HIAWATHA, KS, May 12, 2015 /CNW/ - (TSX: AJX) -- AgJunction today reported financial results for the first quarter ended March 31, 2015. All currency amounts are expressed in U.S. dollars.
Novariant Merger
In a press release dated March 16, 2015, AgJunction Inc. ("AgJunction") and Novariant, Inc. ("Novariant") announced that they had entered into an agreement under which AgJunction would acquire Novariant through a merger transaction. Complete details of the terms of the transaction are set out in the agreement filed by AgJunction under its profile on SEDAR on March 26, 2015.
Novariant is a premier provider of advanced steering solutions for precision agriculture. Based in Silicon Valley, Novariant's steering solutions are used today in over 60 countries. With approximately 55 employees worldwide, Novariant generated revenues of approximately $30 million in 2014.
Combined, the two companies establish a pre-eminent position in automated steering and machine control technologies worldwide, combining product portfolios, OEM customers, and leveraging industry-leading intellectual property. As global machine manufacturers increasingly target the integration of auto-steer technologies at the factory level, the combined company will bring advanced levels of machine automation to both current and future OEM clients faster and at lower cost.
Upon closing of the transaction, the combined company will have approximately 200 employees worldwide and will be headquartered at Novariant's corporate headquarters in Silicon Valley. The combined company plans to maintain additional offices in Kansas, Arizona, Canada and Australia. The transaction also brings changes at the board and management level as outlined in the March 16, 2015 announcement.
Completion of the transaction is expected late summer of 2015, subject to a number of conditions, including receipt of a permit from the California Commissioner of Corporations, approval of the shareholders of Novariant, approval of the shareholders of AgJunction, and receipt of customary regulatory approvals, including the approval of the Toronto Stock Exchange.
At transaction close, AgJunction shares will be issued to shareholders of Novariant in exchange for all of the outstanding shares of Novariant. After giving effect to the issuance of such AgJunction shares, AgJunction will have approximately 123.7 million fully diluted shares outstanding, of which approximately 49.5 million shares will be held by the former shareholders of Novariant, representing approximately 40.0 % of the combined company. Post transaction, directors, officers and other insiders will hold approximately 30.6 % of the combined company.
Additional information in respect of the transaction will be forthcoming in the information circular which will be provided to AgJunction shareholders in connection with the meeting to approve the transaction. This meeting is scheduled to occur by August 31, 2015.
First Quarter Financial Review
For the three months ended March 31, 2015, the Company reported revenue of $12.1 million, a 19% decrease from $14.9 million in the first quarter of 2014. Lower revenue for the quarter relates largely to an overall downturn within the Air product line.
In the US, net farm income has been declining since 2013, and according to the February 2015 US Department of Agriculture ("USDA") report, a further decline of 32% is forecast for 2015. Lower crop and livestock receipts are the main drivers of the 2015 decrease in net farm income. The rate of growth in US farm assets is also forecast to slow in 2015 compared to recent years as a result of lower net income, leading to less capital investment and a slight decline in farmland values.
"Despite the near term declines, we view the fundamentals of the global agriculture markets to be positive over the long term," said Rick Heiniger, President and CEO. "Global population growth, limited arable land, and the need for increased output all contribute to a global need for a higher penetration of precision agriculture technologies such as Global Navigation Satellite System (GNSS) and auto-steering. The momentum we are gaining within the OEM sector echoes this."
Sales by business unit for the first quarter of March 31, 2015 and 2014 are as follows:
(000's) |
Q1 2015 |
Q1 2014 |
Change |
||||||||||
Outback |
$ |
2,507 |
$ |
2,585 |
(3.0%) |
||||||||
OEM |
7,881 |
8,615 |
(8.5%) |
||||||||||
Air |
973 |
3,158 |
(69.2%) |
||||||||||
Agronomy Services |
735 |
571 |
28.7% |
||||||||||
Total |
$ |
12,096 |
$ |
14,929 |
(19.0%) |
On March 31, 2015, AgJunction announced the sale of its Agronomy Services operations for $2.4 million in cash. All Agronomy Services business activities and related costs were transferred effective April 1, 2015. Divesting the division is aligned with AgJunction's strategy to focus all of its resources on delivering the most accurate, innovative and reliable steering solutions.
Sales by geographic region for the first quarter of March 31, 2015 and 2014 are as follows:
(000's) |
Q1 2015 |
Q1 2014 |
Change |
||||||||||
North America |
$ |
4,774 |
$ |
7,460 |
(36.0%) |
||||||||
Europe |
5,180 |
6,203 |
(16.5%) |
||||||||||
Australia |
153 |
335 |
(54.3%) |
||||||||||
Other |
1,989 |
931 |
113.6% |
||||||||||
Total |
$ |
12,096 |
$ |
14,929 |
(19.0%) |
United States and Canadian combined revenues were down by 36% from the first quarter of 2014 generally characterized with ongoing softness in the aftermarket agricultural retail space. European revenues decreased 16% due to order timing from OEM customers. Sales to Australia decreased 54% due to the global downturn within the agricultural space compounded by a strengthening US dollar. Sales to other markets, including South America and Asia, increased 114%.
