[April 05, 2005] CSI Acquires RHS's Outback Operations to Become the World's Largest Supplier of Agricultural GPS Guidance Products Tweet CALGARY, April 5 /PRNewswire-FirstCall/ -- CSI Wireless Inc. ("CSI"), a leading provider of GPS and Wireless products, and Kansas based RHS Inc. ("RHS"), announced today that they have entered into a Letter Agreement whereby CSI will purchase RHS' sales, marketing and distribution assets associated with the market-leading Outback(R) line of GPS guidance products for agriculture applications (the "Outback Business"). Under this Letter Agreement, CSI and RHS will combine their respective GPS operations to create the world's leading supplier of GPS products for agricultural markets. The Outback Business will be combined with CSI's GPS Business Unit to create "Hemisphere GPS" which will market Satloc and Outback branded products, together with all of CSI's other GPS products. CSI currently manufactures the Outback branded line exclusively for RHS. On a proforma basis, for the year ended December 2004, the combined revenue of CSI's GPS Business Unit and the Outback Business would have been approximately $45 million. Hemisphere GPS brings together CSI's proprietary GPS technology and manufacturing strengths, with RHS's exceptional sales, marketing, branding and distribution expertise. Together they have made the Outback product line the global market leader for agricultural-related GPS products. The transaction is aligned with CSI's corporate strategy to leverage its GPS engineering strength. CSI is a technology leader in several specialized GPS niche markets, and is intent on leveraging its advanced technology position and the underlying intellectual property to increase its dominance within its existing and new GPS markets. Stephen Verhoeff, President and CEO of CSI commented, "Combined, we become the industry leader in agricultural GPS products, with strong R&D capabilities, marketing and sales strength and distribution channel expertise. This is a rapidly growing market and we now hold the market leader position. Our agricultural GPS business is very profitable and this acquisition will allow us to further increase our dominance and CSI's profitability over the long term." Rick Heiniger, Chief Executive Officer of RHS Inc. will be appointed President of Hemisphere GPS, and Dean Ryerson, RHS' President will be responsible for Hemisphere's combined operating functions as Vice President and General Manager. Both have agreed to sign multi-year employment contracts. "This is a dramatic development within our market and is tremendously exciting for us," stated Mr. Heiniger. "Combining our businesses is strategically powerful. Hemisphere will be a formidable competitor in a rapidly expanding market as a result of its customer focus and high value, high performance GPS. Because we have aligned all aspects of the enterprise, from technology development to product sales, efficiency improves, quality increases and faster response to market is achieved. We now have the enterprise components necessary in one well-managed delivery structure to be the perfect supply partner to existing and future customers. This formula will be hard to compete with." Outback Background RHS Inc., located in Hiawatha, Kansas, is a leading supplier of guidance products and agricultural sprayers with a 25-year history of innovation related to application technology. RHS has been twice named to Inc. magazine's annual "Inc. 500" of America's fastest-growing companies primarily based on the success of its innovative and user-friendly guidance-related products. In addition to its Hiawatha operations, RHS has sales offices located in Texas, Iowa, Nebraska and in Manitoba, Canada. Outback products are also sold through a number of international distributors. RHS and CSI first began working together in 1999 to develop the Outback product line that provides farmers with precision guidance, auto-steering and situational awareness capabilities on their agricultural equipment such as tractors and sprayers. To date, CSI has designed and manufactured all Outback products exclusively for RHS which provides all end-customer sales, marketing, distribution and service functions. RHS' Outback Business is profitable and had revenues of approximately US$20 million and US$14 million in its fiscal years ended August 31, 2004 and 2003 respectively with increasing profitability throughout these periods, producing pre-tax income of approximately 11% in fiscal 2004. For its fiscal year ending August 31, 2005, it is anticipated that growth in revenues will range from 25% to 30%. Year-to-date revenues are up approximately 24% year-over-year. The Outback business is seasonal, with approximately 75% of Outback product sales occurring between February and August. The addition of the Outback Business will contribute materially to CSI's overall revenues in 2005, however as a result of sales seasonality and accounting adjustments related to Outback inventory purchased, the acquisition is not expected to be accretive to CSI earnings in 2005. The Company expects significant earnings contribution from the acquisition in 2006. The 2005 inventory adjustment arises from Outback inventory on hand on the date of the acquisition that, consistent with generally accepted accounting principles, must be recorded at Outback's carrying cost. This carrying cost is the price at which the products were previously purchased by