Hemisphere GPS Reports 16% Revenue Growth for Q4 2009

CALGARY, March 2 /CNW/ - (TSX: HEM) Hemisphere GPS, a designer and manufacturer of advanced GPS products, today reported financial results for the fourth quarter and year ended December 31, 2009. All amounts in this news release are expressed in US dollars.

For the fourth quarter ended December 31, 2009, Hemisphere GPS reported a 16% increase in revenues to $12.1 million, versus $10.5 million in the fourth quarter of 2008. Hemisphere GPS reported a net loss of $2.4 million, or $(0.04) per share (basic and diluted), in the fourth quarter of 2009 compared to a net loss of $2.6 million, or ($0.05) per share (basic and diluted), in the fourth quarter of 2008. The similar loss on increased revenues is the result of marginally higher operating costs, R&D investment, a lower foreign exchange gain and the impact of the weakening US dollar on gross margins.

"We were pleased with the fourth quarter," stated Steven Koles, President and CEO of Hemisphere GPS. "It was our first quarter of growth in five quarters, and was in fact, the second best Q4 ever, second only to Q4, 2007. We are encouraged by positive signals heading into 2010 compared to the weakness of 2009. However, balanced by weaker commodity prices and harsh weather conditions, real visibility remains somewhat difficult at this point", added Koles. "More clarity should be available by the end of the first quarter."

Throughout 2009 in general, sales in all areas of business were impacted by uncertainty associated with the decline in global financial markets. Management believes that the weather-driven late harvest in the United States also reduced overall agriculture customer purchasing activity during the quarter.

A weaker US dollar effectively increases the purchasing power in international markets, notably South America, Europe and Australia, which could positively influence sales. International revenues did in fact show a strong performance with growth of 55% compared to the fourth quarter of 2008 with particular strength in Asia, South America and Europe. This is a marked improvement following the 34% decrease in International revenues for the first three quarters of the year. North American revenues were essentially even year-over-year, but an improvement compared to the first three quarters of 2009 where Hemisphere's North American revenues were down more than 30% year-over-year.

In its December 2009 report Agricultural Income and Finance Outlook, the US Department of Agriculture ("USDA") projects that net farm income will be $57.0 billion for 2009, down by 34.5% from record 2008 net farm income of $87.1. Net farm income is forecasted by the USDA to grow in 2010.

Fourth quarter gross margins were 43.3% compared to 45.9% in 2008. Margins were lower primarily as a result of the impact of the significant weakening of the US dollar. The weakening of the US dollar reduced effective gross margins for the quarter, as a majority of the US dollar inventory held by the Company during the fourth quarter was acquired during the first and second quarter - when the US dollar was much stronger. The Company estimates that this had a negative impact on gross margins in the quarter of approximately 6%, in part due to the fourth quarter of 2008 having an opposite foreign exchange impact. Offsetting the negative impact of foreign exchange rates, gross margins were positively impacted during the quarter by cost reductions in the manufacturing department, product mix and by higher software revenues compared to 2008. As inventory turnover improves and foreign exchange rates become more stable, foreign exchange rate changes should have a smaller impact on gross margins.

Operating expenses were $7.4 million in the fourth quarter, an increase of $0.1 million, or 2%, compared to the fourth quarter of 2008. Research and development expense for the quarter increased by $0.1 million to $2.4 million. Investment in research and development is critical to maintain and expand the Company's portfolio of technology and products. Sales and marketing expenses decreased by $0.2 million or 8% from the fourth quarter of 2008 as a result of lower headcount and other cost reduction initiatives, offset by higher commissions. General and administrative expenses increased from the fourth quarter of 2008 by $0.2 million or 15%.

At December 31, 2009, Hemisphere GPS held cash of $8.4 million, as compared to $7.9 million at September 30, 2009. Inventory levels decreased from $19.3 million at September 30, 2009 to $17.8 million at the end of December 2009, which is up from inventory of $14.0 million at December 31, 2008. Inventory was originally built in anticipation of strong sales during the first half of the year, which is historically the strongest buying season for Hemisphere GPS. Softer than anticipated sales did not draw down inventory levels as expected. Physical inventory levels reported in the Company's Canadian dollar measurement currency peaked in March and have drawn down since. However, the weakening US dollar has offset this trend for reported inventory levels. Quarter-end inventory has reflected the following levels and rates:

                         Measurement               FX            Reporting
                           Currency               Rate            Currency

    Mar 31, 2009       Cdn$22.6 million         $1.2602       US$17.9 million
    Jun 30, 2009       Cdn$21.6 million         $1.1625       US$18.6 million
    Sep 30, 2009       Cdn$20.7 million         $1.0722       US$19.3 million
    Dec 31, 2009       Cdn$18.6 million         $1.0466       US$17.8 million

Management expects a further drawdown of inventory throughout 2010.

