Hammond Power Solutions Inc. ("HPS") (TSX:HPS.A) a leading
manufacturer of dry type, cast coil and oil filled transformers and
related magnetics, today announced its financial results for the
second quarter of 2012.
"I am pleased to report a robust Quarter 2, 2012 in terms of
both sales and profit growth for Hammond Power Solutions Inc. As we
know, the global economy has become increasingly challenging as the
year has progressed, making our financial and market share
performance even more gratifying," commented Bill Hammond, Chairman
& Chief Executive Officer of Hammond Power Solutions Inc.
SECOND QUARTER RESULTS
Sales for the quarter-ended June 30, 2012 were $65,486, up
$13,156 or 25.1% from the comparative quarter last year, and were
higher by $26,033 or 24.8% year-to-date, finishing at $131,140
compared to $105,107 last year. Due to an increase in new order
booking activity from the same quarter last year, sales in the
United States stated in U.S. dollars were $37,735 in Quarter 2,
2012, an increase of $8,488 or 29.0% from Quarter 2, 2011.
Year-to-date sales in the U.S. were $74,306, an increase of $14,542
or 24.3%, when compared to $59,764 last year-to-date. The sales
increases can be attributed to higher shipments in both the
American and Canadian markets and its expanding international sales
in Italy and India.
Bill Hammond stated, "In North America we continued to see
strong growth from the resource and utility sectors as well as
distributor channel expansion but despite a global economic
slowdown, we remain on a strong growing trend over 2011."
Sales initiatives produced bookings growth resulting in an
increase of 8.8% over Quarter 1, 2012 and 8.5% from Quarter 2,
2011. Bookings in Quarter 2, 2012 trended higher in North America
and internationally. These increased booking rates resulted in a
rise in order backlog of 5.6% from Quarter 1, 2012 and increased
19.3% from Quarter 2, 2011.
The Company delivered stronger gross margin rates in Quarter 2,
2012 finishing at 24.5% versus 23.1% in Quarter 2, 2011 an increase
of 1.4% of sales. On a year-to-date basis, gross margin rates were
24.1% compared to 23.8% in 2011, up 0.3% of sales. The Company's
gross margin rates were impacted by negative selling price
pressures, but did benefit from product mix and the favourable
impact that a weaker Canadian dollar has on U.S. resale
margins.
"Gross margin rates benefitted from the favourable impact that
increased manufacturing throughput has on the absorption of our
fixed factory cost structures, cost containment and improving
labour efficiencies," Bill Hammond further commented.
Total selling and distribution expenses were $6,525 in Quarter
2, 2012 versus $5,506 in Quarter 2, 2011, an increase of $1,019 or
18.5%. Year-to-date, selling and distribution costs were $12,784
versus $10,893 in 2011, an increase of $1,891 or 17.4%. Due to
sales increases, variable selling expenses in Quarter 2, 2012 were
impacted by higher freight and commission expense and increased
salaries associated with strategic hires to support the sales
strategies of the Company.
The general and administrative expenses for Quarter 2, 2012
totaled $4,886, an increase of $122 or 2.6% when compared to
Quarter 2, 2011 costs of $4,764. Almost all of this increase was
attributed to additional general and administrative costs relating
to its new Indian operation. Year-to-date, general and
administrative costs are higher by $913 or 9.6%, totaling $10,424
when compared to $9,511 for 2011. On a year-to-date basis, the
company has seen increases in stock option expense, costs related
to the company's ongoing acquisition activities, investment in its
information systems and general and administrative costs relating
to its new Indian operation.
The Company delivered another strong quarter of sales and gross
margin contribution. This resulted in increased earnings from
operations of $2,844 or 156.3% from the same quarter last year,
finishing at $4,663 in the quarter, as compared to $1,819 in
Quarter 2, 2011. On a year-to-date basis, earnings from operations
were $8,420 versus $4,646 for the same period of 2011, an increase
of $3,774 or 81.2%.
The interest expense for Quarter 2, 2012 finished at $176
compared to $77 in Quarter 2, 2011 an increase of $99. Year-to-date
interest cost was $300, an increase of $193 when compared to
year-to-date 2011 expense of $107.
The foreign exchange gain in Quarter 2, 2012 was $46, relating
primarily to the transactional exchange gain pertaining to the
Company's U.S. dollar trade accounts payable in Canada, compared to
a foreign exchange loss of $180 in Quarter 2, 2011. For the first
six months of 2012, the Company realized an exchange gain of $68 as
compared to a foreign exchange loss of $482 for the same period of
2011.
Net earnings surged in Quarter 2, 2012, increasing by $2,129 or
312.1%, finishing at $2,811 compared to $682 in Quarter 2, 2011. On
a year-to-date basis, net earnings finished at $5,329 an increase
of $3,076 or 136.5% when compared to year-to-date 2011 net earnings
of $2,253. Net earnings were positively impacted by the 25.1%
growth in sales, increased gross margin rates and a 26.2% increase
in gross margin dollars as compared to Quarter 2, 2011.
