Over 100 Years
& Four Generations
Server Racks and Cabinets
Electrical Enclosures
Power Distribution
Small Enclosures
Electronic Transformers
ANNUAL REPORT
2024
Fred Hammond, VE3HC
(right) was part of the
second generation of a fast
growing family run business.
Fred was one of six brothers
and two sisters.
Over 100 years
& four generations
in business.
Established 1917.
Quality Products.
Service Excellence.
We have a broad product offering
to serve our customers in multiple
markets and industries.
We promise ten day back order
recovery on standard product. We
work hard to provide you with your
required product in a prompt time
line.
Value added services
(modifications,assembly and
drop shipment): we go above
and beyond our competition and
provide our customers with the
exact solution required.
Our Values:
• We are dedicated to our customers.
We provide quality products and
service that create value to our
customers.
• We are responsible to our
shareholders. We provide an
adequate return on their investment
over the long term.
• We are committed to our employees.
We provide competitive pay, open
and frank communication and a safe
work environments.
• We recognize the importance of our
suppliers assisting us in our ability
to serve our customers.
www.hammondmfg.com
Annual Report 2024 3
Hammond Manufacturing Company Limited
2024 Annual Report
4
Report to Shareholders
5
Management Discussion and Analysis
24
Management’s Responsibility for Financial Reporting
25
Independent Auditors’ Report
30
Consolidated Statements of Financial Position
31
Consolidated Statements of Comprehensive Income
32
Consolidated Statements of Changes in Equity
33
Consolidated Statements of Cash Flows
34
Notes to Consolidated Financial Statements
72
Corporate Directory
www.hammondmfg.com
Annual Report 2024 4
REPORT TO SHAREHOLDERS
Dear fellow shareholders, employees, and stakeholders:
We are pleased to communicate the results for 2024.
The strong performance of our US operations contributed to the solid results described in the attached
statements.
As we enter the uncertainties of 2025, our strength to respond as a team will continue to be important.
We supply good products with super service and competitive prices to global customers. This is our
strategy for security and continued growth.
We continue to build long term security and success for all our associates and once again want to
express our appreciation for everyone’s involvement in the year’s success.
Sincerely,
Robert F. Hammond
Alex Stirling
Chairman & CEO
Executive VP
ANNUAL MEETING
The meeting of the Shareholders will be held on
April 29, 2025, at
Cutten Fields
190 College Avenue East, Guelph, Ontario
Commencing at 10:00 a.m.
MANAGEMENT DISCUSSION AND ANALYSIS
www.hammondmfg.com
Annual Report 2024 5
This management discussion and analysis (MD&A) comments on the consolidated financial position and
financial performance of Hammond Manufacturing Company Limited (“HMCL” or “the Company”) for the
year ended December 31, 2024. This discussion should be read in conjunction with the Company’s
consolidated financial statements for the year ended December 31, 2024, and related notes. Additional
information about the Company can be found on its website, www.hammfg.com, or through the SEDAR
website at www.sedar.com which includes the Company’s Annual Information Form. The information
contained herein is dated as of March 4, 2025.
The annual consolidated financial statements have been prepared in accordance with IFRS Accounting
Standards as issued by the International Accounting Standards Board (IFRS).
All amounts in this report are in Canadian dollars unless otherwise stated.
Cautionary advisory–Certain information in this MD&A is forward-looking and is subject to important
risks and uncertainties. This MD&A contains forward-looking statements that involve a number of risks
and uncertainties, including statements that relate to among other things, HMCL 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 HMCL 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. HMCL 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.
MANAGEMENT DISCUSSION AND ANALYSIS
www.hammondmfg.com
Annual Report 2024 6
COMPANY PROFILE
Hammond Manufacturing Company Limited manufactures electronic and electrical enclosures, outlet
strips and electronic transformers that are used by manufacturers of a wide range of electronic and
electrical products. Products are sold directly to Original Equipment Manufacturers (OEM) and through
a global network of distributors and agents.
Facilities are situated in Canada, the United States of America (US), the United Kingdom (UK), Taiwan,
the Netherlands and Australia, with agents and distributors located worldwide. The Company also
maintains a 40% ownership share of RITEC Enclosures Inc. (RITEC) located in Taiwan. RITEC
produces a line of small cases for sale through the Hammond Manufacturing Company’s sales channels
and also manages the sourcing of die cast and plastic enclosures.
OPERATIONS
Founded in Guelph, Ontario, Canada in 1917. In the early years, the Company manufactured radios,
power amplifiers and battery eliminators. The Company has grown over the years and has established
a global name for quality products of Electrical Enclosures, Racks and Cabinets, Small Electronic Cases,
Outlet strips and Electronic Transformers. Our customers include electrical, electronic and datacom
OEM’s/MRO’s, utilities and institutions which are served through a network of agents and distributors.
Hammond has a team of over 900 employees supported by a commitment to ongoing capital investment
and our continuous improvement programs combine to affirm the Hammond reputation for quality.
Ongoing efforts to differentiate ourselves through high levels of service and customer satisfaction are a
key corporate focus. These are the cornerstones to our future success.
Demand for Hammond products remained steady in 2024, Hammond realized its highest annual
revenues in the company history.
Primary manufacturing is in Ontario, Canada with supporting manufacturing capabilities in the USA and
United Kingdom. In summer of 2024 Hammond purchased 11.49 acres of land in Fergus, Ontario. This
will secure our needs for future growth.
The company holds high levels of inventory to ensure our customers are serviced well. This policy serves
the company well to ensure that our customer demands are met and serviced in a timely manner.
MANAGEMENT DISCUSSION AND ANALYSIS
www.hammondmfg.com
Annual Report 2024 7
QUARTERLY INFORMATION
FOURTH QUARTER RESULTS
(amounts in thousands of dollars)
NET PRODUCT SALES
Net product sales for the three months ended December 31, 2024, were $61,702, down 0.7% compared
to net product sales of $62,166 in the third quarter of 2024. The US, UK and European markets were
down in local currencies over the prior quarter but the gain from USD foreign exchange helped to mitigate
some of this drop. In local currencies the Canadian market was up 5.2% while the US market was down
slightly by 1.2%. Our UK & European market was down 10.3%. We are attributing lower sales in this
quarter compared to the prior quarter to the impact of the year-end holidays and customers deferring
taking inventory for a better balance sheet presentation for those with a December 31 year end.
Net product sales for the current quarter were up, 7.7%, compared to net product sales of $57,275 for
the three months ended December 31, 2023. Comparatively in local currencies, Canada was up 7.5%
and the UK & European markets were up 8.2% compared to the fourth quarter of 2023. The US market
was up compared to the fourth quarter of 2023 in USD by 10.2%. Foreign exchange from the USD
provided a lift of $1,067.
GROSS PROFIT
Gross profit of $23,494 for the fourth quarter of 2024 was 38.1% of net sales compared to 35.3% in the
third quarter of 2024. If we adjust for the impact of foreign exchange this quarter’s gross margin is closer
to 35.3% compared to the 36.2% in the prior quarter.
HAMMOND MANUFACTURING COMPANY LIMITED
Summary of Quarterly Financial Information
(In thousands of Canadian dollars except earnings per share)
Year-to-date
Q1
Q2
Q3
Q4
Total
Net product sales
$59,086
$61,944
$62,166
$61,702
$244,898
Income from operating activities
6,859
7,329
6,463
6,949
27,600
Net income for the period
4,457
4,712
4,399
4,806
18,374
Earnings per share
$0.39
$0.42
$0.39
$0.42
$1.62
- Basic & diluted
Year-to-date
Q1
Q2
Q3
Q4
Total
Net product sales
$62,492
$61,417
$57,101
$57,275
$238,285
Income from operating activities
6,238
8,006
6,575
7,269
28,088
Net income for the period
4,155
5,540
3,995
5,071
18,761
Earnings per share
$0.37
$0.49
$0.35
$0.45
$1.66
- Basic & diluted
2024
2023
MANAGEMENT DISCUSSION AND ANALYSIS
www.hammondmfg.com
Annual Report 2024 8
When we compare the gross profit level between the comparative fourth quarter of 2023 and 2024 we
can see a decrease from 38.9% to 38.1%. The impact of foreign exchange compared to levels in the
fourth quarter of 2024 helped mitigate some of the decrease in margin levels by approximately 1.7%.
SELLING AND DISTRIBUTION, GENERAL AND ADMINISTRATIVE EXPENSES AND
LOSS ON DISPOSAL OF PROPERTY, PLANT AND EQUIPMENT
Fourth quarter selling and distribution, general and administrative expenses and gain / loss on the
disposal of property plant and equipment of $16,567 was 26.9% of net product sales for the three months
ended December 31, 2024. This compared with spending of $15,499 in the previous quarter, that was
24.9% of net sales. The fourth quarter of 2023 saw spending levels of $15,029 which was 26.2% of net
sales.
Selling and distribution spending in the fourth quarter of 2024 was $14,685 (23.8% of net product sales)
up from $13,938 (22.4% of net product sales) in the third quarter of 2024. Freight expenses were up
with increases coming from our prepaid freight and trailer rental costs.
Selling and distribution spending was up $1,596 over the fourth quarter spending of $13,089 in 2023
(22.9% of net product sales). General freight and warehousing costs are up.
General and administrative expenses of $1,875 (3.0% of net product sales) in the fourth quarter are up
20.7% (or $321) over the previous quarter’s spending of $1,554 (2.5% of net product sales). Wages
were up $75, as well as Marketing and advertising, and depreciation.
This quarter’s spending was down $55 compared to the fourth quarter of 2023 general and administrative
expenses of $1,930 (3.4% of net product sales). In 2024 the bad debt reserve was reduced, due to a
push to reduce aged receivables from June to December.
INCOME FROM OPERATING ACTIVITIES
This quarter’s income from operating activities was $6,949 (11.3% of net product sales). This is up from
the prior quarter of $6,463 (10.4% of net product sales) and down from the fourth quarter of 2023 amount
of $7,269 (12.7% of net product sales).
INTEREST
The fourth quarter net interest expense on bank indebtedness and loans was $742 compared to an
expense of $725 for the fourth quarter 2023.The comparative borrowing base has been reduced
throughout the year and is down by $3.7 million from the end of 2023 to the end of 2024.
MANAGEMENT DISCUSSION AND ANALYSIS
www.hammondmfg.com
Annual Report 2024 9
The following is a breakdown of the interest expenses.
FOREIGN EXCHANGE TRANSACTIONAL IMPACT
During the fourth quarter of 2024, the Company recognized a loss on transactional foreign exchange of
$14 compared to a gain of $191 in the three months ended December 31, 2023. The intercompany
balance payable to our US entity accounts was a driver of this movement earlier in the year. There is an
offset to the intercompany impact found in the foreign exchange translation of foreign operations as the
offsetting US receivable is due from the Canadian entity and is part of the translational adjustment of
the US entities balance sheet on consolidation.
INCOME TAX EXPENSE
Fourth quarter taxes of $1,502 and 23.8% of income before taxes, which brings the overall year’s tax
rate to 25.1% of income before taxes.
NET INCOME FOR THE PERIOD
Net income of $4.806 (7.5% return on net product sales) was recognized for the fourth quarter ending
December 31, 2024. This is up from a net return of $4,399 (7.1% return on net product sales) in the
previous quarter and down from the net return of $5,071 (8.9% return on net product sales) recognized
in the fourth quarter of 2023.
FOREIGN EXCHANGE TRANSLATION OF FOREIGN OPERATIONS
The translation adjustment for the fourth quarter of 2024 was a gain of $2,095 compared to a translation
loss of $602 in the fourth quarter of 2023.
TOTAL COMPREHENSIVE INCOME
Comprehensive income for the fourth quarter ended December 31, 2024, was $6,901 (11.2% of net
product sales) up from the 3 months ended December 31, 2023, of $4,469 (7.8% of net product sales)
and up from the previous quarter’s total comprehensive income of $4,065 (6.5% of net product sales).
December 31, 2024
December 31, 2023
Long term debt interest
643
$
614
$
Bank indebtedness interest
34
1
Interest expense
677
$
615
$
Interest income earned on cash
(132)
(29)
Net Interest Expense
545
$
586
$
Interest expense leases
197
$
139
$
Total Interest and lease interest expense
742
$
725
$
MANAGEMENT DISCUSSION AND ANALYSIS
www.hammondmfg.com
Annual Report 2024 10
FULL YEAR RESULTS
(amounts in thousands of dollars)
NET PRODUCT SALES
Net product sales of $244,898 in 2024 were up 2.8% compared to net sales of $238,285 reported in
2023. Foreign exchange had a positive impact on year-over-year reporting of approximately $2,620,
1.1% of the sales increase. Our Canadian market is down by 2.4% compared to 2023. The US market
is up 4.3% when measured in USD. Due to the impact of foreign exchange the US sales are up 5.8%
when measured in CAD. The rest of the world’s activity is up 4.5%, this segment is mostly made up of
UK & European sales.
GROSS PROFIT
In 2024, gross profit was $90,901 or 37.1% of net product sales compared to $86,206 or 36.2% achieved
in 2023. If we remove the foreign exchange impact in 2024, gross margin would be closer to 36.3 %.
Pricing remained relatively stable in 2024 consistent with 2023.
SELLING AND DISTRIBUTION, GENERAL AND ADMINISTRATIVE, AND LOSS ON
DISPOSAL OF PROPERTY, PLANT AND EQUIPMENT
Selling and distribution, general and administrative, including the net impact of the disposal of property,
plant and equipment of $63,301 (25.8% of net product sales) was up 8.9% compared to the 2023 spend
of $58,118 (24.4% of net product sales). Of the change, $520 (0.8%) can be attributed to foreign
exchange. This compares to a year-over-year sales increase of 2.8%.
Selling and distribution expenses of $56,186 increased $5,168 or 10.1% compared to 2023. Foreign
exchange had the impact of increasing comparative costs by $519. Including the foreign exchange
impact, freight expenses are up $3,718 or 13.2%. Selling expenses were up $1,623, or 8.0%. Largely
driven by the fact that post Covid travel volumes are returning, additional sales staff and warehousing
costs in the UK.
Our general and administrative expenses of $7,101 were down $129 or 1.8% compared to 2023
spending levels of $7,230. The foreign exchange impact was negligible year over year. The largest
driver of the cost reduction came from a reduction in the bad debt reserve.
This year we saw a small impact on the disposal of property, plant and equipment with a loss of $14.
This compares to a net gain on disposals of $130 recognized in 2023.
INCOME FROM OPERATING ACTIVITIES
Overall, 2024 income from operating activities was $27,600 (11.3% of net product sales) which is down
compared to 2023 earnings of $28,088 (11.8% of net product sales).
