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Press release from CNW Group

AgJunction Grows 37% on Strong Q4 Revenue

Tuesday, March 18, 2014

AgJunction Grows 37% on Strong Q4 Revenue

19:54 EDT Tuesday, March 18, 2014

"International revenue jumps 160% in fourth quarter on OEM growth"

HIAWATHA, KS, March 18, 2014 /CNW/ - (TSX: AJX) -- AgJunction today reported a 37% increase in fourth quarter revenues compared to last year driven by strong OEM growth.

On September 5, 2012, the Company announced a corporate restructuring to focus exclusively on its agriculture business, subsequently selling its non-agriculture business on January 31, 2013. 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.

All currency amounts for financial results for the three and twelve-month periods ended December 31, 2013 are expressed in U.S. dollars.

Fourth Quarter Financial Review

For the fourth quarter ended December 31, 2013, the Company reported total revenue of $13.9 million, an increase of 37% from $10.2 million in the fourth quarter of 2012.

Total international (non-North American) revenue increased 160% year-over-year to $7.3 million, growing to represent 53% of total Q4 revenue compared to 28% in 2012. European revenue increased 180% in the quarter to $4.3 million from $1.5 million in the same period in 2012. A 120% increase in OEM revenue to $8.2 million was driven by international customers.

"I am pleased to report strong revenue and earnings growth during the fourth quarter " stated Rick Heiniger, President and CEO. "Our international OEM business was the core driver behind our fourth quarter growth and is changing the traditional seasonality of our business. We believe our global markets are generally making a transition from aftermarket to OEM for core precision agriculture guidance technologies and is evident in our sales results. We are working closely with our current and new OEM partners to support this trend."

Revenues during the fourth quarter were as follows:

                           
(000's)         Q4 2013       Q4 2012       Change
Agriculture         $ 13,867       $ 10,155       37%

Fourth quarter revenue growth was driven by solid results in the Company's OEM, Air and Agronomy product lines. Reported Outback revenues in North America declined by 21% as a result of the new aftermarket dealer program that was implemented during the third and fourth quarters. As previously announced, 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 negatively impacted.

Sales by business unit for the fourth quarter of 2013 and 2012 were as follows:

           
(000's)   Q4 2013 Q4 2012   Change
Outback North America   $ 3,149 $ 4,005   -21%
Outback Australia     222   381   -42%
OEM     8,183   3,713   120%
Air     1,657   1,474   12%
Agronomy      656   582   13%
               
    $ 13,867 $ 10,155   37%
               
Sales by region for the fourth quarter of 2013 and 2012 are as follows:    
 
(000's)   Q4 2013 Q4 2012   Change
North America   $ 6,555 $ 7,339   -11%
Europe     4,295   1,536   180%
Australia     221   483   -54%
Other      2,796   797   251%
               
    $ 13,867 $ 10,155   37%

While year-over-year North American Outback product sales were essentially flat in the fourth quarter, reported revenue declined by 11% from 2012 primarily due to the change to North American aftermarket dealer program pricing changes for the fourth quarter of 2013. North American revenue represented 47% of total revenues as compared to 72% in 2012.

In Australia, sales declined by 54% from $0.5 million to $0.2 million due to softening in the aftermarket agricultural retail space. Sales to other markets, including South America and Asia, grew by 251% from $0.8 million to $2.8 million due to strengthening relationships in the OEM and Air markets.

Fourth quarter consolidated gross margin was unchanged at 40% or $5.5 million, compared to 40% and $4.0 million for the fourth quarter of 2012.

As a result of management's streamlining initiatives, operating expenses were $5.3 million in the fourth quarter down $0.9 million or 14% from $6.2 million (prior to restructuring) in the fourth quarter of 2012. The decrease relates to several cost saving initiatives and efficiencies realized through the restructuring period that began in late 2012. Management is maintaining tight control of expenses, supporting the overall profitability of the streamlined operating model.

