Hemisphere GPS Reports Q1 2010 Financial Results
CALGARY, May 11 /CNW/ - (TSX: HEM) Hemisphere GPS, a designer and manufacturer of advanced GPS products, today reported financial results for the first quarter ended March 31, 2010. All amounts in this news release are expressed in US dollars.
For the first quarter ended March 31, 2010, Hemisphere GPS reported a 16% decrease in revenues to $15.1 million, versus $18.0 million in the first quarter of 2009. Hemisphere GPS reported a net loss of $1.7 million, or $(0.03) per share (basic and diluted), in the first quarter of 2010 compared to net earnings of $1.6 million, or $0.03 per share (basic and diluted), in the first quarter of 2009.
Agriculture segment revenues decreased by 21% as a result of weakened agricultural equipment spending in North America, Europe and Australia. The Company's North American agriculture sales were 22% lower in the first quarter of 2010 compared to the first quarter of 2009. Similarly, European and Australian sales were 32% and 38% lower respectively. Sales in other regions of the world showed very strong growth being up by 165% driven by sales in South America and China - both up in excess of 200%. Revenues from the Company's Precision Products segment grew by 18% in the first quarter lead by increased sales of Vector heading sensor products, as well as GPS boards, to OEM customers.
"Economies around the world are recovering at different rates and the agriculture sector experienced varied geographical trends globally during the first quarter," stated Steven Koles, President and CEO of Hemisphere GPS. "While agriculture revenue in South America was very strong, North America, Europe and Australia were quite weak as heavy planting activity and weak commodity prices tempered purchasing. Operationally, we entered the second quarter initiating full commercial shipping of several key new products, including the new eDriveX. Based on these new products and associated order backlog, we expect revenue in 2010 to reflect a different seasonal profile than has been typical for our company - with significant relative strength in the back half."
First quarter gross margins of $6.8 million, or 45.2%, were down from $9.4 million, or 52.4%, for the same quarter of 2009. Margins decreased year-over-year primarily as a result of the impact on inventory of the significant weakening of the US dollar over the last year. Much of the US dollar inventory sold by the Company during the first quarter was acquired during the first and second quarter of 2009 - when the US dollar was much stronger. The Company estimates that this had a negative impact on gross margins in the quarter of approximately 4%, in part because the first quarter of 2010 realized an opposite impact from FX rates.
Operating expenses were $8.4 million in the first quarter, an increase of $0.6 million, or 7%, compared to the first quarter of 2009. Research and development expense for the quarter increased year-over-year by $0.3 million to $2.4 million. Sales and marketing expenses were essentially flat over the first quarter of 2009 at $3.2 million. General and administrative expenses increased over the first quarter of 2009 by $150 thousand or 10%. Total headcount at March 31, 2010 was 227 employees, down from 262 at March 31, 2009 with a reduction of 17 employees in the manufacturing department and 18 employees in other functions. However, the impact of these reductions on operating expenses has been substantially offset by the impact of the weakening US dollar on translated expenses.
At March 31, 2010, Hemisphere GPS held cash of $9.1 million, as compared to $8.4 million at December 31, 2009. Working capital at the end of the first quarter was $27.3 million.
First quarter Operational Highlights
- In the first quarter, Hemisphere GPS began a controlled release
shipping program for the recently launched Outback eDriveXTM auto-
steering system, which delivers a new level of precision steering and
control performance. eDriveX steers more demanding farming practices
including high-precision planting, strip tilling and bedding,
requiring centimeter-level accuracy at a wide range of speeds. Full
commercial availability and shipping of eDriveX commenced at the
beginning of the second quarter.
- In the first quarter Hemisphere GPS launched its new Earthworks
business unit that designs and manufactures products for the
construction market. The Earthworks product line is focused on
machine guidance and control of earth-moving machinery. Hemisphere
GPS has adapted its proven technology and applications currently used
in agriculture, aerial application, marine and survey markets, to
meet the needs of the construction industry.
- Hemisphere GPS announced its first Earthworks product, the Earthworks
X200 excavator machine guidance system, which improves operator
accuracy, simplifies machine operations and reduces excavation
rework. The X200 guides the operator with a graphical and numeric
display of the excavator bucket relative to the desired grade. "My
company engaged two Hemisphere GPS X200 systems during fall 2009 and
we have proven them to increase productivity and impact the bottom
line by more than 25 per cent, even on smaller jobs," said Doug
Pratt, president of Prattco Excavating Ltd. The company plans to
expand its Earthworks product portfolio by offering complementary
excavator and blade solutions in 2010.
- Hemisphere GPS signed an alliance agreement with Prolec Ltd. in
support of the Earthworks business segment. Prolec Ltd. is a leader
in machine guidance, safety and on-board weighing technology for the
construction, road and rail industries. The two companies are
collaborating on integrated systems incorporating their respective
technologies.
- In Australia, Hemisphere GPS implemented a plan to expand its Outback
Guidance sales network by implementing the US model that helped
Outback Guidance develop itself into one of North America's largest
aftermarket suppliers of GPS guidance systems for agriculture.