INTEREST
Interest Expense was up in 2024 to $2,815 versus $2,548 in 2023, the main driver was the timing of the
$25,833 loan that was taken out in late 2023 at a higher interest rate, in 2024 the full impact of the annual
interest was recorded. In 2023 interest rates were lower and rose throughout the year. Despite a lower
borrowing base year over year the interest expense was higher. This was offset by improved interest
income leading to a net interest expense of $2,220 in 2024 versus $2,508 in 2023.
MANAGEMENT DISCUSSION AND ANALYSIS
www.hammondmfg.com
Annual Report 2024 11
The following is a breakdown of the interest expenses.
FOREIGN EXCHANGE TRANSACTIONAL IMPACT
A $221 foreign exchange transactional loss was reported in 2024, compared to a transactional gain of
$29 in 2023. The Canadian dollar averaged 2023 at $1.00 USD to $1.350 CAD closed 2023 at $1.00
USD to $1.323 CAD. The value fluctuated throughout the year, closing 2024 at $1.00 USD to $1.439
CAD. In 2024 the average rate was $1.00 USD to $1.369 CAD level.
INCOME TAX EXPENSE
2024 tax expenses of $6,148 were 25.1% of income before income tax. This compares to a 2023 tax
expense of $6,238 which was 25.0% of income before income tax.
NET INCOME FOR THE YEAR
Net income for the year ending December 31, 2024, was $18,374 (7.5% of net product sales) compared
to the prior year net income of $18,761 (7.9% of net product sales).
FOREIGN EXCHANGE TRANSLATION OF FOREIGN OPERATIONS
During 2024, a gain of $2,842 on translational foreign exchange was recorded compared to a loss of
$627 in 2023. As noted earlier, a part of the transactional impact is offset by the foreign exchange
transactional impact of intercompany loans.
TOTAL COMPREHENSIVE INCOME
Comprehensive income for 2024 was $21,216 (8.7% of net product sales) compared to comprehensive
income of $18,134 (7.6% of net product sales) in 2023.
December 31, 2024
December 31, 2023
Long term debt interest
2,566
$
1,668
$
Bank indebtedness interest
249
880
Interest expense
2,815
$
2,548
$
Interest income earned on cash
(595)
(40)
Net Interest Expense
2,220
$
2,508
$
Interest expense leases
655
$
544
$
Total Interest and lease interest expense
2,875
$
3,052
$
MANAGEMENT DISCUSSION AND ANALYSIS
www.hammondmfg.com
Annual Report 2024 12
SELECTED ANNUAL INFORMATION
CAPITAL RESOURCES AND LIQUIDITY
Net cash generated in operating activities for 2024 was $33,665 (net cash generated in 2023 - $16,935).
Cash flows from financing activities used $7,371 to paying down long-term debt and leases (2023 –
financing activities generated $5,195, with the $26,000 of new debt set up). Net cash used in investing
activities was $12,039 (2023 - $13,624).
Trade and other receivables of $32,491 as at December 31, 2024 have increased 5.3% compared to
2023. The increase can be attributed to higher sales and timing of incoming payments in the
corresponding periods.
The year-end investment in inventory of $66,654 saw a decrease of 1.6% from the 2023 inventory value
of $67,772. Inventory turnover was consistent year over year at 2.3 (cost of sales for the year divided
by the twelve-month average inventory level). Turns of 2 to 3 reflect our historical levels. Our value
statement hinges on having our standard product on our shelves.
Trade and other liabilities increased by $1,571, or 6.3% over 2023 to $26,386. Total long-term debt,
lease liabilities and bank indebtedness increased by $277 over the prior year to $56,728. Our debt-to-
equity ratio at year-end (excluding lease liabilities) was approximately 0.35:1 (2023 - 0.46:1). Debt-to-
equity calculated inclusive of the lease liabilities was 0.47:1 (2023 – 0.57:1). Debt is made up of Bank
Indebtedness, Long-term Debt and Lease Liabilities.
Total dividends paid in 2024 were $680 (2023 - $680).
Property, plant, equipment and intangible asset additions excluding the right of use assets in 2024 were
$12,051 from $13,764 in 2023.
The overall cash position increased by $15,820 in 2024 compared to a cash position increase of $7,988
in 2023. The excess cash will be utilized to fund future growth projects.
In the second quarter the company set up a new lease for warehouse property located in Guelph. It is
31,766 sq. ft. The present value of the lease is $2,056, and it ends May 31, 2029. Also set up a new
Consolidated Statements of Comprehensive Income
2024
2023
2022
Net product sales
244,898
$
238,285
$
225,922
$
Income from operating activities
27,600
28,088
19,442
Net income for the year
18,374
18,761
12,003
Per share - basic & fully diluted
net earnings for the year
$1.62
$1.66
$1.06
Consolidated Statement of Financial Position
2024
2023
2022
Total assets
214,789
$
189,132
$
168,005
$
Total funded debt and lease liabilities
56,728
56,451
48,392
Working capital
56,044
43,075
32,665
Net cash generated from operating activities
33,665
16,895
4,824
Dividends declared and paid
680
680
680
Shareholders' equity
119,535
$
98,999
$
81,545
$
MANAGEMENT DISCUSSION AND ANALYSIS
www.hammondmfg.com
Annual Report 2024 13
lease in a newly renovated UK facility adding an additional 10,200 sq. ft., this is a 10-year lease that
ends in June 2034, the present value is $1,688, this is the fifth unit in the UK.
The Company is compliant with all the bank covenants, and the credit facilities are well designed to meet
expected on-going requirements.
As at December 31, 2024 the contractual obligations showing demand loans as current are as follows.
As at December 31, 2024 the contractual obligations based on repayment not being called early.
In addition to the contractual obligations above, the Company has current obligations of $998 (2023 -
$395) against open purchase orders for outstanding capital expenditures.
The Company also has open purchase commitments with RITEC as at December 31, 2024 of $985
(2023 - $452). This expenditure should be completed in the first half of 2025.
SHARE CAPITAL
As of March 4, 2025, 8,556,000 Class A subordinate voting shares and 2,778,300 Class B common
shares were issued and outstanding. The Company also has a management share option plan, with no
options currently outstanding.
EBITDA
EBITDA for 2024 was $37,809. This showed improvement over EBITDA of $36,500 achieved in 2023.
EBITDA adjusted for transactional impact of foreign exchange was $38,030 in 2024 compared to an
adjusted EBITDA of $36,471 in 2023. EBITDA and adjusted EBITDA are calculated as outlined in the
following table:
Reconciliation of Net Earnings to Earnings Before Interest, Taxes Depreciation and Amortization
(EBITDA)*.
Contractual obligations
(In thousands)
Total
Current
1-2 Years 2-3 Years 3-4 Years 4-5 Years
After 5
Years
Long-term debt
41,135
$
36,238
$
1,476
$
1,551
$
1,553
$
317
$
-
$
Lease Liabilities
15,310
3,317
2,758
2,023
1,838
1,490
3,884
Total contractual obligations
56,445
$
39,556
$
4,234
$
3,574
$
3,391
$
1,807
$
3,884
$
Contractual obligations
(In thousands)
Total
Current
1-2 Years 2-3 Years 3-4 Years 4-5 Years
After 5
Years
Long-term debt
41,135
$
4,869
$
8,416
$
2,082
$
25,451
$
317
$
-
$
Lease Liabilities
15,310
3,317
2,758
2,023
1,838
1,490
3,884
Total contractual obligations
56,445
$
8,186
$
11,174
$
4,105
$
27,289
$
1,807
$
3,884
$
MANAGEMENT DISCUSSION AND ANALYSIS
www.hammondmfg.com
Annual Report 2024 14
* EBITDA and Adjusted EBITDA are non-IFRS earnings measures, therefore they do not have any
standardized meaning prescribed by International Financial Reporting Standards and may not be similar
to measures presented by other companies. EBITDA represents earnings before interest, income taxes,
depreciation and amortization. Adjusted EBITDA removes the impact of foreign exchange transactional
so management can assess the impact of this on the operating results. Management uses these
measurements to evaluate the operating results of the Company. These measures are also important
to management since they are used by the Company’s lenders to evaluate the ongoing cash generating
capability of the Company and therefore the amounts those lenders are willing to lend to the Company.
Investors find EBITDA and Adjusted EBITDA to be useful information because they provide measures
of the Company’s operating performance.
ENVIRONMENTAL ISSUES
The Glen Ewing Property is 50% co-tenancy with Hammond Power Solutions Inc. (HPSI) of a vacant
property located at 2 Glen Road, Georgetown. The soil has been contaminated by diesel oil, which is
believed to be related to site operations of prior owners. The Company and HPSI, as co-tenants, have
been working co-operatively with our environmental consultant, the Ministry of the Environment,
Conservation and Park’s (“MECP”) and the adjacent property owner to contain and remove any free-
flowing contaminants. The parties have cooperatively developed a remediation action plan to contain
and remove any free-flowing contaminants and began remediation in October 2009. The MECP is aware
of the remediation and the process being used. It does not include obtaining a record of site condition.
The Company’s estimate of the remaining portion of the environmental remediation costs for the October
2009 plan for this site is $225 (2023 $225) with $80 (2023- $80) presented as a current liability in the
consolidated financial statements. The provision covers the next four years’ activities.
In March 2024, the MECP performed an inspection of the Glen Ewing Property which resulted in the
MECP recommending certain additional remedial actions: including further monitoring and
implementation of systems to prevent migration of certain other contaminants. The MECP did not issue
a formal regulatory order. However, a formal order may be issued if certain steps are not taken. The
costs of the additional remedial actions are currently contingent on the completion of a feasibility study.
However, the anticipated costs will be based on an external consultant’s remediation plan and
management’s estimate, discounted for expected timing of expenditures. The cost of the initial feasibility
study is estimated to be between $50 - $100, and shared with Hammond Power Solutions Incorporated.
(In thousands of Canadian dollars)
Years Ended:
Three Months Ended:
December 31,
2024
December 31,
2023
December 31,
2024
December 31,
2023
Net income for the period
18,373
$
18,761
$
4,805
$
5,071
$
Add
Income tax expense
6,148
6,238
1,502
1,646
Depreciation and amortization
6,840
5,769
2,506
1,435
Right-of-use depreciation
2,978
2,680
982
684
Finance costs on debt
2,220
2,508
82
575
Right-of-use finance costs
655
544
198
139
Subtotal
18,841
17,739
5,270
4,479
EBITDA*
37,214
$
36,500
$
10,075
$
9,550
$
Add:
FX transactional loss (gain)
221
(29)
14
(191)
Adjusted EBITDA *
37,435
$
36,471
$
10,089
$
9,359
$
MANAGEMENT DISCUSSION AND ANALYSIS
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Annual Report 2024 15
A third-party statement of claim was issued on March 6, 2019, against the Company with respect to an
adjacent property to one of our Waterloo facilities. Our records do not show any spills of chemicals at
this location and management has made the decision not to make any provision/contingency in these
consolidated financial statements.
Other than the above noted sites, management is not aware of any unusual or significant environmental
issues.
CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
The preparation of financial statements in conformity with IFRS requires management to make
estimates and assumptions that affect the application of accounting policies and the reported
amount of assets, liabilities, income and expense. Actual results may differ from these
estimates. Revisions to accounting estimates are recognized in the period in which the
estimates are revised and in any future periods affected. Management periodically reviews its
estimates and underlying assumptions relating to the following items:
i)
Inventory
Inventories are valued at the lower of cost or net realizable value. When necessary,
the write-down of inventory to its net realizable value is recorded as a result of
industry conditions. We have made certain assumptions when determining
expected future demand by utilizing information such as inventory quantities and
aging, historical sales of inventory and general market understanding. Reductions
in demand for certain of our inventories or declining market values, as well as
differences between actual results and the assumptions utilized by us when
determining the market value of our inventories, could result in the recognition of
write-down expenses in future periods.
ii) Amortization
Management makes estimates of the appropriate useful lives to be assigned to
intangible assets based on the individual circumstances of an acquisition.
Management reviews the appropriateness of the lives assigned and adjusts
prospectively, where necessary.
iii) Impairment tests
Management makes estimates of sustainable earnings, future expected cash flows
and discount rates in the determination of the value-in-use or fair value less costs
of disposal of cash-generating units (“CGUs”).
iv) Provision against accounts receivable
Management makes estimates on the expected credit losses (“ECLs”) of accounts
receivable balances based on customer specific facts and circumstances as well
as experience of write-offs. Changes in the economic conditions in which the
Company’s customers operate and their underlying financial stability may impact
on these estimates.
v) Employee future benefits
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Annual Report 2024 16
Management estimates the discount rates, retirement age and future costs of
benefits associated with providing future employee benefits and exercises judgment
to determine how many employees will utilize these benefits.
vi) Tax assets
Deferred tax assets and liabilities contain estimates about the nature and timing of
future permanent and temporary differences as well as the future tax rates that will
apply to those differences. Changes in tax laws and rates as well as changes to the
expected timing of reversals may have a significant impact on the amounts
recorded for deferred tax assets and liabilities. Management closely monitors
current and potential changes to tax law and bases its estimates on the best
available information at each reporting date.
vii) Depreciation
Management estimates future residual values and the rate at which the useful lives
of property and equipment are consumed to determine appropriate depreciation
charges. Estimates of residual value and useful lives are based on data and
information from various sources, including vendors, industry practice and
Company-specific history. Management reviews the appropriateness of the lives
assigned and adjusts prospectively, where necessary.
viii) Property value
Management estimates the value of the investment property to assess if impairment
has occurred. The estimate is made by reviewing local land prices and current sales
of similar properties as well as property tax value assessment.
ix) Environmental remediation:
Management estimates the value to complete the remediation project on the Glen
Ewing Property each year by reviewing the project status and activities still to be
completed. Any changes to the project scope are updated in the cost estimation
model and any change in the required reserve is recorded in the current year.
x) Sales returns:
Management estimates the value of product that will be returned based on a
historical analysis. Any change to the estimate is recorded as a reduction of revenue
in the current period.
xi) Leases:
For the purpose of initial and subsequent measurement of leases the Company
utilizes a discounted interest rate in the lease that is readily available or the Groups
incremental borrowing rate. The group also utilizes its best estimate of any costs to
dismantle and remove the assets at the end of the lease.
