Mar. 22, 2011 (Canada NewsWire Group) --
CALGARY, March 22 /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, 2010. All amounts in this news release are expressed in US dollars.
For the fourth quarter ended December 31, 2010, Hemisphere GPS reported $12.2 million in revenues, compared to $12.1 million recorded in the fourth quarter of 2009. Revenues from all market segments increased in the fourth quarter with the exception of OEM sales in the Agriculture segment which were 31% below 2009 due to timing of order receipts. Specifically, OEM revenues increased by 20% during the second half of 2010, driven by high deliveries in the third quarter which increased 106% over 2009. In the fourth quarter, however, expected OEM orders were deferred into the first half of 2011. Despite deferred orders, the fourth quarter of 2010 still represents the second highest fourth quarter revenue in the Company's history and the last half of the year is the strongest on record for Hemisphere GPS.
"We experienced a general recovery that strengthened through 2010, with second half revenues that grew by 20% year-over-year, after a decline of 6% in the first half of the year" stated Steven Koles, President and CEO of Hemisphere GPS. "The recovery led us well into 2011 where we have seen improved momentum in the first quarter supporting a return to growth and profitability. Traction from new products, stronger grain prices and signs of economic recovery are believed to have contributed to stronger purchasing since the second quarter of 2010."
A weaker US dollar softened gross margins and increased operating costs during the fourth quarter. Incremental inventory reserves also lowered margins during the quarter. Hemisphere GPS reported a net loss for the fourth quarter of $3.8 million, or $(0.07) per share (basic and diluted), compared to a net loss of $2.5 million, or ($0.04) per share (basic and diluted), in the fourth quarter of 2009.
The percentage of total sales that were made outside North America in 2010 increased to 40% from 32% in 2009. Sales to Australia showed the strongest relative performance in 2010 with a year-over-year increase of 77% resulting from the launch of an Outback sales network in Australia modeled after the existing Outback sales network deployed in North America. Sales to other markets, excluding Europe, grew by 67% for the year, with particularly strong growth in Asia and South America. In 2010, North American sales declined by 8% for the year given the slower recovery compared to international markets. Following a decline in North American revenues of 17% in the first half of the year, revenues grew by 8% in the back half of 2010.
Agriculture product sales in the Company's Outback North American and Australian networks grew by 22% during the fourth quarter compared to 2009, driven by sales of the new eDriveX auto-steering product and the launch of the Australian network during the year. However, sales to OEM and International distributors declined by about 30% from the fourth quarter of 2009. Purchasing by these customers was up by 20% over the last half of 2010 as a result of a third quarter increase of 106% over 2009. The particularly strong third quarter deliveries combined with the deferral of some expected fourth quarter OEM customer orders into 2011, resulted in lower than expected fourth quarter revenues. Growth of 18% in the Precision Products segment during the fourth quarter was led by sales of Vector heading sensor products, including strong sales of the newly released Vector II OEM board.
Fourth quarter gross margins decreased to 40% compared to 43% in 2009. Lower margins were largely attributable to incremental inventory reserves recorded in the quarter totaling 5.5 percentage points. In addition, gross margins were negatively impacted by the impact on cost of sales of a weaker US dollar which reduced margins by about 1.5 percentage points in the quarter.
Operating expenses were $8.9 million in the fourth quarter, an increase of $1.5 million compared to the fourth quarter of 2009, impacted, in part, by a weakened US dollar and by 2009 cost reduction initiatives that were not in place during the fourth quarter of 2010. Research and development expense for the quarter increased by $0.3 million to $2.7 million. Sales and marketing expenses increased by $0.8 million from the fourth quarter of 2009 as a result of foreign exchange, consulting costs associated with international sales activities, and the deployment of the Australian Outback distribution network. For 2011, management has implemented foreign currency risk management transactions intended to mitigate the impact on operating expenses of future foreign currency fluctuations.
At December 31, 2010, Hemisphere GPS held cash of $5.3 million, as compared to $8.4 million at the end of 2009. Working capital was $22.3 million. Subsequent to the close of 2010, Hemisphere GPS closed a bought-deal financing of 5,228,759 common shares at a price of $1.53 per share for gross proceeds of approximately $8.0 million.
For the 2010 year, Hemisphere GPS reported revenues of $56 million, a 4.4% increase from revenues of $53.6 million in 2009. Gross margin for the 2010 year was 44%, compared to 48% in 2009. The weakening of the US dollar had a 2.5 percentage point impact on gross margins for the year and the inventory reserve had a negative impact of 1.2 percentage points. Rising Canadian and Australian currencies versus the US dollar were responsible for approximately half of increased year-over-year expenses of $3.4 million, or 11%, to $33.8 million. Increased investment in research and development contributed the majority of the remaining increase. Average headcount of 229 during 2010 was down by 18 employees from 247 for 2009. The Company reported a net loss for 2010 of $9.4 million, or $(0.17) per share (basic and diluted), compared to a net loss of $5.9 million, or ($0.11) per share (basic and diluted) in 2009.
