HIAWATHA, KS, Nov. 12, 2014 /CNW/ - (TSX: AJX) - AgJunction today reported third quarter operating results for the three and nine months ended September 30, 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.
Third quarter Financial Review
For the three months and quarter ended September 30, 2014, the Company reported total revenue of $9.6 million, a 16% decrease from $11.4 million in the third quarter of 2013. The lower revenue numbers for the quarter relate to the general softness in the overall global agriculture marketspace, affecting the Company's Outback retail and OEM product lines, however sales in North and South America for the Company's Air product line increased 12% over the same period of 2013. AgJunction is the market share leader in this segment.
"Seasonally, the third quarter is the lowest activity period for our core customer base," stated Rick Heiniger, President and CEO. "During this period we focus resources on business and market expansion while further streamlining operations. This is evidenced by the CLAAS and STARA OEM factory installation contracts we recently announced. These type of business relationships make it possible to emerge from the current industry downturn we're experiencing as a stronger company."
Sales by business unit for the third quarter of 2014 and 2013 are as follows:
(000's) |
Q3 2014 |
Q3 2013 |
Change |
|||||
Outback |
$3,030 |
$ 4,028 |
(24.8%) |
|||||
OEM |
4,644 |
5,476 |
(15.2%) |
|||||
Air |
1,389 |
1,236 |
12.4% |
|||||
Agronomy Services |
555 |
698 |
(20.5%) |
|||||
Total |
$9,618 |
$11,438 |
(15.9%) |
The declines relate to an overall market downturn within the Outback, OEM and Agronomy Services product lines. Increased demand in the North and South America for the Air product line resulted in an increase of 12% over the same period of 2013.
Sales by geographic region for the third quarter of 2014 and 2013 are as follows:
(000's) |
Q3 2014 |
Q3 2013 |
Change |
||||||
North America |
$5,778 |
$6,264 |
(7.8%) |
||||||
Europe |
1,956 |
3,191 |
(38.7%) |
||||||
Australia |
104 |
248 |
(58.1%) |
||||||
Other |
1,780 |
1,735 |
2.6% |
||||||
Total |
$9,618 |
$11,438 |
(15.9%) |
Year-over-year, United States and Canadian revenues were 8% lower compared to the third quarter of 2013 primarily as a result of the new aftermarket dealer program that was implemented during the fourth quarter of 2013. North American sales were generally characterized with ongoing softness in the aftermarket agricultural retail space. European revenues were 39% lower year-over-year as the Company's OEM customers slowed production in response to the softened agriculture market. Combined revenue from other markets, including Australia, South America and Asia was 5% lower.
Total international (non-North American) revenue decreased 26% year-over-year to $3.8 million, representing 40% of total Q3 2014 revenue compared to 45% in 2013. Consequently North American revenue represented 60% of total revenues in Q3 2014 compared to 55% in 2013.
Third quarter, 2014 consolidated gross margin was $3.9 million (41%) versus $5.2 million (46%) in the comparable quarter. The change is due to a decrease in sales volumes and a change in sales mix, partially offset by a decrease in the estimated warranty reserve for certain product lines in 2013.
Total operating expenses were $4.8 million in the third quarter, as compared to $5.2 million in the third quarter of 2013 with the reduction related to several cost saving initiatives and efficiencies realized through the restructuring period in 2013.
For the third quarter ended September 30 2014, the Company reported a net loss from continuing operations of $0.8 million, or ($0.01) per share (basic and diluted), compared to net income from continuing operations of $32 thousand, or $0.00 per share (basic and diluted), in the third quarter of 2013.
The Company realized a total comprehensive loss of $0.8 million in the third quarter of 2014 compared to total comprehensive income of $3 thousand in the comparable quarter of 2013.
