industry tradeshows which are intensive during the first quarter.

"During this period of slow growth in global markets, we are prioritizing the bottom line in 2013 as we maximize efficiencies and streamline operations," said Mr. Heiniger.

General and administrative expenses were $1.5 million increasing marginally from $1.3 million in 2012. Lower G&A expenses are anticipated following upon completion of the Calgary office before the end of June, 2013. For the first quarter of 2013, the Company reported restructuring costs of $0.2 million related to the closing of the Company's Calgary office and the pending name change to AgJunction.

The Company reported net income from continuing operations of $1.5 million, or $0.02 per share (basic and diluted), compared to net income of $2.3 million, or $0.03 per share (basic and diluted), in the first quarter of 2012.

Net and comprehensive income, which includes $3.5 million of income from discontinued operations,, was $4.9 million, or $0.07 per share (basic and diluted), compared to income of $1.6 million or $0.02 per share (basic and diluted), in the first quarter of 2012.

At March 31, 2013, the Company held cash of $13.6 million compared to $2.6 million on December 31, 2012. Working capital was $21.8 million, and the Company had 69,180,871 common shares outstanding.

Restructuring and Business Strategy

The Company is in the process of transitioning to market-responsive product development to drive greater innovation and higher returns from the product development process.  The restructuring aims to ensure profitable and sustainable growth through a streamlined business which can more effectively capitalize on the expanding market opportunities in agriculture.

"Strategic plans are being approved this month, ready to execute during the remainder of the year. Clearly, our flagship business of guidance, steering, terminals and GNSS represent exciting opportunities ahead.  OEM uptake of automatic steering appears to be set for rapid acceleration over the coming years.  We believe we can leverage our superior steering experience and capability in tapping that opportunity.  The emerging AgJunction Agronomy Systems business provides us with a compelling longer term of highly profitable growth that will add nicely to our flagship growth well into the next decade," stated Rick Heiniger.

Conference Call - Today at 11:00AM Eastern Time

A conference call and webcast to discuss the results has been scheduled for today at 11:00 a.m. Eastern Time to discuss the financial results.  To participate in the conference call, please dial 1-877-613-8340 approximately 10 minutes before the conference call and provide Conference ID: 58794448.  The call will be also webcasted live and then archived on the Company's web site at:

http://www.corp.agjunction.com/InvestorCenter/ConferenceCallsOtherEvents.aspx

A recording of the call will be available through May 31. Please dial 1-800-585-8367 and enter passcode 58794448 to listen to the rebroadcast.

About AgJunction

Hemisphere GPS (to be renamed "AgJunction" following shareholder and TSX approval) 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, Australia. Hemisphere GPS is doing business as AgJunction and is listed on the Toronto Stock Exchange (TSX) under the symbol "HEM" 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 Hemisphere GPS' 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. Hemisphere GPS' 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 Hemisphere GPS will derive therefrom.

Hemisphere GPS Inc.          
Condensed Consolidated Statements of Financial Position          
(Unaudited - expressed in U.S. dollars)          
    March 31,      December 31,
    2013      2012
           
Assets          
           
Current assets:          
  Cash and cash equivalents    13,567,634    2,645,605
  Accounts receivable      7,770,644      6,187,216
  Inventories      10,248,426      13,777,915
  Prepayments and deposits     508,945      661,790
  Assets held for sale         7,567,133
    32,095,649      30,839,659
           
Property, plant and equipment      3,452,421      3,438,472
Intangible assets      7,753,742      7,703,947
Goodwill      21,230,519      21,230,519
  64,532,331    63,212,597
           
Liabilities and Shareholders' Equity          
           
Current liabilities:          
  Accounts payable and accrued liabilities    $   5,246,198    6,449,665
  Bank indebtedness         550,000
  Provisions     2,721,664      3,226,234
  Deferred revenue     1,930,022      1,748,928
  Finance lease      29,532      52,184
  Current portion of contingent consideration     400,000      500,000
  Debt          1,140,699
    10,327,416      13,667,710
           
Deferred revenue     757,808      746,820
           
Contingent consideration          400,000
           
Shareholders' equity:          
  Share capital     120,398,360      119,341,668
  Equity reserve     6,230,228      7,182,124
           
Deficit     (73,181,481)     (78,125,725)
    53,447,107      48,398,067
           
  64,532,331    63,212,597
             

HEMISPHERE GPS INC.          
Condensed Consolidated Statements of Comprehensive Income          
           
Three months ended March 31, 2013 and 2012          
(Unaudited - expressed in U.S. dollars)          
    2013      2012
           
Sales  16,610,757    19,021,417
           
Cost of sales    8,863,006      10,038,590
    7,747,751      8,982,827
           
Expenses:          
  Research and development    2,288,086      2,256,991
  Sales and marketing    2,349,434      3,015,302
  General and administrative    1,542,977      1,263,277
  Acquisition costs        117,475
  Restructuring costs    156,483      -
    6,336,980      6,653,045
           
Results from operating activities    1,410,771      2,329,782
           
Foreign exchange (gain) loss    (52,593)      74,507
Interest and other income    (6,981)      (151)
    (59,574)      74,356
           