Outback from CSI. As a result, combined financial results will not reflect the combined margins on Outback product sales until the acquired Outback inventory has been sold. CSI expects that this inventory will be sold prior to the end of 2005. Transaction Overview CSI will purchase the Outback Business assets for consideration of approximately $US 9.6 million in cash, 4.4 million common shares of CSI and the assumption of debt from RHS of approximately $US 1.2 million. The Outback Business assets to be purchased include working capital of approximately US$2.0 million comprised mainly of Outback related inventory, net of accounts payable, certain fixed assets, product brands, trade names, intellectual property, the Outback internet-based order fulfillment system, information systems, and other related assets. CSI will assume the office space leases for each of the RHS sales offices. The cash component of the purchase price is subject to certain adjustments at closing. The 4.4 million common shares issued will be subject to a time release escrow over a 3 year period and 450 thousand shares are subject to hold back against certain claims that may arise for which CSI has been indemnified. An additional 2.1 million common shares will be issued to RHS if the Outback Business achieves certain revenue growth and profitability targets in 2005, 2006 and 2007. The Outback Business has 49 employees, who will become part of Hemisphere GPS. In total, Hemisphere GPS will have approximately 145 employees. The transaction is subject to certain conditions, including completion of formal documentation, final board approvals, regulatory approvals and there being no material adverse change in the business and affairs of the Outback Business prior to the closing date. The parties intend to close the transaction on or before April 30, 2005. In the short-term the companies will be operating in a business-as-usual fashion. Customers can expect no changes or disruptions in service or in their respective Outback and CSI contacts. About the Outback Product Line The Outback S(TM), which has been cited for "outstanding innovation" by the American Society of Agriculture Engineers, features a highly accurate Differential GPS receiver, guidance system and Steering Guide(TM). The Steering Guide is very helpful in straight-row guidance, and essential for contoured or curved-row guidance. The Outback S features a standard serial output to connect to current-generation peripherals or add-on products (including those from other manufacturers) and a CAN (Controller Area Network) bus to connect to next-generation peripherals or add-ons - giving the Outback line an attractive "expandability path" to accommodate future technologies and products. The entire system can be installed in less than 15 minutes on almost any tractor, combine or self-propelled sprayer. The Outback 360(TM) is a computerized visual aid system providing the farmer with enhanced "situational awareness". It features a high-resolution colour display screen that offers farmers a 360-degree bird's eye view of their fields. Using the Outback 360 in conjunction with the Outback S, farmers can effectively look down from the sky - monitoring the progress of their tractors, sprayers, cultivators and other farming equipment as they move across fields. The Outback 360 is available as an add-on to the Outback S, or in an integrated package that includes the Outback S. The Outback eDrive(TM) is an easy-to-install, cost-effective, after-market automated steering system for tractors and self-propelled sprayers. Drivers equipped with eDrive need their hands on the steering wheel only when turning their vehicles around at row ends. Priced several thousand dollars below the cost of competing auto-steering systems, eDrive reduces driver fatigue while substantially increasing steering accuracy and productivity - enabling agricultural machinery to operate all night if necessary. For more information about the Outback line, please go to http://www.outbackguidance.com/ or call 1-800-247-3808 toll-free. About CSI With offices in Calgary, Silicon Valley, and Phoenix, CSI designs and manufactures innovative, cost-effective, wireless and GPS products for mobile and fixed applications in the agriculture, marine, automotive and other markets. CSI is a leader in several high-growth markets including Precision Guidance in Agriculture, Telematics and Desktop Cellular Telephones. The Company owns numerous patents and intellectual property relating to wireless and GPS technologies. It has licensed its cellular technology to GPS, cellular handset, and chipset manufacturers. CSI's common shares trade on The Toronto Stock Exchange under the trading symbol "CSY", with approximately 33 million shares outstanding. For more information about CSI, go to http://www.csi-wireless.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 CSI'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. CSI'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 CSI will derive therefrom. CSI Wireless Inc. CONTACT: Stephen Verhoeff, President & CEO, CSI Wireless Inc.,(403) 259-3311, [email protected]; Corbet Pala, InvestorRelations, E-vestor Communications Inc., (416) 657-2400,[email protected]; Jeff Adams, Public Relations Manager, CSI WirelessInc., (403) 259-3311 or (403) 615-8747 (cell), [email protected];Rick Heiniger, CEO, RHS Inc., (816) 595-5542, [email protected] [ Back To TMCnet.com's Homepage ]