http://www.pioneerpowersolutions.com () —
Pioneer Power Solutions, Inc. (OTCBB: PPSI) ("Pioneer" or the "Company"), a manufacturer of electrical equipment for utility, industrial, commercial and wind energy applications, announced its results for the three months and six months ended June 30, 2010.
Three Months Ended June 30, 2010
Revenues for the second quarter of 2010 grew 7.6% to $12.4 million from $11.5 million for the comparable quarter of last year. Jefferson Electric, Inc. ("Jefferson"), which was acquired at the end of April 2010, contributed $3.8 million in revenue during the quarter. Pioneer Transformers, the Company's Canada-based, liquid-filled transformer business, experienced a $2.9 million revenue decline in the second quarter of 2010, to $8.5 million, versus $11.5 million of revenue during comparable quarter of last year. This decline was due to lower unit volume stemming from delays on expected orders and the generally weak economic environment. Pioneer Wind Energy Systems, Inc. ("Pioneer Wind"), the Company's new clean energy business formed upon the acquisition of wind turbine manufacturing assets on June 7, 2010, did not contribute any revenue during the quarter.
The Company's gross margin was 24.2% during the second quarter of 2010, up 0.2% from 24.0% during the comparable quarter of 2009. Pioneer Transformers and Jefferson achieved similar gross margin percentages, the overall increase of 0.2% was primarily due to lower material costs during the current year quarter as compared to the same period of 2009.
Net earnings were $1.4 million for the second quarter of 2010, up 28.0% from net earnings of approximately $1.1 million during the first quarter of 2009. Net earnings for the second quarter of 2010 includes a $1.1 million gain related to the acquisition of wind turbine-related inventories and capital equipment below their fair market values. Net earnings during the three months ended June 30, 2010 also increased from the acquisition of Jefferson on April 30, 2010, offset by initial operating losses from the new Pioneer Wind division and a decline in net earnings from Pioneer Transformers, as compared to the same three month period of 2009.
Earnings per basic and diluted share was $0.05 in the second quarter of 2010, or no change from $0.05 reported for the second quarter of 2009 when there were 6.9 million fewer diluted common shares outstanding.
Six Months Ended June 30, 2010
Revenues for the first six months of 2010 grew 9.8% to $20.6 million, compared to $18.8 million during the first half of 2009. The acquisition of Jefferson on April 30, 2010 accounted for all of the growth between the periods, partially offset by a $2.0 million decline in revenue from Pioneer Transformers (which equates to a 10.5% decline in revenue by Pioneer Transformers during the six months ended June 30, 2010 as compared to six months ended June 30, 2009). Pioneer Wind made no contribution to revenue during either six month period.
The Company's gross margin was 23.2% during the six months ended June 30, 2010, up 0.8% from 22.4% during the first half of 2009. As discussed above, lower material costs were the primary reason for the overall gross margin percentage improvement.
Net earnings were $1.8 million for the six months ended June 30, 2010, up 22.1% from net earnings of $1.4 million during the first half of 2009. Results for the first half of 2010 include the $1.1 million gain recognized in conjunction with the acquisition of assets for the Pioneer Wind business during the second quarter. Our net earnings during the first half of 2010 also increased from the contribution of Jefferson beginning after April 30th, offset by initial operating losses from our new Pioneer Wind division and a decline in net earnings from Pioneer Transformers, as compared to the first half of 2009.
Earnings per basic and diluted share was $0.06 for the first six months of 2010, or no change from $0.06 reported for the first six months of 2009 when there were 6.6 million fewer diluted shares outstanding.
Financial Position as of June 30, 2010
During the quarter ended June 30, 2010, the Company used most of its cash on hand and cash generated from operating activities to repay debt ($6.1 million outstanding as of June 30, 2010), to fund two acquisitions and to continue the previously disclosed expansion of its manufacturing plant in Granby, Quebec. Pioneer finished the second quarter with $3.1 million of net working capital and significant borrowing capacity remaining under its bank credit facilities.
"The second quarter of 2010 was a very successful one for Pioneer from several perspectives -- we successfully integrated two acquisitions and diversified our product mix and markets served, all while achieving solid revenue growth and a substantial increase in net earnings for the quarter and first six months," said Nathan Mazurek, Pioneer's Chairman and Chief Executive Officer. "After posting strong growth in the first quarter, our liquid-filled transformer business experienced a sales decline in the second quarter when compared to a particularly strong second quarter of 2009. However, our margins at the unit continue to improve, the current level of business activity has picked up and we have new products coming online soon with the completion of our plant expansion. Absent any unforeseen developments, I expect that Pioneer Transformers will surpass its last quarter revenue starting next quarter and throughout 2011."
