Hemisphere GPS Reports Q1 2009 Results

    Slower farm spending reduces revenues

    CALGARY, April 23 /CNW/ - (TSX: HEM) Hemisphere GPS, a designer and
manufacturer of advanced GPS products, today reported financial results for
the first quarter ended March 31, 2009. All amounts in this news release are
expressed in US dollars.
    For the first quarter ended March 31, 2009, Hemisphere GPS reported a 31%
decrease in revenues to $18.0 million, versus $25.9 million in the first
quarter of 2008. Customer purchasing activity in the agriculture sector was at
the low end of management's expectations due to cautious recessionary
spending. Further, the relative strength of a robust first quarter of 2008
amplified the year-over-year relative performance comparison.
    While the near-term outlook remains uncertain, mid and long-term
conditions in the agricultural markets remain positive and unchanged from
management's earlier assessment. In its recent February 2009 updated Farm
Income and Costs estimate, the US Department of Agriculture ("USDA") projects
that net farm income - which includes both crop and livestock farms - was
$89.2 billion for 2008, which is 46% higher than the 10-year average. Crop
prices remain high by historical standards, driven by lower grain inventory
levels and increasing global demand, arising from growing demand for ethanol
and other grain-based biofuels as well as the changing diets of emerging
economies. Offsetting price increases to some extent are production cost
increases from fertilizer, seed and fuel expenses, expected to rise by 65%,
29% and 25% respectively. However, despite the good sector fundamentals and
financial health of farmers, spending remained cautious in the early part of
the North American selling season.
    Hemisphere GPS views the fundamentals of the global agriculture markets
to be positive for the mid to longer term. However, volatile financial markets
and caution from recessionary fears appear to be resulting in the deferral of
discretionary farmer equipment purchases in 2009. The fundamental supply and
demand drivers underlying the mid to long term agriculture market opportunity
remain; population growth, limited arable land, requirements for increased
yields and output, and a relatively low penetration of precision agriculture
technologies such as GPS and auto-steering.
    Although fundamentals remain reasonably strong in the agriculture
markets, first quarter revenues decreased in both the Ground Agriculture and
Air product lines. This also impacted purchases by OEM and system integrator
customers. The global financial uncertainty had a similar impact on customers
in the Precision Products line leading to a decline in revenues of 20%
compared to the first quarter of 2008.
    For the first quarter, North American revenues decreased 35% and
international revenues decreased 13%. European revenues were very strong in
the first quarter with year over year growth of 39%, where the expansion of
the Company's European distribution network and strong purchases from certain
European OEM and systems integrator customers contributed to the increase in
that region. Sales to Australia and other international regions declined by
48% and 57% respectively, partly due to the substantial strengthening of the
US dollar which increases the price for Hemisphere GPS products which are
priced in US dollars.
    "Despite good sector fundamentals and initiatives to stimulate demand,
the current global economic climate has reduced discretionary spending and we
now expect an overall revenue decline for 2009 - though not to the extent of
the first quarter since the relative strength of the comparable first quarter
of 2008 amplified the comparative decrease," stated Steven Koles, President &
CEO of Hemisphere GPS. "We expect the back half of 2009, in particular, to
compare much more favourably year-over-year and project full year revenues of
at least $60 million".
    "Operationally, our company is sound, our technology and products are
better than ever, and we are very pleased with the scale potential of the
business even in a short term down market. We have tremendous future prospects
ahead associated with new products, new customers, and additional regional
expansion. We are managing the company effectively and efficiently as the
recessionary challenges play out and expect better year-over-year performance
for the remainder of 2009."
    Despite the decrease in first quarter revenues, gross margin increased to
a record 52.4% of revenues from 50.5% in the first quarter of 2008. Cost
reductions through outsourcing manufacturing of an increased number of
component and finished goods products has been a key driver in this margin
improvement. In addition, the weakening of the Canadian dollar relative to the
US dollar has had a positive impact on gross margins as a portion of cost of
sales is denominated in Canadian dollars, whereas revenues are denominated
almost entirely in US dollars. The Canadian dollar weakened by approximately
24% compared to the first quarter of 2008.
    Research and development expenses for the quarter increased from $1.8
million to $2.1 million. The investment in research and development activities
is critical for the Company to maintain and build its position in current and
targeted markets. During 2008 and in the first quarter of 2009, the Company
has continued to build the strength of its research and development
    Total operating expenses for the first quarter decreased by 4% to $7.8
million. Global market uncertainty has resulted in an increasingly more
conservative cost management strategy, and Hemisphere GPS has announced that
it will be closing its office in Euless, Texas before the end of the second
quarter of 2009 in order to increase the efficiency of its operations. Several
other initiatives have been implemented to manage cost levels in light of the
global economic circumstances.
    Hemisphere GPS reported net income of $1.6 million, or $0.03 per share
(basic and diluted), in the first quarter of 2009 compared to $5.8 million, or
$0.11 per share (basic and diluted), in the first quarter of 2008.
    At March 31, 2009, Hemisphere GPS held cash of $12.5 million, or $0.23
per share, compared to a balance of $16.3 million at December 31, 2008.
Inventories increased by $3.9 million during the first quarter.
Agriculture-related inventory was built in anticipation of strong sales during
the first half of the year. Softer sales than anticipated during this period
resulted in an increase in inventory. Working capital at March 31, 2009 was
approximately $28.6 million.
    Hemisphere GPS reports in US dollars but is quoted in Canadian dollars on
the Toronto Stock Exchange. As of March 31, 2009, there were 55,561,676 common
shares outstanding with shareholders' equity of $1.37 per share. During the
quarter, 226,700 shares acquired in 2008 under the normal course issuer bid
announced in September 2008 were cancelled. No shares were purchased under
this program during the first quarter of 2009.

