CSI Wireless Reports 40% Growth in GPS Business



    Return to profitability on-track

    CALGARY, March 8 /CNW/ - (TSX:CSY): CSI Wireless Inc., a designer and
manufacturer of advanced GPS products, today reported financial results for
the fourth quarter and year ended December 31, 2006.
    CSI's GPS business operates under the Hemisphere GPS brand which owns the
Outback, Satloc and Del Norte product names. CSI will formally change its
corporate name to "Hemisphere GPS" at the Company's Annual General Meeting, to
be held in Calgary on May 9, 2007. CSI is currently carrying on business as
Hemisphere GPS.
    In 2006, CSI made the strategic decision to focus its resources
exclusively on its GPS product lines, where it is a market leader with
significant competitive advantages and intellectual property. Accordingly, the
Company sold its wireless businesses. The wireless component of the business
is thus accounted for as discontinued operations in the Company's financial
statements.
    For the year ended December 31, 2006, Hemisphere GPS reported record
revenues reflecting a 40% increase to $45.9 million, up from $32.7 million in
2005. Gross margin for the year was 40%, unchanged from gross margins of 40%
in 2005. Management is targeting gross margin to improve to at least 50% in
2007.
    Before the impact of the discontinued wireless business, Hemisphere GPS
reported an operating loss from continuing operations in 2006 of $5.1 million,
or ($0.11) per share basic and diluted, compared to a loss of $5.1 million, or
($0.12) per share basic and diluted in 2005. Losses from the discontinued
operations of the wireless business during the year and associated
restructuring costs totaled $14.7 million. After the impact of discontinued
operations, Hemisphere GPS reported a net loss of $19.9 million, or
($0.43) per common share basic and diluted, compared to a net loss of $12.0
million, or ($0.29) per share basic and diluted, in 2005. The Company will
return to profitability in the first quarter of 2007.
    "2006 was a transition year as we exited our wireless operations and
restructured as a pure-play GPS company," said Steve Koles, President & CEO of
Hemisphere GPS. "Though the impact to our bottom-line was significant, the
distractions of the wireless business are now behind us as we committed to do
before the end of 2006. We began 2007 with clean and efficient operations and
a focused start as we entered the strongest selling season for agriculture
where we are the dominant market leader. We are experiencing robust demand and
generating record sales of our industry leading GPS products. Strengthening
agriculture commodity prices, and increasing technology adoption in the
agriculture sector have created an optimistic outlook for our business."

    2006 Fourth Quarter Financial Results

    For the three months ended December 31, 2006, total revenue for
Hemisphere GPS increased 40% to a record $7.9 million, relative to revenues of
$5.6 million for the fourth quarter of 2005 due to strong sales of ground
agricultural guidance products.
    The majority of Hemisphere's GPS revenues are derived from sales to the
North American agriculture market. The significant seasonality of this market
affects the Company's revenues as sales are directly to a seasonal end-user
market. Based upon the needs of these markets, the latter half of the year is
generally slower than the first half. In 2006, the agriculture revenue segment
contributed over 75% of total GPS revenues, which highlights the seasonal
effects.
    Fourth quarter gross margin was 37%, as compared to gross margins of 35%
for the fourth quarter of 2005. Third and fourth quarter margins are typically
lower than the first and second quarters due to the allocation of fixed
manufacturing overhead over seasonally low revenues and due to the product mix
during that period. In 2007, the Company is targeting overall blended gross
margins for the year to be at least 50%.
    Total expenses for the fourth quarter were $6.2 million, compared to
$5.0 million in the fourth quarter of 2005. Sales and marketing expenses
experienced the largest increase, to $2.4 million, from $1.8 million in the
fourth quarter of 2005. This is primarily due to the acquisition of the
Del Norte business at the beginning of 2006, increased promotional expenses
including advertising and tradeshow costs and from increased activity and
commissions associated with higher revenue levels. Research and development
expenses increased from $1.0 million to $1.2 million. General and
administrative expenses increased to $1.7 million from $1.4 million in the
fourth quarter of 2005 primarily as a result of the Del Norte acquisition, and
increased legal and audit fees.
    Hemisphere GPS reported a consolidated net loss of $2.8 million, or
($0.06) per share (basic and diluted), compared to a net loss of $6.5 million,
or ($0.15) per share basic and diluted for the fourth quarter of 2005. The
fourth quarter of 2005 included a $3.3 million loss from discontinued
operations of the Company's former wireless business which was sold in May of
2006.
    At December 31, 2006, Hemisphere GPS held cash of $11.2 million, and
reported $21.5 million in working capital.

