Hammond Power Solutions Inc.
TSX : HPS.A

Hammond Power Solutions Inc.

April 23, 2015 16:55 ET

Hammond Power Solutions Inc. Announces Quarter 1 2015 Financial Results - Solid Bookings and Backlog Growth

GUELPH, ONTARIO--(Marketwired - April 23, 2015) -

(Dollar amounts are in thousands unless otherwise specified)

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 first quarter of 2015.

FIRST QUARTER RESULTS

Sales for the quarter-ended March 28, 2015 were $63,137, an increase of $3,184 or 5.3% from Quarter 1, 2014 sales of $59,953. U.S. sales grew by $5,376 or 15.9%, finishing at $39,123 for Quarter 1, 2015 compared to $33,747 in Quarter 1, 2014. Canadian sales were $16,678 for the quarter, a decline of $1,252 or 7.0% from Quarter 1, 2014 sales of $17,930. The Company has been lifted by a modestly improved, construction, alternative energy, and project market segments. International sales for Quarter 1, 2015 finished at $7,336 versus $8,276 in Quarter 1, 2014, a decrease of $940 or 11.4%.

The Company increased bookings 14.8% over Quarter 1, 2014 due to stronger bookings in both the distributor and direct channels in North American and International markets. Booking rates in the distributor channel increased 11.4% over Quarter 1, 2014. On a direct channel basis, bookings exceeded Quarter 1, 2014 by 17.8%. Backlog increased 16.6% over Quarter 4, 2014 and finished higher by 15.8% when compared to Quarter 1, 2014 due to higher booking rates in several markets including the Canadian and U.S. OEM markets.

Bill Hammond commented, "We are enjoying the largest growth in bookings and backlog across all of our global operations since 2012."

Gross margin rates for Quarter 1, 2015 were 22.2% compared to Quarter 1, 2014 margin rates of 23.2%, and a decrease of 1.0% of sales. The Company's gross margin rates were reduced by customer and market mix, as well as lower factory capacity utilization.

Total selling and distribution expenses were $6,746 in Quarter 1, 2015 or 10.7% of sales versus $7,058 in Quarter 1, 2014 or 11.8% of sales, a decrease of $312 or 4.4%. The general and administrative expenses for Quarter 1, 2015 totaled $5,822 or 9.2% of sales, consistent with Quarter 1, 2014 expenses of $5,546 or 9.3% of sales.

Quarter 1, 2015 earnings from operations was $1,446, an increase of $143 or 11.0% from $1,303 for the same quarter last year. The improvement in the quarter is a result of higher sales, increased gross margin dollar contribution and a higher foreign exchange gain.

Interest expense for Quarter 1, 2015 finished at $116, a decrease of $141 or 54.9% compared to the Quarter 1, 2014 expense of $257. Interest expense in Quarter 1, 2014 was being generated as a result of higher operating debt levels related to the assumption of debt associated with the 2013 acquisition of Marnate and working capital requirements.

The foreign exchange gain in Quarter 1, 2015 was $290. This gain relates primarily to the transactional exchange pertaining to the Company's U.S. dollar trade accounts payable in Canada, compared to a foreign exchange gain of $97 in Quarter 1, 2014.

Net earnings for Quarter 1, 2015 increased by $261 or 50.2% and finished at $781 compared to net earnings of $520 in Quarter 1, 2014. This growth in the quarter earnings is a result of higher sales, increased gross margin dollar contribution despite lower gross margin rates, and an increased foreign exchange gain this quarter compared to Quarter 1, 2014.

Net cash provided by operating activities for Quarter 1, 2015 was $421 versus cash used in operating activities of $1,645 in Quarter 1, 2014, an increase of $2,066. During the quarter, non-cash working capital used cash of $2,880 compared to $4,686 for the same quarter last year.

The Company's overall debt balances net of cash was $14,419 in Quarter 1, 2015 compared to $19,858 in Quarter 1, 2014, a decrease in debt position of $5,439 primarily reflecting cash generated by operations during the year.

In Quarter 1, 2015, the Company announced that it had completed the formation of a new joint venture company, Corefficient S. de R.L. de C.V. ("Corefficient"). Corefficient will design, manufacture and market energy efficient electrical cores, a major component used in the manufacture of dry type and liquid filled transformers. Corefficient will be based out of Monterrey, Mexico, where a state of the art manufacturing facility is currently under construction and will be fully operational by the fourth quarter of 2015.

Mr. Hammond commented, "Corefficient is an exciting venture and is reflective of the strong, long-term relationship between Hammond Power Solutions Inc. and National Material LP. Both partners bring the value of people, technology and financial strength to Corefficient. The manufacturing operation will be world class."

The Company continued with its regular quarterly dividend program, paying six cents ($0.06) per Class A Subordinate Voting Share of HPS and six cents ($0.06) per Class B Common Share of HPS on March 26, 2015.

Mr. Hammond concluded, "We are cautiously optimistic about our growth going forward. This is supported by our growing bookings and backlog and we continue to expand our penetration of the geographies we serve. We are confident that our financial strength, core competencies and long term strategies will accelerate our growth as markets start to improve."

FINANCIAL RESULTS

THREE MONTHS ENDED:
(dollars in thousands)

March 28, 2015 March 29, 2014 Change
Sales $ 63,137 $ 59,953 $ 3,184
Earnings from Operations $ 1,446 $ 1,303 $ 143
Exchange Gain $ 290 $ 97 $ 193
Net Earnings $ 781 $ 520 $ 261
Earnings per share
Basic $ 0.07 $ 0.04 $ 0.03
Diluted $ 0.07 $ 0.04 $ 0.03
Cash provided by (used in) operations $ 421 $ (1,645) $ 2,066

TELECONFERENCE

Hammond Power Solutions Inc. will hold a conference call on Friday, April 24, 2015 at 10:00 a.m. EST, to discuss the Company's financial results for the first quarter 2015.

Listeners may attend the conference by dialing:

1-416-340-8530 / 1-800-769-8320 / 1-800-2787-2090
Instant Replay
Dial in numbers 905-694-9451 or 1-800-408-3053
Pass code 6223114
End date May 01, 2015

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.

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