In the fourth quarter of 2013, the Company generated income from continuing operations of $7 thousand, or $0.00 per share (basic and diluted), compared to a loss from continuing operations of $29.3 million or ($0.45) per share (basic and diluted) in the fourth quarter of 2012, which included a $5.7 million restructuring charge and a $21 million goodwill impairment.

For the fourth quarter of 2013 the Company realized a comprehensive income of $6 thousand, or $0.00 per share (basic and diluted), compared to a comprehensive loss of $32.9 million, or ($0.50) per share (basic and diluted), in the fourth quarter of 2012.

2013 12-Month Financial Review

For the twelve months ended December 31, 2013, AgJunction reported revenues of $58.2 million compared to $55.4 million in 2012.

                   
(000's)         2013   2012   Change
Outback North America         $ 18,847   $ 24,410   -23%
Outback Australia           1,246     2,166   -42%
OEM           27,307     18,438   48%
Air           8,014     8,294   -3%
Agronomy Services            2,806      2,124    32%
                       
          $ 58,220    $ 55,432    5%
                       
Sales by geographic region  
                       
                       
(000's)         2013   2012   Change
North America         $ 34,265   $ 39,127   -12%
Europe           14,734     7,878   87%
Australia           1,318     3,099   -57%
Other            7,903     5,328   48%
                       
          $ 58,220   $ 55,432   5%

Driven primarily by OEM sales growth of 48%, total international (non-North American) revenue increased 47% year-over-year, growing to represent 41% of total revenue compared to 29% in 2012. Year-over-year North American reported revenue declined by 12% from 2012, and represented 59% of total revenues as compared to 71% in 2012. The previously discussed change to the North American aftermarket dealer pricing changes contributed to the year-over-year decrease.

In North America, 2013 United States revenue declined 6% and Canada declined by 27%, due primarily to first quarter delays in aftermarket product releases during growing season and the North American aftermarket dealer pricing changes. Revenue in Europe grew by 87% due to strengthening relationships in the OEM market. In Australia, sales declined by 57% due to softening in the aftermarket agricultural retail space and a strengthening US dollar. Sales to other markets, including South America and Asia, grew by 48% in 2013 due to strengthening relationships in the OEM and Air markets.

For 2013, strong OEM growth of 48% and Agronomy Services growth of 32% were offset by 24% lower reported revenue in Outback and 3% revenue decrease for Air product lines compared to 2012.

2013 consolidated gross margin was $25.5 million, or 44% versus $24.5 million, or 44% in 2012. Operating expenses before acquisition and restructuring costs was $22.7 million in 2013, down by 12% or $3.0 million from $25.7 million in 2012. The primary driver of the decrease is related to the Company's post restructuring efforts previously discussed.

For 2013, the Company realized income from continuing operations of $2.6 million or $0.04 per share (basic and diluted), compared to a loss from continuing operations of $29.0 million or ($0.44) per share (basic and diluted) in 2012.

Income from discontinued operations was $2.5 million or $0.04 per share (basic and diluted) in 2013, compared to a loss of $5.5 million or ($0.08) per share (basic and diluted) in 2012.

The Company realized comprehensive income of $5.2 million of $0.08 per share (basic and diluted) in 2013 compared to comprehensive loss of $34.6 million or ($0.52) per share (basic and diluted) in 2012.

At December 31, 2013, the Company held cash and short-term deposits of $10.1 million compared to $2.6 million at the end of 2012. Working capital was $22.9 million at December 31, 2013, up from $17.2 million at December 31, 2012.

The Company had 69,805,628 common shares outstanding at December 31, 2013.

Guidance

AgJunction is issuing guidance for Q1'14 due to a general softness within its core markets for precision agriculture. Weaker grain prices in 2013 may have tempered market strength typically experienced in the first part of the year. Despite this uncertainty, the Company expects first quarter 2014 financial results to exceed the fourth quarter of 2013, but trail first quarter 2013 reported results. Management maintains confidence for revenue and earnings growth over the long term.

