Pioneer Power Solutions announced its financial results for the third quarter and year-to-date periods ended September 30, 2015.
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Total revenue for the three month period decreased to $24.9 million, down 4.5%, or $1.2 million, from $26.1 million during the same period last year.
The decrease was driven by the $4.6 million decrease in revenue from the company's transformer product lines in its T&D Solutions segment which was partially offset by an increase in revenue from the company's Critical Power Solutions segment, led by the acquisition of Titan.
For the nine months ended September 30, 2015, total revenue increased by $12.2 million, or 17.9%, to $80.3 million, up from $68.1 million during the nine months ended September 30, 2014.
The increase was primarily driven by an increase in revenue in the Critical Power Solutions segment as a result of the Titan acquisition, which was partially offset by a decrease in transformer sales in the T&D Solutions segment.
The T&D Solutions segment was impacted by continued weakness in Canadian market conditions, unexpected customer delivery delays and the effect of foreign currency translation. Sales to U.S. customers were robust, driven mostly by demand for custom magnetics in the company's OEM sales channel, together with increased brand label sales and commercial construction activity.
Service revenue, most of which originates from recurring preventative maintenance contracts for backup power systems, grew to 8.4% of total revenue during the nine months ended September 30, 2015, as compared to 0.1% of total revenue during the same period last year.
For the third quarter, the gross margin percentage was 19.4% of revenues, as compared to 25.7% during the third quarter of 2014.
The 6.3% decrease in consolidated gross margin percentage is explained mostly by lower sales of liquid-filled transformers within the company's larger T&D Solutions segment, and was also driven by the Critical Power Solutions segment, which included lower sales of paralleling switchgear in 2015, as compared to the same quarter of 2014.
For the nine months ended September 30, 2015, the gross margin percentage was 18.9% of revenues, compared to 23.2% during the nine months ended September 30, 2014. The decrease in gross margin percentage is primarily the result of an unfavorable sales mix shift within the T&D Solutions segment due to challenging demand and sales mix factors in Canada, affecting all transformer categories. Higher throughput and sales by U.S.
T&D operations offset nearly half of the decline in gross profit dollars from Canada, but at a lower average gross margin. On the Critical Power side of the business, the decrease in gross margin percentage was due mostly to the timing of the Titan acquisition, together with a lack of major projects completed in 2015 by the original Critical Power business focused on paralleling switchgear.
Operating loss for the third quarter was down from operating income of $2.8 million during the third quarter of 2014.
The decrease in operating income in the third quarter of 2015, before restructuring charges, was primarily a result of lower sales and gross profit from the company's Canadian businesses, particularly in the utility sales channel, as well as in the company's short-cycle, distribution transformer product lines where the economic downturn and adverse effect of a stronger U.S. dollar has been felt hardest.
Operating loss was also negatively impacted by $0.4 million in a non-cash amortization expense related to intangible assets arising from the Titan acquisition.
For the nine months ended September 30, 2015, the operating loss was down from operating income of $4.4 million during the nine months ended September 30, 2014.
The decrease in operating income was the result of lower sales and gross profit from the company's Canadian business, but was driven mostly by restructuring, integration and impairment expenses related to the company's improvement initiatives. ■