"Since mid-2010 we have experienced recovery and strengthening in all of our markets," said Mr. Koles. "This strength has continued in the first quarter, and year-to-date revenues in 2011 are ahead of the same period in 2010 by 40%. Our current sales forecast predicts better than 25% growth for 2011 and supports a return to profitability."
Throughout 2010, Hemisphere GPS capitalized on product and technology innovation and expanded its sales channels and partners.
Hemisphere GPS announced its first OEM (original equipment manufacturer)
alliance in China with FOTON LOVOL International Heavy Industry Co.,
Ltd. to launch Outback Guidance precision farming products in China.
FOTON LOVOL is a leading manufacturer of tractor, harvester and
construction machinery in China with sales of $2.04 billion (U.S.) in
2009. FOTON LOVOL annually manufactures approximately 200,000 tractors.
Hemisphere GPS also formed an OEM joint venture with Chinese
manufacturer, YTO Group, to complement its series of agricultural
vehicles with Outback products in China.
In Europe, CLAAS Agrosystems launched eDriveX under the CLAAS brand,
"GPS pilot", as a part of its precision automated steering solution
that also includes the Hemisphere GPS Outback S3 guidance terminal and
BaseLineX GPS base station.
In Brazil, Hemisphere GPS and Stara S.A. Industria de Implementos
Agricolas launched eDriveX under the Stara brand, "SPEED DRIVEx".
Stara, one of the world's largest agricultural equipment manufacturers,
is offering SPEED DRIVEx as a part of its precision automated steering
solution. When combined with Outback S3 and BaseLineX or A220/A221 RTK
GPS systems, the system automatically steers farm machinery to
centimeter-level accuracy. The new system is being sold throughout
Stara's distribution network that includes over 1,100 resellers.
Also in Brazil, Hemisphere GPS announced that Technomaster, a marine
electronics engineering firm in Brazil, had integrated Hemisphere GPS's
new LV101 GPS compass into a state-of-the-art marine navigation
autopilot system. The LV101 GPS compass is paired with Technomaster's
exclusive navigation technology to create an autopilot system suitable
for large vessels and small pleasure crafts.
In Canada, 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.
Innovation through Research & Development is a core focus at Hemisphere
GPS. Commitment to R&D investment through the economic challenges of
2008 and 2009 resulted in the highest number of new product
announcements ever by Hemisphere GPS for a single year, in 2010. Based
on new Hemisphere GPS firmware and ASIC designs, Hemisphere GPS
introduced its next-generation Eclipse II GNSS receiver technology and
released the Eclipse II OEM board -- the first product incorporating
these technological advancements. Eclipse II provides improved RTK
performance, GPS, GLONASS, SBAS and OmniSTAR support, and reduced power
consumption. In addition, the miniEclipse was unveiled, the smallest
precision dual-frequency (L1/L2) OEM module available in the market
today. Innovations for the Outback product line included new software
that allows users to configure and operate Outback AutoMate from the
Outback S3 user interface. The most notable new product in 2010 was the
remarkable high-precision Outback eDriveX.
The Outback eDriveX was launched through the Outback Guidance dealer
network in early 2010. When combined with Outback S3 and BaseLineX or
A220/A221 RTK GPS systems, eDriveX automatically steers farm machinery
to centimetre-level accuracy. The most demanding farm practices
including high precision planting, strip tilling and bedding are
improved through the reliable and repeatable performance of eDriveX. As
a result, farmers achieve more uniform treatments, reduced waste and
fuel conservation all while reducing driver fatigue.
- Subsequent to the close of 2010, Hemisphere GPS has introduced the latest advanced feature to for Outback eDriveX - the agriculture industry's first auto-turn solution available for multiple brands of farm machinery. eTurns enables farmers to automatically execute a turn at the end of a row, increasing efficiency and reducing driver fatigue
New applications and market verticals were introduced during the year.
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 entered the Earthworks market with the launch of its X200
full two-dimensional machine guidance system in March 2010. The Company
followed with the Earthworks X300 excavator guidance system later in
the year. The X300 measures and displays three-dimensional excavator
positioning to operators, vastly improving excavation proficiency and
accuracy and greatly reducing rework.
Three new Earthworks dealers were added to the Company's distribution
network, serving the mid-Atlantic and Western United States; Rocky
Mountain Laser, Print-O-Stat, and Engineering Supply Company. Each
channel partner represents the Hemisphere GPS Earthworks product
portfolio, including the X200 and X300 excavator machine guidance
Hemisphere GPS applied its S3 Outback guidance technology to the Oil and
Gas Industry through a customized version of the S3 in partnership with
Summit Liability Solutions. The resulting product, the S3-S Navigator
provides a drilling waste disposal solution that manages the
ever-increasing regulatory pressure to be environmentally compliant.
