GUELPH, ONTARIO — (Marketwired) — 10/23/13 — (Dollar amounts are in thousands unless otherwise specified)
NOTE: ALL NUMBERS HAVE BEEN STATED UNDER IFRS
Hammond Power Solutions Inc. (“HPS”) (TSX: HPS.A), a leading manufacturer of dry-type and cast resin transformers and related magnetics, today announced its financial results for the third quarter of 2013.
Bill Hammond, Chairman & Chief Executive Officer of Hammond Power Solutions Inc. commented, “During a time of economic uncertainty, HPS continues to deliver respectable cash generation through prudent cost containment and margin retention. This is happening despite a significant slowdown in the North American mining and capital construction markets as well as sizeable investments to expand our business globally. We are confident that our financial strength, core competencies and long term strategies of market diversification will not only help us weather the current economic instability but also position HPS to accelerate our growth when the global recovery begins.”
THIRD QUARTER RESULTS
Sales for the quarter-ended September 28, 2013 were $57,393, a decline of $6,310 or 9.9% from the Quarter 3, 2012 sales of $63,703. Year-to-date sales were $180,137 in 2013 and $194,843 in 2012, a decrease of $14,706 or 7.5%. As a result of a slowdown in OEM order booking and sales activity U.S. sales were $32,079 in Quarter 3, 2013, a decrease of $4,527 or 12.4% from Quarter 3, 2012. Canadian sales were $19,803 for the quarter, a decrease over Quarter 3, 2012, of $3,415 or 14.7%. Year to date Canadian sale were $59,685 in 2013 compared to $71,334 in 2012 a drop of $11,649 or 16.3%. International sales in Quarter 3, 2013 were $5,511 versus $3,891 in Quarter 3, 2012, an increase of $1,620 or 41.6%. Our Quarter 1, Italian acquisition, Marnate Trasformatori s.r.l. (“Marnate”) contributed $1,715 in International sales for the quarter and $4,180 year-to-date. International sales were $17,172 in 2013 compared to $12,989 in 2012, an increase of $4,172 or 32.1%.
The Company realized an increase in bookings of 0.2% over Quarter 2, 2013 and an increase of 3.6% as compared against Quarter 3, 2012. Due to the softer North American, European and Asian economies, year-to-date bookings were lower by 2.4%.
Gross margin rates for Quarter 3, 2013 finished at 24.7% versus 24.5% in Quarter 3, 2012, an increase of 0.2% of sales. The year-to-date margin rate was stable at 24.2% in 2013 and 2012.
Bill Hammond further commented, “Despite current market pressures and manufacturing throughput variability, the Company continues to maintain its margin rates.”
Total selling and distribution expenses were $6,536 in Quarter 3, 2013 versus $6,337 in Quarter 3, 2012, a slight increase of $199 or 3.1%. These expenses represent 11.4% of sales in Quarter 3, 2013 and 10.0% of sales in Quarter 3, 2012. Year-to-date selling and distribution expenses were $19,695 or 10.9% of sales in 2013, compared to $19,121 or 9.8% of sales in 2012.
The general and administrative expenses for Quarter 3, 2013 totaled $5,704, an increase of $637 or 12.6% when compared to Quarter 3, 2012 expenses of $5,067. This represents 9.9% of sales in Quarter 3, 2013 as compared to 8.0% of sales in Quarter 3, 2012. The Company continues to invest in information technology, research and development and employee training in the Quarter. Year-to-date general and administrative expenses were $17,015 or 9.4% of sales in 2013, compared to $15,491 or 8.0% of sales in 2012.
Interest expense for Quarter 3, 2013 finished at $243 and was comparable to $249 in Quarter 3, 2012. Year-to-date interest cost was $705, an increase of $156 when compared to the 2012 year-to-date expense of $549. The increase in interest expense year-to-date was a result of higher operating debt levels related to the assumption of debt associated with the earlier year purchase of Marnate.
Net earnings for Quarter 3, 2013 decreased by $1,760, finishing at $792 compared to net earnings of $2,552 in Quarter 3, 2012. Year-to-date net earnings were $3,209 in 2013 and $7,881 in 2012, a decrease of $4,672 or 59.3%. Decreased sales, increased interest costs, higher general and administrative expenses and foreign exchange losses in 2013 were the main contributing factors to the quarter and year-to-date decline.
Net cash generated by operating activities for Quarter 3, 2013 was $3,021 versus $3,763 in Quarter 3, 2012, a decrease of $742 as a result of lower net earnings. Year-to-date cash generated by operating activities was $3,439 in 2013 and $10,909 in 2012, a change of $7,470.
The Company continued with its regular quarterly dividend program, paying five cents ($0.05) per Class A Subordinate Voting Share of HPS and five cents ($0.05) per Class B Common Share of HPS on September 26, 2013. Year to date, the Company has paid a quarterly cash dividend of fifteen cents ($0.15) per Class A Subordinate Voting Share and fifteen cents ($0.15) per Class B Common Share.
Mr. Hammond concluded, “While there continues to be economic challenges, we are beginning to see some increased activity in the electrical industry. We anticipate that our business development strategies and increased market share will deliver improvement in our financial performance going forward.”
FINANCIAL RESULTS
TELECONFERENCE
Hammond Power Solutions Inc. will hold a conference call on Thursday, October 24, 2013 at 10:00 a.m. EST, to discuss the Company–s financial results for the third quarter 2013.
Listeners may attend the conference by dialing:
Caution Regarding Forward-Looking Information
This press release contains forward-looking statements that involve a number of risks and uncertainties, including statements that relate to among other things, HPS– strategies, intentions, plans, beliefs, expectations and estimates, and can generally be identified by the use of words such as “may”, “will”, “could”, “should”, “would”, “likely”, “expect”, “intend”, “estimate”, “anticipate”, “believe”, “plan”, “objective” and “continue” and words and expressions of similar import. Although HPS believes that the expectations reflected in such forward-looking statements are reasonable, such statements involve risks and uncertainties, and undue reliance should not be placed on such statements. Certain material factors or assumptions are applied in making forward-looking statements, and actual results may differ materially from those expressed or implied in such statements. Important factors that could cause actual results to differ materially from expectations include but are not limited to: general business and economic conditions (including but not limited to currency rates); changes in laws and regulations; legal and regulatory proceedings; and the ability to execute strategic plans. HPS does not undertake any obligation to update publicly or to revise any of the forward-looking statements contained in this document, whether as a result of new information, future events or otherwise, except as required by law.
ABOUT HAMMOND POWER SOLUTIONS INC.
Hammond Power Solutions Inc. (TSX: HPS.A) is a North American leader for the design and manufacture of dry-type custom electrical engineered magnetics, electrical dry-type and cast resin transformers. Leading edge engineering capabilities, high quality products, and responsive service to customers– needs have all served to establish HPS as a technical and innovative leader in the electrical and electronic industries.
HPS has operations in Canada, the United States, Mexico, India and Italy.
Contacts:
Hammond Power Solutions Inc.
Dawn Henderson
Manager Investor Relations
(519) 822-2441 x414