For the 2009 year, Hemisphere GPS reported revenues of $53.6 million, a 26% decrease from revenues of $72.7 million for the same period in 2008. Gross margin for the 2009 year was 48%, compared to 51% in 2008. Year-over-year expenses decreased by $1.0 million to $30.4 million. The Company reported a net loss in the 2009 year of $5.9 million, or $(0.11) per share (basic and diluted), compared to net income of $6.1 million, or $0.11 per share (basic and diluted) in 2008.

Following cost reduction initiatives implemented during the 2009, total headcount at December 31st was 231, down 10.5% from 258 employees at December 31st, 2008. Some of the cost savings from such activities have been offset by the weaker US dollar, which results in higher Canadian and Australian expenses when converted to US dollars for reporting purposes.

Working capital at December 31, 2009 was approximately $27.6 million.

    Fourth Quarter Operational Highlights

    -   Sales to non-agriculture markets through the Precision Products
        segment were less impacted during 2009 with a decline of just 7% in
        the year. These revenues include sales to marine, GIS, OEMs and other
        customers. Revenues for these products continue to benefit from a
        focus on expanding and improving the quality of Precision Products
        sales channels around the world as well as the introduction of new
        products, including dual frequency GPS products.

    -   The Company's auto-steering products showed a smaller decline than
        other categories, including basic guidance products, as product sales
        represent both sales to new customers and buy-up sales to existing
        customers who own Outback Guidance(R) units. As in 2008, the Outback
        eDriveTC(TM) auto-steering product was the largest single revenue-
        generating product for the Company.

    -   During the quarter, Hemisphere GPS' investment in research and
        development resulted in new product introductions. Further product
        introductions are scheduled for commercial release during the first
        quarter of 2010.

    -   Hemisphere GPS announced the Outback eDriveX(TM) auto-steering system
        delivering a new level of precision steering and control performance.
        eDriveX utilizes the Company's world-class Celestia(TM) sensor fusion
        technology, to steer more demanding farming practices including high-
        precision planting, strip tilling and bedding, requiring centimeter-
        level accuracy at a wide range of speeds. Outback eDriveX provides
        more uniform treatments, reduces waste, conserves fuel and reduces
        driver fatigue; all of which reduce cost and extend time in the
        field. eDriveX opens up new opportunities with aftermarket and OEM

    -   Hemisphere GPS launched its plug-and-play G100(TM) all-in-one
        steering and guidance system for auto-steer ready agricultural
        vehicles. The first version of the G100 software is compatible with
        the AGCO(R) Auto-Guide Ready(TM) tractors, while future GPS 100
        software releases will be compatible with additional agricultural

    -   Hemisphere GPS launched the Outback A220(TM) smart GPS antenna, an
        all-in-one GPS receiver and antenna for both aftermarket and OEM
        applications. Powered by Hemisphere GPS' dual-frequency Eclipse(TM)
        GPS receiver technology, it provides fast, portable, submeter and
        decimeter differential GPS (DGPS) as well as centimeter real-time
        kinematic (RTK) positioning accuracy. Indications are that
        centimeter-level steering systems are the fastest-growing segment of
        precision agriculture. Outback eDriveX and Outback A220 are
        positioned ideally for this marketplace. Growers can capture a quick
        return on investment with this level of precision control to increase
        production and reduce waste.

    -   Hemisphere GPS and CLAAS Agrosystems, one of the world's leading
        manufacturers of agricultural technology, launched Outback Sts(TM) in
        Europe. CLAAS Agrosystems is providing its customers a customized
        version of the Hemisphere GPS Outback Sts guidance system named
        Copilot TS. Copilot TS features 16 languages specifically for the
        European market, including Romanian, Russian, Ukrainian and
        Lithuanian. Outback Sts (S touch screen) is the latest addition to
        the line of situational awareness and data management tools from the
        Outback Guidance product line. The Outback Sts 7 inch, high-
        resolution color touch screen and electronically integrated Outback
        Steering Guide(TM) uses GPS data and specific job details to provide
        real time job data and precision guidance.

    -   Hemisphere GPS entered the India market with the launch of a new
        version of the Outback S-Lite(TM) GPS guidance system. India has the
        largest arable land after the United States The new product carries
        over all the proven features of the existing versions and now
        supports the Punjabi language. The Outback S-Lite compact size,
        expandable features and submeter accuracy make it an ideal entry-
        level GPS guidance solution for farming applications, including
        spraying, spreading, broad-acre tillage and seeding applications. The
        Outback S-Lite guidance system now supports more than 20
        international languages.

    -   Hemisphere GPS Inc. released its new version of Outback AutoMate(TM)
        for planter section control. The new version includes advanced
        software and features 10 new languages in support of growing
        international market opportunities. Outback AutoMate provides
        automatic control of spray booms and planter sections, and is
        designed to work with Outback Guidance systems, such as
        Outback S(TM), Outback S2(TM), Outback S-Lite, Outback S3(TM) and
        Outback Sts.