MANAGEMENT DISCUSSION AND ANALYSIS
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Annual Report 2024 17
Use of judgments:
The preparation of financial statements in conformity with IFRS requires management
to make judgments that affect the application of accounting policies and the
interpretation of accounting standards. Management periodically reviews its judgments
and underlying assumptions relating to the following items:
xii) Provision for claims
Judgment is exercised in deciding whether liability for a claim meets the criteria of
a present obligation and in assessing the probability of the outflow of economic
resources.
xiii) Leases
The Company exercises judgement as to whether it is likely to extend the term of
the lease when the option is provided.
xiv) Impairment tests
Management exercises judgment to determine whether there are factors that would
indicate that an asset or a CGU is impaired. The determination of CGUs is also
based on management’s judgment and is an assessment of the smallest group of
assets that generate cash inflows independently of other assets. Factors
considered include whether an active market exists for the output produced by the
asset or group of assets as well as how management monitors and makes decisions
about the Company’s operations.
CONTROLS AND PROCEDURES
Disclosure controls and procedures are designed to provide reasonable assurance that all
relevant information is gathered and reported to management on a timely basis so that
appropriate decisions can be made regarding public disclosure.
The purpose of internal controls over financial reporting as defined by the Canadian Securities
Administrators is to provide reasonable assurance that:
(i) financial statements prepared for external purposes are in accordance with the
Company's Generally Accepted Accounting Principles,
(ii) transactions are recorded as necessary to permit the preparation of financial
statements, and records are maintained in reasonable detail,
(iii) receipts and expenditures of the Company are made only in accordance with the
authorizations of the Company's management and directors, and
(iv) unauthorized acquisitions, uses or dispositions of the Company's assets that could
have a material effect on the financial statements will be prevented or detected to
prevent material error in financial statements.
Internal controls over financial reporting, no matter how well designed have inherent limitations.
Therefore, internal control over financial reporting determined to be effective can provide only
reasonable assurance with respect to financial statement preparation and may not prevent or
detect all misstatements. Moreover, projections of any evaluation of effectiveness to future
MANAGEMENT DISCUSSION AND ANALYSIS
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Annual Report 2024 18
periods are subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Evaluation of Disclosure Controls and Procedures:
Management is responsible for establishing and maintaining disclosure controls and
procedures. Under the supervision and with the participation of the Chief Executive Officer
(CEO) and Chief Financial Officer (CFO), management evaluated the effectiveness of the
Company’s disclosure controls and procedures. Disclosure controls and procedures are
designed to provide reasonable assurance that information required to be disclosed in annual
filings, interim filings or other reports filed or submitted by the Company under securities
legislation is recorded, processed, summarized and reported within the time periods specified
in the securities legislation and include controls and procedures designed to ensure that
information required to be disclosed in the annual filings, interim filings or other reports filed or
submitted under securities legislation is accumulated and communicated to management,
including the Company’s certifying officers, as appropriate to allow timely decisions regarding
required disclosure. Management concluded that the Company’s disclosure controls and
procedures were effectively designed as at the December 31, 2024 year end.
Evaluation of Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining internal control over financial
reporting. Under the supervision and with the participation of the Company’s CEO and the
CFO, management evaluated the effectiveness of the Company’s internal control over financial
reporting. Internal control is a process designed by, or under the supervision of, an issuer’s
certifying officers, and effected by the issuer’s board of directors, management and other
personnel, to provide reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in accordance with IFRS and
includes those policies and procedures that: (a) pertain to the maintenance of records that in
reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of
the Company; (b) are designed to provide reasonable assurance that transactions are recorded
as necessary to permit preparation of financial statements in accordance with the IFRS, and
that receipts and expenditures of the company are being made only in accordance with
authorizations of management and directors of the company; and (c) are designed to provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition,
use or disposition of the company’s assets that could have a material effect on the annual
financial statements or interim financial statements. The CEO and CFO did not identify any
material weaknesses in their evaluation of internal control, and concluded that the Company’s
internal control over financial reporting was effective, as at December 31, 2024.
MANAGEMENT DISCUSSION AND ANALYSIS
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Annual Report 2024 19
RISKS AND UNCERTAINTIES
As with most businesses, the Company is subject to a few marketplaces, industry and
economic related business risks, which could have some material impact on our operating
results.
These risks include:
•
Security Breaches or Disruptions of Information Technology Systems Risk;
•
Key personnel;
•
The cyclical effects, unpredictability and volatility of market driven commodity costs,
raw materials such as copper and steel pricing and supply and demand;
•
A significant, unexpected change in the global demand for resources;
•
The variability of the Canadian dollar versus the US dollar;
•
Rising interest rates;
•
Economic slowdown in the US and Canada;
•
Trade restrictions;
•
Labour costs and labour relations;
•
Competition; and
•
Global political unrest;
•
Pandemics
•
Tariffs
The Company continuously works to minimize the negative impact of these risks and
strengthen its position through diversification of its core business, market channel expansion,
geographic diversity of its operations and business hedging strategies. There are, however,
several risks that deserve particular attention.
Security Breaches or Disruptions of Information Technology Systems Risk
The Company utilizes a variety of information technology systems to manage and operate its
businesses. These information systems may be owned and maintained by the Corporation,
outsource providers or third parties such as customers, vendors and contractors. These
information systems are subject to attacks, failures, and access denials from several potential
sources including viruses, destructive or inadequate code, power failures, and physical
damage to computers, hard drives, communication lines and networking equipment. Despite
the implementation of extensive security measures (including access controls, data encryption,
vulnerability assessments, continuous monitoring, and maintenance of back-up and protective
systems), the Corporation’s information technology systems are potentially vulnerable to
interruptions or delays, unauthorized access, computer viruses, cyber-attack and other events,
ranging from individual attempts to advanced persistent threats. It is possible a security breach
could result in theft of trade secrets or other intellectual property or disclosure of confidential
customer, supplier or employee information. Should the Corporation be unable to prevent
security breaches, disruptions could have an adverse effect on the Corporation’s operations
and financial results, as well as expose the Corporation to litigation, increased cyber security
protection costs, and reputational damage.
MANAGEMENT DISCUSSION AND ANALYSIS
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Annual Report 2024 20
Key Personnel
The Company is dependent on the experience and industry knowledge of its executive officers
and other key employees to execute its business plan. If the Company were to experience a
substantial turnover in its leadership or other key employees, business results from operations
and financial condition could be materially adversely affected.
Commodity Prices
An area that has had a definite effect on the Company’s costs and earnings is the cyclical
effects and unprecedented market cost pressures of copper commodity and steel pricing in the
global market. Due to this unpredictability and volatility, particularly with copper pricing, the
Company does not currently utilize future contracts. Strategic supply line agreements and
alliances are in place with our major steel suppliers to ensure adequate supply and competitive
market pricing.
Foreign Exchange
The Company’s operating results are reported in Canadian dollars. A significant portion of our
sales is denominated in US dollars. A change in the value of the Canadian dollar against the
US dollar will impact revenues and earnings. We have created a bit of a natural hedge as this
is partially offset by a corresponding change in the cost of materials purchased from the US
and commodities tied to US dollar pricing. In general, a lower value for the Canadian dollar
compared to the US dollar will have a beneficial impact on the Company’s results; or, inversely,
a higher value for the Canadian dollar compared to the US dollar will have a negative impact
on the Company’s profitability. In a sensitivity review, if we did not react in any way to a one
cent change in the value of the Canadian to US dollar value it would have an approximate
impact on income from operations of $1,104 for each cent movement in 2024. The Company
also has a US operating subsidiary and US dollar assets. The exchange rate between the
Canadian and US dollar can vary significantly from year to year. There is a corresponding
positive or negative impact to the Company’s Consolidated Statements of Comprehensive
Income solely related to the foreign exchange translation of its Consolidated Statements of
Financial Position. We have partially reduced the impact of foreign exchange fluctuations
through increasing our US dollar-driven manufacturing output. Finally, the Company
periodically institutes price increases / reductions to help offset the negative / positive impact
of changes in foreign exchange and product cost increases / decreases. The Company is also
exposed to the impact from the British pound sterling and Euro as well as to the Australian
dollar but not to the level of exposure of the US dollar.
Interest Rates
The interest rates have been reducing over the last half of the year. The Company is cognizant
that a rise in interest rates negatively impacts the financial results of the Company. The
Company continuously reviews this strategy of hedging this risk by fixing interest rates on part
of its total debt.
North American Economy
We will continue to react to the market conditions to grow our business. Our efforts over the
next 12 months will continue to be on projects that will reduce our costs and improve our
manufacturing flexibility. We believe that being nimble as an organization will become even
more important in order to respond quickly to both unexpected opportunities as well as
MANAGEMENT DISCUSSION AND ANALYSIS
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Annual Report 2024 21
challenges. We also believe that our growing access to a variety of markets, both global and
domestic, through our OEM and distributor channels will help the Company expand its market
share.
Global Political Unrest
Today’s politics can have significant repercussions on business. Issues are constantly
changing, and management must assess the potential outcomes of the different issues and be
prepared to react to or mitigate anything that would have a negative impact on our business.
Pandemics
Global Pandemics such as the COVID outbreak that started in 2020 can have dramatic impacts
on markets as supply chains, labour forces, logistics etc. become susceptible to disruption. It
is important to get ahead of these situations and be prepared to react to mitigate the issues as
they arise.
Tariffs
With pending tariffs from our American trading partner and retaliatory counter tariffs, these
actions could cause disruption within our supply chain due potential cost impacts. At this time,
the nation is waiting as the decision was pushed out until early March so the impact is currently
unknown. The company will remain diligent and educated on the topic and be prepared to
react as needed to support the business.
ACCOUNTING POLICY CHANGES
The International Accounting Standards Board (IASB) has issued the following Standards,
Interpretations and Amendments to Standards that were adopted by the Group.
Lease Liability in a Sale and Leaseback (Amendments to IFRS 16
On September 22, 2022, the IASB issued Lease Liability in a Sale and Leaseback (Amendments
to IFRS 16). The amendments introduce a new accounting model which impacts how a seller-
lessee accounts for variable lease payments that arise in a sale-and-leaseback transaction.
The amendments were adopted January 1, 2024. The impact of adoption of these amendments
did not have an impact on the business.
Classification of Liabilities as Current or Non-current (Amendments to IAS 1)
On January 23, 2020, the IASB issued amendments to IAS 1 Presentation of Financial
Statements, to clarify the classification of liabilities as current or non-current. On October 31,
2022, the IASB issued Non-current Liabilities with Covenants (amendments to IAS 1), to
improve the information a company provides about long-term debt with covenants.
The amendments were adopted January 1, 2024. The impact of adoption of these amendments
did not have an impact on the business.
MANAGEMENT DISCUSSION AND ANALYSIS
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Annual Report 2024 22
Supplier Finance Arrangements (Amendments to IAS 7 and IFRS 7)
On May 25, 2023, the IASB issued amendments to IAS 7 Statement of Cash Flows and IFRS 7
Financial Instruments: Disclosures. The amendments introduce two new disclosure objectives
– one in IAS 7 and another in IFRS 7 – for a company to provide information about its supplier
finance arrangements that would enable users (investors) to assess the effects of these
arrangements on the company’s liabilities and cash flows, and the company’s exposure to
liquidity risk.
The amendments were adopted January 1, 2024. The impact of adoption of these amendments
did not have an impact on the business.
FUTURE ACCOUNTING CHANGES
At the date of authorization of these financial statements, several new, but not yet effective, Standards
and amendments to existing Standards, and Interpretations have been published by the IASB. None of
these Standards or amendments to existing Standards have been adopted early by the Group and it is
still to be determined if any will have a material impact or if they are applicable for the Group’s financial
statements.
Lack of Exchangeability (Amendment to IAS 21, The Effects of Changes in Foreign
Exchange Rates) applies when one currency cannot be exchanged into another. This may
occur, for example, because of government-imposed controls on capital imports and exports, or
a limitation on the volume of foreign currency transactions that can be undertaken at an official
exchange rate. The amendments clarify when a currency is considered exchangeable into
another currency, and how an entity estimates a spot rate for currencies that lack
exchangeability. The amendments introduce new disclosures to help financial statement users
assess the impact of using an estimated exchange rate.
Amendments to the Classification and Measurement of Financial Instruments
(Amendments to IFRS 9, Financial Instruments and IFRS 7, Financial Instruments:
Disclosures) clarify financial assets and financial liabilities are recognized and derecognized at
settlement date except for regular way purchases or sales of financial assets and financial
liabilities meeting conditions for new exception. The new exception permits companies to elect
to derecognize certain financial liabilities settled via electronic payment systems earlier than the
settlement date.
They also provide guidelines to assess contractual cash flow characteristics of financial assets,
which apply to all contingent cash flows, including those arising from environmental, social, and
governance (ESG)-linked features.
Additionally, these amendments introduce new disclosure requirements and update others.
Power Purchase Agreements (PPAs) (Amendments to IFRS 9 and IFRS 7) address the
application of ‘own use’ and hedge accounting requirements for agreements which meet
specified criteria. If a PPA qualifies for the ‘own use’ exemption, it is accounted for as an
executory contract rather than as a derivative. In contrast, if a PPA does not qualify for the ‘own
use’ exemption, it is accounted for as a derivative to which hedge accounting considerations
may apply. The amendments apply to contracts that reference electricity generated from nature
dependent sources and for which cash flows vary based on the amount of electricity generated
by a reference production facility. New disclosures have also been introduced.
MANAGEMENT DISCUSSION AND ANALYSIS
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Annual Report 2024 23
IFRS 18 replaces IAS 1, which sets out presentation and base disclosure requirements for
financial statements. The changes, which mostly affect the income statement, include the
requirement to classify income and expenses into three new categories – operating, investing
and financing – and present subtotals for operating profit or loss and profit or loss before
financing and income taxes.
Further, operating expenses are presented directly on the face of the income statement –
classified either by nature (e.g. employee compensation), by function (e.g. cost of sales) or using
a mixed presentation. Expenses presented by function require more detailed disclosures about
their nature.
IFRS 18 also provides enhanced guidance for aggregation and disaggregation of information in
the financial statements, introduces new disclosure requirements for management-defined
performance measures (MPMs)* and eliminates classification options for interest and dividends
in the statement of cash flows.
*Non-GAAP measures that meet the definition of MPMs will be subject to the disclosure
requirements.
IFRS 19 is a voluntary standard that applies to entities without public accountability, but whose
parents prepare consolidated financial statements under IFRS Accounting Standards.
For in-scope companies, IFRS 19 simplifies disclosures on various topics, including leases,
exchange rates, income taxes, statement of cash flows, etc.
If elected, IFRS 19 is expected to reduce the cost of preparing in-scope financial statements
while maintaining the usefulness of those financial statements for stakeholders.
OUTLOOK FACTORS FOR 2025
The feedback we have from our North American markets is that we will see growth in the low-single digit
area in 2025 compared to the level of activity we experienced in the latter half of 2024. Our UK and
European markets remain weak, and we are watching this closely and will react accordingly.
