FORT LEE, NJ — (Marketwire) — 03/30/12 — Pioneer Power Solutions, Inc. (OTCBB: PPSI) (“Pioneer” or the “Company”), a manufacturer of specialty electrical equipment for applications in the utility, industrial and commercial segments of the electrical transmission and distribution industry, announced its results for the year ended December 31, 2011 and provided revenue and earnings guidance for the year ending December 31, 2012.
2011 revenue of $68.8 million, up 45.6% from $47.2 million in 2010
2011 operating income of $4.7 million, up 15.0% from $4.1 million in 2010
2011 non-GAAP diluted EPS of $0.56, compared to $0.50 in 2010
2012 revenue guidance between $76 and $84 million, up 10% to 22%
2012 non-GAAP diluted EPS guidance between $0.65 and $0.75, up 16% to 34%
Nathan Mazurek, Pioneer–s Chairman and Chief Executive Officer, said, “Again in 2011 we delivered sales growth far exceeding our overall industry. Most importantly, we were able to accomplish this while effectively maintaining our gross margin and operating expenses as a percentage of sales. Pioneer also succeeded in broadening its portfolio of products and markets served, both internally and through a strategic acquisition. We extended several of our major utility contracts, including most recently with our largest customer, Hydro-Quebec, and ended the year with an order backlog of $24.8 million, its highest level since May of 2008. As we begin 2012, we are encouraged by the continuing pace of demand from our industrial and utility customers and expect that we will be able to translate more of our recent sales growth into bottom-line profitability as we more fully integrate the businesses we acquired in 2010 and 2011.”
Revenue
Revenue for the year ended December 31, 2011 increased $21.6 million to $68.8 million, up 45.6% over our revenue of $47.2 million during 2010. Approximately $9.7 million of the revenue increase reflects year-over-year growth in our liquid-filled transformer segment (9.6%) and in our dry-type transformer segment (19.2%). On a combined basis, these respective increases correspond to a 14.3% overall organic growth rate in our revenue during the year ended December 31, 2011, as compared to 2010. The remaining $11.9 million increase in our revenue during 2011 resulted from acquisitions. During 2011 we had ten additional months of operations for the two dry-type transformer businesses we acquired.
Our liquid-filled transformer sales benefitted from strong industrial user demand in Canada, and from renewable energy customers in particular, coupled with stability in the level of utility orders which represent the majority of the segment–s revenue. Our dry-type transformer segment experienced significant year-over-year increases in every U.S. sales channel, led in percentage terms by custom magnetics manufactured for our OEM channel where growth was split evenly between new and existing customers.
Operating Income and Adjusted EBITDA
Consolidated operating income for the year ended December 31, 2011 was $4.7 million, up 15%, or $0.6 million, from $4.1 million in the comparable year ago period. As a percentage of our consolidated revenue, selling, general and administrative expense decreased slightly to 16.1% in 2011, as compared to 16.2% in 2010. The increase in our 2011 operating income resulted from higher sales by each of our operating subsidiaries which were sufficient to overcome an unfavorable variance in the effect of foreign currency exchange coupled with higher corporate expenses during the period.
Approximately $1.3 million of the Company–s operating expense during 2011 consisted of non-cash expenses including depreciation, amortization of acquisition intangibles and stock-based compensation for employee and director stock options. Without the effect of these non-cash expenses, the Company–s Adjusted EBITDA for the year ended December 31, 2011 was approximately $6.1 million, 15.0% higher than $5.3 million in the comparable year period. Please refer to the financial tables included below for a reconciliation of GAAP to non-GAAP results and guidance.
Earnings from Continuing Operations and Per Diluted Share
The Company–s earnings from continuing operations for the year ended December 31, 2011 were approximately $2.5 million, or $0.42 per diluted share. This compares with earnings from continuing operations for the prior year of $3.2 million, or $0.55 per diluted share. Our 2011 earnings included $820,000 of one-time, non-operating expenses related to acquisitions and Pioneer–s effort to obtain a NASDAQ listing through a public offering of common stock which was withdrawn due to market conditions. The 2010 period only included approximately $352,000 of similar expenses relating to an acquisition. In addition, our effective tax rate increased significantly during the year ended December 31, 2011, to 23.8% from 9.2% during the prior year. This increase resulted primarily from a $0.8 million Canadian income tax recovery we recognized in 2010, combined with no longer having the benefit of U.S. net operating loss carryforwards throughout 2011.
On a non-GAAP basis, excluding the non-recurring items above, Pioneer reported earnings from continuing operations of approximately $3.3 million in 2011, or $0.56 per diluted share, up 12% from $0.50 per diluted share, or $2.9 million for the year ended December 31, 2010. Please refer to the financial tables included below for a reconciliation of GAAP to non-GAAP results and guidance.
Andrew Minkow, Pioneer–s Chief Financial Officer continued, “Our guidance is based mostly on year-to-date trends in our business and the current composition of our sales backlog. Excluding future acquisitions, we expect revenue to increase to between $76 and $84 million, or grow by approximately 16% based on the mid-point of this range. On an organic basis, our guidance assumes a low-teens revenue growth rate in 2012 and we expect our revenue to be split about evenly between our liquid-filled and dry-type transformer segments.”