    Conference Call - Thursday March 8 at 11:00AM EST

    A Web cast and conference call for shareholders, analysts and other
members of the investment community has been scheduled for today at 11:00 a.m.
Eastern Time to discuss the financial results and provide updates on
operations.
    To participate, please dial 416-850-9143, or 1-866-400-2280 approximately
10 minutes before the conference call. Please note that a live Web cast of the
call will be available on the CSI Wireless Web site or directly via
http://viavid.net/dce.aspx?sid=00003C16.
    The Web cast will be archived there for later review. A recording of the
call will be available through March 18. Please dial 416-915-1035 or
1-866-400-2240 and enter the reservation number 883522 to listen to the
rebroadcast.

    About Hemisphere GPS and CSI Wireless

    Hemisphere GPS, a division of CSI Wireless Inc., designs and manufactures
innovative, cost-effective GPS products for positioning, guidance and machine
control applications in agriculture, marine and other markets. The Company
owns leading brand names, numerous patents and other intellectual property.
The Company's head office is in Calgary, Alberta, and it has major product
development and sales and marketing facilities in Arizona, Kansas and Texas.
For more information about Hemisphere GPS and CSI Wireless, go to
www.hemispheregps.com and 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 Wireless'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 Wireless'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
Wireless will derive therefrom.


    
    CSI WIRELESS INC.
    Consolidated Balance Sheets
    (unaudited)

    December 31, 2006 and 2005
    -------------------------------------------------------------------------
                                                          2006          2005
    -------------------------------------------------------------------------

    Assets

    Current assets:
      Cash                                        $ 11,160,405  $ 12,595,354
      Accounts receivable                            4,995,204     3,400,719
      Deferred commissions                             111,619             -
      Inventories                                   11,479,139    11,030,410
      Prepaid expenses and deposits                    550,530       550,621
      Current assets of discontinued operations      1,360,735    11,045,664
      -----------------------------------------------------------------------
                                                    29,657,632    38,622,768
    Deferred commissions                               246,414        24,472
    Property and equipment                           8,507,990     6,189,739
    Intangible assets                                4,332,591     4,727,733
    Goodwill                                        22,961,432    22,394,799
    Assets of discontinued operations                  116,380    18,229,059

    -------------------------------------------------------------------------
                                                  $ 65,822,439  $ 90,188,570
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Liabilities and Shareholders' Equity

    Current liabilities:
      Accounts payable and accrued liabilities    $  5,785,501  $  2,999,227
      Deferred revenue                                 773,527             -
      Current portion of long-term debt                300,517       483,134
      Current portion of capital leases                291,057       284,922
      Current liabilities of discontinued
       operations                                      974,505    10,969,890
      -----------------------------------------------------------------------
                                                     8,125,107    14,737,173

    Deferred revenue                                 1,672,116       222,413
    Long-term debt                                           -       300,672
    Capital lease obligations                          101,714       408,411

    Shareholders' equity:
      Share capital                                104,013,743   103,463,383
      Contributed surplus                            2,776,468     2,036,664
      Deficit                                      (50,866,709)  (30,980,146)
    -------------------------------------------------------------------------
                                                    55,923,502    74,519,901

    -------------------------------------------------------------------------
                                                  $ 65,822,439  $ 90,188,570
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    CSI WIRELESS INC.
    Consolidated Statements of Operations and Deficit
    (unaudited)

    -------------------------------------------------------------------------
                           Three months ended         Twelve months ended
                              December 31,                December 31,
                      --------------------------  ---------------------------
                              2006          2005          2006          2005
    -------------------------------------------------------------------------
    Sales             $  7,870,073  $  5,624,755  $ 45,908,060  $ 32,676,705
    Cost of sales        4,988,766     3,681,710    27,390,609    19,492,114
    -------------------------------------------------------------------------
                         2,881,307     1,943,045    18,517,451    13,184,591

    Expenses:
      Research and
       development       1,209,408       989,807     4,741,323     3,949,497
      Sales and
       marketing         2,371,877     1,817,544     9,305,319     5,831,777
      General and
       administrative    1,721,522     1,387,385     5,929,584     5,268,163
      Stock-based
       compensation        212,857       210,748       757,142       768,871
      Amortization         665,576       592,290     2,509,013     1,854,036
      -----------------------------------------------------------------------
                         6,181,240     4,997,774    23,242,381    17,672,344

    -------------------------------------------------------------------------
    Loss before
     undernoted items   (3,299,933)   (3,054,729)   (4,724,930)   (4,487,753)
    Gain on sale of
     marketable
     securities         (1,049,976)            -    (1,049,976)            -
    Foreign exchange
     (gain) loss           (52,520)      144,854       642,856       789,147
    Interest income        (27,203)      (38,018)     (220,984)     (139,272)
    Restructuring
     costs                       -             -     1,043,000             -
    -------------------------------------------------------------------------
    Loss from
     continuing
     operations         (2,170,234)   (3,161,565)   (5,139,826)   (5,137,628)