Consolidated Q1 2015 gross margin was $5.5 million, or 46% of revenue, versus $6.9 million, or 46% of revenue, in Q1 2014. Total operating expenses fell by 11% to $4.9 million, as compared to $5.5 million in the first quarter of 2014 with the reduction primarily related to several cost saving initiatives and efficiencies realized through the restructuring period that began in late 2012.
For the first quarter ended March 31, 2015, the Company reported net income of $0.5 million, or $0.01 per share (basic and diluted), compared to net income of $1.3 million, or $0.02 per share (basic and diluted), in the first quarter of 2014.
At the end of the first quarter of 2015, the Company held cash of $10.8 million compared to $11.2 million at the end of 2014. Working capital was $24.1 million, up from $22.4 million at December 31, 2014.
At March 31, 2015, AgJunction had 72,322,063 common shares outstanding.
Conference Call: May 13, 2015 at 11:00AM ET
A conference call and webcast has been scheduled for tomorrow, May 13, 2015 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 approximately 10 minutes before the conference call and provide Conference ID: 39594288. A recording of the call will be available through July 31, 2015. Please dial +1(416) 849-0833 and enter passcode 39594288 to listen to the rebroadcast.
The call will be webcast live and archived on the Company's web site at: http://www.corp.agjunction.com/InvestorCenter/ConferenceCallsOtherEvents.aspx.
About AgJunction
AgJunction, Inc. 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® and Satloc®. The Company is headquartered in Hiawatha, Kansas, with facilities in Arizona, Winnipeg, and Queensland, Australia. AgJunction is listed on the Toronto Stock Exchange (TSX) under the symbol "AJX." For more information, please go to www.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's 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, |
||||||||||
2015 |
2014 |
||||||||||
(Unaudited) |
|||||||||||
Assets |
|||||||||||
Current assets: |
|||||||||||
Cash and cash equivalents |
$ |
10,774,141 |
$ |
11,223,755 |
|||||||
Accounts receivable, net of bad debt provisions |
|||||||||||
of $298,901 and $645,059 as of March 31, 2015 |
|||||||||||
December 31, 2014, respectively |
6,479,153 |
5,665,108 |
|||||||||
Inventories |
9,714,635 |
9,692,923 |
|||||||||
Prepayments and deposits |
759,702 |
947,931 |
|||||||||
Assets held for sale |
1,729,606 |
– |
|||||||||
29,457,237 |
27,529,717 |
||||||||||
Property, plant and equipment |
2,682,141 |
2,808,052 |
|||||||||
Intangible assets |
6,698,549 |
7,772,064 |
|||||||||
Goodwill |
5,374,519 |
5,374,519 |
|||||||||
$ |
44,212,446 |
$ |
43,484,352 |
||||||||
Liabilities and Shareholders' Equity |
|||||||||||
Current liabilities: |
|||||||||||
Accounts payable and accrued liabilities |
$ |
3,612,204 |
$ |
2,795,216 |
|||||||
Provisions |
295,969 |
302,987 |
|||||||||
Deferred revenue |
496,683 |
2,016,183 |
|||||||||
Finance lease |
11,599 |
13,918 |
|||||||||
Liabilities held for sale |
933,208 |
– |
|||||||||
5,349,663 |
5,128,304 |
||||||||||
Deferred revenue |
300,955 |
343,245 |
|||||||||
Finance Lease |
- |
1,160 |
|||||||||
Shareholders' equity: |
|||||||||||
Share capital |
122,467,464 |
122,467,464 |
|||||||||
Equity reserve |
5,176,906 |
5,150,466 |
|||||||||
Accumulated deficit |
(89,082,542) |
(89,606,287) |
|||||||||
38,561,828 |
38,011,643 |
||||||||||
$ |
44,212,446 |
$ |
43,484,352 |
AgJunction Inc. |
||||||||
Condensed Consolidated Statements of Comprehensive Income and Loss |
||||||||
Three months ended March 31, 2015 and 2014 |
||||||||
(Unaudited - expressed in U.S. dollars) |
||||||||
2015 |
2014 |
|||||||
Sales |
$ |
12,096,140 |
$ |
14,928,593 |
||||
Cost of sales |
6,572,576 |
8,078,937 |
||||||
5,523,564 |
6,849,656 |
|||||||
Expenses: |
||||||||
Research and development |
1,512,097 |
1,962,570 |
||||||
Sales and marketing |
1,530,841 |
1,699,537 |
||||||
General and administrative |
1,853,928 |
1,868,838 |
||||||
4,896,866 |
5,530,945 |
|||||||
Operating income |
626,698 |
1,318,711 |
||||||
Foreign exchange loss |
103,922 |
28,905 |
||||||
Interest and other income |
(969) |
(5,068) |
||||||
Loss on disposal of property, plant and equipment |