For the nine months ended September 30, 2014, AgJunction reported revenues of $34.9 million compared to $44.4 million for the same period in 2013. Gross margin for the first nine months of 2014 was $16.3 million, or 46.7%, versus $20.0 million, or 45.0%, in the comparable period. Operating expenses, excluding restructuring, have declined $1.3 million on a year-over-year basis primarily due to cost reductions within research and development and sales and marketing being partially offset by increases in general and administrative expenses. The additional G&A expenses was related to the Company incurring litigation cost in the year for a lawsuit it brought against a competitor believed to be infringing on the Company's propriety software and intellectual property rights. The infringement does not involve the company's steering patent portfolio.
For the nine months ended September 30, 2014, the Company generated a net loss from continuing operations of $140 thousand, or $0.00 per share (basic and diluted), compared to net income from continuing operations of $2.6 million, or $0.04 per share (basic and diluted), during the same period of 2013.
At September 30, 2014, the Company held cash and short-term investments of $11.3 million compared to $10.1 million at the end of 2013. Working capital was $23.3 million as of September 30, 2014, compared with $22.9 million at December 31, 2013.
The Company had 72,322,063 common shares outstanding at September 30, 2014.
Conference Call: November 13, 2014 at 11:00AM Eastern Time
A conference call and webcast has been scheduled for tomorrow, November 13, 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: 27475489. A recording of the call will be available through January 31, 2015. Please dial +1(416) 849-0833 or 1-855-859-2056 and enter passcode 27475489 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 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". 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'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) |
|||||||||
September 30, |
December 31, |
||||||||
2014 |
2013 |
||||||||
(Unaudited) |
|||||||||
Assets |
|||||||||
Current assets: |
|||||||||
Cash and cash equivalents |
$ |
11,272,554 |
$ |
2,044,278 |
|||||
Short-term investments |
– |
8,100,751 |
|||||||
Accounts receivable, net of bad debt provisions |
|||||||||
of $614,991 and $803,410 as of September 30, 2014 |
|||||||||
December 31, 2013, respectively |
5,097,988 |
11,170,370 |
|||||||
Inventories |
11,099,713 |
10,040,812 |
|||||||
Prepayments and deposits |
939,662 |
708,489 |
|||||||
28,409,917 |
32,064,700 |
||||||||
Property, plant and equipment |
2,899,021 |
3,166,482 |
|||||||
Intangible assets |
7,525,347 |
7,489,245 |
|||||||
Goodwill |
21,230,519 |
21,230,519 |
|||||||
$ |
60,064,804 |
$ |
63,950,946 |
||||||
Liabilities and Shareholders' Equity |
|||||||||
Current liabilities: |
|||||||||
Accounts payable and accrued liabilities |
$ |
3,321,646 |
$ |
5,381,864 |
|||||
Provisions |
382,304 |
796,318 |
|||||||
Deferred revenue |
1,384,790 |
2,439,317 |
|||||||
Finance lease |
12,759 |
19,978 |
|||||||
Current portion of acquisition consideration |
– |
400,000 |
|||||||
Collateralized borrowing |
– |
162,388 |
|||||||
5,101,499 |
9,199,865 |
||||||||
Deferred revenue |
462,490 |
494,568 |
|||||||
Finance Lease |
5,799 |
18,104 |
|||||||
Shareholders' equity: |
|||||||||
Share capital |
122,467,464 |
121,096,751 |
|||||||
Equity reserve |
