GUELPH, ONTARIO--(Marketwired - May 1, 2017) -

(Dollar amounts are in thousands unless otherwise specified)

Strong Quarter

  • Surging sales
  • Increased bookings
  • Margin rate stability

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 2017.


Sales for the quarter-ended April 1, 2017 were $72,362, an increase of $3,981 or 5.3% from Quarter 1, 2016 sales of $68,722. U.S. sales increased by $3,981 or 10.3%, finishing at $42,671 for Quarter 1, 2017 compared to $38,690 in Quarter 1, 2016. Canadian sales were $16,939 for the quarter, a decrease of $986 or 5.5% from Quarter 1, 2016 sales of $17,925. International sales for Quarter 1, 2017 finished at $12,752 versus $12,107 in Quarter 1, 2016, an increase of $645 or 5.3%.

Bookings increased 7.1% over Quarter 1, 2016 due to a momentum increase in bookings in the North American direct channel.

"We feel with the resurgence in bookings and the strengthening end markets we serve that HPS is poised to rebound in the coming quarters," Bill Hammond commented.

Gross margin rate for Quarter 1, 2017 was 24.4% compared to Quarter 1, 2016 margin rate of 24.3%, a slight increase of 0.1% of sales. The improvement in margin rates can be attributed to a combination of restructuring cost reductions, efficiency increases, higher manufacturing throughput, product mix, and geographic blend.

Total selling and distribution expenses were $8,205 in Quarter 1, 2017 or 11.3% of sales versus $7,637 in Quarter 1, 2016 or 11.1% of sales, an increase of $568 or 0.8% of sales.

General and administrative expenses for Quarter 1, 2017 totaled $6,238 or 8.6% of sales, compared to Quarter 1, 2016 expenses of $6,411 or 9.3% of sales, a decrease of $173 and 0.2% of sales.

Quarter 1, 2017 earnings from operations were $3,221, an increase of $544 or 20.3% from $2,677 for the same quarter last year. After restructuring charges, Quarter 1, 2017 earnings from operations were $2,405, compared to $2,677 for the same quarter last year, a decrease of $272 or 10.2%. The reduction in the quarter earnings is primarily a result of higher net earnings derived from increased sales, increased gross margins, lower foreign exchange losses, and a smaller loss of investment in the joint venture which were diluted by non-recurring restructuring charges.

Interest expense for Quarter 1, 2017 was $316, an increase of $115 or 57.2% compared to the Quarter 1, 2016 expense of $201.

The foreign exchange loss in Quarter 1, 2017 was $67 compared to $321 in Quarter 1, 2016, a decrease of $254 or 79.1%. This loss relates primarily to the transactional exchange pertaining to the Company's U.S. dollar trade accounts payable in Canada.

Net earnings for Quarter 1, 2017 finished at $1,084 compared to net earnings of $884 in Quarter 1, 2016, an increase of $200 or 22.6%. This increase in the quarter earnings is a result of higher sales, increased gross margin, a decline in the loss on investment in the joint venture and restructuring charges.

Basic earnings per share were $ 0.09 for Quarter 1, 2017 versus $0.07 in Quarter 1, 2016.

Net cash used in operating activities for Quarter 1, 2017 was $7,622 versus $3,380 in Quarter 1, 2016, an increase of $4,242. This increase is a result of an increase in cash utilized for working capital. In Quarter 1, 2017, non-cash working capital used cash of $11,455 compared to cash used of $3,731 for the same quarter last year, an increase of $7,724.

The Company's overall operating debt balance net of cash was $21,475 in Quarter 1, 2017 compared to $17,579 in Quarter 1, 2016, an increase in debt position of $3,896 primarily reflecting funding of the joint venture and working capital requirements.

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 19, 2017.

Mr. Hammond concluded, "We are well aware of the risks and subsequent uncertainties that extend across the world due to possible U.S. trade policies, the impact of Brexit negotiations on the Eurozone, and sabre rattling in the Far East. However the global economy, especially the United States, is beginning to come back to life and I believe that HPS can ride this to improved financial performance in the quarters and years ahead."

(dollars in thousands)
April 1, 2017 April 2, 2016 Change
Sales $ 72,362 $ 68,722 $ 3,640
Restructuring Charges $ 816 $ - $ 816
Earnings from Operations $ 2,405 $ 2,677 $ (272)
Exchange Loss $ 67 $ 321 $ (254)
Share of loss of investment in joint venture $ 257 $ 528 $ (271)
Net Earnings $ 1,084 $ 884 $ 200
Earnings per share
Basic $ 0.09 $ 0.07 $ 0.02
Diluted $ 0.09 $ 0.07 $ 0.02
Cash used in operations $ (7,622) $ (3,380) $ (4,242)

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.

Contact Information:

Hammond Power Solutions Inc.
Dawn Henderson
Manager Investor Relations
(519) 822-2441 x414