Hemisphere GPS is currently taking on new Outback Guidance Center
Dealers in Australia and plans to launch its eCommerce website in
autumn 2010.
- Hemisphere GPS Inc. and UFA Co-operative Ltd. partnered to sell the
Outback Guidance S-Lite GPS system in UFA's 35 farm and ranch supply
stores across Alberta.
- 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 A220TM smart GPS antenna, an all-
in-one GPS receiver and antenna for both aftermarket and OEM
applications. Powered by Hemisphere GPS' dual-frequency EclipseTM 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.
- During the first quarter Hemisphere GPS announced that its Board of
Directors adopted a shareholder rights plan which is designed to
provide shareholders and the board with adequate time to consider and
evaluate any unsolicited bid made for the corporation and to ensure
that any proposed transaction is in the best interests of the
shareholders of the corporation. Shareholder approval will be sought
at the corporation's annual and special meeting of shareholders to be
held on May 18, 2010.
Conference Call - Thursday, May 11 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 May 11, 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 1-647-427-7450, 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 May 18. Please dial 1- 416-849-0833 or 1-800-642-1687 and enter the reservation number 71799733 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, construction, and other markets. The Company holds numerous patents and other intellectual property and owns several leading brand names, including Outback Guidance(R), 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.
Consolidated Statements of Operations and Deficit
Three months ended March 31, 2010 and 2009
(unaudited - expressed in U.S. dollars)
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2010 2009
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Sales $ 15,068,403 $ 17,955,052
Cost of sales 8,259,979 8,548,013
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6,808,424 9,407,039
Expenses:
Research and development 2,383,976 2,101,362
Sales and marketing 3,271,446 3,224,684
General and administrative 1,725,689 1,575,204
Stock-based compensation 168,124 216,868
Amortization 866,674 713,480
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8,415,909 7,831,598
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Earnings (loss) before undernoted items (1,607,485) 1,575,441
Foreign exchange loss (gain) 113,506 (10,463)
Interest income (2,351) (9,335)
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Net earnings (loss) (1,718,640) 1,595,239
Deficit, beginning of period (40,121,337) (34,232,193)
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Deficit, end of period $(41,839,977) $(32,636,954)
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Earnings per common share:
Basic $ (0.03) $ 0.03
Diluted (0.03) 0.03
HEMISPHERE GPS INC.
Consolidated Balance Sheets
(unaudited - expressed in U.S. dollars)
March 31, December 31,
2010 2009
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Assets
Current assets:
Cash and cash equivalents $ 9,055,059 $ 8,397,418
Accounts receivable 7,565,747 5,986,781
Inventories 17,407,480 17,751,949
Deferred commissions 173,739 187,436
Prepaid expenses and deposits 640,171 628,023
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34,842,196 32,951,607
Deferred commissions 109,366 158,171
Property and equipment 7,928,920 7,905,708
Intangible assets 7,148,361 7,386,776
Goodwill 42,168,991 40,919,957
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$ 92,197,834 $ 89,322,219
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Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued liabilities $ 6,244,966 $ 4,030,075
Deferred revenue 1,153,621 1,242,573
Current portion of capital lease 94,257 89,637
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7,492,844 5,362,285
Deferred revenue 729,777 819,888
Capital lease 242,032 258,426
Shareholders' equity:
Share capital 107,708,468 107,708,468
Contributed surplus 4,021,570 3,853,826
Deficit (41,839,977) (40,121,337)
Accumulated other comprehensive income 13,843,120 11,440,663
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83,733,181 82,881,620
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$ 92,197,834 $ 89,322,219
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HEMISPHERE GPS INC.
Consolidated Statements of Cash Flows
Three months ended March 31, 2010 and 2009
(unaudited - expressed in U.S. dollars)
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2010 2009
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Cash flows from (used in) operating
activities:
Earnings (loss) from operations $ (1,718,640) $ 1,595,239
Items not involving cash:
Amortization 948,379 770,576
Stock-based compensation 168,124 216,868
Unrealized foreign exchange loss (gain) 137,239 (469,352)
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Cash from operations (464,898) 2,113,331
Change in non-cash operating working
capital:
Accounts receivable (1,362,290) (2,719,701)
Inventories 847,293 (4,361,864)
Prepaid expenses and deposits 6,851 (11,677)
Accounts payable and accrued liabilities 2,038,004 1,857,500
Foreign currency contract - (284,256)
Deferred revenue (236,135) (49,248)
Deferred commissions 71,277 30,982
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900,102 (3,424,933)
Cash flows used in financing activities:
Capital leases (21,854) -
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(21,854) -
Cash flows used in investing activities:
Purchase of property and equipment (212,145) (287,504)
Intangible asset addition (53,332) (203,910)
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(265,477) (491,414)
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Increase (decrease) in cash position 612,771 (3,916,347)
Effect of currency translation on cash
balances and cash flows 44,870 139,732
Cash and cash equivalents, beginning
of period 8,397,418 16,288,684
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Cash and cash equivalents, end of period $ 9,055,059 $ 12,512,069
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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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