We continue to competitively price our products and stimulate market share growth as we keep an eye
on currency fluctuations. This is tied closely to the pending tariffs from our US partner. If implemented,
it is expected that the Canadian dollar would weaken in the immediate term.
The Company continues with the objective of sales growth and increased market share but will weigh
this against achieving acceptable margins.
Capital spending will continue to be focused on high impact projects as accommodated by cash flows.
Our primary focus continues to be productivity and margin improvements.
MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL REPORTING
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Annual Report 2024 24
The consolidated financial statements are the responsibility of the management of Hammond
Manufacturing Company Limited. These statements have been prepared in accordance with IFRS
Accounting Standards, using management’s best estimates and judgments, where appropriate.
Management is responsible for the reliability and integrity of the consolidated financial statements, the
notes to the consolidated financial statements and other financial information contained in the report. In
the preparation of these statements, estimates are sometimes necessary because a precise
determination of certain assets and liabilities is dependent on future events. Management believes such
estimates have been based on careful judgment and have been properly reflected in the accompanying
consolidated financial statements.
Management is responsible for the maintenance of a system of internal controls designed to provide
reasonable assurance that the assets are safeguarded and that accounting systems provide timely,
accurate and reliable financial information.
The Board of Directors is responsible for ensuring that management fulfills its responsibilities for financial
reporting and internal control. The Board of Directors assists in exercising its responsibilities through
the Audit Committee of the Board, which is composed of four non-management directors. The Audit
Committee meets periodically with management and the auditors to satisfy itself that management’s
responsibilities are properly discharged, to review the consolidated financial statements and to
recommend the approval of the consolidated financial statements to the Board of Directors.
KPMG LLP, the independent auditors appointed by the shareholders, has audited the Company’s
consolidated financial statements in accordance with Canadian generally accepted auditing standards
and their report follows. The independent auditors have full and unrestricted access to the Audit
Committee to discuss their audit and related findings as to the integrity of the financial reporting process.
R.F. Hammond
A. Stirling
Chairman & CEO
Secretary & EVP
Guelph, Ontario
March 5, 2024
KPMG LLP
120 Victoria Street South
Suite 600
Kitchener, ON N2G 0E1
Canada
Telephone 519 747 8800
Fax 519 747 8811
KPMG LLP, an Ontario limited liability partnership and member firm of the KPMG global organization of independent member firms affiliated
with KPMG International Limited, a private English company limited by guarantee. KPMG Canada provides services to KPMG LLP.
INDEPENDENT AUDITOR’S REPORT
To the Shareholders of Hammond Manufacturing Company Limited
Opinion
We have audited the consolidated financial statements of Hammond Manufacturing Company
Limited (the Company), which comprise:
the consolidated statements of financial position as at December 31, 2024 and 2023
the consolidated statements of comprehensive income for the years then ended
the consolidated statements of changes in equity for the years then ended
the consolidated statements of cash flows for the years then ended
and notes to the consolidated financial statements, including a summary of material accounting
policy information
(Hereinafter referred to as the “financial statements”).
In our opinion, the accompanying financial statements present fairly, in all material respects, the
consolidated financial position of the Company as at December 31, 2024 and 2023, and its
consolidated financial performance and its consolidated cash flows for the years then ended in
accordance with IFRS Accounting Standards as issued by the International Accounting Standards
Board.
Basis for Opinion
We conducted our audit in accordance with Canadian generally accepted auditing standards. Our
responsibilities under those standards are further described in the “Auditor’s Responsibilities for
the Audit of the Financial Statements” section of our auditor’s report.
We are independent of the Company in accordance with the ethical requirements that are relevant
to our audit of the financial statements in Canada and we have fulfilled our other ethical
responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
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Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in
our audit of the financial statements for the year ended December 31, 2024. These matters were
addressed in the context of our audit of the financial statements as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on these matters.
We have determined the matters described below to be the key audit matters to be communicated
in our auditor’s report.
Evaluation of the write-down of inventory for excess or obsolescence
Description of the matter
We draw attention to notes 2(d)(i), 3(c) and 5 to the financial statements. The Company has
inventory with a carrying value of $66,654 thousand. Inventory is valued at the lower of cost or net
realizable value. When necessary, the Company will write-down inventory to its net realizable value.
The determination of net realizable value requires the Company to make certain assumptions
including forecasted demand.
Why the matter is a key audit matter
We identified the evaluation of the write-down of inventory for excess and obsolescence as a key
audit matter. There is a high degree of estimation uncertainty as well as complexity in predicting
forecasted demand. Significant auditor judgement was required to evaluate the results of our audit
procedures due to the estimation uncertainty associated with the determination of net realizable
value.
How the matter was addressed in the audit
The primary procedures we performed to address this key audit matter included the following:
We evaluated the Company’s ability to accurately forecast demand by comparing the Company’s
prior year expectations of forecasted demand to actual sales data, inventory usage, and publicly
available industry outlook reports.
Other Information
Management is responsible for the other information. Other information comprises:
the information included in Management’s Discussion and Analysis filed with the relevant
Canadian Securities Commissions.
the information, other than the financial statements and the auditor’s report thereon, included in
a document entitled “Annual Report”.
Our opinion on the financial statements does not cover the other information and we do not and will
not express any form of assurance conclusion thereon.
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In connection with our audit of the financial statements, our responsibility is to read the other
information identified above and, in doing so, consider whether the other information is materially
inconsistent with the financial statements or our knowledge obtained in the audit and remain alert for
indications that the other information appears to be materially misstated.
We obtained the information included in Management’s Discussion and Analysis filed with the
relevant Canadian Securities Commissions and the Annual Report as at the date of this auditor’s
report. If, based on the work we have performed on this other information, we conclude that there
is a material misstatement of this other information, we are required to report that fact in the auditor’s
report.
We have nothing to report in this regard.
Responsibilities of Management and Those Charged with Governance for the
Financial Statements
Management is responsible for the preparation and fair presentation of the financial statements in
accordance with IFRS Accounting Standards as issued by the International Accounting Standards
Board, and for such internal control as management determines is necessary to enable the
preparation of financial statements that are free from material misstatement, whether due to fraud or
error.
In preparing the financial statements, management is responsible for assessing the Company’s
ability to continue as a going concern, disclosing as applicable, matters related to going concern and
using the going concern basis of accounting unless management either intends to liquidate the
Company or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company’s financial reporting
process.
Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole
are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report
that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted
in accordance with Canadian generally accepted auditing standards will always detect a material
misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken
on the basis of the financial statements.
As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise
professional judgment and maintain professional skepticism throughout the audit.
Annual Report 2024 27
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We also:
Identify and assess the risks of material misstatement of the financial statements, whether due
to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit
evidence that is sufficient and appropriate to provide a basis for our opinion.
The risk of not detecting a material misstatement resulting from fraud is higher than for one
resulting from error, as fraud may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.
Conclude on the appropriateness of management's use of the going concern basis of accounting
and, based on the audit evidence obtained, whether a material uncertainty exists related to
events or conditions that may cast significant doubt on the Company's ability to continue as a
going concern. If we conclude that a material uncertainty exists, we are required to draw attention
in our auditor’s report to the related disclosures in the financial statements or, if such disclosures
are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained
up to the date of our auditor’s report. However, future events or conditions may cause the
Company to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial statements, including the
disclosures, and whether the financial statements represent the underlying transactions and
events in a manner that achieves fair presentation.
Communicate with those charged with governance regarding, among other matters, the planned
scope and timing of the audit and significant audit findings, including any significant deficiencies
in internal control that we identify during our audit.
Provide those charged with governance with a statement that we have complied with relevant
ethical requirements regarding independence, and communicate with them all relationships and
other matters that may reasonably be thought to bear on our independence, and where
applicable, related safeguards.
Plan and perform the group audit to obtain sufficient appropriate audit evidence regarding the
financial information of the entities or business units within the group as a basis for forming an
opinion on the group financial statements. We are responsible for the direction, supervision and
review of the audit work performed for the purposes of the group audit. We remain solely
responsible for our audit opinion.
Annual Report 2024 28
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Determine, from the matters communicated with those charged with governance, those matters
that were of most significance in the audit of the financial statements of the current period and
are therefore the key audit matters. We describe these matters in our auditor’s report unless law
or regulation precludes public disclosure about the matter or when, in extremely rare
circumstances, we determine that a matter should not be communicated in our auditor’s report
because the adverse consequences of doing so would reasonably be expected to outweigh the
public interest benefits of such communication.
Chartered Professional Accountants, Licensed Public Accountants
The engagement partner on the audit resulting in this auditor’s report is Matthew Betik.
Kitchener, Canada
March 4, 2025
Annual Report 2024 29
HAMMOND MANUFACTURING COMPANY LIMITED
www.hammondmfg.com
Annual Report 2024 30
The notes on pages 34 to 69 are an integral part of these consolidated financial statements.
Consolidated Statements of Financial Position
(in thousands of Canadian dollars)
Note
December 31, 2024 December 31, 2023
Assets
Current assets:
Cash
24,710
$
8,890
$
Trade and other receivables
4, 26
32,491
30,856
Income taxes receivable
96
799
Inventories
5
66,654
67,772
Prepaid expenses
2,134
1,890
Total current assets
126,085
110,207
Non-current assets:
Property, plant and equipment
6
72,150
66,817
Intangible assets and goodwill
7
383
383
Right-of-use assets
8
14,135
10,378
Investment property
9
1,044
1,044
Equity investment
10
992
929
Total non-current assets
88,704
79,551
Total assets
214,789
$
189,758
$
Liabilities
Current liabilities:
Bank indebtedness
11
283
$
431
$
Trade and other payables
14
26,386
24,815
Income taxes payable
3,177
406
Current portion of provisions
15
500
480
Current portion of employee future benefits
16
140
137
Current portion of long-term debt
12
36,238
38,428
Current portion of lease liabilities
8
3,317
2,435
Total current liabilities
70,041
67,132
Non-current liabilities:
Provisions
15
145
145
Employee future benefits
16
310
336
Long-term debt
12
4,897
6,299
Lease liabilities
8
11,993
8,858
Deferred tax liabilities
17
7,868
7,989
Total non-current liabilities
25,213
23,627
Total liabilities
95,254
90,759
Equity:
Share capital
19
10,249
10,249
Contributed surplus
290
290
Accumulated other comprehensive income
5,628
2,786
Retained earnings
103,368
85,674
Total equity
119,535
98,999
Total liabilities and equity
214,789
$
189,758
$
HAMMOND MANUFACTURING COMPANY LIMITED
www.hammondmfg.com
Annual Report 2024 31
The notes on pages 34 to 69 are an integral part of these consolidated financial statements.
Consolidated Statements of Comprehensive Income
(in thousands of Canadian dollars, except earnings per share)
For The Years ended December 31,
Note
2024
2023
Net product sales
27
$ 244,898
$ 238,285
Cost of sales
153,997
152,079
Gross profit
90,901
86,206
Selling and distribution
56,186
51,018
General and administrative
7,101
7,230
(Gain) Loss on disposal of property, plant and equipment
14
(130)
Income from operating activities
27,600
28,088
Interest expense
13
(2,815)
(2,548)
Interest expense leases
13
(655)
(544)
Interest income
13
595
40
Foreign exchange gain (loss)
(221)
29
Net finance expense
(3,096)
(3,023)
Share of profit of equity accounted investee
10
110
12
Share of expenses from investment property
9
(92)
(78)
Income before income tax
24,522
24,999
Income tax expense
18
6,148
6,238
Net income for the period
$ 18,374
$ 18,761
Other comprehensive Income (Loss):
Foreign currency translation for foreign operations, net of
income tax
2,842
(627)
Total comprehensive income for the period
$ 21,216
$ 18,134
Earnings per share
Basic earnings per share
22
$ 1.62
$ 1.66
Diluted earnings per share
22
$ 1.62
$ 1.66
Twelve Months Ended:
HAMMOND MANUFACTURING COMPANY LIMITED
www.hammondmfg.com
Annual Report 2024 32
The notes on pages 34 to 69 are an integral part of these consolidated financial statements.
Consolidated Statements of Changes in Equity
For the years December 31, 2024 and December 31, 2023
(in thousands of Canadian dollars)
Share
Capital
Contributed
Surplus
AOCI**
Retained
earnings
Total
equity
Balance at January 1, 2023
10,249
$
290
$
3,413
$
67,593
$
81,545
$
Net income for the year
-
-
-
18,761
18,761
Other comprehensive loss:
Foreign currency translation differences
-
-
(627)
-
(627)
Total comprehensive income (loss) for the year
-
-
(627)
18,761
18,134
Transactions with owners, recorded directly in equity:
Dividends to equity holders
-
-
-
(680)
(680)
Balance at December 31, 2023
10,249
$
290
$
2,786
$
85,674
$
98,999
$
Balance at January 1, 2024
10,249
$
290
$
2,786
$
85,674
$
98,999
$
Net income for the year
-
-
18,374
18,374
Other comprehensive income:
Foreign currency translation differences
-
-
2,842
-
2,842
Total comprehensive income for the year
-
-
2,842
18,374
21,216
Transactions with owners, recorded directly in equity:
Dividends to equity holders
-
-
-
(680)
(680)
Balance at December 31, 2024
10,249
$
290
$
5,628
$
103,368
$
119,535
$
** Accumulated other comprehensive income (loss)
Attributable to equity holders of the Company
HAMMOND MANUFACTURING COMPANY LIMITED
www.hammondmfg.com
Annual Report 2024 33
The notes on pages 34 to 69 are an integral part of these consolidated financial statements.