Conference Call - March 19 at 11:00AM Eastern Time

A conference call and webcast has been scheduled for March 19 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: 5797486. A recording of the call will be available through May 12. Please dial 1-855-859-2056 and enter passcode 5797486 to listen to the rebroadcast.

The call will be also 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.
Consolidated Statements of Financial Position

(Expressed in U.S. dollars)

 
  December 31,    December 31
  2013   2012
Assets          
           
Current assets:          
  Cash and cash equivalents   $  2,044,278   $  2,645,605
  Short-term investments      8,100,751      -
  Accounts receivable, net of bad debt provisions
of $803,410 and $825,096 as of December 31,
2013 and 2012, respectively  
  11,170,370     6,187,216
  Inventories     10,040,812     13,777,915
    Prepayments and deposits    708,489     661,790
  Assets held for sale                   7,567,133
    32,064,700     30,839,659
           
Property, plant and equipment     3,166,482     3,438,472
Intangible assets     7,489,245     7,703,947
Goodwill     21,230,519     21,230,519
  $  63,950,946   $ 63,212,597
           
Liabilities and Shareholders' Equity          
           
Current liabilities:          
  Accounts payable and accrued
liabilities 
$  5,381,864    $  6,449,665
  Bank indebtedness    -      550,000
  Provisions     796,318      3,226,234
  Deferred revenue    2,439,317      1,748,928
  Collateralized borrowing     162,388      -
  Finance lease     19,978      52,184
  Current portion of acquisition consideration     400,000      500,000
  Debt   -      1,140,699
    9,199,865      13,667,710
           
Deferred revenue    494,568      746,820
Finance lease    18,104      -
Acquisition consideration     -      400,000
             
Shareholders' equity:          
  Share capital     121,096,751      119,341,668
  Equity reserve    6,091,297      7,182,124
           
Accumulated deficit    (72,949,639)     (78,125,725)
    54,238,409     48,398,067
           
  $  63,950,946    $ 63,212,597
           

AgJunction Inc.
Consolidated Statements of Comprehensive Income and Loss
Years ended December 31, 2013 and 2012
(Expressed in U.S. dollars)
         
    2013   2012
           
Sales  $  58,219,588 $ 55,432,427
         
Cost of sales    32,712,697   30,946,118
    25,506,891   24,486,309
Expenses:        
  Research and development    8,671,129   9,711,176
         
  Sales and marketing    8,579,137   10,509,849
  General and administrative    5,425,352   5,472,720
  Acquisition costs     -   117,475
  Restructuring costs     247,596   6,154,025
    22,923,214   31,965,245
           
Operating income (loss)    2,583,677   (7,478,936)
         
Goodwill impairment     -   21,000,000
Revaluation of acquisition consideration      -   412,000
Foreign exchange (gain) loss    (283,061)   109,147
Interest and other income    (25,019)   (2,329)
Loss on sale of property, plant and equipment     146,733   -
Income (loss) before income taxes   2,745,024   (28,997,754)
         
Income taxes   99,811   48,650
Net income (loss) from continuing operations   2,645,213   (29,046,404)
         
Comprehensive (gain) loss from discontinued operations, net of tax   (2,530,873)   5,551,240
Comprehensive income (loss) $  5,176,086 $ (34,597,644)
         
Earnings per share:        
  Basic and diluted income (loss) per share  $  0.08 $  (0.52)
         
  Basic and diluted income (loss) per share from        
  continuing operations   $  0.04 $  (0.44)
         
  Basic and diluted income (loss) per share from        
  discontinued operations   $  0.04 $  (0.08)
           

AgJunction Inc.
Consolidated Statements of Changes in Equity
Years ended December 31, 2013 and 2012
(Expressed in U.S. dollars)
                       
    Share 
capital
  Equity
reserve
  Deficit   Total
equity
  Number of
shares
                     
Balance at January 1, 2012  $ 115,168,510 $ 4,783,284 $ (43,528,081) $ 76,423,713   60,824,409
                     