Profit before income taxes    1,470,345      2,255,426
           
Income taxes       48,650
Profit for the period    1,470,345      2,206,776
           
Comprehensive income        114,538
Net profit from continuing operations     1,470,345       2,321,314
           
Income (loss) from discontinued operations, net of tax    3,473,899      (731,877)
Net income and comprehensive income  4,944,244    1,589,437
           
           
Earnings per share:          
  Basic and diluted income per share   0.07    0.02
           
  Basic and diluted income per share from          
    continuing operations  0.02    0.03
           
  Basic and diluted loss per share from          
    discontinued operations   0.05    $  (0.01)
             

Hemisphere GPS Inc.                                
Condensed Consolidated Statements of Changes in Equity                                
                                 
(Unaudited - expressed in U.S. dollars)                                
    Share     Equity           Hedging     Total   Number of
    capital     reserve     Deficit     reserve     equity   shares
                                 
Balance at December 31, 2011    115,168,510     4,783,284     (43,528,081)     -     76,423,713   60,824,409
                                 
  Net profit for the period    -     -     1,435,437     -     1,435,437   -
  Accumulated other comprehensive income    -     -     -     154,000     154,000   -
  Issue of common shares for business acquisition     4,150,000     -     -     -     4,150,000   5,447,410
  Share issue cost     (71,081)     -     -     -     (71,081)   -
  Share-based payment transactions    -     119,856     -     -     119,856   -
  Stock options exercised    7,435      -     -     -     7,435   8,958
  Business acquisition     -     2,014,000     -     -     2,014,000   -
  Transfer from equity reserve on exercise of stock options    3,621     (3,621)     -     -     -   -
Balance at March 31, 2012  $ 119,258,485   $ 6,913,519   $ (42,092,644)   $ 154,000   84,233,360   66,280,777
                                 
  Net loss for the period    -     -     (36,033,081)     -     (36,033,081)   -
  Accumulated other comprehensive loss    -     -     -     (154,000)     (154,000)   -
  Issue of common shares, net of share issue cost    80,056     -     -     -     80,056   120,000
  Share-based payment transactions    -     269,578     -     -     269,578   -
  Stock options exercised    2,154     -     -     -     2,154   -
  Transfer from equity reserve onexercise of stock options    973     (973)     -     -     -   3,438
Balance at December 31, 2012    119,341,668     7,182,124     (78,125,725)     -     48,398,067   66,404,215
                                 
  Net profit for the period    -     -     4,944,244     -     4,944,244   -
  Issue of common shares    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  $ 120,398,360   $ 6,230,228   $ (73,181,481)   $ -   $ 53,447,107   69,180,871
                                   

.

Hemisphere GPS Inc.          
Condensed Consolidated Statements of Cash Flows          
           
Three months ended March 31, 2013 and 2012          
(Unaudited - expressed in U.S. dollars)          
    2013     2012
           
Cash flows from (used in) operating activities:          
  Net income    $ 1,470,345   $ 2,206,776
  Items not involving cash:          
    Depreciation and amortization    465,258     783,243
    Share-based payment transactions    70,000     89,517
    Unrealized foreign exchange gain    (11,963)     (15,140)
    1,993,640     3,064,396
           
  Change in non-cash operating working capital:          
    Accounts receivable    (1,583,428)     (2,568,614)
    Income tax credits receivable    -     (4,251)
    Inventories    3,529,489     (636,449)
    Prepaid expenses and deposits    152,845     82,005
    Accounts payable and accrued liabilities    (1,203,467)     2,118,320
    Provisions    (504,570)     225,951
    Deferred revenue    192,082     783,593
    2,576,591     3,064,952
           
Cash used in discontinued operations    (2,756,261)     (1,536,259)
    (179,670)     1,528,693
Cash flows from (used in) financing activities:          
  Payment of finance lease liability    (22,652)     (20,405)
  Bank loan   (550,000)     -
  Issue of debt    -     1,501,351
  Repayment of debt    (1,140,699)     -
  Issue of share capital, net    34,796     7,435
    (1,678,555)     1,488,381
Cash flows used in investing activities:          
  Purchase of property, plant and equipment    (237,203)     (209,265)
  Intangible asset addition    (306,009)     (475,000)
  Payment of contingent consideration    (500,000)     -
  Proceeds from sale of assets, net of cost    13,811,503     -
  Business acquisition     -     (2,071,081)
  Cash used in discontinued operations    -     (131,747)
    12,768,291     (2,887,093)
           
Increase in cash position    10,910,066     129,981
           
Effect of exchange rate fluctuations on cash and cash equivalents    11,963     15,140
           
Cash and cash equivalents, beginning of year    2,645,605     6,721,314
Cash and cash equivalents, end of year  $ 13,567,634   $ 6,866,435

 

 

 

 

 

 

SOURCE: Hemisphere GPS Inc.

For further information:

Wes Dittmer
Chief Financial Officer 
Hemisphere GPS Inc.
785-742-5149
WDittmer@agjunction.com

Cory Pala
Investor Relations 
E.vestor Communications Inc.
416-657-2400
Cory.Pala@evestor.com

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Hemisphere GPS Inc.

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