Consolidated Statements of Cash Flows
(in thousands of Canadian dollars)
For The Years ended December 31,
Note
2024
2023
Cash flows from operating activities
Net income for the period
18,374
$
18,761
$
Adjustments for:
Depreciation of property, plant and equipment
6
6,760
5,691
Amortization of intangible assets
7
80
78
Depreciation of right-of-use assets
8
2,978
2,680
Net Interest expense
13
2,220
2,508
Interest expense on leases
13
655
544
Income tax expense
18
6,148
6,238
Loss (gain) on disposal of property, plant and equipment
14
(130)
Provisions and employee future benefits
(3)
113
Equity investments
(16)
(106)
Change in inventory allowance for lower of cost or net realizabe value
5
305
251
37,515
36,628
Change in non-cash working capital:
Inventories
1,308
(4,386)
Trade and other receivables
(255)
(1,159)
Prepaid expenses
(209)
(29)
Trade and other payables
1,026
(4,812)
Cash generated in operating activities
39,385
26,242
Interest expense paid
13
(2,815)
(2,508)
Interest income received
13
595
40
Interest paid on leases
13
(655)
(544)
Income tax paid
(2,845)
(6,295)
Net cash generated in operating activities
33,665
16,935
Cash flows from financing activities
Bank indebtedness repayment
(193)
(14,015)
Payment of long-term debt
13
(3,741)
(3,429)
Payment of lease liabilities
13
(2,757)
(2,681)
Advances of long-term debt
-
26,000
Payment of dividends
(680)
(680)
Net cash generated (used) in financing activities
(7,371)
5,195
Cash flows from investing activities
Proceeds from disposal of property, plant and equipment
12
140
Acquisition of property, plant and equipment
(11,979)
(13,653)
Intangible asset additions
(72)
(111)
Net cash used in investing activities
(12,039)
(13,624)
Net increase in cash
14,255
8,506
Cash at beginning of period
8,890
942
Foreign exchange gain on cash and cash
equivalents in a foreign currency
1,565
(518)
Cash at end of period
24,710
$
8,930
$
HAMMOND MANUFACTURING COMPANY LIMITED
Notes to Consolidated Financial Statements
Years ended December 31, 2024, and 2023
(amounts (except share amounts) in thousands of Canadian dollars)
www.hammondmfg.com
Annual Report 2024 34
1) Introduction:
a) Reporting entity:
Hammond Manufacturing Company Limited (“HMCL” or the “Company”) is a public company
traded on the Toronto Stock Exchange under the symbol “HMM.A” and is incorporated under
the Ontario Business Corporations Act. The address of the Company’s registered office is 394
Edinburgh Road North, Guelph, Ontario. The consolidated financial statements of the Company
as at and for the year ended December 31, 2024, include the Company and its subsidiaries
(together referred to as the “Group” and individually as “Group entities”) and the Group’s interest
in jointly controlled entities. The Group primarily is involved in the design, manufacture and sale
of electrical and electronic components. Facilities are located in Canada, the US, the UK, the
Netherlands, Taiwan and Australia, with agents and distributors located worldwide. The
Company also maintains a 40% ownership share of RITEC Enclosures Inc. (RITEC) located in
Taiwan. RITEC produces plastic and die cast enclosures for sale through the Company’s sales
network and its own existing market channels.
2) Basis of preparation:
a) Statement of compliance:
These consolidated financial statements have been prepared in accordance with IFRS
Accounting Standards as issued by the International Accounting Standards Board (IFRS).
The Board of Directors approved these consolidated financial statements on March 4, 2025.
b) Basis of measurement:
The consolidated financial statements have been prepared on the historical cost basis.
c) Functional and presentation currency:
The consolidated financial statements are presented in Canadian dollars. The functional
currency of the Group’s entities is the currency of their primary economic environment. Foreign
currency translation differences are recognized in other comprehensive income which is
included in accumulated other comprehensive income. The functional currency of the
Company’s subsidiary operations located in the US, UK, Netherlands, Taiwan and Australia are
the US dollar, the British pound sterling, and Euro dollar respectively. The functional currency
of the Company’s Canadian operations is the Canadian dollar.
d) Use of estimates:
The preparation of financial statements in conformity with IFRS requires management to make
estimates and assumptions that affect the application of accounting policies and the reported
amount of assets, liabilities, income and expense. Actual results may differ from these
estimates. Revisions to accounting estimates are recognized in the period in which the
estimates are revised and in any future periods affected. Management periodically reviews its
estimates and underlying assumptions relating to the following items:
i)
Inventory
Inventories are valued at the lower of cost or net realizable value. When necessary, the
write-down of inventory to its net realizable value is recorded as a result of industry
conditions. Management has made certain assumptions including expected forecasted
HAMMOND MANUFACTURING COMPANY LIMITED
Notes to Consolidated Financial Statements
Years ended December 31, 2024, and 2023
(amounts (except share amounts) in thousands of Canadian dollars)
www.hammondmfg.com
Annual Report 2024 35
demand by utilizing information such as inventory quantities and aging, historical sales of
inventory and general market understanding. Reductions in demand for certain of our
inventories or declining market values, as well as differences between actual results and
the assumptions utilized by us when determining the market value of our inventories, could
result in the recognition of write-down expenses in future periods.
ii) Amortization
Management makes estimates of the appropriate useful lives to be assigned to intangible
assets based on the individual circumstances of an acquisition. Management reviews the
appropriateness of the lives assigned and adjusts prospectively, where necessary.
iii) Impairment tests
Management makes estimates of sustainable earnings, future expected cash flows and
discount rates in the determination of the value-in-use or fair value less costs of disposal of
cash-generating units (“CGUs”).
iv) Provision against accounts receivable
Management makes estimates on the expected credit losses (“ECLs”) of accounts
receivable balances based on customer specific facts and circumstances as well as
experience of write-offs. Changes in the economic conditions in which the Company’s
customers operate and their underlying financial stability may have an impact on these
estimates.
v) Employee future benefits
Management estimates the discount rates, retirement age and future costs of benefits
associated with providing employee future benefits and exercises judgment to determine
how many employees will utilize these benefits.
vi) Tax assets
Deferred tax assets and liabilities contain estimates about the nature and timing of future
permanent and temporary differences as well as the future tax rates that will apply to those
differences. Changes in tax laws and rates as well as changes to the expected timing of
reversals may have a significant impact on the amounts recorded for deferred tax assets
and liabilities. Management closely monitors current and potential changes to tax law and
bases its estimates on the best available information at each reporting date.
vii) Depreciation
Management estimates future residual values and the rate at which the useful lives of
property and equipment are consumed to determine appropriate depreciation charges.
Estimates of residual value and useful lives are based on data and information from various
sources, including vendors, industry practice and Company-specific history. Management
reviews the appropriateness of the lives assigned and makes adjustments prospectively,
where necessary.
HAMMOND MANUFACTURING COMPANY LIMITED
Notes to Consolidated Financial Statements
Years ended December 31, 2024, and 2023
(amounts (except share amounts) in thousands of Canadian dollars)
www.hammondmfg.com
Annual Report 2024 36
viii) Property value
Management estimates the value of the investment property to assess if impairment has
occurred. The estimate is made by reviewing local land prices and current sales of similar
properties as well as property tax value assessment.
ix) Environmental remediation:
Management estimates the value to complete the remediation project on the Glen Ewing
Property each year by reviewing the project status and activities still to be completed. Any
changes to the project scope are updated in the cost estimation model and any change in
the required reserve is recorded in the current year.
x) Sales returns:
Management estimates the value of product that will be returned based on a historical
analysis. Any change to the estimate is recorded as an increase or reduction of revenue in
the current period.
xi) Leases:
For the purpose of initial and subsequent measurement of leases the Company utilizes a
discount rate in the lease that is readily available or the Group’s incremental borrowing rate.
The Group also utilizes its best estimate of any costs to dismantle and remove the asset at
the end of the lease.
e) Use of judgments:
The preparation of financial statements in conformity with IFRS requires management to make
judgements that affect the application of accounting policies and the interpretation of accounting
standards. Management periodically reviews its judgments and underlying assumptions relating
to the following items:
i)
Provision for claims
Management exercises judgement in deciding whether liability for a claim meets the criteria
of the present obligation and in assessing the probability of the outflow of economic
resources.
ii) Leases
Management exercises judgement as to whether it is likely to extend the term of a lease
when the option is provided.
iii) Impairment tests
Management exercises judgement to determine whether there are factors that would
indicate that an asset or a CGU is impaired. The determination of CGUs is also based on
management’s judgement and is an assessment of the smallest group of assets that
generate cash inflows independently of other assets. Factors considered include whether
an active market exists for the output produced by the asset or group of assets as well as
how management monitors and makes decisions about the Company’s operations.
HAMMOND MANUFACTURING COMPANY LIMITED
Notes to Consolidated Financial Statements
Years ended December 31, 2024, and 2023
(amounts (except share amounts) in thousands of Canadian dollars)
www.hammondmfg.com
Annual Report 2024 37
3) Summary of material accounting policies:
Except for the changes explained in “new standards and interpretations adopted” below, the
accounting policies set out below have been applied consistently to all periods presented in these
consolidated financial statements. These accounting policies have been consistently applied by all
Group entities.
a) Basis of consolidation:
The consolidated financial statements include the accounts of Hammond Manufacturing
Company Limited, its wholly owned subsidiaries, Hammond Manufacturing Company Inc.,
Hammond Electronics Limited, Hammond Electronics Pty Limited, Les Fabrications Hammond
(Quebec) Inc., Hammond Electronics Asia Limited, Hammond Electronics B.V. and its
proportionate share of the Glen Ewing Property, an unincorporated co-tenancy (50%). All
significant intercompany balances and transactions have been eliminated on consolidation. The
consolidated financial statements include the investment in RITEC, which is accounted for using
the equity method.
b) Revenue recognition:
The Company principally generates revenue through the manufacturing and sale of industrial
enclosures, electronic enclosures, racks and cabinets, transformers and other products.
Revenue is recognized when control of a product is transferred to a customer. This is generally
at the point in time when product is available for physical delivery, and the customer has legal
title to, physical possession of (or through their carrier), and the risks and rewards of ownership
of the product have transferred; therefore, the customer is able to direct the use of and obtain
substantially all of the benefits of the product. There is only a single performance obligation,
except for where delivery is provided by Hammond after the point of transfer.
Revenue is measured based on the consideration specified in a contract with a customer, net
of variable consideration, including rebates, returns and discounts. Rebates are accrued using
sales data and rebate percentages specific to each customer contract. Accruals for sales returns
are calculated based on the best estimate of the amount of product that will ultimately be
returned by customers. All customer receivables are expected to be paid within one year and
therefore the Company does not adjust for the effects of a financing component.
Contract liabilities are recorded when cash payments are received or due in advance of the
Company’s performance.
c) Inventories:
Inventories are measured at the lower of cost, determined on a first-in, first-out basis, and net
realizable value, and include expenditures incurred in acquiring the inventories, production or
conversion costs and other costs incurred in bringing them to their existing location and
condition. In the case of manufactured inventories and work in progress, costs include an
appropriate share of production overheads based on normal operating capacity. Net realizable
value is the estimated selling price in the ordinary course of business, less the estimated costs
of completion and selling expenses. When circumstances that previously gave rise to an
inventory write down no longer exist, the previous impairment is reversed.
HAMMOND MANUFACTURING COMPANY LIMITED
Notes to Consolidated Financial Statements
Years ended December 31, 2024, and 2023
(amounts (except share amounts) in thousands of Canadian dollars)
www.hammondmfg.com
Annual Report 2024 38
d) Investment property:
Investment property is property held either to earn rental income or for capital appreciation or
for both, but not for sale in the ordinary course of business, use in the production or supply of
goods or services or for administrative purposes. The Group measures its investment property,
being the land held by Glen Ewing Property, at historical cost.
e) Property, plant and equipment:
Property, plant and equipment are shown in the statements of financial position at their historical
cost. Costs include expenditures that are directly attributable to the acquisition of the assets.
Assets are amortized over their useful life on a straight-line basis, except for specific tooling
items which are amortized based on units of production method.
The depreciation rates based on the estimated useful lives for the current and comparative
periods are as follows:
Asset
Useful Life
Buildings
20 to 40 years
Office equipment
4 to 10 years
Machinery and equipment
4 to 10 years
Tooling general use
4 to 10 years
Tooling specific part
Based on anticipated life unit output
Depreciation methods, useful lives and residual values are reviewed at each financial year-end
and adjusted, if appropriate.
f)
Intangible assets other than goodwill:
Intangible assets are stated at cost, less accumulated amortization. Intangible assets with a
finite life are amortized using the straight-line method at rates calculated to amortize the cost of
these assets over their estimated useful lives.
The amortization rates based on the estimated useful lives for the current and comparative
periods are as follows:
Asset
Straight-Line Method
Computer software
5 years
Development costs
5 years
Amortization methods, useful lives and residual values are reviewed at each financial year-end
and adjusted, if appropriate.
HAMMOND MANUFACTURING COMPANY LIMITED
Notes to Consolidated Financial Statements
Years ended December 31, 2024, and 2023
(amounts (except share amounts) in thousands of Canadian dollars)
www.hammondmfg.com
Annual Report 2024 39
g) Investments measured using equity method:
The Company uses the equity method as a basis of accounting for investments in companies
over which it exercises significant influence or joint control. Under the equity method, the
Company records these investments initially at cost and the carrying values are adjusted
thereafter to include the Company's pro rata share of post-acquisition earnings of the investees,
computed by the consolidation method. The adjustments are included in the determination of
net income by the Company, and the investment accounts of the Company are also increased
or decreased to reflect the Company's share of capital transactions (including amounts
recognized in other comprehensive income). Profit distributions received from investees reduce
the carrying values of the investments. Unrealized intercompany gains or losses are eliminated.
The Company uses the equity method to account for its 40% interest in RITEC.
h) Income taxes:
Deferred income tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured
using enacted or substantively enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or settled. The effect
on deferred tax assets and liabilities of a change in tax rates is recognized in income in the
period that includes the date of enactment or substantive enactment. A deferred tax asset is
recognized for unused tax losses, tax credits and deductible temporary differences, to the extent
that it is probable that future taxable profits will be available against which they can be utilized.
Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is
no longer probable that the related tax benefit will be realized.
i)
Provisions:
Provisions may include liabilities of uncertain timing or amounts that arise from environmental,
litigation, commercial or other risks. Provisions are recognized when a legal or constructive
obligation exists stemming from a past event and when the future cash outflows can be reliably
estimated. Provisions are determined by discounting the expected future cash flows at a pre-
tax rate that reflects the current market assessments of the time value of money and the risks
specific to the liability.
j)
Financial assets and financial liabilities:
Financial assets are initially measured at fair value. On initial recognition, the Company
classifies its financial assets at either amortized cost, fair value through other comprehensive
income or fair value through profit or loss, depending on its business model for managing the
financial assets and the contractual cash flow characteristics of the financial assets.
Financial liabilities are initially measured at fair value, net of transaction costs incurred. They
are subsequently carried at amortized cost using the effective interest rate method; any
difference between the proceeds (net of transaction costs) and the redemption value is
recognized as an adjustment to interest expense over the period of the borrowings.
Financial liabilities include bank indebtedness, trade and other payables and long-term debt.
HAMMOND MANUFACTURING COMPANY LIMITED
Notes to Consolidated Financial Statements
Years ended December 31, 2024, and 2023
(amounts (except share amounts) in thousands of Canadian dollars)
www.hammondmfg.com
Annual Report 2024 40
k) Impairment:
i)
Financial assets:
ECLs are recognized on all financial assets not carried at fair value through profit or loss.