    Operational Highlights

    -   As part of its ongoing focus on quality and efficiency, Hemisphere
        celebrated a major milestone, achieving certification to ISO
        9001:2008 for its quality management system in Calgary, Hiawatha,
        Scottsdale and Brisbane. Hemisphere GPS underwent an intensive
        process and audits, and raised the standards of its organizational
        discipline to qualify for the international recognition. The
        certification reinforces Hemisphere GPS's commitment to customer
        satisfaction through high-quality design, development, assembly,
        testing, delivery and technical support.

    -   During the first quarter Hemisphere GPS signed a new supply agreement
        with AGCO Corporation to continue to supply and support the Auto-
        Guide guidance software platform. Under the agreement, Hemisphere GPS
        continues to design innovative guidance and auto-steering solutions
        for AGCO.

    -   In January, Hemisphere GPS announced two new patents had been
        awarded. These patents, relating to agriculture vehicle guidance
        using GPS data, and implement control, bring the total number of
        patents issued or pending to nearly 50.

    -   In February, Hemisphere GPS announced the new Outback StsTM (S touch
        screen). It is the latest addition to the Outback line of situational
        awareness and data management tools. Outback Sts combines features of
        the successful Outback S2TM with a user-friendly high-resolution
        colour touch screen interface. The functionality of Outback Sts
        includes electronically integrated Outback steering and is expandable
        with the Outback eDriveTC GPS-assisted steering system, and Outback
        AutoMateTM, an automatic boom control system. Features are powered by
        Crescent(R), the Company's advanced patented GPS receiver technology.
        Information can be stored on internal memory or data can be
        transferred via the USB port.

    Conference Call - Thursday, April 23rd 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 Thursday, April
23rd, 2009 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 1-800-590-1817
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
    A recording of the call will be available through May 2. Please dial
416-640-1917 or 1-877-289-8525 and enter the reservation number 21304091
followed by the number sign 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) and BEELINE(R), two of the leading brands in precision GPS for
ground agriculture. The Company is headquartered in Calgary, Alberta, with
major product development, sales, and marketing facilities in Arizona, Kansas,
and Australia. Hemisphere GPS trades on the Toronto Stock Exchange under the
symbol "HEM" and is a component of Standard & Poor's TSX SmallCap Index. 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 Statements of Operations and Deficit
    Three months ended March 31, 2009 and 2008
    (unaudited - expressed in U.S. dollars)
                                                         2009           2008

    Sales                                        $ 17,955,052   $ 25,908,764
    Cost of sales                                   8,548,013     12,834,517
                                                    9,407,039     13,074,247
      Research and development                      2,101,362      1,804,391
      Sales and marketing                           3,224,684      3,298,067
      General and administrative                    1,575,204      1,965,506
      Stock-based compensation                        216,868        127,880
      Amortization                                    713,480        927,765
                                                    7,831,598      8,123,609

    Earnings before undernoted items                1,575,441      4,950,638

    Foreign exchange gain                             (10,463)      (594,359)
    Interest income                                    (9,335)      (115,172)
    Other income                                            -       (263,036)
    Earnings before income taxes                    1,595,239      5,923,205

    Current income taxes                                    -        113,768
    Net earnings                                    1,595,239      5,809,437

    Deficit, beginning of period                  (34,232,193)   (40,469,714)
    Adjustment due to adoption of new accounting
     policy                                                 -        150,135
    Deficit, end of period                       $(32,636,954)  $(34,510,142)

    Earnings per common share:
      Basic                                      $       0.03   $       0.11
      Diluted                                            0.03           0.11

