(Dollar amounts are in thousands unless otherwise specified)
Gaining Momentum - Strengthening North American Sales and Bookings
GUELPH, Ontario, April 30, 2018 (GLOBE NEWSWIRE) -- 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 2018.
FIRST QUARTER RESULTS
Sales for the quarter-ended March 31, 2018 were $73,073, an increase of $711 or 1.0% from Quarter 1, 2017 sales of $72,362. U.S. sales increased by $2,041 or 4.8%, finishing at $44,712 for Quarter 1, 2018 compared to $42,671 in Quarter 1, 2017. U.S. sales, when stated in U.S. dollars were $35,862 in Quarter 1, 2018, compared to Quarter 1, 2017 of $32,264, an increase of $3,599 or 11.2%. Canadian sales were $20,270 for the quarter, an increase of $3,781 or 22.3% from Quarter 1, 2017 sales of $16,939. International sales for Quarter 1, 2018 finished at $7,641 versus $12,752 in Quarter 1, 2017, a decrease of $5,111 or 40.1% primarily a result of lower sales due to restructuring of our Italian operations and customer shipment deferrals.
Bookings increased 3.7% over Quarter 1, 2017 due to an increase in bookings in the North American distribution channel and increased bookings in the Indian market.
“The positive momentum continues to build for Hammond Power Solutions Inc. as we enter 2018. In Quarter 1 we continue to enjoy strengthening sales and bookings, especially in North America,” Bill Hammond commented.
The Quarter 1, 2018 gross margin rate was 23.4% compared to a Quarter 1, 2017 margin rate of 24.4%, a decrease of 1.0% of sales. The lower margin rate was a result of a stronger Canadian dollar, escalating raw material commodity costs, and selling price pressures.
Total selling and distribution expenses were $8,605 in Quarter 1, 2018 or 11.8% of sales versus $8,205 in Quarter 1, 2017 or 11.3% of sales, an increase of $400 or 0.5% of sales.
General and administrative expenses for Quarter 1, 2018 totaled $6,498 or 8.9% of sales, compared to Quarter 1, 2017 expenses of $6,238 or 8.6% of sales, an increase of $260 and 0.3% of sales.
Quarter 1, 2018 earnings from operations were $1,973, a decrease of $432 or 18.0% from $2,405 for the same quarter last year. The reduction in the quarter earnings from operations is primarily a result of the decrease in gross margin rates.
Interest expense for Quarter 1, 2018 was $296, a decrease of $20 or 6.3% compared to the Quarter 1, 2017 expense of $316.
The foreign exchange gain in Quarter 1, 2018 was $162 compared to a loss of $67 in Quarter 1, 2017, an improvement of $229. This gain relates primarily to the transactional exchange pertaining to the Company’s U.S. dollar trade accounts payable in Canada.
Net earnings for Quarter 1, 2018 finished at $895 compared to net earnings of $1,084 in Quarter 1, 2017, a decrease of $189 or 17.4%. The decrease in the quarter earnings is a result of decreased gross margin partially offset by the foreign exchange gain.
Basic earnings per share were $0.08 for Quarter 1, 2018 versus $0.09 in Quarter 1, 2017.
Net cash used in operating activities for Quarter 1, 2018 was $1,907 versus $7,622 in Quarter 1, 2017, a decrease of $5,715. This decrease is a result of a decrease in cash utilized for working capital.
In Quarter 1, 2018, non-cash working capital used cash of $4,952 compared to cash used of $11,455 for the same quarter last year, a decrease of $6,503.
During the quarter the remaining minority interest of the Indian operation was purchased for cash proceeds of $1,511. This purchase provides HPS with 100% ownership and control over the Indian facility.
The Company’s overall operating debt balance net of cash has remained consistent year-over-year from $21,483 in Quarter 1, 2018 compared to $21,475 in Quarter 1, 2017, primarily reflecting the purchase of the minority interest and working capital requirements being offset by cash generated by operations.
Mr. Hammond concluded, “Rising plant utilization, price increases, higher sales, and a more favourable product mix will help improve our bottom line in the quarters ahead. These are the strongest market conditions that we have seen this decade, and we remain optimistic about our prospects going forward.”
FINANCIAL RESULTS
THREE MONTHS ENDED:
(dollars in thousands)
| March 31, 2018 | April 1, 2017 | Change | |||||||
| Sales | $ | 73,073 | $ | 72,362 | $ | 711 | |||
| Restructuring Charges | $ | - | $ | 816 | $ | (816 | ) | ||
| Earnings from Operations | $ | 1,973 | $ | 2,405 | $ | (432 | ) | ||
| Exchange (Gain) Loss | $ | (162 | ) | $ | 67 | $ | (229 | ) | |
| Share of loss of investment in joint venture | $ | 279 | $ | 257 | $ | 22 | |||
| Net Earnings | $ | 895 | $ | 1,084 | $ | 189 | |||
| Earnings per share Basic Diluted | $ $ | 0.08 0.08 | $ $ | 0.09 0.09 | $ $ | (0.01 (0.01 | ) ) | ||
| Cash used in operations | $ | (1,907 | ) | $ | (7,622 | ) | $ | 5,715 | |
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.