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 second
quarter of 2013.
Bill Hammond, Chairman & Chief Executive Officer of Hammond
Power Solutions Inc. commented, "I think it's fair to say that the
North American economy, specifically the Canadian market and the
mining sector are in much worse shape than anyone forecasted 7-8
months ago. Our solid core competencies, financial strength, broad
geographical presence and market diversification will serve HPS in
withstanding the current economic instability."
SECOND QUARTER RESULTS
Sales for the quarter-ended June 29, 2013 were $59,072, a
decline of $6,414 or 9.8% from the Quarter 2, 2012 sales of
$65,486. Year-to-date sales were $122,744 in 2013 and $131,140 in
2012, a decrease of $8,396 or 6.4%. As a result of a slowdown in
OEM order booking and sales activity U.S. sales were $36,016 in
Quarter 2, 2013, a decrease of $1,397 or 3.7% from Quarter 2, 2012.
Canadian sales were $18,610 for the quarter, a decrease over
Quarter 2, 2012, of $4,536 or 19.6% year to date were $39,882 in
2013 compared to $48,116 in 2012 a drop of $8,234 or 17.1%.
International sales in Quarter 2, 2013 were $4,446 versus $4,927 in
Quarter 2, 2012, a decrease of $481 or 9.8%. Our recently acquired
Italian acquisition, Marnate Trasformatori s.r.l. ("Marnate")
contributed $1,404 in International sales for the quarter.
Year-to-date international sales were $11,661 in 2013 compared to
$9,109 in 2012, an increase of $2,552 or 28%.
The Company realized an increase in bookings of 17.6% over
Quarter 1, 2013 and also increased 3.4% as compared against Quarter
2, 2012. Due to the sluggishness of the North American, European
and Asian economies, year to date bookings were lower by 5.3%.
Gross margin rates for Quarter 2, 2013 finished at 23.9% versus
24.5% in Quarter 2, 2012, a decrease of 0.6% of sales. The
year-to-date margin rate was 24.0% in 2013 which was comparable to
the 2012 rate of 24.1%.
Bill Hammond further commented, "Despite current market
pressures, the Company is holding on to margin rates for the
year."
Total selling and distribution expenses were $6,617 in Quarter
2, 2013 versus $6,525 in Quarter 2, 2012, an increase of $92 or
1.4%. These expenses represent 11.2% of sales in Quarter 2, 2013
and 10.0% of sales in Quarter 2, 2012. Year-to-date selling and
distribution expenses were $13,159 or 10.7% of sales in 2013,
compared to $12,784 or 9.7% of sales in 2012. The Quarter 2, 2013
selling and distribution expenses include international operation
expenses of $287 versus $258 in Quarter 2, 2012. Year-to-date
international operation expenses include $594 in 2013 and $578 in
2012.
The general and administrative expenses for Quarter 2, 2013
totaled $5,916, an increase of $1,030 or 21.1% when compared to
Quarter 2, 2012 expenses of $4,886. This represents 10.0% of sales
in Quarter 2, 2013 as compared to 7.5% of sales in Quarter 2, 2012.
The Quarter 2, 2013 general and administrative expenses include
international operation expenses of $905 versus $516 in Quarter 2,
2012. The Company also continued with its investment in information
technology, research and development and employee training and
recruitment in the Quarter. Year-to-date general and administrative
expenses were $11,311 or 9.2% of sales in 2013, compared to $10,424
or 7.9% of sales in 2012.
Quarter 2, 2013 earnings from operations decreased by $3,064 or
65.8% from the same quarter last year, finishing at $1,599 compared
to $4,663 in Quarter 2, 2012. The year-to-date earnings from
operations were $4,958 in 2013 compared to $8,420 in 2012, a
decrease of $3,462 or 59%. The reduction was a result of the
decrease in sales, slight decrease in margin rates and increased
general and administrative expenses.
Interest expense for Quarter 2, 2013 finished at $293 compared
to $176 in Quarter 2, 2012, an increase of $117 or 66.5%.
Year-to-date interest cost was $462, an increase of $162 when
compared to the 2012 year-to-date expense of $300. The increase in
interest expense for the quarter and 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 2, 2013 decreased by $2,301, finishing
at $510 compared to net earnings of $2,811 in Quarter 2, 2012.
Year-to-date net earnings were $2,417 in 2013 and $5,329 in 2012, a
decrease of $2,912 or 54.7%. Net earnings for the quarter and year
were lower as a result of the weaker sales, softer margins, a
higher effective income tax rate and increased general and
administrative expenses.
Net cash generated by operating activities for Quarter 2, 2013
was $1,429 versus $10,476 in Quarter 2, 2012, a decrease of $9,047
as a result of an increase in non-cash working capital and lower
net earnings. Year-to-date cash generated by operating activities
was $418 in 2013 and $7,146 in 2012, a difference of $6,728.
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 June 27, 2013. "This regular quarterly dividend demonstrates our
confidence in our operational strategies," Mr. Hammond
commented.
Mr. Hammond concluded, "While there continues to be economic
challenges we are encouraged by the increased activity in the
electrical industry and anticipate that our business development
strategies and increased market share will add to our financial
results in the second half of the year."
THREE MONTHS ENDED:
(dollars in thousands)
----------------------------------------------------------------------------
June 29, June 30,
2013 2012 Change
----------------------------------------------------------------------------
Sales 59,072 65,486 $ (6,414)
----------------------------------------------------------------------------
Earnings from Operations 1,599 4,663 (3,064)
----------------------------------------------------------------------------
Exchange Loss/(Gain) 122 (46) 168
----------------------------------------------------------------------------
Net Earnings 510 2,811 (2,301)
----------------------------------------------------------------------------
Earnings per share
Basic .04 0.24 (0.20)
Diluted .04 0.24 (0.20)
----------------------------------------------------------------------------
Cash provided by operations 1,429 10,476 (9,047)
----------------------------------------------------------------------------
SIX MONTHS ENDED:
(dollars in thousands)
----------------------------------------------------------------------------
June 29, June 30,
2013 2012 Change
----------------------------------------------------------------------------
Sales $ 122,744 $ 131,140 $ (8,396)
----------------------------------------------------------------------------
Earnings from Operations $ 4,958 $ 8,420 $ (3,462)
----------------------------------------------------------------------------
Exchange Loss/(Gain) $ 114 $ (68) $ 182
----------------------------------------------------------------------------
Net Earnings $ 2,417 $ 5,329 $ (2,912)
----------------------------------------------------------------------------
Earnings per share
Basic 0.20 0.46 (0.26)
Diluted 0.20 0.46 (0.26)
----------------------------------------------------------------------------
Cash provided by operations $ 418 $ 7,146 $ (6,728)
----------------------------------------------------------------------------
TELECONFERENCE
Hammond Power Solutions Inc. will hold a conference call on
Thursday, July 25, 2013 at 10:00 a.m. EST, to discuss the Company's
financial results for the second quarter 2013.
Listeners may attend the conference by dialing:
1-416-340-8061 / 1-866-225-0198 / 1-800-6578-9898
Instant Replay
Dial in numbers 905-694-9451 or 1-800-408-3053
Pass code 6306081
End date August 8, 2013
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's 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
x414ir@hammondpowersolutions.com
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