Hemisphere GPS Reports 2013 Q1 Results

HIAWATHA, KS, May 8, 2013 - (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 ReviewTo increase clarity of results for continuing operations of the agriculture business after divesting the nonagriculture 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 thefirst 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 StrategyThe 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 TimeA 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.aspxA 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 AgJunctionHemisphere 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 isheadquartered 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.For further information:Jeff Morris, Corporate Communications, AgJunction+1-510-933-4808jmorris@agjunction.comCory PalaInvestor RelationsE.vestor Communications Inc.416-657-2400Cory.Pala@evestor.comHEMISPHERE GPS INC.Condensed Consolidated Statements of Financial Position(Unaudited - expressed in U.S. dollars)March 31, December 31,2013 2012AssetsCurrent assets:Cash and cash equivalents $ 13,567,634 $ 2,645,605Accounts receivable 7,770,644 6,187,216Inventories 10,248,426 13,777,915Prepayments and deposits 508,945 661,790Assets held for sale – 7,567,13332,095,649 30,839,659Property, plant and equipment 3,452,421 3,438,472Intangible assets 7,753,742 7,703,947Goodwill 21,230,519 21,230,519$ 64,532,331 $ 63,212,597Liabilities and Shareholders’ EquityCurrent liabilities:Accounts payable and accruedliabilities $ 5,246,198 $ 6,449,665Bank indebtedness – 550,000Provisions 2,721,664 3,226,234Deferred revenue 1,930,022 1,748,928Finance lease 29,532 52,184Current portion of contingent consideration 400,000 500,000Debt – 1,140,69910,327,416 13,667,710Deferred revenue 757,808 746,820Contingent consideration – 400,000Shareholders’ equity:Share capital 120,398,360 119,341,668Equity reserve 6,230,228 7,182,124Deficit (73,181,481) (78,125,725)53,447,107 48,398,067$ 64,532,331 $ 63,212,597HEMISPHERE GPS INC.Condensed Consolidated Statements of Comprehensive IncomeThree months ended March 31, 2013 and 2012(Unaudited - expressed in U.S. dollars)2013 2012Sales $ 16,610,757 $ 19,021,417Cost of sales 8,863,006 10,038,5907,747,751 8,982,827Expenses:Research and development 2,288,086 2,256,991Sales and marketing 2,349,434 3,015,302General and administrative 1,542,977 1,263,277Acquisition costs – 117,475Restructuring costs 156,483 –6,336,980 6,653,045Results from operating activities 1,410,771 2,329,782Foreign exchange (gain) loss (52,593) 74,507Interest and other income (6,981) (151)(59,574) 74,356Profit before income taxes 1,470,345 2,255,426Income taxes – 48,650Profit for the period 1,470,345 2,206,776Comprehensive income – 114,538Net profit from continuing operations 1,470,345 2,321,314Income (loss) from discontinued operations, net of tax 3,473,899 (731,877)Net income and comprehensive income $ 4,944,244 $ 1,589,437Earnings per share:Basic and diluted income per share $ 0.07 $ 0.02Basic and diluted income per share fromcontinuing operations $ 0.02 $ 0.03Basic and diluted loss per share fromdiscontinued 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 ofcapital reserve Deficit reserve equity sharesBalance at December 31, 2011 115,168,510 4,783,284 (43,528,081) – 76,423,713 60,824,409Net profit for the period – – 1,435,437 – 1,435,437 –Accumulated other comprehensiveincome – – – 154,000 154,000 –Issue of common shares forbusiness acquisition 4,150,000 – – – 4,150,000 5,447,410Share issue cost (71,081) – – – (71,081) –Share-based payment transactions – 119,856 – – 119,856 –Stock options exercised 7,435 – – – 7,435 8,958Business acquisition – 2,014,000 – – 2,014,000 –Transfer from equity reserve onexercise 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 66,280,777Net loss for the period – – (36,033,081) – (36,033,081) –Accumulated other comprehensiveloss – – – (154,000) (154,000) –Issue of common shares, net ofshare issue cost 80,056 – – – 80,056 120,000Share-based payment transactions – 269,578 – – 269,578 –Stock options exercised 2,154 – – – 2,154 –Transfer from equity reserve onexercise of stock options 973 (973) – – – 3,438Balance at December 31, 2012 119,341,668 7,182,124 (78,125,725) – 48,398,067 66,404,215Net profit for the period – – 4,944,244 – 4,944,244 –Issue of common shares 1,007,000 (1,007,000) – – – 2,723,705Share-based payment transactions – 70,000 – – 70,000 –Stock options exercised 34,796 – – – 34,796 52,951Transfer from equity reserve onexercise 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 FlowsThree months ended March 31, 2013 and 2012(Unaudited - expressed in U.S. dollars)2013 2012Cash flows from (used in) operating activities:Net income $ 1,470,345 $ 2,206,776Items not involving cash:Depreciation and amortization 465,258 783,243Share-based payment transactions 70,000 89,517Unrealized foreign exchange gain (11,963) (15,140)1,993,640 3,064,396Change 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 82,005Accounts payable and accrued liabilities (1,203,467) 2,118,320Provisions (504,570) 225,951Deferred revenue 192,082 783,5932,576,591 3,064,952Cash used in discontinued operations (2,756,261) (1,536,259)(179,670) 1,528,693Cash flows from (used in) financing activities:Payment of finance lease liability (22,652) (20,405)Bank loan (550,000) –Issue of debt – 1,501,351Repayment of debt (1,140,699) –Issue of share capital, net 34,796 7,435(1,678,555) 1,488,381Cash 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 10,910,066 129,981Effect of exchange rate fluctuations on cash and cash equivalents 11,963 15,140Cash and cash equivalents, beginning of year 2,645,605 6,721,314Cash and cash equivalents, end of year $ 13,567,634 $ 6,866,435

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