Net cash generated by operating activities for Quarter 2, 2012
was $10,476 versus cash used of $6,504 in Quarter 2, 2011 a
difference of $16,980. Year-to-date cash generated from operations
was $7,146 compared to 2011 cash used of $8,846, a change of
$15,992.
Non-cash operating working capital generated cash of $6,455
compared to a usage of cash of $8,394 for the same quarter last
year resulting in an overall increase difference of $14,849.
Quarter 2, 2012 cash generation was primarily a net result of a
decrease in inventory of $1,795, a decrease in accounts receivable
of $1,971 and an increase in accounts payable of $1,743. For the
first six months of 2012, the change in non-cash working capital
was a net usage of cash of $884, as compared to a net usage of cash
in working capital of $14,188 in the first six months of 2011, a
decrease in cash usage of $13,304.
The Company's overall debt, net of cash was $11,369 in Quarter
2, 2012 compared to a net debt position of $7,520 in Quarter 2,
2011, a reduction in cash position of $3,849. The major
contributing factors to this were the purchase of PETE for $15,410
and the change in non-cash working capital.
Mr. Hammond concluded, "We are cautiously optimistic about the
next several quarters. Booking rates are strong from almost all
markets and we continue to expand our penetration of the
geographies we serve. We believe that it is prudent to remain
cautious and conservative in how we manage and grow our
Company."
THREE MONTHS ENDED:
(dollars in thousands)
----------------------------------------------------------------------------
June 30, 2012 July 2, 2011 Change
----------------------------------------------------------------------------
Sales $65,486 $52,330 $13,156
----------------------------------------------------------------------------
Earnings from Operations $4,663 $1,819 $2,844
----------------------------------------------------------------------------
Exchange Loss/(Gain) $(46) $180 $(226)
----------------------------------------------------------------------------
Net Earnings $2,811 $682 $2,129
----------------------------------------------------------------------------
Earnings per share
Basic .24 .06 .18
Diluted .24 .06 .18
----------------------------------------------------------------------------
Cash (Used) Provided by
Operations $10,476 $(6,504) $16,980
----------------------------------------------------------------------------
SIX MONTHS ENDED:
(dollars in thousands)
----------------------------------------------------------------------------
June 30, 2012 July 2, 2011 Change
----------------------------------------------------------------------------
Sales $131,140 $105,107 $26,033
----------------------------------------------------------------------------
Earnings from Operations $8,420 $4,646 $3,774
----------------------------------------------------------------------------
Exchange Loss/(Gain) $(68) $482 $(550)
----------------------------------------------------------------------------
Net Earnings $5,329 $2,253 $3,076
----------------------------------------------------------------------------
Earnings per share
Basic 0.46 0.20 .26
Diluted 0.46 0.20 .26
----------------------------------------------------------------------------
Cash (Used in) Provided by
Operations $7,146 $(8,846) $15,992
----------------------------------------------------------------------------
NOTE: ALL NUMBERS HAVE BEEN STATED UNDER IFRS
TELECONFERENCE
Hammond Power Solutions Inc. will hold a conference call on
Friday, July 27, 2012 at 10:00 a.m. EST, to discuss the Company's
financial results for the Second quarter 2012.
Listeners may attend the conference by dialing:
1-416-340-2216 or 1-866-226-1792
Instant replay Access Information:
Local access: 905-694-9451
Toll Free access: 800-408-3053
Pass code: 1338265
Caution Regarding Forward-Looking Information
This press release contains "forward-looking information" within
the meaning of applicable securities laws. The forward-looking
information contained in this press release is subject to known and
unknown risks, uncertainties and other factors that are not within
the control of HPS. Generally, this forward-looking information can
be identified by the use of forward-looking terminology such as
"outlook", "anticipate", "project", "target", "believe",
"estimate", "expect", "intend", "should", "scheduled", "will",
"plan" and similar expressions. Forward-looking information is
subject to known and unknown risks, uncertainties and other factors
that may cause HPS's actual results, level of activity, performance
or achievements to be materially different from those expressed or
implied by such forward-looking information and developed based on
assumptions about such risks, uncertainties and other factors set
out herein.
A discussion of factors that may affect HPS' actual results,
performance, achievements or financial position is contained in the
filings by HPS with the Canadian securities regulatory authorities,
including HPS' Annual Information Form. This list is not exhaustive
of the factors that may affect our forward-looking information.
These and other factors should be considered carefully and readers
should not place undue reliance on such forward-looking
information. HPS disclaims any intent or obligations to update or
revise publicly any forward-looking statements whether as a result
of new information, estimates or options, future events or results
or otherwise, unless required to do so by law.
About Hammond Power Solutions Inc.
Hammond Power Solutions Inc., ("HPS" or the "Company") is the
North American leader for the design of custom electrical
engineered magnetic as well as the leading manufacturer of standard
electrical dry type transformers. Advanced engineering
capabilities, high quality products and fast responsive service to
customers' needs has established the Company as a technical and
innovative leader in the electrical and electronic industries. The
Company has manufacturing facilities in Canada, the United States,
Mexico, Italy and India.
Contacts: Hammond Power Solutions Inc. Dawn Henderson Manager
Investor Relations (519) 822-2441 x414
Hammond Power Solutions (TSX:HPS.A)
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