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
third quarter of 2012.
"Sales increased by 15% compared to the same quarter in 2011,
while gross margin dollars grew 18% during that same period. This
was accomplished during a time of growing uncertainty in the U.S.
and global economies which makes us especially proud of our
continuing strong performance," commented Bill Hammond, Chairman
& Chief Executive Officer of Hammond Power Solutions Inc.
THIRD QUARTER RESULTS
Sales for the quarter-ended September 29, 2012 were $63,703 up
$8,214 or 14.8% from the comparative quarter last year, and were
higher by $34,247 or 21.3% year-to-date, finishing at $194,843
compared to $160,596 last year. HPS sales increased in both Canada
and the U.S. electrical markets, which also benefitted from a
weaker Canadian dollar. As a result of higher Original Equipment
Manufacturers ("OEM") order booking and sales activity, sales in
the United States stated in U.S. dollars ("USD") were $36,608 in
Quarter 3, 2012 an increase of $2,277 or 6.6% from Quarter 3, 2011.
Year-to-date sales in the U.S. stated in USD were $110,914, an
increase of $13,936 or 14.4%, when compared to $96,978 last
year-to-date.
Bill Hammond stated, "Canadian sales are up 21% year-to-date as
a result of a stronger project market and increased market share
through our distributor channel. Sales in the United States are up
14% compared to a year ago driven by continuing strong OEM activity
as well as expanding market share through our growing industrial
and commercial distributor network."
Our strategic sales initiatives produced bookings growth
resulting in an increase of 4.1% over Quarter 2, 2012. Bookings in
Quarter 3, 2012 trended higher in both North America and
internationally contributing to an increase in backlog.
The Company was very effective at growing it margin rates this
Quarter. Gross margin rates Quarter 3, 2012 finished at 24.5%
versus 23.9% in Quarter 3, 2011, an increase of 0.6% of sales. On a
year-to-date basis, gross margin rates were 24.2% compared to 23.9%
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.
"We are most pleased with the improvement in our North American
margins compared to a year ago, particularly at a time of
continuing cost pressures in a highly competitive market place,"
Bill Hammond further commented.
Total selling and distribution expenses were $6,337 in Quarter
3, 2012 versus $5,667 in Quarter 3, 2011 - an increase of $670 or
11.8%. Year-to-date, selling and distribution costs were $19,121
versus $16,560 in 2011, an increase of $2,561 or 15.5%. Due to
sales increases, variable selling expenses in Quarter 3, 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 3, 2012
totaled $5,067 - an increase of $143 or 2.9% when compared to
Quarter 3, 2011 costs of $4,924. 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 $1,056 or 7.3%, totaling $15,491
when compared to $14,435 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.
Quarter 3, 2012 earnings from operations, increased by $1,551 or
58.2% from the same quarter last year, finishing at $4,215 in the
quarter, as compared to $2,664 in Quarter 3, 2011. Earnings from
operations were $12,635 versus $7,310 for the same period of 2011,
an increase of $5,325 or 72%. Higher sales, the realization of
selling price increases, the positive effects of growing
manufacturing throughput and cost reductions contributed to these
gains.
The interest expense for Quarter 3, 2011 finished at $249
compared to $77 in Quarter 3, 2011 an increase of $172.
Year-to-date interest cost was $549, an increase of $365 when
compared to the year-to-date 2011 expense of $184.
The foreign exchange gain in Quarter 3, 2012 was $314. This
relates 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 $227 in Quarter 3, 2011. The
year-to-date exchange gain is $382 in 2012 compared to a foreign
exchange loss of $709 for the same period of 2011.
Net earnings for Quarter 3, 2012, increased by $2,381, finishing
at $2,552 compared to net earnings of $171 in Quarter 3, 2011. On a
year-to-date basis net earnings finished at $7,881, an increase of
$5,457 when compared to year-to-date 2011 net earnings of $2,424.
Net earnings were positively impacted by the 14.8% growth in sales
and increased gross margin rates.
Net cash provided by operating activities for Quarter 3, 2012
was $3,736 versus cash provided of $4,923 in Quarter 3, 2011 a
decrease of $1,160 as a result of an increase in non-cash working
capital and higher income tax payments. Year-to-date cash generated
from operations was $10,909 compared to 2011 cash used of $4,029, a
change of $14,938. This is as a result of higher profits and lower
working capital requirements to support the operations.
Change in non-cash operating working capital resulted in an
increase in usage of cash of $2,761 compared to the same quarter
last year. For the first nine months of 2012, the change in
non-cash working capital was a net usage of cash of $2,132 as
compared to a net usage of cash from the change in non-cash working
capital of $12,555 in the first nine months of 2011, a decrease in
cash usage of $10,423.
The Company's overall debt, net of cash was $9,255 in Quarter 3,
2012 compared to a net debt position of $3,344 in Quarter 3, 2011,
a reduction in cash position of $5,911. This debt position change
was a result of the purchase of PETE plus the assumed debt and the
change in non-cash working capital.
Mr. Hammond concluded, "We are carefully watching what may
happen over the next 15 months however, we are not as pessimistic
as many companies given our geographical, market and channel
diversification . We will continue to manage Hammond Power
Solutions in a cautious and conservative manner to not only weather
any economic storms that might develop, but to also be in a strong
financial position to take advantage of the growth opportunities
that we believe will surface."
THREE MONTHS ENDED:
(dollars in thousands)
----------------------------------------------------------------------------
September 28, October 1,
2012 2011 Change
----------------------------------------------------------------------------
Sales $ 63,703 $ 55,489 $ 8,214
----------------------------------------------------------------------------
Earnings from Operations $ 4,215 $ 2,664 $ 1,551
----------------------------------------------------------------------------
Exchange Loss/(Gain) $ (314) $ 227 $ (541)
----------------------------------------------------------------------------
Net Earnings $ 2,552 $ 171 $ 2,381
----------------------------------------------------------------------------
Earnings per share
Basic 0.21 0.01 0.20
Diluted 0.21 0.01 0.20
----------------------------------------------------------------------------
Cash Provided by Operations $ 3,763 $ 4,923 $ (1,160)
----------------------------------------------------------------------------
NINE MONTHS ENDED:
(dollars in thousands)
----------------------------------------------------------------------------
September 28, October 1,
2012 2011 Change
----------------------------------------------------------------------------
Sales $ 194,843 $ 160,596 $ 34,247
----------------------------------------------------------------------------
Earnings from Operations $ 12,635 $ 7,310 $ 5,325
----------------------------------------------------------------------------
Exchange Loss/(Gain) $ (382) $ 709 $ (1,091)
----------------------------------------------------------------------------
Net Earnings $ 7,881 $ 2,424 $ 5,457
----------------------------------------------------------------------------
Earnings per share
Basic 0.67 0.21 0.46
Diluted 0.67 0.21 0.46
----------------------------------------------------------------------------
Cash (Used in) Provided by
Operations $ 10,909 $ (4,029) $ 14,938
----------------------------------------------------------------------------
NOTE: ALL NUMBERS HAVE BEEN STATED UNDER IFRS
TELECONFERENCE
Hammond Power Solutions Inc. will hold a conference call on
Thursday, November 1, 2012 at 10:00 a.m. EST, to discuss the
Company's financial results for the Third 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
x414ir@hammondpowersolutions.com
Hammond Power Solutions (TSX:HPS.A)
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