Expected credit losses are based on the difference between the contractual cash flows due
in accordance with the contract and all the cash flows that the Company expects to receive,
discounted at an approximation of the original effective interest rate.
For trade receivables and contract assets, the Company applies a simplified approach in
calculating ECLs. Therefore, the Company does not track changes in credit risk but instead
recognizes a loss allowance based on lifetime ECL at each reporting date. The Company
has established a provision matrix that is based on its historical credit loss experience,
adjusted for forward-looking factors specific to the debtors and the economic environment.
ii) Non-financial assets:
The carrying amounts of the Group’s non-financial assets are reviewed at each reporting
date to determine whether there is any indication of impairment. If any such indication exists,
then the asset’s recoverable amount is estimated. For goodwill, and intangible assets that
have indefinite useful lives or that are not yet available for use, the recoverable amount is
estimated each year at the same time.
The recoverable amount of an asset or CGU is the greater of its value in use and its fair
value less costs to sell. In assessing value in use, the estimated future cash flows are
discounted to their present value using a pre-tax discount rate that reflects current market
assessments of the time value of money and the risks specific to the asset. For the purpose
of impairment testing, assets that cannot be tested individually are grouped together into
the smallest group of assets that generates cash inflows from continuing use that are largely
independent of the cash inflows of other assets or groups of assets.
For the purposes of goodwill impairment testing, goodwill acquired in a business
combination is allocated to the CGU, or the group of CGUs, that is expected to benefit from
the synergies of the combination. The value in use is based on their future projected cash
flows discounted to the present value at an appropriate pre-tax discount rate.
The Group completed its annual impairment test at December 31, 2024 and December 31,
2023, and concluded there was no impairment.
l)
Employee Benefits:
i)
Defined contribution plans:
A defined contribution plan is a post-employment benefit plan under which an entity pays
fixed contributions to a separate entity and will have no legal or constructive obligation to
pay further amounts. Obligations for contributions to defined contribution pension plans are
recognized as an employee benefit expense in the periods during which services are
rendered by the employees. Prepaid contributions are recognized as an asset to the extent
that a cash refund or a reduction on future payments is available.
HAMMOND MANUFACTURING COMPANY LIMITED
Notes to Consolidated Financial Statements
Years ended December 31, 2024, and 2023
(amounts (except share amounts) in thousands of Canadian dollars)
www.hammondmfg.com
Annual Report 2024 41
ii) Other long-term employee benefits:
The Group’s net obligation in respect of long-term employee benefits, other than pension
plans, is the amount of future benefit that employees have earned in return for their service
in the current and prior periods; that benefit is discounted to determine its present value and
the fair value of any related assets is deducted. Any actuarial gains and losses are
recognized in profit or loss in the period in which they arise.
iii) Termination benefits:
Termination benefits are recognized as an expense when the Group is committed
demonstrably, without realistic possibility of withdrawal, to a formal detailed plan to either
terminate employment before the normal retirement date, or to provide termination benefits
as a result of an offer made to encourage voluntary redundancy. Termination benefits for
voluntary redundancies are recognized as an expense if the Group has made an offer of
voluntary redundancy, it is probable that the offer will be accepted, and the number of
acceptances can be estimated reliably. If benefits are payable more than 12 months after
the reporting period, then they are discounted to their present value.
iv) Short-term employee benefits:
Short-term employee benefit obligations are measured on an undiscounted basis and are
expensed as the related service is provided. A liability is recognized for the amount expected
to be paid under short-term cash bonus or profit-sharing plans if the Group has a present
legal or constructive obligation to pay this amount as a result of past service provided by
the employee, and the obligation can be estimated reliably.
m) Segment reporting:
The continuing operations of the Company are in one operating segment, electrical and
electronic components.
n) Finance costs:
Finance costs consist of interest on borrowings and finance leases.
o) Government Grants:
Grants from the government are recognized at their fair value where there is a reasonable
assurance that the grant will be received, and the Company will comply with all the attached
conditions.
Government grants in respect of capital expenditures are credited to the carrying amount of the
related assets and are released to income over the expected useful lives of the relevant assets.
Government grants which are not associated with an asset are credited to income to net them
against the expense to which they relate.
HAMMOND MANUFACTURING COMPANY LIMITED
Notes to Consolidated Financial Statements
Years ended December 31, 2024, and 2023
(amounts (except share amounts) in thousands of Canadian dollars)
www.hammondmfg.com
Annual Report 2024 42
p) Leases:
The Group recognizes a right-of-use asset and a lease liability at the lease commencement
date. The right-of-use asset is initially measured at cost, which comprises the initial amount of
the lease liability adjusted for any lease payments made at or before the commencement date,
plus any initial direct costs incurred and an estimate of costs to dismantle and remove the
underlying asset or to restore the underlying asset or the site on which it is located, less any
lease incentives received.
The right-of-use asset is subsequently depreciated using the straight-line method from the
commencement date to the end of the lease term, unless the lease transfers ownership of the
underlying asset to the Group by the end of the lease term or the cost of the right-of-use asset
reflects that the Group will exercise a purchase option. In that case the right-of-use asset will be
depreciated over the useful life of the underlying asset, which is determined on the same basis
as those of property and equipment. In addition, the right-of-use asset is periodically reduced
by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.
The lease liability is initially measured at the present value of the lease payments that are not
paid at the commencement date, discounted using the interest rate implicit in the lease or, if that
rate cannot be readily determined, the Group’s incremental borrowing rate. Generally, the Group
uses its incremental borrowing rate as the discount rate.
The Group determines its incremental borrowing rate by obtaining interest rates from various
external financing sources and makes certain adjustments to reflect the terms of the lease and
type of asset leased.
The lease liability is measured at amortized cost using the effective interest method. It is
remeasured when there is a change in future lease payments arising from a change in an index
or rate, if there is a change in the Group’s estimate of the amount expected to be payable under
a residual value guarantee, if the Group changes its assessment of whether it will exercise a
purchase, extension or termination option or if there is a revised in-substance fixed lease
payment.
When the lease liability is remeasured in this way, a corresponding adjustment is made to the
carrying amount of the right-of-use asset or is recorded in profit or loss if the carrying amount of
the right-of-use asset has been reduced to zero.
Short-term leases and leases of low-value assets:
The Group has elected not to recognize right-of-use assets and lease liabilities for leases of
low-value assets and short-term leases, including IT equipment. The Group recognizes the
lease payments associated with these leases as an expense on a straight-line basis over the
lease term.
q) New standards and interpretations adopted:
Lease Liability in a Sale and Leaseback (Amendments to IFRS 16)
On September 22, 2022, the IASB issued Lease Liability in a Sale and Leaseback (Amendments
to IFRS 16). The amendments introduce a new accounting model which impacts how a seller-
lessee accounts for variable lease payments that arise in a sale-and-leaseback transaction.
HAMMOND MANUFACTURING COMPANY LIMITED
Notes to Consolidated Financial Statements
Years ended December 31, 2024, and 2023
(amounts (except share amounts) in thousands of Canadian dollars)
www.hammondmfg.com
Annual Report 2024 43
The amendments were adopted on January 1, 2024. The impact of adoption of these
amendments did not have an impact on the business.
Classification of Liabilities as Current or Non-current (Amendments to IAS 1)
On January 23, 2020, the IASB issued amendments to IAS 1 Presentation of Financial
Statements, to clarify the classification of liabilities as current or non-current. On October 31,
2022, the IASB issued Non-current Liabilities with Covenants (amendments to IAS 1), to
improve the information a company provides about long-term debt with covenants.
The amendments were adopted on January 1, 2024. The impact of adoption of these
amendments did not have an impact on the business.
Supplier Finance Arrangements (Amendments to IAS 7 and IFRS 7)
On May 25, 2023, the IASB issued amendments to IAS 7 Statement of Cash Flows and IFRS 7
Financial Instruments: Disclosures. The amendments introduce two new disclosure objectives
– one in IAS 7 and another in IFRS 7 – for a company to provide information about its supplier
finance arrangements that would enable users (investors) to assess the effects of these
arrangements on the company’s liabilities and cash flows, and the company’s exposure to
liquidity risk.
The amendments were adopted on January 1, 2024. The impact of the adoption of these
amendments did not have an impact on the business
r)
New standards and interpretations have not yet been adopted (if applicable):
At the date of authorization of these financial statements, several new, but not yet effective,
Standards and amendments to existing Standards, and Interpretations have been published by
the IASB. None of these Standards or amendments to existing Standards have been adopted
early by the Group and it is still to be determined if any will have a material impact or if they are
applicable for the Group’s financial statements.
Lack of Exchangeability (Amendment to IAS 21, The Effects of Changes in Foreign
Exchange Rates) applies when one currency cannot be exchanged into another. This may
occur, for example, because of government-imposed controls on capital imports and exports, or
a limitation on the volume of foreign currency transactions that can be undertaken at an official
exchange rate. The amendments clarify when a currency is considered exchangeable into
another currency, and how an entity estimates a spot rate for currencies that lack
exchangeability. The amendments introduce new disclosures to help financial statement users
assess the impact of using an estimated exchange rate.
Amendments to the Classification and Measurement of Financial Instruments
(Amendments to IFRS 9, Financial Instruments and IFRS 7, Financial Instruments:
Disclosures) clarify financial assets and financial liabilities are recognized and derecognized at
settlement date except for regular way purchases or sales of financial assets and financial
liabilities meeting conditions for new exception. The new exception permits companies to elect
to derecognize certain financial liabilities settled via electronic payment systems earlier than the
settlement date.
HAMMOND MANUFACTURING COMPANY LIMITED
Notes to Consolidated Financial Statements
Years ended December 31, 2024, and 2023
(amounts (except share amounts) in thousands of Canadian dollars)
www.hammondmfg.com
Annual Report 2024 44
They also provide guidelines to assess contractual cash flow characteristics of financial assets,
which apply to all contingent cash flows, including those arising from environmental, social, and
governance (ESG)-linked features.
Additionally, these amendments introduce new disclosure requirements and update others.
Power Purchase Agreements (PPAs) (Amendments to IFRS 9 and IFRS 7) address the
application of ‘own use’ and hedge accounting requirements for agreements which meet
specified criteria. If a PPA qualifies for the ‘own use’ exemption, it is accounted for as an
executory contract rather than as a derivative. In contrast, if a PPA does not qualify for the ‘own
use’ exemption, it is accounted for as a derivative to which hedge accounting considerations
may apply. The amendments apply to contracts that reference electricity generated from nature
dependent sources and for which cash flows vary based on the amount of electricity generated
by a reference production facility. New disclosures have also been introduced.
IFRS 18 replaces IAS 1, which sets out presentation and base disclosure requirements for
financial statements. The changes, which mostly affect the income statement, include the
requirement to classify income and expenses into three new categories – operating, investing
and financing – and present subtotals for operating profit or loss and profit or loss before
financing and income taxes.
Further, operating expenses are presented directly on the face of the income statement –
classified either by nature (e.g. employee compensation), by function (e.g. cost of sales) or using
a mixed presentation. Expenses presented by function require more detailed disclosures about
their nature.
IFRS 18 also provides enhanced guidance for aggregation and disaggregation of information in
the financial statements, introduces new disclosure requirements for management-defined
performance measures (MPMs)* and eliminates classification options for interest and dividends
in the statement of cash flows.
*Non-GAAP measures that meet the definition of MPMs will be subject to the disclosure
requirements.
IFRS 19 is a voluntary standard that applies to entities without public accountability, but whose
parents prepare consolidated financial statements under IFRS Accounting Standards.
For in-scope companies, IFRS 19 simplifies disclosures on various topics, including leases,
exchange rates, income taxes, statement of cash flows, etc.
If elected, IFRS 19 is expected to reduce the cost of preparing in-scope financial statements
while maintaining the usefulness of those financial statements for stakeholders.
HAMMOND MANUFACTURING COMPANY LIMITED
Notes to Consolidated Financial Statements
Years ended December 31, 2024, and 2023
(amounts (except share amounts) in thousands of Canadian dollars)
www.hammondmfg.com
Annual Report 2024 45
4) Trade and other receivables:
The Company’s exposure to credit and currency risks, and impairment losses related to trade and
other receivables is disclosed in note 26.
5) Inventories:
In 2024, raw materials, consumables and changes in finished goods and work in progress
recognized as cost of sales amounted to approximately $153,795 (2023 - $151,828). In 2024, the
write-down of inventories to net realizable value net of recovery was $305 (2023 - $251). The current
banking agreement pledges 40% of this value as security up to $15,000.
6) Property, plant and equipment:
December 31, 2024
December 31, 2023
Trade receivables
$ 32,158
$ 30,895
Employee receivables
4
15
Other receivables
685
487
32,847
31,397
Estimated credit losses
(356)
(541)
Trade and other receivables
$ 32,491
$ 30,856
December 31, 2024
December 31, 2023
Raw materials
$ 16,015
$ 17,120
Work-in-process
6,028
5,615
Finished goods
44,381
44,817
Right to recover returned goods
230
220
Inventories
$ 66,654
$ 67,772
Inventories carried at net realizable value
$ 1,973
$ 1,788
Cost
Land and
buildings
Machinery
and
equipment
Tooling
Office
equipment
Total
Balance at December 31, 2022
40,777
$
60,768
$
12,499
$
3,059
$
117,103
$
Reclassifications
-
$
5,377
$
181
$
-
$
5,558
$
Additions
4,275
8,150
804
424
13,653
Disposals
(146)
(1,008)
(175)
(54)
(1,383)
Effect of movements in exchange rates
3
(44)
(17)
(1)
(59)
Balance at December 31, 2023
44,909
$
73,243
$
13,292
$
3,428
$
134,872
$
Additions
6,528
3,922
789
740
11,979
Disposals
(227)
(575)
(255)
(50)
(1,107)
Effect of movements in exchange rates
10
289
162
33
494
Balance at December 31, 2024
51,220
$
76,879
$
13,988
$
4,151
$
146,238
$
HAMMOND MANUFACTURING COMPANY LIMITED
Notes to Consolidated Financial Statements
Years ended December 31, 2024, and 2023
(amounts (except share amounts) in thousands of Canadian dollars)
www.hammondmfg.com
Annual Report 2024 46
At December 31, 2024, the amount of expenditures recognized in the carrying amount that was in
the course of construction was $Nil (2023 - $Nil) in land and buildings, $786 (2023 - $166) in
machinery and equipment and $93 (2023 - $47) in tooling.
In 2023, assets previously classified as right-of-use assets (note 8) were reclassified to property,
plant and equipment as a result of the buyout of the leased assets.
