Hammond Power Solutions Inc.

TSX : HPS.A


Hammond Power Solutions Inc.

March 13, 2014 17:15 ET

Hammond Power Solutions Inc. Announces Quarter 4, 2013 Financial Results Building for the Future

GUELPH, ONTARIO--(Marketwired - March 13, 2014) -

(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 fourth quarter of 2013.

Bill Hammond, Chairman & Chief Executive Officer of Hammond Power Solutions Inc. commented, "Hammond Power Solutions has come through one of the most challenging years since the recession started in 2008. A number of unexpected circumstances as well as higher levels of economic volatility buffeted our sales and profit performance during 2013. We are confident that our financial strength, core competencies and long term strategies will accelerate our growth as the global recovery begins."

FOURTH QUARTER RESULTS

Sales for the quarter ended December 31, 2013 were $62,804 a slight increase of $271 or 0.4% from the comparative quarter last year, which is reflective of the impact of the continued demand for our product, market share and favorable product mix. U.S. sales were stable at $35,201 in Quarter 4, 2013, an increase of $637 or 1.8% from Quarter 4, 2012. In 2013, sales to the U.S. market of $138,481 decreased by $6,604, or 4.6%, compared to 2012 sales of $145,085. Canadian sales were $20,081 for the quarter, a decrease over Quarter 4, 2012, of $4,052 or 16.8%. Year to date Canadian sale were $79,766 in 2013 compared to $95,467 in 2012 a drop of $15,701 or 16.4%. International sales in Quarter 4, 2013 were $7,522 versus $3,824 in Quarter 4, 2012, an increase of $3,698 or 96.7%. International sales were $24,694 in 2013 compared to $16,824 in 2012, an increase of $7,870 or 46.8%.

The Company realized an increase in bookings of 1.12% over Quarter 3, 2013 and an increase of 2.7% as compared against Quarter 4, 2012. Due to the softer North American, European and Asian economies, year-to-date bookings were lower by 1.1%.

Quarter 4, 2013 gross margin dollars decreased by $529 compared to Quarter 4, 2012. Gross margin rate decreased to 27.1% in Quarter 4, 2013 versus 28.1% in Quarter 4, 2012 as a result of market pricing pressures and lower manufacturing throughput and were 25.0% year to date 2013 versus 25.2% year to date 2012.

Bill Hammond further commented, "We are pleased with our solid gross margin rates for the year. Despite a slower than expected economy, we continued to increase our sales and market share through our U.S. distributor channel. Our expanded channel and geographical presence will benefit HPS even more as the U.S. economy begins to improve."

Total selling and distribution expenses were $7,461 in Quarter 4, 2013 versus $6,773 in Quarter 4, 2012, an increase of $688 or 10.2%. These expenses represent 11.9% of sales in Quarter 4, 2013 and 10.8% of sales in Quarter 4, 2012. Year-to-date selling and distribution expenses were $27,156 or 11.2% of sales in 2013, compared to $25,894 or 10.1% of sales in 2012.

The general and administrative expenses for Quarter 4, 2013 totaled $5,394, a slight increase of $171 or 3.2% when compared to Quarter 4, 2012 expenses of $5,223. This represents 8.6% of sales in Quarter 4, 2013 as compared to 8.4% of sales in Quarter 4, 2012. Year-to-date general and administrative expenses were $22,409 or 9.2% of sales in 2013, compared to $20,714 or 8.0% of sales in 2012.

Earnings from operations were $4,157 in Quarter 4, 2013 versus $5,545 in Quarter 4, 2013, a decrease of $1,388 or 25.0% and were $11,036 year-to-date in 2013, as compared to $18,180 in 2012, a decrease of $7,144 or 39.3%.

Interest expense for Quarter 4, 2013 finished at $155 and was comparable to $146 in Quarter 4, 2012. Year-to-date interest cost was $860, an increase of $165 when compared to the 2012 year-to-date expense of $695. 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 Italian acquisition in the year.

There was a foreign exchange gain of $217 in the Quarter 4, 2013 versus $393 in Quarter 4, 2012 and a foreign exchange loss in 2013 of $80 related primarily to the transactional exchange gain or loss pertaining to the Company's U.S. dollar trade accounts payable in Canada, compared to a foreign exchange gain of $775 in 2012.

Net earnings for Quarter 4, 2013 decreased by $1,835, finishing at $2,895 compared to net earnings of $4,730 in Quarter 4, 2012. Year-to-date net earnings were $6,104 in 2013 and $12,611 in 2012, a decrease of $6,507 or 51.6. This decrease is mostly due to lower sales in the year.

Net cash used in operating activities for Quarter 4, 2013 was $2,819 versus cash generated of $10,461 in Quarter 4, 2012, a decrease of $13,280 as a result of lower net earnings. Year-to-date cash generated by operating activities was $620 in 2013 and $21,371 in 2012, a change of $20,751.

Overall cash balances net of debt bank lines of credit resulted in net debt of $15,959 as at December 31 2013, a decrease of $17,111 as compared to a net cash balance of $1,152 as at December 31, 2012. This is primarily reflecting acquisition activity, capital investment and debt repayment in the year.

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 December 30, 2013. Year to date, the Company has paid a quarterly cash dividend of twenty cents ($0.20) per Class A Subordinate Voting Share and twenty cents ($0.20) per Class B Common Share.

Mr. Hammond concluded, "We continue to implement operational and strategic initiatives to grow our sales, control our expenses, manage the company and build for the future."

FINANCIAL RESULTS

THREE MONTHS ENDED:
(dollars in thousands)
December 31, 2013 December 31, 2012 Change
Sales $ 62,804 $ 62,533 $ 271
Earnings from Operations $ 4,157 $ 5,545 $ (1,388 )
Exchange Gain $ (217 ) $ (393 ) $ (176 )
Net Earnings $ 2,895 $ 4,730 $ (1,835 )
Earnings per share
Basic $ 0.25 $ 0.41 $ (0.16 )
Diluted $ 0.25 $ 0.41 $ (0.16 )
Cash (used) generated by Operations $ (2,819 ) $10,461 $ (13,280 )
TWELVE MONTHS ENDED:
(dollars in thousands)
December 31, 2013 December 31, 2012 Change
Sales $ 242,941 $ 257,376 $ (14,435 )
Earnings from Operations $ 11,036 $ 18,180 $ (7,144 )
Exchange Loss/(Gain) $ 80 $ (775 ) $ (855 )
Net Earnings $ 6,104 $ 12,611 $ (6,507 )
Earnings per share
Basic $ 0.52 $ 1.08 $ (0.56 )
Diluted $ 0.52 $ 1.08 $ (0.56 )
Cash generated by Operations $ 620 $ 21,371 $ (20,751 )

TELECONFERENCE

Hammond Power Solutions Inc. will hold a conference call on Friday, March 14, 2014 at 10:00 a.m. EST, to discuss the Company's financial results for the fourth quarter 2013.

Listeners may attend the conference by dialing:

1-416-340-2216 / 1-866-226-1792 / 1-800-9559-6849
Instant Replay
Dial in numbers 905-694-9451 or 1-800-408-3053
Pass code 7239947
End date March 28, 2014

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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