5,117,045 |
6,091,297 |
|||||||
Accumulated deficit |
(73,089,493) |
(72,949,639) |
|||||||
54,495,016 |
54,238,409 |
||||||||
$ |
60,064,804 |
$ |
63,950,946 |
||||||
AgJunction Inc. |
||||||||||||||
Condensed Consolidated Statements of Comprehensive Income and Loss |
||||||||||||||
(Unaudited – expressed in U.S. dollars) |
||||||||||||||
Three months ended |
Nine months ended |
|||||||||||||
September 30, |
September 30, |
|||||||||||||
2014 |
2013 |
2014 |
2013 |
|||||||||||
Sales |
$ |
9,618,155 |
$ |
11,437,654 |
$ |
34,845,174 |
$ |
44,352,769 |
||||||
Cost of sales |
5,689,507 |
6,232,257 |
18,574,774 |
24,386,751 |
||||||||||
3,928,648 |
5,205,397 |
16,270,400 |
19,966,018 |
|||||||||||
Expenses: |
||||||||||||||
Research and development |
1,860,051 |
1,675,842 |
5,465,992 |
6,289,327 |
||||||||||
Sales and marketing |
1,529,253 |
1,945,319 |
4,773,841 |
6,574,891 |
||||||||||
General and administrative |
1,456,534 |
1,530,703 |
6,098,376 |
4,495,856 |
||||||||||
Restructuring costs |
– |
18,287 |
– |
244,226 |
||||||||||
4,845,838 |
5,170,151 |
16,338,209 |
17,604,300 |
|||||||||||
Operating income (loss) |
(917,190) |
35,246 |
(67,809) |
2,361,718 |
||||||||||
Foreign exchange gain (loss) |
(45,491) |
29,912 |
(159,730) |
304,029 |
||||||||||
Interest and other income |
36,760 |
11,161 |
42,160 |
15,359 |
||||||||||
Gain on disposal of property, |
||||||||||||||
plant and equipment |
9,783 |
– |
8,175 |
– |
||||||||||
1,052 |
41,073 |
(109,395) |
319,388 |
|||||||||||
Income (loss) before income taxes |
(916,138) |
76,319 |
(177,204) |
2,681,106 |
||||||||||
Income taxes (benefit) |
(100,339) |
43,953 |
(37,350) |
43,953 |
||||||||||
Net income (loss) from continuing |
||||||||||||||
operations |
(815,799) |
32,366 |
(139,854) |
2,637,153 |
||||||||||
(Gain) loss from discontinued |
||||||||||||||
operations, net of tax |
– |
29,004 |
– |
(2,531,782) |
||||||||||
Net income (loss) |
(815,799) |
3,362 |
(139,854) |
5,168,935 |
||||||||||
Other comprehensive income |
– |
– |
– |
– |
||||||||||
Total comprehensive income (loss) |
$ |
(815,799) |
$ |
3,362 |
$ |
(139,854) |
$ |
5,168,935 |
||||||
Earnings per share: |
||||||||||||||
Basic and diluted income (loss) |
||||||||||||||
per share |
$ |
(0.01) |
$ |
0.00 |
$ |
0.00 |
$ |
0.08 |
||||||
Basic and diluted income (loss) per |
||||||||||||||
share from continuing operations |
$ |
(0.01) |
$ |
0.00 |
$ |
0.00 |
$ |
0.04 |
||||||
Basic and diluted income (loss) per |
||||||||||||||
share from discontinued operations |
$ |
0.00 |
$ |
0.00 |
$ |
0.00 |
$ |
0.04 |
||||||
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 |
– |
– |
5,168,935 |
5,168,935 |
– |
||||||||||||
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 |
– |
114,389 |
– |
114,389 |
– |
||||||||||||
Stock options exercised |
245,504 |
– |
– |
245,504 |
344,310 |
||||||||||||
Transfer from equity reserve on |
|||||||||||||||||
exercise of stock options |
108,154 |
(108,154) |
– |
– |
– |
||||||||||||
Balance at September 30, 2013 (unaudited) |
$ |
120,702,326 |
$ |
6,181,359 |
$ |
(72,956,790) |
$ |
53,926,895 |
69,472,230 |
||||||||
Balance at December 31, 2013 |
121,096,751 |
6,091,297 |
(72,949,639) |
54,238,409 |
69,805,628 |
||||||||||||
Comprehensive income |
– |
– |
(139,854) |
(139,854) |
– |
||||||||||||
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 |
– |
147,461 |
– |
147,461 |
– |
||||||||||||
Stock options exercised |
249,000 |
– |
– |
249,000 |