Mr. Minkow continued, “In terms of earnings, our initial guidance is that we expect our non-GAAP net earnings to increase to between $0.65 and $0.75 per diluted share. This range is based on several assumptions including that our gross margin will remain stable and that our effective tax rate will increase further from its level 2011, but still remain below 30% on a consolidated basis.”
Pioneer Power Solutions, Inc. is a manufacturer of specialty electrical equipment and provides through its three operating subsidiaries, Pioneer Transformers Ltd., Jefferson Electric, Inc. and Bemag Transformer Inc., a broad range of custom-engineered and general purpose electrical transformers for applications in the utility, industrial and commercial segments of the electrical transmission and distribution industry. The Company is headquartered in Fort Lee, New Jersey and presently operates from six other locations in the U.S., Canada and Mexico for manufacturing, centralized distribution, engineering, sales and administration. To learn more about Pioneer, please visit our website at .
For more information regarding Pioneer–s financial performance during the year ended December 31, 2011, please refer to the Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 30, 2012.
This press release contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. Such statements may be preceded by the words “intends,” “may,” “will,” “plans,” “expects,” “anticipates,” “projects,” “predicts,” “estimates,” “aims,” “believes,” “hopes,” “potential” or similar words. Forward-looking statements are not guarantees of future performance, are based on certain assumptions and are subject to various known and unknown risks and uncertainties, many of which are beyond the Company–s control, and cannot be predicted or quantified and consequently, actual results may differ materially from those expressed or implied by such forward-looking statements. Such risks and uncertainties include, without limitation, risks and uncertainties associated with (i) the Company–s ability to expand its business through strategic acquisitions, (ii) the Company–s ability to integrate acquisitions and related businesses, (iii) the fact that many of the Company–s competitors are better established and have significantly greater resources, and may subsidize their competitive offerings with other products and services, which may make it difficult for the Company to attract and retain customers, (iv) the Company–s dependence on Hydro-Quebec Utility Company and Siemens Industry, Inc. for a large portion of its business, and the fact that any change in the level of orders from Hydro-Quebec Utility Company or Siemens Industry, Inc. could have a significant impact on the Company–s results of operations, (v) the potential loss or departure of key personnel, including Nathan J. Mazurek, the Company–s Chairman, President and Chief Executive Officer, (vi) the fact that fluctuations between the U.S. dollar and the Canadian dollar will impact the Company–s revenues, (vii) the Company–s ability to generate internal growth, (viii) market acceptance of existing and new products, (ix) operating margin risk due to competitive pricing and operating efficiencies, supply chain risk, material, labor or overhead cost increases, interest rate risk and commodity risk, (x) restrictive loan covenants or the Company–s ability to repay or refinance debt under its credit facilities that could limit the Company–s future financing options and liquidity position and may limit the Company–s ability to grow its business, (xi) the Company–s ability to discontinue its wind energy business at the cost expected, (xii) general economic and market conditions in the electrical equipment, power generation, commercial construction, industrial production, oil and gas, marine and infrastructure industries, (xiii) the impact of geopolitical activity on the economy, changes in government regulations such as income taxes, climate control initiatives, the timing or strength of an economic recovery in the Company–s markets and the Company–s ability to access capital markets, (xiv) the fact that unanticipated increases in raw material prices or disruptions in supply could increase production costs and adversely affect the Company–s profitability, (xv) the fact that the Company–s Chairman controls a majority of the Company–s combined voting power, and may have, or may develop in the future, interests that may diverge from yours and (xvi) the fact that future sales of large blocks of the Company–s common stock may adversely impact the Company–s stock price. More detailed information about the Company and the risk factors that may affect the realization of forward-looking statements is set forth in the Company–s filings with the Securities and Exchange Commission, including the Company–s Form 10-K filed with the SEC on March 30, 2012. Investors and security holders are urged to read these documents free of charge on the SEC–s web site at . The Company assumed no obligation to publicly update or revise its forward-looking statements as a result of new information, future events or otherwise.
Note: Pioneer has presented non-GAAP measures such as non-GAAP net earnings and Adjusted EBITDA because many of our investors use these non-GAAP measures to monitor the Company–s performance. These non-GAAP measures should not be considered as an alternative to GAAP measures as an indicator of the Company–s operating performance.
Non-GAAP net earnings is defined by the Company as net earnings before amortization of acquisition-related intangibles, stock-based compensation, non-recurring acquisition costs and reorganization expense, impairments, other unusual gains or charges and any tax effects related to these items. The Company defines Adjusted EBITDA as net earnings before interest, income tax expense, depreciation and amortization, non-cash compensation and non-recurring acquisition costs and reorganization expenses and other non-recurring or non-cash items.
Generally, a non-GAAP financial measure is a numerical measure of a company–s performance, financial position or cash flow that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with GAAP. The non-GAAP measures included in this release, however, should be considered in addition to, and not as a substitute for or superior to, operating income, cash flows, or other measures of financial performance prepared in accordance with GAAP. A reconciliation of non-GAAP to GAAP net income is set forth in the table above.
Amounts may not foot due to rounding.
Contact:
Howard Gostfrand
American Capital Ventures
305.918.7000