Depreciation of $6,760 (2023 - $5,691) was recorded in the consolidated statement of
comprehensive income as follows: cost of sales $6,332 (2023 – $5,254), selling and distribution
$369 (2023 – $336) and general and administrative $59 (2023 – $101).
Accumulated depreciation
Land and
buildings
Machinery
and
equipment
Tooling
Office
equipment
Total
Balance at December 31, 2022
9,662
$
38,258
$
9,217
$
2,680
$
59,817
$
Reclassifications
-
$
3,772
$
181
$
-
$
3,953
$
Depreciation for the period
1,120
3,650
702
219
5,691
Disposals
(141)
(1,007)
(171)
(54)
(1,373)
Effect of movements in exchange rates
3
(22)
(14)
-
(33)
Balance at December 31, 2023
10,644
$
44,651
$
9,915
$
2,845
$
68,055
$
Depreciation for the period
1,268
4,570
727
195
6,760
Disposals
(224)
(573)
(238)
(46)
(1,081)
Effect of movements in exchange rates
8
183
135
28
354
Balance at December 31, 2024
11,696
$
48,831
$
10,539
$
3,022
$
74,088
$
Carrying amounts
Land and
buildings
Machinery
and
equipment
Tooling
Office
equipment
Total
At December 31, 2022
31,115
$
22,510
$
3,282
$
379
$
57,286
$
At December 31, 2023
34,265
$
28,592
$
3,377
$
583
$
66,817
$
At December 31, 2024
39,524
$
28,048
$
3,449
$
1,129
$
72,150
$
HAMMOND MANUFACTURING COMPANY LIMITED
Notes to Consolidated Financial Statements
Years ended December 31, 2024, and 2023
(amounts (except share amounts) in thousands of Canadian dollars)
www.hammondmfg.com
Annual Report 2024 47
7) Intangible assets and goodwill:
Amortization expense of $80 (2023 - $78) was recorded in the consolidated statement of
comprehensive income as follows: cost of sales $42 (2023 – $33), selling and distribution $19 (2023
- $32) and general and administrative $19 (2023 – $13).
Impairment testing for CGUs:
The Company has defined its CGUs as each individual legal entity since each location is largely
independent of the other entities and each is ultimately responsible for sales generated in their
markets. The Company monitors the performance through the use of profitability analysis based on
the most recent business plan in place as at December 31, 2024.
Cost
Goodwill
Computer
software
Development
costs
Total
Balance at December 31, 2022
109
$
682
$
396
$
1,187
$
Additions
-
$
75
$
36
$
111
$
Disposal
-
(109)
-
(109)
Effect of movement in exchange rates
3
(2)
-
1
Balance at December 31, 2023
112
$
646
$
432
$
1,190
$
Additions
-
$
8
$
64
$
72
$
Disposal
-
-
-
-
Effect of movement in exchange rates
8
7
-
15
Balance at December 31, 2024
120
$
661
$
496
$
1,277
$
Amortization
Goodwill
Computer
software
Development
costs
Total
Balance at December 31, 2022
-
$
499
$
341
$
840
$
Amortization for the period
-
$
48
$
30
$
78
$
Disposal
-
(109)
-
(109)
Effect of movement in exchange rates
-
(2)
-
(2)
Balance at December 31, 2023
-
$
436
$
371
$
807
$
Amortization for the period
-
$
55
$
25
$
80
$
Disposal
-
-
-
-
Effect of movement in exchange rates
-
7
-
7
Balance at December 31, 2024
-
$
498
$
396
$
894
$
Carrying amounts
Goodwill
Computer
software
Development
costs
Total
At December 31, 2022
109
$
183
$
55
$
347
$
At December 31, 2023
112
$
210
$
61
$
383
$
At December 31, 2024
120
$
163
$
100
$
383
$
HAMMOND MANUFACTURING COMPANY LIMITED
Notes to Consolidated Financial Statements
Years ended December 31, 2024, and 2023
(amounts (except share amounts) in thousands of Canadian dollars)
www.hammondmfg.com
Annual Report 2024 48
Impairment testing for CGUs containing goodwill:
The Company performed an impairment test on the goodwill of its UK entity using the value-in-use
method, under which a five-year present value cash flow projection was completed using Hammond
Electronics Limited weighted average pre-tax cost of capital of 7.0%. The cash flow model also
incorporated growth rates in the range of 2% – 4% based on the market location and the facility’s
operating history. This was then compared to the carrying value of the facility’s assets, including
goodwill, to determine if there was impairment. Effective December 31, 2024, and December 31,
2023, the assets, including goodwill of $120 (2023 - $112), of the Company’s wholly owned
subsidiary, Hammond Electronics Limited, were tested and no impairment was found.
8) Leases:
Right-of-use assets
in thousands of dollars
Buildings Machinery
and
equipment
Tooling
Office
equipment
Trucks
and
Vehicles
Total
Balance at December 31, 2022
15,178
$
5,699
$
181
$
10
$
2,850
$
23,918
$
Reclassifications (see note 6)
-
$
(5,377)
$
(181)
$
-
$
-
$
(5,558)
$
Additions for the period
1,647
-
-
19
499
2,165
Disposals
-
-
-
-
(294)
(294)
Effect of movements in exchange rates
73
16
-
(1)
(3)
85
Balance at December 31, 2023
16,898
$
338
$
-
$
28
$
3,052
$
20,316
$
Additions for the period
4,567
-
-
-
1,881
6,448
Disposals
-
-
-
-
(632)
(632)
Effect of movements in exchange rates
512
24
-
2
6
544
Balance at December 31, 2024
21,977
$
362
$
-
$
30
$
4,307
$
26,676
$
Accumulated depreciation
Buildings
Machinery
and
equipment
Tooling
Office
equipment
Trucks
and
Vehicles
Total
Balance at December 31, 2022
6,665
$
3,572
$
181
$
3
$
1,074
$
11,495
$
Reclassifications (see note 6)
-
$
(3,772)
$
(181)
$
-
$
-
$
(3,953)
$
Depreciation for the period
1,826
267
-
4
583
2,680
Disposals
-
-
-
-
(294)
(294)
Effect of movements in exchange rates
11
1
-
-
(2)
10
Balance at December 31, 2023
8,502
$
68
$
-
$
7
$
1,361
$
9,938
$
Depreciation for the period
2,218
35
-
5
720
2,978
Disposals
-
-
-
-
(632)
(632)
Effect of movements in exchange rates
247
6
-
1
3
257
Balance at December 31, 2024
10,967
$
109
$
-
$
13
$
1,452
$
12,541
$
HAMMOND MANUFACTURING COMPANY LIMITED
Notes to Consolidated Financial Statements
Years ended December 31, 2024, and 2023
(amounts (except share amounts) in thousands of Canadian dollars)
www.hammondmfg.com
Annual Report 2024 49
Depreciation of $2,978 (2023 - $2,680) was recorded in the consolidated statement of
comprehensive income as follows: cost of sales $801 (2023 – $967) selling and distribution $2,152
(2023 – $1,700) and general and administrative $25 (2023 – $13).
Total Lease obligations:
The Group leases warehouse and factory facilities. These leases typically run for a period of 5 years
with an option to renew the lease after that date. Lease payments generally are renegotiated every
five years to reflect current market rates of office and production buildings.
The Group leases automobiles with a typical lease period of 3 years. The Company provides for a
guaranteed residual value when the vehicle is turned in.
The Group’s fleet trucks are generally leased for a five-year term after which they are turned in. The
lease rates for the trucks are a fixed rate plus a variable charge per kilometer driven. The variable
charge is excluded from the initial measurement of the lease liability and asset. The variable charge
is expensed in the month it is incurred.
The lease liabilities are secured by the related underlying assets. Future minimum lease payments
at December 31, 2024 were as follows:
Carrying amounts
Buildings
Machinery
and
equipment
Tooling
Office
equipment
Trucks
and
Vehicles
Total
At December 31, 2022
8,513
$
2,127
$
-
$
7
$
1,776
$
12,423
$
At December 31, 2023
8,396
$
270
$
-
$
21
$
1,691
$
10,378
$
At December 31, 2024
11,010
$
253
$
-
$
17
$
2,855
$
14,135
$
December 31,
2024
December 31,
2023
$ 15,310
$ 11,293
Less current portion due in the next 12 months
(3,317)
(2,435)
Non-current leases
$ 11,993
$ 8,858
Total Leases
Current 1-2 Years 2-3 Years 3-4 Years 4-5 Years
After 5
Years
Total
December 31, 2024
Lease Payments
4,066
$
3,348
$
2,482
$
2,194
$
1,749
$
4,326
$
18,165
Finance Charge
(749)
(590)
(459)
(356)
(259)
(442)
(2,855)
Net Present Value
3,317
$
2,758
$
2,023
$
1,838
$
1,490
$
3,884
$
15,310
$
Current 1-2 Years 2-3 Years 3-4 Years 4-5 Years
After 5
Years
Total
December 31, 2023
Lease Payments
2,930
$
2,914
$
2,107
$
1,293
$
1,030
$
2,812
$
13,086
$
Finance Charge
(495)
(385)
(282)
(209)
(161)
(261)
(1,793)
Net Present Value
2,435
$
2,529
$
1,825
$
1,084
$
869
$
2,551
$
11,293
$
Minimum lease payments due
HAMMOND MANUFACTURING COMPANY LIMITED
Notes to Consolidated Financial Statements
Years ended December 31, 2024, and 2023
(amounts (except share amounts) in thousands of Canadian dollars)
www.hammondmfg.com
Annual Report 2024 50
Lease payments not recognized as a liability:
The Group has elected not to recognize a lease liability for short-term leases (leases with an
expected term of 12 months or less) or for leases of low value assets. Payments made under such
leases are expensed on a straight-line basis. In addition, certain variable lease payments are not
permitted to be recognized as lease liabilities and are expensed as incurred.
The expense relating to payments not included in the measurement of the lease liability is as follows:
9) Investment property:
The Group has a 50% ownership of a property in Georgetown, Ontario (referred to as the Glen
Ewing Property), which is classified as an investment property under IAS 40. It is a vacant plot of
land and currently under environmental remediation. The property value represents the actual
historical cost of the property. The fair value of this property cannot be reliably determined due to
the following reasons:
Market Inactivity: The property is situated in a region with limited market activity, resulting in a lack
of comparable sales data.
Unique Characteristics: Due to the state of the environmental condition of the property it is difficult
to compare with other properties in the area.
Given these factors, the Company has opted to carry the property at its historical cost of $1,044.
The Company will continue to monitor the market conditions and reassess the valuation of the
property in future reporting periods.
No independent evaluation has been performed. The property is currently vacant, and no income is
derived from it. The Company’s direct operating expense in 2024 related to the property was $92
(2023- $78).
Year to date
December 31, 2024
December 31, 2023
Short Term leases
$ 616
$ 628
Variable lease payments
55
55
Total
$ 671
$ 683
HAMMOND MANUFACTURING COMPANY LIMITED
Notes to Consolidated Financial Statements
Years ended December 31, 2024, and 2023
(amounts (except share amounts) in thousands of Canadian dollars)
www.hammondmfg.com
Annual Report 2024 51
10) Equity investment:
Since 2008, the Company has had 40% ownership of RITEC. All dividends paid since taking the
40% holding in 2008 have been reinvested in RITEC.
11) Bank indebtedness:
Bank indebtedness is due on demand and secured by inventories, a general assignment of trade
receivables and a charge on specific assets of the Company. The Company has established
operating lines for the entities in Canada, the US and the UK. The following chart depicts the amount
utilized on each of the entities’ lines of credit.
Interest was payable at the rate of bank prime for all of 2023 and 2024.
2024
2023
Non-current Assets
259
$
223
$
Current Assets (including cash
and cash equivalents)
3,183
4,847
Non-Current Liabilities
(515)
(492)
Current Liabilities (including non-current)
(1,083)
(2,628)
Net Assets (100%)
1,844
1,727
Percentage of Ownership
40%
40%
Group's Share of net assets (40%)
738
691
Dividend receivable
206
198
Foreign exchange impact
48
40
Carrying amount of interest in joint venture
992
929
Revenue
3,241
6,144
Cost of Sales
2,691
5,164
Selling Expenses
599
772
Net Profit
(49)
208
Loss on Exchange
(19)
(100)
Interest (and other Gains)
117
268
Income tax
(9)
(83)
Profit and total comprehensive income (100%)
40
293
Profit and total comprehensive income (40%)
16
117
Elimination of unrealised profit on downstream sales
94
(105)
Group's share of total comprehensive income
110
12
Dividends received by the Group
-
$
-
$
Local currency
CAD
Local currency
CAD
Canadian entities
CAD
-
$
-
$
-
$
-
$
UK entity
GBP
£ 157
283
£ 256
431
Bank indebtedness
$ 283
$ 431
December 31, 2024
December 31, 2023
HAMMOND MANUFACTURING COMPANY LIMITED
Notes to Consolidated Financial Statements
Years ended December 31, 2024, and 2023
(amounts (except share amounts) in thousands of Canadian dollars)
www.hammondmfg.com
Annual Report 2024 52
12) Long term debt:
December 31,
2024
December 31,
2023
$ 1,763
$ 1,675
1,213
1,255
5,460
5,632
693
1,490
309
606
3,353
4,131
2,947
3,504
25,397
25,833
-
601
$ 41,135
$ 44,727
Less current portion of long-term debt
36,238
38,428
Non-current long-term debt
$ 4,897
$ 6,299
Demand term loan amortized over 25 years (expiring in Jan 2042)
drawn in USD funds with a current fixed interest rate of 5.30% through
November 2025 secured by the assets of HMCL. Monthly blended
installments of 9 USD.
Demand term loan amortized over 25 years (expiring in Dec 2041)
drawn in CAD funds with a current fixed interest rate of 5.20% through
December 2026 secured by the assets of HMCL. Monthly blended
Demand term loan amortized over 25 years (expiring in Jan 2042)
drawn in CAD funds with a current fixed interest rate of 4.10% through
December 2026 secured by the assets of HMCL. Monthly blended
installments of 43 CAD.
Demand term loan amortized over 7 years (expiring in Oct 2025) drawn
in CAD funds with a current fixed interest rate of 4.43% through
October 2025 secured by the assets of HMCL. Monthly blended
installments of 71 CAD.
Demand term loan amortized over 7 years (expiring in Dec 2025) drawn
in CAD funds with a current fixed interest rate of 4.00% through
December 2025 secured by the assets of HMCL. Monthly blended
installments of 26 CAD.
