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Hammond Power Solutions Inc. Announces Q1 2014 Financial Results

Gaining Momentum - Bookings Increase 32%

GUELPH, ONTARIO -- (Marketwired) -- 04/24/14 -- 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 2014.

Bill Hammond, Chairman & Chief Executive Officer of Hammond Power Solutions Inc. commented, "Hammond Power Solutions first quarter of 2014 has been challenging, but we are finally seeing concrete reasons to believe that a more positive business environment lays ahead for HPS."


Sales for the quarter-ended March 29, 2014 were $59,953, a decline of $3,719 or 5.8% from Quarter 1, 2013 sales of $63,672. U.S. sales were $33,747 in Quarter 1, 2014 a reduction of $1,438 or 4.1% from Quarter 1, 2013. Canadian sales were $17,930 for the quarter, a decrease over Quarter 1, 2013, of $3,342 or 15.7%. These declines were largely due to lower Quarter 4, 2013 booking rates in several market segments which include delayed construction related business attributed to the severe weather conditions in the quarter. International sales in Quarter 1, 2014 were $8,276 versus $7,222 in Quarter 1, 2013, an increase of $1,054 or 14.6%.

The Company realized an increase in bookings of 13.3% over Quarter 4, 2013 as a result of higher direct bookings and an increase of 31.5% as compared against Quarter 1, 2013, due to a significant increase in bookings in both the direct and distributor channels in North America.

"We are pleased with our lift in bookings rates. This bodes well going forward. We are starting to see general activity in the United States to slowly accelerate in most markets and regions. We are also seeing growth from our European and Indian operations compared to 2013," Bill Hammond further commented.

Quarter 1, 2014 gross margin dollars decreased by $2,330 compared to Quarter 1, 2013. Gross margin rate decreased to 23.2% in Quarter 1, 2014 versus 24.0% in Quarter 1, 2013 due to selling price pressures and the effect that lower production has on the absorption of factory costs.

Total selling and distribution expenses were $7,058 in Quarter 1, 2014 versus $6,542 in Quarter 1, 2013, an increase of $516 or 7.9%. These expenses represent 11.8% of sales in Quarter 1, 2014 and 10.9% of sales in Quarter 1, 2013.

The general and administrative expenses for Quarter 1, 2014 totaled $5,546, a slight increase of $151 or 2.8% when compared to Quarter 1, 2013 expenses of $5,395. This represents 9.3% of sales in Quarter 1, 2014 as compared to 8.5% of sales in Quarter 1, 2013

Quarter 1, 2014 earnings from operations decreased by $2,056 or 61.2% from the same quarter last year, finishing at $1,303 compared to $3,359. This reduction was a result of the lower sales.

The interest expense for Quarter 1, 2014 finished at $257, an increase of $88 or 52.1% compared to the Quarter 1, 2013 expense of $169. The increase in interest expense for the quarter was a result of higher operating debt levels attributed to higher working capital utilization.

The foreign exchange gain in Quarter 1, 2014 was $97, relating 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 $8 in Quarter 1, 2013.

Net earnings for Quarter 1, 2014 decreased by $1,387 or 72.7% and finished at $520 compared to net earnings of $1,907 in Quarter 1, 2013. Decreased sales, lower gross margin rate dollars, increased interest costs and higher general and administrative expenses were the main contributing factors to the quarter decline.

Net cash used in operating activities for Quarter 1, 2014 was $1,645 versus $1,011 in Quarter 1, 2013, an increase of $634 as a result of lower net earnings.

The Company's overall debt, net of cash was $24,965 in Quarter 1, 2014 compared to a net debt position of $18,934 in Quarter 1, 2013, an increase in debt position of $6,031. This debt position change was a result of the purchase of Marnate and the change in non-cash working capital.

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 27, 2014.

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."


(dollars in thousands)
                            March 29, 2014   March 30, 2013          Change
Sales                      $        59,953  $        63,672  $       (3,719)

Earnings from Operations   $         1,303  $         3,359  $       (2,056)

Exchange Gain              $            97  $             8  $           89

Net Earnings               $           520  $         1,907  $       (1,387)

Earnings per share
                           $          0.04  $          0.16  $        (0.12)
                           $          0.04  $          0.16  $        (0.12)
Cash Used in Operations    $         1,645  $         1,011  $          634


Hammond Power Solutions Inc. will hold a conference call on Friday, April 25, 2014 at 10:00 a.m. EST, to discuss the Company's financial results for the first quarter 2014.

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         May 9, 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.


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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