The S3-S uses Hemisphere GPS's Crescent GPS receiver technology in
combination with a Hemisphere GPS eDriveTC for tilt control to
precisely apply drilling fluids to a disposal area and is designed to
eliminate most of the human error currently present in drilling waste
- In the third quarter, Sunshine Village ski resort began outfitting its entire Snow Cat fleet with Hemisphere GPS's new snow grooming guidance systems. Sunshine Village operators can use the guidance systems to record boundaries and set flags on the screen to map tree lines, out-of-bounds limits, winch holds, hazards or other areas of interest. With Hemisphere's snow grooming guidance systems, maintenance managers are able to review job files for operator and machine performance and concerns. It is easy to plot speed, position, area covered and time. "We experienced productivity improvements immediately with Hemisphere's snow grooming guidance systems" says Rod Chisholm, maintenance manager at Sunshine Village ski resort.
Conference Call - Tuesday, March 22nd 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 22, 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 March 29. Please dial 1-416-849-0833 or 1-800-642-1687 and enter the reservation number 50785271 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® 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, 2010 and 2009
(unaudited - expressed in U.S. dollars)
|Cash and cash equivalents||$||5,319,385||$||8,397,418|
|Prepaid expenses and deposits||568,299||628,023|
|Property and equipment||7,475,301||7,905,708|
|Liabilities and Shareholders' Equity|
|Accounts payable and accrued liabilities||$||7,610,401||$||4,030,075|
|Current portion of capital lease||102,254||89,637|
|Accumulated other comprehensive income||15,410,702||11,440,663|
|HEMISPHERE GPS INC.|
|Consolidated Statements of Operations and Deficit|
|(unaudited - expressed in U.S. dollars)|
|Three months ended||Year ended|
|December 31,||December 31,|
|Cost of sales||7,308,477||6,882,861||31,588,820||27,781,060|
|Research and development||2,732,181||2,409,890||10,320,530||8,851,616|
|Sales and marketing||3,321,739||2,473,379||12,545,441||11,044,783|
|General and administrative||1,773,998||1,608,309||7,010,661||6,630,584|
|Loss before undernoted items||(4,022,881)||(2,142,121)||(9,406,514)||(4,535,502)|
|Foreign exchange (gain) loss||(227,626)||(778)||(222,580)||244,332|
|Net interest income||(2,154)||(1,854)||(10,758)||(20,697)|
|Loss before income taxes||(3,793,101)||(2,203,397)||(9,381,161)||(5,635,231)|
|Current income taxes||-||253,913||-||253,913|
|Deficit, beginning of period||(45,709,397)||(37,664,027)||(40,121,337)||(34,232,193)|
|Deficit, end of period||$||(49,502,498)||$||(40,121,337)||$||(49,502,498)||$||(40,121,337)|
|Loss per common share:|
|Basic and diluted||$||(0.07)||$||(0.04)||$||(0.17)||$||(0.11)|
|Weighted average shares outstanding:|
|HEMISPHERE GPS INC.|
|Consolidated Statements of Cash Flows|
|(unaudited - expressed in U.S. dollars)|
|Three months ended||Year ended|
|December 31,||December 31,|
|Cash flows from (used in) operating activities:|
|Net income (loss)||$||(3,793,101)||$||(2,457,310)||$||(9,381,161)||$||(5,889,144)|
|Items not involving cash:|
|Unrealized foreign exchange loss||159,352||141,350||161,516||1,193,512|
|Cash from (used in) operations||(2,520,009)||(1,315,803)||(4,989,719)||(567,332)|
|Change in non-cash operating working capital:|
|Prepaid expenses and deposits||89,356||121,001||92,740||161,598|
|Accounts payable and accrued liabilities||(427,321)||20,030||3,199,108||(3,541,335)|
|Foreign currency contract||-||-||-||(3,270,210)|
|Cash flows from (used in) financing activities:|
|Issue of share capital, net of issue cost||6,126||-||6,126||-|
|Cash flows used in investing activities:|
|Purchase of property and equipment||(285,789)||(79,398)||(900,221)||(1,031,215)|
|Intangible asset additions||-||(229,966)||(100,774)||(1,132,280)|
|Increase (decrease) in cash position||(2,555,999)||449,574||(3,207,431)||(8,064,925)|
|Effect of currency translation on cash balances and cash flows||69,238||57,576||129,398||173,659|
|Cash and cash equivalents, beginning of period||7,806,146||7,890,268||8,397,418||16,288,684|
|Cash and cash equivalents, end of period||$||5,319,385||$||8,397,418||$||5,319,385||$||8,397,418|
| Cameron Olson |
Chief Financial Officer
Hemisphere GPS Inc.
| Cory Pala |
e.vestor Communications Inc.