    Loss from
     discontinued
     operations           (582,070)   (3,302,187)  (14,746,737)   (6,899,860)
    -------------------------------------------------------------------------
    Net loss            (2,752,304)   (6,463,752)  (19,886,563)  (12,037,488)

    Deficit, beginning
     of period         (48,114,405)  (24,516,394)  (30,980,146)  (18,942,658)

    Deficit, end of
     period           $(50,866,709) $(30,980,146) $(50,866,709) $(30,980,146)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Loss per common
     share from
     continuing
     operations:
      Basic and
       diluted        $      (0.05) $      (0.07) $      (0.11) $      (0.12)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net loss per
     common share:
      Basic and
       diluted        $      (0.06) $      (0.15) $      (0.43) $      (0.29)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Weighted average
     shares outstanding:
      Basic and
       diluted          46,115,873    43,344,291    46,023,887    41,510,451
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    CSI WIRELESS INC.
    Consolidated Statements of Cash Flows
    (unaudited)

    -------------------------------------------------------------------------
                           Three months ended         Twelve months ended
                              December 31,                December 31,
                      --------------------------  ---------------------------
                              2006          2005          2006          2005
    -------------------------------------------------------------------------

    Cash flows from
     (used in)
     operating
     activities:
      Loss from
       continuing
       operations     $ (2,170,234) $ (3,161,565) $ (5,139,826) $ (5,137,628)
      Items not
       involving cash:
        Amortization       665,576       592,290     2,509,013     1,854,036
        Stock-based
         compensation      212,857       210,748       757,142       768,871
        Unrealized
         foreign
         exchange loss
         (gain)             20,367        15,240        25,116      (142,459)
        Gain on sale
         of marketable
         securities     (1,049,976)            -    (1,049,976)            -
      -----------------------------------------------------------------------
                        (2,321,410)   (2,343,287)   (2,898,531)   (2,657,180)

      Change in non-
       cash operating
       working capital:
        Accounts
         receivable     (1,106,340)     (366,571)   (1,582,795)     (750,555)
        Inventories       (625,555)      407,506      (321,448)    4,588,763
        Prepaid
         expenses and
         deposits           47,881        20,353            91       (17,502)
        Deferred
         commissions       (56,170)      (24,472)     (333,561)      (24,472)
        Accounts
         payable and
         accrued
         liabilities     1,835,392       615,602     2,657,714    (1,079,170)
        Deferred
         revenue           376,554       222,413     2,223,230       222,413
      -----------------------------------------------------------------------
                        (1,849,648)   (1,468,456)     (255,300)      282,297

      Cash from
       (used in)
       discontinued
       operations        2,077,595     2,176,720    (5,263,760)   (2,690,846)
      -----------------------------------------------------------------------
                           227,947       708,264    (5,519,060)   (2,408,549)

    Cash flows from
     (used in)
     financing
     activities:
      Long-term debt      (126,633)     (135,875)     (508,406)     (407,624)
      Capital leases       (88,441)     (135,727)     (300,562)     (210,434)
      Issue of share
       capital              16,792         7,073       414,051    22,318,459
      Cash used in
       discontinued
       operations          (34,590)     (254,962)     (346,812)   (1,513,344)
      -----------------------------------------------------------------------
                          (232,872)     (519,491)     (741,729)   20,187,057

    Cash flows from
     (used in)
     investing
     activities:
      Purchase of
       property and
       equipment        (2,613,361)     (198,269)   (4,059,272)   (1,447,738)
      Proceeds from
       sale of
       marketable
       securities        7,209,670             -     7,209,670             -
      Business
       acquisition, net          -             -      (959,303)            -
      Repayment of note
       payable and
       transaction
       costs                     -             -             -   (12,754,510)
      Cash from (used in)
       discontinued
       operations                -       108,147     2,634,745    (1,234,346)
      -----------------------------------------------------------------------
                         4,596,309       (90,122)    4,825,840   (15,436,594)

    -------------------------------------------------------------------------
    Increase (decrease)
     in cash position    4,591,384        98,651    (1,434,949)    2,341,914

    Cash, beginning of
     period              6,569,021    12,496,703    12,595,354    10,253,440

    -------------------------------------------------------------------------
    Cash, end of
     period           $ 11,160,405  $ 12,595,354  $ 11,160,405  $ 12,595,354
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    





For further information:

For further information: Cameron Olson, Chief Financial Officer, CSI
Wireless Inc., (403) 259-3311, colson@csi-wireless.com; Cory Pala, Investor
Relations, E.vestor Communications Inc., (416) 657-2400, CPala@evestor.com

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