On the performance of Pioneer's new Jefferson unit, Mr. Mazurek commented, "Jefferson has lost no momentum in its business since the acquisition was completed; in fact its revenues during the quarter were up over 10% versus the comparable period of 2009. Jefferson made an immediate contribution to our net earnings and the management team has proven exceptionally capable and energized to help Pioneer pursue new business opportunities, including acquisitions."
Mr. Mazurek continued, "Preparations to fully launch our renewable energy business, Pioneer Wind, are progressing extremely well. We are far along in the process of choosing key supply chain partners and inbound interest from prospective customers has been much greater than expected. Orders for our transformers in wind energy applications have picked up dramatically and we foresee many opportunities to leverage this market presence into turbine sales. We hope to be able to provide more updates on our wind segment in the near future."
For more information regarding Pioneer's financial performance during the second quarter of 2010, please refer to the Form 10-Q filed with the Securities and Exchange Commission on August 16, 2010.
Consolidated Interim Statement of Earnings (In thousands except in per share data) (Unaudited) Three Months Six Months Ended June 30, Ended June 30, -------------------- -------------------- 2010 2009 2010 2009 $ $ $ $ $ Sales 12,350 11,480 20,601 18,764 Cost of goods sold 9,367 8,724 15,811 14,552 Gross profit 2,983 2,756 4,790 4,211 Expenses Selling, general and administrative 1,987 883 3,137 1,837 Foreign exchange (gain) loss -150 170 -57 44 1,837 1,053 3,080 1,881 Operating income 1,146 1,703 1,710 2,331 Interest and bank charges 81 119 94 203 Other expense 350 - 350 - Gain on bargain purchase -1,052 - -1,052 - Earnings before income taxes 1,767 1,584 2,318 2,128 Provision for income taxes 394 512 555 684 Net earnings 1,373 1,072 1,763 1,444 Earnings per common share Basic 0.05 0.05 0.06 0.06 Diluted 0.05 0.05 0.06 0.06 Weighted average number of common shares outstanding Basic 29,370 22,800 29,185 22,800 Diluted 29,736 22,800 29,416 22,800
About Pioneer Power Solutions, Inc.Pioneer is a manufacturer of electrical equipment with particular emphasis on the North American electric utility, industrial, commercial and wind energy markets. Through its subsidiaries, Pioneer has been in the electrical transformer business for over 90 years, manufacturing a full line of liquid filled, encapsulated and ventilated transformers. Pioneer's wind energy business manufactures turbines of sizes greater than one megawatt capacity primarily for community wind projects and industrial customers. Pioneer is headquartered in Fort Lee, NJ and operates from six manufacturing, distribution and marketing locations in the U.S., Canada and Mexico. To learn more about Pioneer, please visit our website at www.pioneerpowersolutions.com (http://www.pioneerpowersolutions.com) .
Forward-looking Statements:This press release contains certain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. Such statements may be preceded by the words "intends," "may," "will," "plans," "expects," "anticipates," "projects," "predicts," "estimates," "aims," "believes," "hopes," "potential" or similar words. Forward-looking statements are not guarantees of future performance, are based on certain assumptions and are subject to various known and unknown risks and uncertainties, many of which are beyond the Company's control, and cannot be predicted or quantified and consequently, actual results may differ materially from those expressed or implied by such forward-looking statements. Such risks and uncertainties include, without limitation, risks and uncertainties associated with: (i) fluctuations in foreign currency exchange rates; (ii) the loss of significant customers; (iii) increases in the prices of raw materials; (iv) development of new products and service offerings; (v) the Company's ability to integrate acquisitions; (vi) the effectiveness, profitability, and marketability of the Company's current and prospective products and services; (vii) the impact of current, pending, or future legislation and regulation on the Company's industry; and (viii) the impact of competitive products, services, pricing or technological changes. More detailed information about the Company and the risk factors that may affect the realization of forward-looking statements is set forth in the Company's filings with the Securities and Exchange Commission, including the Company's Form 10-K filed with the SEC on April 15, 2010, the Post-Effective Amendment to Form S-1 filed with the SEC on June 1, 2010 and the Company's Form 10-Q filed with the SEC on August 16, 2010. Investors and security holders are urged to read these documents free of charge on the SEC's web site at www.sec.gov (http://www.sec.gov) . The Company does not undertake to publicly update or revise its forward-looking statements as a result of new information, future events or otherwise.