    -   Hemisphere GPS unveiled Air IntelliStar(TM), the new standard for
        state-of-the art GPS guidance for aerial applicators. IntelliStar
        gives pilots the ability to fly and spray precise patterns using
        state-of-the-art GPS guidance, reducing flight time and input costs
        by minimizing skips and overlaps, and maximizing the precision of the
        application. IntelliStar features a real-time graphic moving map
        display that provides visual guidance including swaths sprayed, field
        boundaries, skips and overlaps, and mark points. The software also
        gives pilots the ability to fly various precise spray patterns, using
        constant or variable rate flow control, to maximize flight efficiency
        for any selected area, track acreage sprayed and log flight and spray
        job data.

Conference Call - Tuesday, March 2nd at 11:00AM ET (9:00am MT)

A conference call and Web cast for shareholders, analysts and other members of the investment community has been scheduled for Tuesday, March 2, 2010 at 11:00 a.m. Eastern Time (9:00 a.m. Mountain Time) to discuss the financial results and provide updates on operations.

To participate in the conference call, please dial 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 March 9. Please dial 1-416-849-0833 or 1-800-642-1687 and enter the reservation number 59341513 to listen to the rebroadcast.

About Hemisphere GPS

Hemisphere GPS designs and manufactures innovative, cost-effective GPS products for positioning, guidance, and machine control applications in agriculture, marine and other markets. The Company holds numerous patents and other intellectual property and owns leading brand names including Outback Guidance(R) in precision 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. This year marks the Company's 20th anniversary of providing innovative GPS technology and product solutions to customers worldwide. 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.

    Consolidated Balance Sheets
    December 31, 2009 and 2008
    (unaudited - expressed in U.S. dollars)

                                                          2009          2008


    Current assets:
      Cash and cash equivalents                   $  8,397,418  $ 16,288,684
      Accounts receivable                            5,986,781     7,409,108
      Inventories                                   17,751,949    14,016,645
      Deferred commissions                             187,436       215,402
      Prepaid expenses and deposits                    628,023       679,863
                                                    32,951,607    38,609,702

    Deferred commissions                               158,171       171,852
    Property and equipment                           7,905,708     6,871,801
    Intangible assets                                7,386,776     7,029,627
    Goodwill                                        40,919,957    34,972,095
                                                  $ 89,322,219  $ 87,655,077

    Liabilities and Shareholders' Equity

    Current liabilities:
      Accounts payable and accrued liabilities    $  4,030,075  $  6,634,059
      Foreign exchange contract                              -     3,270,210
      Deferred revenue                               1,242,573     1,484,166
      Current portion of capital lease                  89,637             -
                                                     5,362,285    11,388,435

    Deferred revenue                                   819,888     1,035,220
    Capital lease                                      258,426             -

    Shareholders' equity:
      Share capital                                107,708,468   108,162,136
      Share capital purchased for cancellation
       under Normal Course Issuer Bid                        -      (450,633)
      Contributed surplus                            3,853,826     3,134,045
      Deficit                                      (40,121,337)  (34,232,193)
      Accumulated other comprehensive income
       (loss)                                       11,440,663    (1,381,933)
                                                    82,881,620    75,231,422

                                                  $ 89,322,219  $ 87,655,077

    Consolidated Statements of Operations and Deficit
    (unaudited - expressed in U.S. dollars)

                           Three months ended               Year ended
                               December 31,                December 31,
                      --------------------------- ---------------------------
                              2009          2008          2009          2008

    Sales             $ 12,149,446  $ 10,517,618  $ 53,638,296  $ 72,663,712

    Cost of sales        6,882,861     5,691,814    27,781,060    35,860,059
                         5,266,585     4,825,804    25,857,236    36,803,653

      Research and
       development       2,409,890     2,324,189     8,851,616     8,097,446
      Sales and
       marketing         2,473,379     2,683,114    11,044,783    12,009,367
      General and
       administrative    1,608,309     1,398,893     6,630,584     7,189,844
       compensation         78,576       161,028       719,781       699,875
      Amortization         838,552       727,323     3,145,974     3,427,272
                         7,408,706     7,294,547    30,392,738    31,423,804

    Income (loss)
     before undernoted
     items              (2,142,121)   (2,468,743)   (4,535,502)    5,379,849

    Foreign exchange
     loss (gain)              (778)     (111,867)      244,332      (625,840)
    Net interest
     income                 (1,854)     (109,380)      (20,697)     (668,673)
     costs                  63,908       250,742       876,094       250,742
    Legal fees on
     settlement of
     lawsuit                     -       151,700             -       151,700
    Income (loss)
     before income
     taxes              (2,203,397)   (2,649,938)   (5,635,231)    6,271,920

