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
customers.
- 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
equipment.
- 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.
HEMISPHERE GPS INC.
Consolidated Balance Sheets
December 31, 2009 and 2008
(unaudited - expressed in U.S. dollars)
-------------------------------------------------------------------------
2009 2008
-------------------------------------------------------------------------
Assets
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
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$ 89,322,219 $ 87,655,077
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HEMISPHERE GPS INC.
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
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5,266,585 4,825,804 25,857,236 36,803,653
Expenses:
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
Stock-based
compensation 78,576 161,028 719,781 699,875
Amortization 838,552 727,323 3,145,974 3,427,272
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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)
Restructuring
costs 63,908 250,742 876,094 250,742
Legal fees on
settlement of
lawsuit - 151,700 - 151,700
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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
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Net income (loss) (2,457,310) (2,649,938) (5,889,144) 6,096,009
Deficit,
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)
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Deficit, end of
period $(40,121,337) $(34,232,193) $(40,121,337) $(34,232,193)
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Loss per common
share:
Basic and
diluted $ (0.04) $ (0.05) $ (0.11) $ 0.11
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Weighted average
shares
outstanding:
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
HEMISPHERE GPS INC.
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
reporting
currency 2,010,090 (12,218,918) 12,822,596 (18,607,593)
-------------------------------------------------------------------------
Comprehensive
income (loss) $ (447,220) $(14,868,856) $ 6,933,452 $(12,511,584)
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-------------------------------------------------------------------------
Accumulated other
comprehensive
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
reporting
currency 2,010,090 (12,218,918) 12,822,596 (18,607,593)
-------------------------------------------------------------------------
Accumulated other
comprehensive
income (loss),
closing balance $ 11,440,663 $ (1,381,933) $ 11,440,663 $ (1,381,933)
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HEMISPHERE GPS INC.
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)
operating
activities:
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
Stock-based
compensation 78,576 161,028 719,781 699,875
Unrealized
foreign
exchange loss
(gain) 217,346 (3,800,732) 1,193,512 (4,571,105)
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Cash from (used
in) operations (1,239,807) (5,493,078) (567,332) 5,940,654
Change in non-
cash operating
working capital:
Accounts
receivable 221,788 (715,962) 2,731,328 (1,567,739)
Inventories 2,007,111 (1,668,957) (655,460) (1,661,374)
Prepaid
expenses and
deposits 121,001 275,554 161,598 (233,241)
Deferred
commissions 5,434 31,362 97,701 31,798
Accounts
payable and
accrued
liabilities 20,030 225,098 (3,541,335) (279,785)
Foreign
currency
contract - 3,270,210 (3,270,210) 3,270,210
Note payable - - - (322,680)
Deferred
revenue (279,376) (191,266) (836,473) (147,935)
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856,181 (4,267,039) (5,880,183) 5,029,908
Cash flows from
(used in)
financing
activities:
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)
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(21,247) (1,167,254) (21,247) (716,179)
Cash flows used
in investing
activities:
Purchase of
property and
equipment (79,398) (140,104) (1,031,215) (1,858,711)
Intangible
asset
additions (229,966) - (1,132,280) -
Business
acquisition - - - (92,654)
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(309,364) (140,104) (2,163,495) (1,951,365)
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Increase
(decrease) in
cash position 525,570 (5,574,397) (8,064,925) 2,362,364
Effect of
currency
translation on
cash balances
and cash flows (18,420) 1,053,015 173,659 470,541
Cash and cash
equivalents,
beginning of
period 7,890,268 20,810,066 16,288,684 13,455,779
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Cash and cash
equivalents,
end of period $ 8,397,418 $ 16,288,684 $ 8,397,418 $ 16,288,684
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For further information: Cameron Olson, Chief Financial Officer, Hemisphere GPS Inc., (403) 259-3311, [email protected]; Cory Pala, Investor Relations, e.vestor Communications Inc., (416) 657-2400, [email protected]
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