Hemisphere GPS Reports 2011 Q3 Results

CALGARY, Nov. 2, 2011 /CNW/ - (TSX: HEM) Hemisphere GPS today reported financial results for the third quarter ended September 30, 2011. All currency amounts are expressed in U.S. dollars. The Company notes that effective with the 2011 year, its financial results are reported under International Financial Reporting Standards ("IFRS") and as a result certain components, as well as 2010 comparatives, have been reclassified and adjusted within the financial statements to reflect the conversion. Details relating to the impact of the conversion were included in the financial statements and management's discussion and analysis documents for the first quarter ended March 31, 2011 which are available on www.sedar.com.

For the three months ended September 30, 2011, Hemisphere GPS reported record revenues of $14.1 million, an increase of 7% compared to $13.2 million in the third quarter of 2010. The third quarter is seasonally the slowest sales period for Hemisphere GPS, and despite an early harvest, the quarter represented the highest third quarter revenue level in the Company's history. Strong growth in all regions was offset by a decline in European revenues associated with uncertainty arising from the European debt crisis.

"The third quarter was the sixth consecutive quarter of recovery for our business coming out of the recession," stated Steven Koles, President and CEO of Hemisphere GPS. "Our sales are up 27% for the first nine months of 2011 and we expect to meet our objectives of 25% revenue growth for this year. The very early 2011 harvest in North America impacted sales in the quarter given our direct-to-farmer business model which does not push inventory to distributors in advance of end user sales.  Grain prices, while volatile, remain above historical averages, and with US net farm income projected to increase 31% to $103.6 billion for 2011, we have been building up our product inventory for anticipated post-harvest sales and the 2012 buying season."

Gross profit contribution was $6.8 million for the third quarters of both 2011 and 2010. On a percentage basis, gross margins were 47.9% compared to 51.7% in 2010, impacted by foreign exchange fluctuations which had a positive impact of 3.9% in 2010 but which have stabilized in 2011. 2010 gross margins were revised based upon the conversion from Canadian to US functional currency under IFRS. Revised gross margins for 2010 are higher than originally reported under Canadian generally accepted accounting principles as a result of a strengthening Canadian dollar on the weighted average costing of Canadian inventories and cost of sales when using the US dollar as functional currency. The impact of the strengthening Canadian dollar is declining compared to that seen in 2010 as the strengthening trend has ended compared to that seen in 2009 and 2010.

Expenses increased at a slower rate than revenues in the third quarter in line with managements' profitability objectives. Total operating expenses increased by 3% year over year to $8.3 million in the third quarter compared to $8.0 million in 2010.

Research and development expenses were lower by 1.0% year over year at $2.7 million. Sales and marketing expenses for the quarter were up by 11% to $3.2 million from $2.9 million in 2010, primarily related to one-time consulting costs incurred related to international sales activities. General and administrative expenses were down by 1% to $1.7 million. Hemisphere GPS reported a loss of $1.6 million, or ($0.03) per share (basic and diluted) in the third quarter of 2011 compared to a loss of $1.5 million, or ($0.03) per share (basic and diluted) in the third quarter of 2010.

For the nine months ended September 30, 2011, Hemisphere GPS reported revenues of $55.5 million, a 27% increase from revenues of $43.8 million, for the same period in 2010. Gross margin for the first nine months of 2011 was 47.9% compared to 49.7% in the nine months of 2010, impacted primarily by currency changes and also by increased component and shipping costs. Prior to one-time expenses of $0.8 million related to strategic initiatives in the second quarter of 2011, year-over-year expenses decreased by $0.4 million to $24.6 million. Through the first nine months of the year operating expenses have remained relatively flat compared to the growth in revenues, demonstrating the scalability of the Company's operating model.

Non-GAAP profit for the first nine months of 2011, prior to the deduction of one-time expenses of $0.8 million related to strategic initiatives, was $1.9 million, or $0.03 per share (basic and diluted), compared to a loss for the first nine months of 2010 of $4.3 million, or ($0.08) per share (basic and diluted). GAAP profit, after the deduction of one-time expenses related to strategic initiatives of $0.8 million, was $1.1 million, or $0.02 per share (basic and diluted) in the first nine months of 2011.

At September 30, 2011, the Company held cash of $10.3 million, working capital of approximately $31 million and had 60,824,409 common shares outstanding.

Use of Non-GAAP Financial Information

To help our shareholders to better understand our financial performance, Hemisphere GPS has reported "Non-GAAP Profit" for 2011, representing GAAP Profit prior to the deduction of one-time expenses of $0.8 million related to strategic transaction investigation costs. Management believes that this information is useful to understanding its financial results as similar costs were not incurred in the 2010 comparative financial results, and similar expenses are not expected to be incurred in the foreseeable future. Non-GAAP Profit is not computed according to GAAP and may differ from the methods used or reported by other companies. Non-GAAP Profit is not meant to be considered in isolation or as a substitute for GAAP Profit and should be read only in conjunction with our consolidated financial statements prepared in accordance with GAAP. Management believes that Non-GAAP Profit reflects an additional perspective on its financial results that, when viewed together with our GAAP results, provides a more complete understanding of the recurring trends affecting our business.