  Comprehensive loss    -   -   (34,597,644)   (34,597,644)   -
  Issue of common shares, net of                    
     share issue cost    80,056   -   -   80,056   120,000
  Issue of common shares for                    
     business acquisition, net of
  4,078,919   -   -   4,078,919   5,447,410
     share issue cost                    
  Business acquisition     -   2,014,000   -   2,014,000   -
  Share-based payment                    
     transactions    -   389,434   -   389,434   -
  Stock options exercised    9,589   -   -   9,589   12,396
  Transfer from equity reserve on                    
     exercise of stock options    4,594   (4,594)   -   -   -
                     
Balance at December 31, 2012    119,341,668   7,182,124   (78,125,725)   48,398,067   66,404,215
                     
  Comprehensive income    -   -   5,176,086   5,176,086   -
  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    -   149,803   -   149,803   -
  Stock options exercised    514,453   -   -   514,453   677,708
  Transfer from equity reserve on                    
     exercise of stock options    233,630   (233,630)   -   -   -
                     
Balance at December 31, 2013 $ 121,096,751 $ 6,091,297 $ (72,949,639) $ 54,238,409   69,805,628
                     

AgJunction Inc.
Consolidated Statements of Cash Flows
Years ended December 31, 2013 and 2012
(Expressed in U.S. dollars)
         
    2013   2012
         
Cash flows from (used in) operating activities:        
  Net income (loss) from continuing operations  $ 2,645,213 $ (29,046,404)
  Items not involving cash:        
    Depreciation     640,470   1,059,509
    Amortization     1,032,152   2,138,939
         
    Share-based payment transactions     149,803   290,859
    Allowance on trade receivables    384,468   427,311
    Net realizable value write down of inventory    885,307   3,010,032
    Loss on disposal of property, plant and equipment     146,733   -
    Goodwill write off     -   21,000,000
      5,884,146   (1,119,754)
  Change in non-cash operating working capital:        
    Accounts receivable    (5,803,409)   (751,167)
    Income tax credits receivable    -   237,224
         
    Inventories    2,851,796   (626,897)
         
    Prepaid expenses and deposits    (46,699)   38,099
    Accounts payable and accrued liabilities    (999,824)   523,102
    Provisions    (2,429,916)   3,000,969
    Deferred revenue    438,137   1,035,805
    Income taxes paid    (59,000)   -
      (6,048,915)   3,457,135
         
  Cash used in discontinued operations     (2,815,091)   (3,472,772)
Cash flows used in operating activities    (2,979,860)   (1,135,391)
         
Cash flows from (used in) financing activities:        
  Payment of finance lease liability    (14,102)   (110,252)
  Interest paid, net    (8,977)   (25,820)
  Bank loan repayment    (550,000)   550,000
  Issuance of debt    -   1,500,000
  Repayment of debt    (1,140,699)   (300,000)
  Issuance of share capital    514,453   9,589
      (1,199,325)   1,623,517
           
  Cash used in discontinued operations     (299,464)   -
Cash flow from (used in) financing activities    (1,498,789)   1,623,517
           
Cash flows from (used in) investing activities:        
  Acquisition of short-term investments     (8,100,751)   -
  Payment for the disposal of property, plant and equipment     (96,495)   -
  Purchase of property, plant and equipment     (418,718)   (645,780)
  Intangible asset addition     (2,632,472)   (1,852,408)
  R&D expense reimbursement     1,815,022   -
  Business acquisition      -   (2,071,081)
  Increase in acquisition consideration     -   412,000
  Payment of acquisition consideration     (500,000)   -
  Proceeds from sale of assets, net of costs     13,810,736   -
      3,877,322   (4,157,269)
  Cash used in discontinued operations      -   (406,566)
Cash flow from (used in) investing activities    3,877,322   (4,563,835)
           
Increase (decrease) in cash position    (601,327)   (4,075,709)
           
Cash and cash equivalents, beginning of year     2,645,605   6,721,314
Cash and cash equivalents, end of year  $  2,044,278 $  2,645,605

  

 

 

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

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