    Weighted average shares outstanding:
      Basic                                        55,561,676     50,786,540
      Diluted                                      55,561,676     51,533,451

    Consolidated Statements of Comprehensive Income and Accumulated Other
    Comprehensive Income
    Three months ended March 31, 2009 and 2008
    (unaudited - expressed in U.S. dollars)
                                                         2009           2008
    Net earnings                                 $  1,595,239   $  5,809,437
    Other Comprehensive Income (net of tax):
    Translation of assets and liabilities into
    U.S. dollar reporting currency                 (2,147,103)    (3,537,810)
    Comprehensive Income (loss)                  $   (551,864)  $  2,271,627

    Accumulated Other Comprehensive Income
     (loss), opening balance                     $ (1,381,933)  $ 17,225,660
    Translation of assets and liabilities into
    U.S. dollar reporting currency                 (2,147,103)    (3,537,810)
    Accumulated Other Comprehensive Income
     (loss), closing balance                     $ (3,529,036)  $ 13,687,850

    Hemisphere GPS Inc.
    Consolidated Balance Sheets
    (unaudited - expressed in U.S. dollars)
                                                     March 31,   December 31,
                                                         2009           2008


    Current assets:
      Cash and cash equivalents                  $ 12,512,069   $ 16,288,684
      Accounts receivable                           9,886,702      7,409,108
      Inventories                                  17,929,936     14,016,645
      Deferred commissions                            204,248        215,402
      Prepaid expenses and deposits                   672,193        679,863
                                                   41,205,148     38,609,702

    Deferred commissions                              141,458        171,852
    Property and equipment                          6,660,966      6,871,801
    Intangible assets                               6,571,960      7,029,627
    Goodwill                                       33,984,151     34,972,095
                                                 $ 88,563,683   $ 87,655,077

    Liabilities and Shareholders' Equity

    Current liabilities:
      Accounts payable and accrued liabilities   $  8,281,746   $  6,634,059
      Foreign exchange contract                     2,985,954      3,270,210
      Deferred revenue                              1,353,071      1,484,166
                                                   12,620,771     11,388,435

    Deferred revenue                                1,046,490      1,035,220

    Shareholders' equity:
      Share capital                               107,711,503    108,162,136
      Share capital purchased for cancellation
        Normal Course Issuer Bid                            -       (450,633)

      Contributed surplus                           3,350,909      3,134,045
      Deficit                                     (32,636,954)   (34,232,193)
      Accumulated other comprehensive income       (3,529,036)    (1,381,933)
                                                   74,896,422     75,231,422

                                                 $ 88,563,683   $ 87,655,077

    Consolidated Statements of Cash Flows
    Three months ended March 31, 2009 and 2008
    (unaudited - expressed in U.S. dollars)
                                                         2009           2008
    Cash flows from (used in) operating
      Earnings from continuing operations        $  1,595,239   $  5,809,437
      Items not involving cash:
        Amortization                                  713,480        927,765
        Stock-based compensation                      216,868        127,880
        Unrealized foreign exchange gain             (130,339)             -
      Cash from continuing operations               2,395,248      6,865,082

      Change in non-cash operating working
        Accounts receivable                        (2,719,701)    (4,027,116)
        Inventories                                (4,361,864)      (114,455)
        Prepaid expenses and deposits                 (11,677)       116,198
        Accounts payable and accrued liabilities    1,857,500      2,016,258
        Notes payable                                       -       (311,217)
        Deferred revenue                              (49,248)       303,492
        Deferred commissions                           30,982        (43,327)
                                                   (2,858,760)     4,804,915

    Cash flows from (used in) financing
      Capital leases                                        -        (50,241)
      Issue of share capital                                -        334,454
      Share issue cost                                      -        (69,716)
                                                            -        214,497

    Cash flows used in investing activities:
      Purchase of property and equipment             (434,318)      (471,469)

    Increase (decrease) in cash position           (3,293,078)     4,547,943

    Effect of currency translation on cash
     balances and cash flows                         (483,537)      (626,458)

    Cash and cash equivalents, beginning of
     period                                        16,288,684     13,455,779
    Cash and cash equivalents, end of period     $ 12,512,069   $ 17,377,264

    Cash and cash equivalents consist of:
      Cash                                       $  7,512,069   $  2,288,684
      Term deposits                              $  5,000,000   $ 14,000,000
    Supplemental disclosure:
      Interest paid                              $      4,052   $      7,189
      Income taxes paid                          $    212,000   $          -

For further information:

For further information: Cameron Olson, Chief Financial Officer,
Hemisphere GPS, (403) 259-3311, CFO@HemisphereGPS.com; Cory Pala, Investor
Relations, e.vestor Communications Inc., (416) 657-2400,

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