    Current income
     taxes                 253,913             -       253,913       175,911
    Net income (loss)   (2,457,310)   (2,649,938)   (5,889,144)    6,096,009

     beginning of
     period            (37,664,027)  (31,582,255)  (34,232,193)  (40,469,714)
    Adjustment due to
     adoption of new
     accounting policy           -             -             -       150,135
    Adjustment due to
     Normal Course
     Issuer Bid                  -             -             -        (8,623)
    Deficit, end of
     period           $(40,121,337) $(34,232,193) $(40,121,337) $(34,232,193)

    Loss per common
      Basic and
       diluted        $      (0.04) $      (0.05) $      (0.11) $       0.11

    Weighted average
      Basic             55,561,676    56,223,363    55,561,676    54,798,890
      Diluted           55,561,676    56,484,373    55,561,676    55,132,241

    Consolidated Statements of Comprehensive Income (Loss) and Accumulated
    Other Comprehensive Income (Loss)
    (unaudited - expressed in U.S. dollars)

                           Three months ended               Year ended
                               December 31,                December 31,
                      --------------------------- ---------------------------
                              2009          2008          2009          2008

    Net income (loss) $ (2,457,310) $ (2,649,938) $ (5,889,144) $  6,096,009

    Translation of
     assets and
     liabilities into
     U.S. dollars
     currency            2,010,090   (12,218,918)   12,822,596   (18,607,593)
     income (loss)    $   (447,220) $(14,868,856) $  6,933,452  $(12,511,584)

    Accumulated other
     income (loss),
     opening balance  $  9,430,573  $ 10,836,985  $ (1,381,933) $ 17,225,660

    Translation of
     assets and
     liabilities into
     U.S. dollars
     currency            2,010,090   (12,218,918)   12,822,596   (18,607,593)
    Accumulated other
     income (loss),
     closing balance  $ 11,440,663  $ (1,381,933) $ 11,440,663  $ (1,381,933)

    Consolidated Statements of Cash Flows
    (unaudited - expressed in U.S. dollars)

                           Three months ended               Year ended
                               December 31,                December 31,
                      --------------------------- ---------------------------
                              2009          2008          2009          2008

    Cash flows from
     (used in)
      Net income
       (loss)         $ (2,457,310) $ (2,649,938) $ (5,889,144) $  6,096,009
      Items not
       involving cash:
        Amortization       921,581       796,564     3,408,519     3,715,875
         compensation       78,576       161,028       719,781       699,875
         exchange loss
         (gain)            217,346    (3,800,732)    1,193,512    (4,571,105)
      Cash from (used
       in) operations   (1,239,807)   (5,493,078)     (567,332)    5,940,654

      Change in non-
       cash operating
       working capital:
         receivable        221,788      (715,962)    2,731,328    (1,567,739)
        Inventories      2,007,111    (1,668,957)     (655,460)   (1,661,374)
         expenses and
         deposits          121,001       275,554       161,598      (233,241)
         commissions         5,434        31,362        97,701        31,798
         payable and
         liabilities        20,030       225,098    (3,541,335)     (279,785)
         contract                -     3,270,210    (3,270,210)    3,270,210
        Note payable             -             -             -      (322,680)
         revenue          (279,376)     (191,266)     (836,473)     (147,935)
                           856,181    (4,267,039)   (5,880,183)    5,029,908

    Cash flows from
     (used in)
      Capital lease        (21,247)            -       (21,247)     (101,003)
      Issue of share
       capital, net
       of issue cost             -        79,839             -     1,060,771
      Purchase of
       shares for
       cash                      -    (1,247,093)            -    (1,675,947)
                           (21,247)   (1,167,254)      (21,247)     (716,179)

    Cash flows used
     in investing
      Purchase of
       property and
       equipment           (79,398)     (140,104)   (1,031,215)   (1,858,711)
       additions          (229,966)            -    (1,132,280)            -
       acquisition               -             -             -       (92,654)
                          (309,364)     (140,104)   (2,163,495)   (1,951,365)

     (decrease) in
     cash position         525,570    (5,574,397)   (8,064,925)    2,362,364

    Effect of
     translation on
     cash balances
     and cash flows        (18,420)    1,053,015       173,659       470,541

    Cash and cash
     beginning of
     period              7,890,268    20,810,066    16,288,684    13,455,779
    Cash and cash
     end of period    $  8,397,418  $ 16,288,684  $  8,397,418  $ 16,288,684

SOURCE AgJunction Inc.

For further information: 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

Organization Profile

AgJunction Inc.

More on this organization

Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

CNW Membership

Fill out a CNW membership form or contact us at 1 (877) 269-7890

Learn about CNW services

Request more information about CNW products and services or call us at 1 (877) 269-7890