– |
10,273 |
||||||
102,953 |
34,110 |
|||||||
Income before income taxes |
523,745 |
1,284,601 |
||||||
Income tax expense |
– |
21,289 |
||||||
Net income from continuing operations |
523,745 |
1,263,312 |
||||||
Other comprehensive income |
– |
– |
||||||
Total comprehensive income |
$ |
523,745 |
$ |
1,263,312 |
||||
Earnings per share: |
||||||||
Basic and diluted income per share |
$ |
0.01 |
$ |
0.02 |
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, 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 |
|||||||||
Balance at December 31, 2014 |
$ |
122,467,464 |
$ |
5,150,466 |
$ |
(89,606,287) |
$ |
38,011,643 |
72,322,063 |
|||||||||
Comprehensive income |
– |
– |
523,745 |
523,745 |
– |
|||||||||||||
Issue of common shares for |
||||||||||||||||||
business acquisition, net of |
||||||||||||||||||
share issue cost |
– |
– |
– |
– |
– |
|||||||||||||
Share-based payment |
||||||||||||||||||
transactions |
– |
26,440 |
– |
26,440 |
– |
|||||||||||||
Stock options exercised |
– |
– |
– |
– |
– |
|||||||||||||
Transfer from equity reserve on |
||||||||||||||||||
exercise of stock options |
– |
– |
– |
– |
– |
|||||||||||||
Balance at March 31, 2015 (unaudited) |
$ |
122,467,464 |
$ |
5,176,906 |
$ |
(89,082,542) |
$ |
38,561,828 |
72,322,063 |
AgJunction Inc. |
|||||||||||||
Condensed Consolidated Statements of Cash Flows |
|||||||||||||
Three months ended March 31, 2015 and 2014 |
|||||||||||||
(Unaudited - expressed in U.S. dollars) |
|||||||||||||
2015 |
2014 |
||||||||||||
Cash flows from (used in) operating activities: |
|||||||||||||
Net income from continuing operations |
$ |
523,745 |
$ |
1,263,312 |
|||||||||
Items not involving cash: |
|||||||||||||
Depreciation |
131,810 |
150,086 |
|||||||||||
Amortization |
257,763 |
257,955 |
|||||||||||
Share-based payment transactions |
26,440 |
49,449 |
|||||||||||
Allowance on trade receivables |
58,458 |
91,325 |
|||||||||||
Net realizable value write down (gain) of inventory |
129,001 |
(28,230) |
|||||||||||
Loss on disposal of property, plant and equipment |
– |
10,273 |
|||||||||||
1,127,217 |
1,794,170 |
||||||||||||
Change in non-cash operating working capital: |
|||||||||||||
Accounts receivable |
(872,503) |
4,100,522 |
|||||||||||
Inventories |
(192,739) |
(1,946,295) |
|||||||||||
Prepaid expenses and deposits |
188,229 |
10,257 |
|||||||||||
Accounts payable and accrued liabilities |
844,208 |
248,289 |
|||||||||||
Provisions |
(7,018) |
100,236 |
|||||||||||
Deferred revenue |
(655,802) |
(379,784) |
|||||||||||
Income taxes paid |
– |
(62,100) |
|||||||||||
(695,625) |
2,071,125 |
||||||||||||
Cash used in discontinued operations |
– |
– |
|||||||||||
Cash flows from (used in) operating activities |
431,592 |
3,865,295 |
|||||||||||
Cash flows from (used in) financing activities: |
|||||||||||||
Payment of finance lease liability |
(3,479) |
(4,852) |
|||||||||||
Interest received, net of bank charges |
– |
39,065 |
|||||||||||
Issue of share capital, net |
– |
192,090 |
|||||||||||
(3,479) |
226,303 |
||||||||||||
Cash used in discontinued operations |
– |
(162,388) |
|||||||||||
Cash flow from (used in) financing activities |
(3,479) |
63,915 |
|||||||||||
Cash flows used in investing activities: |
|||||||||||||
Proceeds from redemption of short-term investments |
– |
8,011,021 |
|||||||||||
Purchase of property, plant and equipment |
(43,445) |
(91,679) |
|||||||||||
Intangible asset addition |
(834,282) |
(643,362) |
|||||||||||
R&D expense reimbursement |
– |
169,504 |
|||||||||||
Payment of acquisition consideration |
– |
(400,000) |
|||||||||||
Cash flows from investing activities |
(877,727) |
7,045,484 |
|||||||||||
Increase (decrease) in cash position |
(449,614) |
10,974,694 |
|||||||||||
Cash and cash equivalents, beginning of year |
11,223,755 |
2,044,278 |
|||||||||||
Cash and cash equivalents, end of period |
$ |
10,774,141 |
$ |
13,018,972 |
SOURCE Agjunction Inc.
For further information: Wes Dittmer, Chief Financial Officer, AgJunction Inc., (785) 742-5149, [email protected]; Cory Pala, Investor Relations, e.vestor Communications Inc., (416) 657-2400, [email protected]
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