337,471 |
||||||||||||
Transfer from equity reserve on |
|||||||||||||||||
exercise of stock options |
114,713 |
(114,713) |
– |
– |
– |
||||||||||||
Balance at September 30, 2014 (unaudited) |
$ |
122,467,464 |
$ |
5,117,045 |
$ |
(73,089,493) |
$ |
54,495,016 |
72,322,063 |
AgJunction Inc. |
|||||||||||
Condensed Consolidated Statements of Cash Flows |
|||||||||||
Nine months ended September 30, 2014 and 2013 |
|||||||||||
(Unaudited - expressed in U.S. dollars) |
|||||||||||
2014 |
2013 |
||||||||||
Cash flows from (used in) operating activities: |
|||||||||||
Net income (loss) from continuing operations |
$ |
(139,854) |
$ |
2,637,153 |
|||||||
Items not involving cash: |
|||||||||||
Depreciation |
438,259 |
489,842 |
|||||||||
Amortization |
773,909 |
772,896 |
|||||||||
Share-based payment transactions |
147,461 |
114,389 |
|||||||||
Allowance on trade receivables |
61,990 |
381,136 |
|||||||||
Net realizable value write down of inventory |
142,734 |
829,114 |
|||||||||
Gain on disposal of property, plant and equipment |
(8,175) |
– |
|||||||||
1,416,324 |
5,224,530 |
||||||||||
Change in non-cash operating working capital: |
|||||||||||
Accounts receivable |
6,010,392 |
(1,438,462) |
|||||||||
Inventories |
(1,201,635) |
2,244,282 |
|||||||||
Prepaid expenses and deposits |
(231,173) |
(112,706) |
|||||||||
Accounts payable and accrued liabilities |
(2,164,018) |
(1,875,863) |
|||||||||
Provisions |
(414,014) |
(2,350,891) |
|||||||||
Deferred revenue |
(1,086,605) |
(148,300) |
|||||||||
Income taxes paid |
103,800 |
– |
|||||||||
1,016,747 |
(3,681,940) |
||||||||||
Cash used in discontinued operations |
– |
(2,964,469) |
|||||||||
Cash flows from (used in) operating activities |
2,433,071 |
(1,421,879) |
|||||||||
Cash flows from (used in) financing activities: |
|||||||||||
Payment of finance lease liability |
(19,524) |
(52,184) |
|||||||||
Bank loan repayment |
– |
(550,000) |
|||||||||
Repayment of debt |
– |
(1,140,699) |
|||||||||
Issue of share capital |
249,000 |
245,504 |
|||||||||
229,476 |
(1,497,379) |
||||||||||
Cash used in discontinued operations |
(162,388) |
(299,464) |
|||||||||
Cash flow from (used in) financing activities |
67,088 |
(1,796,843) |
|||||||||
Cash flows from (used in) investing activities: |
|||||||||||
Acquisition of short-term investments |
– |
(8,000,000) |
|||||||||
Proceeds from redemption of short-term investments |
8,061,686 |
– |
|||||||||
Interest received, net of bank charges |
39,065 |
– |
|||||||||
Proceeds from sale of property, plant and equipment |
63,208 |
– |
|||||||||
Purchase of property, plant and equipment |
(225,831) |
(489,700) |
|||||||||
Intangible asset addition |
(2,064,791) |
(1,899,088) |
|||||||||
R&D expense reimbursement |
1,254,780 |
1,429,466 |
|||||||||
Payment of acquisition consideration |
(400,000) |
(500,000) |
|||||||||
Proceeds from sale of assets, net of cost |
– |
13,810,736 |
|||||||||
Cash flows from investing activities |
6,728,117 |
4,351,414 |
|||||||||
Increase in cash position |
9,228,276 |
1,132,692 |
|||||||||
Cash and cash equivalents, beginning of year |
2,044,278 |
2,645,605 |
|||||||||
Cash and cash equivalents, end of period |
$ |
11,272,554 |
$ |
3,778,297 |
SOURCE: Agjunction Inc.
![](http://rt.newswire.ca/rt.gif?NewsItemId=C7170&Transmission_Id=201411121700CANADANWCANADAPR_C7170&DateId=20141112)
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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