Product Segment Sales

Sales of the Company's air-based products grew by 39% compared to the third quarter of 2010, led by the new Bantam aerial guidance system. Ground-based agriculture products, including the Outback Guidance® branded products, increased by 5% year-over-year. Record sales of $10.0 million for the Agriculture segment increased by 5% compared to the third quarter of 2010, contributing 71% of total third quarter revenues, compared with 72% in the third quarter of 2010.

Record sales of $4.1 million for the Precision Products segment were up 10%, contributing 29% of total revenue in the quarter. Sales of Vector heading sensor products to the marine markets together with sales of GPS boards, receivers and development kits to OEM customers and system integrators led the growth in this segment.

Regional Sales

For the third quarter, total North American revenues were up by 17%, Australian sales grew by 57%, and sales to other international regions, which include South America and Asia, increased by 15% compared to the third quarter of 2010. Hemisphere GPS continues to see good demand in these international markets. Healthy sales growth in these regions was offset by European sales decreases of 34% compared to the third quarter of 2010, resulting from uncertainty stemming from the European sovereign debt crisis.

CLAAS OEM Partnership

In early October, Hemisphere GPS and CLAAS Agrosystems signed an OEM agreement whereby Hemisphere GPS will develop next generation precision farming solutions for integration into CLAAS machinery.  The two companies are combining their expertise to develop new intelligent machine control solutions including precise guidance, advanced automated steering, application controls, and remote data management.  The multi-year partnership includes co-development funding to Hemisphere GPS for customized engineering of Hemisphere GPS technology to CLAAS specifications.  CLAAS Agrosystems, a company belonging to the global CLAAS Group agricultural equipment manufacturer, currently offers optional installation of Hemisphere GPS guidance products as part of their GPS Pilot automated steering solution portfolio.  Under the new agreement, Hemisphere GPS precision farming solutions will be introduced over the next several years as a factory installation on CLAAS machinery as well as aftermarket products throughout CLAAS' distribution network.

Mr. Koles explained: "Our new agreement with a global agriculture machinery leader like CLAAS provides valuable long term growth for Hemisphere GPS and improves the efficiency of farming operations for purchasers of CLAAS farming equipment."

New S320 Survey Product

Hemisphere GPS recently announced its new S320 GNSS survey receiver, a complete system with receivers, data collector and field survey software all included in a single rugged case. The S320 combines the advanced GNSS receiver performance of Hemisphere GPS's Eclipse II technology, precise geodetic antenna, wireless communication and batteries all in a portable, rugged unit with matching data collector. The S320 is capable of sending real-time SMS text messages on such indicators as battery status, signal strength, positioning and remote management.

Hemisphere GPS's SureTrack technology ensures that S320 uses every satellite it is tracking for RTK (real-time kinematic) solutions, even satellites not tracked at the base. Additional benefits include fewer RTK dropouts in congested environments, faster reacquisitions, and more robust solutions due to better cycle slip detection and the ability to process GNSS data from various manufacturers. Even if the base supports only GPS, SureTrack will process GloNaSS (Global Navigation Satellite System) signals at the rover to deliver complete GNSS performance.

"Hemisphere GPS' Sure-Track intelligence delivers superior RTK performance in areas where others may not," said Mr. Koles. "With advanced RTK functionality and broad third party product compatibility, the S320 is turning heads within the precise positioning survey market."

Conference Call

A conference call and Web cast for shareholders, analysts and other members of the investment community has been scheduled the same day at 11:00 a.m. Eastern Time (9:00 a.m. Mountain 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. Please note that a live Web cast of the call will be available on the Hemisphere GPS Web site at http://www.hemispheregps.com. The Web cast will be archived there for later review.

A recording of the call will be available through November 11. Please dial 1-416-849-0833 or 1-855-859-2056 and enter password 22507147 to listen to the rebroadcast.

About Hemisphere GPS

Hemisphere GPS designs and manufactures innovative, cost-effective GPS (GNSS) products for positioning, guidance, and machine control applications in agriculturemarineconstruction, and other markets. The Company holds numerous patents and other intellectual property and owns several leading brand names, including Outback Guidance®, a leading brand in precision GPS for agriculture. The Company is headquartered in Calgary, Alberta, with major product development, sales, and marketing facilities in Arizona, Kansas, and Australia. Hemisphere GPS is listed on the Toronto Stock Exchange (TSX) trading under the symbol "HEM" and is one of the TSX Cleantech designated companies. For more information about Hemisphere GPS, please go to www.hemispheregps.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.


HEMISPHERE GPS 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, 
  2011 2010   2011 2010
                 
Sales  $ 14,099,557 $  13,208,451 $ 55,452,276 $   43,833,959
                 
Cost of sales    7,344,845   6,375,902   28,875,073   22,029,776
    6,754,712   6,832,549   26,577,203   21,804,183
Expenses:                
  Research and development     2,687,173   2,718,612   7,188,929   7,742,790
  Sales and marketing    3,224,275   2,900,516   10,088,037   9,415,013
  General and administrative    1,685,707   1,703,491   5,001,475   5,344,657
  Depreciation and amortization    671,989   705,718   2,142,468   2,229,175
  Restructuring costs    -   -   157,000   207,985
  Strategic transaction investigation costs    -   -   800,320   -
    8,269,144   8,028,337   25,378,229   24,939,620
                   
Results from operating activities    (1,514,432)   (1,195,788)   1,198,974   (3,135,437)
                 
Foreign exchange loss     46,949   307,701   140,605   1,147,569
Interest and other income     (4,695)   (2,539)   (23,290)   (8,604)
    42,254   305,162   117,315   1,138,965
                   
Profit (loss) for the period    (1,556,686)   (1,500,950)   1,081,659   (4,274,402)
                 
Comprehensive loss    (464,120)   -   (131,120)   -
Total comprehensive income (loss)  $  (2,020,806) $  (1,500,950) $      950,539 $  (4,274,402)
                 
Earnings (loss) per common share:                
  Basic and diluted  $  (0.03) $  (0.03) $  0.02  $  (0.08)


HEMISPHERE GPS INC.
Condensed Consolidated Statements of Financial Position

(Unaudited - expressed in U.S. dollars)    
  September 30, December 31,
  2011  2010
     
Assets    
     
Current assets:    
  Cash and cash equivalents    $ 10,272,987 $  5,319,385
  Accounts receivable     8,250,427   7,290,150
  Income tax credits receivable     328,764   -
  Inventories     18,717,333   16,395,329
  Prepayments and deposits     669,208   497,271
    38,238,719   29,502,135
         
Property and equipment      6,000,791    6,233,319
Intangible assets      4,697,983    5,506,432
Goodwill     38,082,358    38,082,358
  $ 87,019,851 $  79,324,244
         
Liabilities and Shareholders' Equity      
       
Current liabilities:      
  Accounts payable and accrued liabilities     $ 6,306,403  $  7,214,211
  Provisions     234,411   396,190
  Deferred revenue     663,003   765,996
  Finance lease     108,778   102,254
    7,312,595   8,478,651
         
Deferred revenue     794,556   645,028
Finance lease     78,888   169,683
         
Shareholders' equity:        
  Share capital      115,168,510   107,717,704
  Equity reserve     4,705,531   4,303,946
           
Deficit     (40,909,109)   (41,990,768)
Accumulated other comprehensive loss     (131,120)   -
    78,833,812   70,030,882
         
  $ 87,019,851 $  79,324,244



HEMISPHERE GPS INC.
Condensed Consolidated Statements of Cash Flows

Nine months ended September 30, 2011 and 2010
(Unaudited - expressed in U.S. dollars)
   
  2011  2010
     
Cash flows from (used in) operating activities:    
  Profit (loss)  $  1,081,659 $  (4,274,402)
  Items not involving cash:        
    Depreciation and amortization    2,322,468    2,391,220
    Share-based payment transactions    415,991    453,746
    Other comprehensive loss    (131,120)    -
    Unrealized foreign exchange (gain) loss    (28,089)   10,029
      3,660,909    (1,419,407)
  Change in non-cash operating working capital:        
    Accounts receivable    (960,277)    (1,253,811)
    Income tax credits receivable    (328,764)    -
    Inventories    (2,322,004)    (426,908)
    Prepaid expenses and deposits    (171,937)    65,457
    Accounts payable and accrued liabilities    (907,808)    3,899,996
    Provisions    (161,779)    (161,458)
    Deferred revenue    46,535    (502,663)
      (1,145,125)    201,206
           
Cash flows from (used in) financing activities:        
  Finance lease    (68,335)    (67,243)
  Issue of share capital, net    7,436,400    -
    7,368,065    (67,243)
         
Cash flows used in investing activities:        
  Purchase of property and equipment    (783,458)    (614,432)
  Intangible asset addition, net    (513,969)    (100,774)
    (1,297,427)    (715,206)
         
Increase (decrease) in cash position    4,925,513    (581,243)
         
Effect of exchange rate fluctuations on cash and cash equivalents    28,089    (10,029)
         
Cash and cash equivalents, beginning of period    5,319,385    8,397,418
         
Cash and cash equivalents, end of period  $  10,272,987 $  7,806,146

 

 

SOURCE Hemisphere GPS Inc.

For further information:

Cameron Olson
Chief Financial Officer
Hemisphere GPS Inc.
403-259-3311
CFO@HemisphereGPS.com
        Cory Pala
Investor Relations
e.vestor Communications Inc.
416-657-2400
InvestorRelations@HemisphereGPS.com

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Hemisphere GPS Inc.

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