Interest free term loan of $385 CAD made in 2015, $1,150 CAD in
2016, $958 CAD in 2017, $624 CAD in 2018 and $346 CAD in 2019
through the Federal Economic Development Agency for Southern
Ontario. Repayment will be over 60 equal monthly installments ending
Nov 2024. Value represents the present value of the stream of
payments to repay utilizing a 5.2% discount factor.
Subtotal
Demand term loan amortized over 7 years (expiring in Nov 2028) drawn
in CAD funds with a current fixed interest rate of 3.85% through
November 2028 secured by the assets of HMCL. Monthly blended
installments of 77 CAD.
Demand term loan amortized over 7 years (expiring in May 2029) drawn
in CAD funds with a current fixed interest rate of 6.50% through May
2029 secured by the assets of HMCL. Monthly blended installments of
64 CAD.
Demand term loan amortized over 25 years (expiring in Feb 2049)
drawn in CAD funds with a current fixed interest rate of 6.25% through
July 2028 secured by the assets of HMCL. Monthly blended
installments of 170 CAD.
HAMMOND MANUFACTURING COMPANY LIMITED
Notes to Consolidated Financial Statements
Years ended December 31, 2024, and 2023
(amounts (except share amounts) in thousands of Canadian dollars)
www.hammondmfg.com
Annual Report 2024 53
The following reflects the aggregate number of principal payments required to meet the existing
long-term debt obligations in each of the next five years if the loans are not placed on demand:
2025
$
4,869
2026
8,416
2027
2,082
2028
25,452
2029
316
Thereafter
-
$
41,135
13) Interest expense
Reconciliation of movements of liabilities to cash flows arising from financing activities:
December 31, 2024
December 31, 2023
Long term debt interest
2,566
$
1,668
$
Bank indebtedness interest
249
880
Interest expense
2,815
$
2,548
$
Interest income earned on cash
(595)
(40)
Net Interest Expense
2,220
$
2,508
$
Interest expense leases
655
$
544
$
Total Interest and lease interest expense
2,875
$
3,052
$
Lease
Liabilities
Long-term
debt
Bank
indebtedness
Total
Balance at December 31, 2022
$ 11,748
$ 22,198
$ 14,446
$ 48,392
Changes from financing cash flows
Proceeds from loans and borrowings
-
26,000
-
26,000
Repayment of lease liabilities
(2,681)
-
-
(2,681)
Repayment of borrowings
-
(3,429)
(14,015)
(17,444)
Total changes from financing cash flows
(2,681)
22,571
(14,015)
5,875
Liability related
Interest earned on cash
-
-
(40)
(40)
Interest expense
544
1,668
880
3,092
Interest paid
(544)
(1,668)
(840)
(3,052)
Total liability-related other changes
-
-
-
-
Non-cash added liabilities
2,165
-
-
2,165
Foreign exchange impact
61
(42)
-
19
Balance at December 31, 2023
$ 11,293
$ 44,727
$ 431
$ 56,451
HAMMOND MANUFACTURING COMPANY LIMITED
Notes to Consolidated Financial Statements
Years ended December 31, 2024, and 2023
(amounts (except share amounts) in thousands of Canadian dollars)
www.hammondmfg.com
Annual Report 2024 54
14) Trade and other payables:
The Group’s exposure to currency and liquidity risk related to trade and other payables is disclosed
in note 26.
15) Provisions:
Lease
Liabilities
Long-term
debt
Bank
indebtedness
Total
Balance at December 31, 2023
$ 11,293
$ 44,727
$ 431
$ 56,451
Changes from financing cash flows
Proceeds from loans and borrowings
-
-
-
-
Repayment of lease liabilities
(2,757)
-
-
(2,757)
Repayment of borrowings
-
(3,741)
(193)
(3,934)
Total changes from financing cash flows
(2,757)
(3,741)
(193)
(6,691)
Liability related
Interest earned on cash
-
-
(595)
(595)
Interest expense
655
2,566
249
3,470
Net Interest (paid) / received
(655)
(2,566)
346
(2,875)
Total liability-related other changes
-
-
-
-
Non-cash added liabilities
6,448
-
-
6,448
Foreign exchange impact
326
149
45
520
Balance at December 31, 2024
$ 15,310
$ 41,135
$ 283
$ 56,728
December 31, 2024
December 31, 2023
Trade payables
$
11,099
$
8,500
Non-trade payables and accrued expenses
15,287
16,315
$ 26,386
$ 24,815
Environmental
remediation
Sales returns
Total
Balance at December 31, 2022
$ 225
$ 321
$ 546
Provisions made during the period
57
5,199
5,256
Provisions used during the period
(57)
(5,120)
(5,177)
Balance at December 31, 2023
$ 225
$ 400
$ 625
Provisions made during the period
51
5,077
5,128
Provisions used during the period
(51)
(5,057)
(5,108)
Balance at December 31, 2024
$ 225
$ 420
$ 645
Non-current
145
-
145
Current
80
420
500
Balance at December 31, 2024
$ 225
$ 420
$ 645
HAMMOND MANUFACTURING COMPANY LIMITED
Notes to Consolidated Financial Statements
Years ended December 31, 2024, and 2023
(amounts (except share amounts) in thousands of Canadian dollars)
www.hammondmfg.com
Annual Report 2024 55
Environmental Remediation
The Glen Ewing Property is 50% co-tenancy with Hammond Power Solutions Inc. (HPSI) of a vacant
property located at 2 Glen Road, Georgetown. The soil has been contaminated by diesel oil, which
is believed to be related to site operations of prior owners. The Company and HPSI, as co-tenants,
have been working co-operatively with our environmental consultant, the Ministry of the
Environment, Conservation and Park’s (“MECP”) and the adjacent property owner to contain and
remove any free-flowing contaminants. The parties have cooperatively developed a remediation
action plan to contain and remove any free-flowing contaminants and began remediation in October
2009. The MECP is aware of the remediation and the process being used. It does not include
obtaining a record of site condition. The Company’s estimate of the remaining portion of the
environmental remediation costs for the October 2009 plan for this site is $225 (2023 $225) with $80
(2023- $80) presented as a current liability in the consolidated financial statements. The provision
covers the next four years’ activities.
In March 2024, the MECP performed an inspection of the Glen Ewing Property which resulted in the
MECP recommending certain additional remedial actions: including further monitoring and
implementation of systems to prevent migration of certain other contaminants. The MECP did not
issue a formal regulatory order. However, a formal order may be issued if certain steps are not
taken. The costs of the additional remedial actions are currently contingent on the completion of a
feasibility study. However, the anticipated costs will be based on an external consultant’s
remediation plan and management’s estimate, discounted for expected timing of expenditures. The
cost of the initial feasibility study is estimated to be between $50 - $100 and shared with Hammond
Power Solutions Incorporated.
Sales Returns
The provision for sales returns is based on estimates from historical returns of product. The provision
reflects the estimated sales value of the anticipated returns.
16) Employee future benefits:
The Company’s net obligation in respect of its current and long-term employee benefits is calculated
by estimating the amount of future benefit that employees have earned in return for their service in
the current and prior periods. The terms of the agreements do not require the Company to fund
these obligations as they accumulate. The Company has accounted for these post-employment
benefits as defined benefit plans. The benefit plans are broken into two categories:
a) Benefit for post-employment health benefits:
If an employee meets the set criteria and retires between the age of 60 and 65, their health plan
will continue until age 65.
b) Disability health coverage:
This benefit is for employees who are off work due to a covered disability. Health coverage will
continue until they are off disability or reach the age of 65, whichever occurs first.
HAMMOND MANUFACTURING COMPANY LIMITED
Notes to Consolidated Financial Statements
Years ended December 31, 2024, and 2023
(amounts (except share amounts) in thousands of Canadian dollars)
www.hammondmfg.com
Annual Report 2024 56
In determining both the post-employment health benefit and the disability health coverage liabilities
a 3.5% (2023 – 3.5%) per annum health cost increase and a discount rate of 4.0% (2023 – 4.0%)
were utilized to determine its present value.
Assumed healthcare cost trend rates affect the amounts recognized in profit and loss. A 1% change
in assumed healthcare cost trend rates would increase (decrease) the aggregate service and
interest costs by $20 (2023 - $25). Changes in assumptions resulted in nominal gains/losses which
have been included in general and administrative expense.
17) Deferred tax assets and liabilities:
Unrecognized deferred tax liabilities:
At December 31, 2024, temporary differences of $36,393 (2023 - $30,502) related to investments
in subsidiaries were not recognized because the Company controls whether liability will be incurred
and it is satisfied that it will not be incurred in the foreseeable future.
Recognized deferred tax liabilities:
Deferred tax assets and liabilities are attributable to the following:
December 31, 2024
December 31, 2023
Post employment health benefits
$ 45
$ 73
Employee health benefits while on disability
405
400
Total employee future benefits
$ 450
$ 473
Post
employment
health benefits
Employee health
benefits while on
disability
Total
Balance at December 31, 2022
$ 60
$ 340
$ 400
Provisions made during the period
31
234
265
Provisions used during the period
(18)
(174)
(192)
\
Balance at December 31, 2023
$ 73
$ 400
$ 473
Provisions made during the period
(3)
168
165
Provisions used during the period
(25)
(163)
(188)
Balance at December 31, 2024
$ 45
$ 405
$ 450
Non-current
27
283
310
Current
18
122
140
Balance at December 31, 2024
$ 45
$ 405
$ 450
HAMMOND MANUFACTURING COMPANY LIMITED
Notes to Consolidated Financial Statements
Years ended December 31, 2024, and 2023
(amounts (except share amounts) in thousands of Canadian dollars)
www.hammondmfg.com
Annual Report 2024 57
18) Income tax expense:
19) Share capital:
a) Authorized:
Unlimited number of Class A subordinate voting shares, no par value.
Unlimited number of Class B common shares with four votes per share, convertible into Class
A subordinate voting shares on a one-for-one basis, no par value. Annual dividends on the Class
B common shares may not exceed the annual dividends on the Class A subordinate voting
shares.
Unlimited number of Class YA non-voting, no par value, redeemable, retractable shares entitled
to non-cumulative discretionary dividends. No dividends shall be declared or paid on the Class
YA shares unless the same dividend is simultaneously declared and paid on the Class YB
shares.
December 31, 2024
December 31, 2023
Deferred tax assets
Investment property
$ 8 $ 8
Inventories
989
755
Loans and borrowings
2,376
1,943
Provisions
281
356
Other
-
-
Total deferred tax assets
3,654
3,062
Deferred tax liabilities
Other
(28) (23)
Loans and borrowings
-
Property, plant and equipment
(11,494) (11,028)
Total deferred tax liabilities
(11,522) (11,051)
Net deferred tax liabilities
$ (7,868) $ (7,989)
December 31, 2024 December 31, 2023
Current tax expense
$ 6,291 $ 3,430
Deferred tax expense:
Origination and reversal of temporary differences
(143) 2,808
Total income tax expense
$ 6,148 $ 6,238
Income before income tax
$ 24,522
$ 24,999
Income tax using the Company’s domestic tax rate
26.50% 6,498
26.50% 6,625
Reduced rate for active business and manufacturing
and processing
(310)
(319)
Effect of tax rates in foreign jurisdictions
(180)
(205)
Non-deductible expenses
81
34
Other
59
103
25.1% $ 6,148
24.95% $ 6,238
2024
2023
HAMMOND MANUFACTURING COMPANY LIMITED
Notes to Consolidated Financial Statements
Years ended December 31, 2024, and 2023
(amounts (except share amounts) in thousands of Canadian dollars)
www.hammondmfg.com
Annual Report 2024 58
Unlimited number of Class YB non-voting, no par value, redeemable, retractable shares entitled
to non-cumulative discretionary dividends. No dividends shall be declared or paid on the Class
YB shares unless the same dividend is simultaneously declared and paid on the Class YA
shares.
b) Issued:
No shares were issued in 2024 or in 2023.
c) Dividends:
The following dividends were declared and paid by the Company:
Cash dividends of $0.06 per Class A subordinate voting share were declared and paid in 2024
(2023 – $0.06) and cash dividends of $0.06 per Class B common share were declared and paid
in 2024 (2023 – $0.06).
Total dividends declared and paid in 2024 were $680 (2023 - $680).
Subsequent to year end a cash dividend of $0.03 Class A subordinate voting share was declared
on March 4, 2025, and cash dividends of $0.03 per Class B common share were declared on
March 4, 2025. For a total declared value of $340.
20) Commitments:
The Company has contractual obligations for outstanding capital expenditures of $998 (2023 -
$395).
21) Contingency:
Currently there is nothing out of the normal course of business that requires additional
contingencies.
22) Earnings per share:
The computations for basic and diluted earnings per share are as follows:
No share options to purchase common shares were outstanding as at December 31, 2024 or
December 31, 2023.
December 31, 2024
December 31, 2023
8,556,000 Class A shares (2023 - 8,556,000)
10,242
$
10,242
$
2,778,300 Class B shares (2023 - 2,778,300)
7
7
10,249
$
10,249
$
December 31,2024
December 31,2023
Net income for the period
$ 18,374
$ 18,761
Average number of common shares outstanding:
Basic and Diluted
11,334,300
11,334,300
Earnings per share:
Basic
$ 1.62
$ 1.66
Diluted
1.62
1.66
HAMMOND MANUFACTURING COMPANY LIMITED
Notes to Consolidated Financial Statements
Years ended December 31, 2024, and 2023
(amounts (except share amounts) in thousands of Canadian dollars)
www.hammondmfg.com
Annual Report 2024 59
23) Personnel expenses:
24) Management share option plan:
As at December 31, 2024, the Company has a stock-based compensation plan, which is described
below. No options were granted through December 31, 2024, or in 2023 and no stock options were
outstanding as of January 1, 2023, and, accordingly, no stock-based compensation expense has
been incurred in either year.
In 1986, the Company established the management share option plan providing for the granting to
directors, officers and key employees of the Company options to purchase the Class A subordinate
voting shares of the Company. A maximum number of 540,000 Class A subordinate voting shares
are issuable under the plan. The exercise price for purchasing Class A subordinate voting shares
may not be less than the market price of the Class A subordinate voting shares at the date the option
is granted.
25) Determination of fair values:
The carrying values of the Group’s financial assets and liabilities, consisting of cash, trade and other
receivables, bank indebtedness, trade and other accounts payables approximate their fair values
due to the relatively short periods to maturity of the instruments.
The fair values of financial assets and liabilities together with the carrying amounts shown in the
statements of financial position are as follows:
Term loans are considered level 2 in the fair value hierarchy.
2024
2023
Wages and salaries
$ 61,150
$ 59,658
Health benefit plans
7,920
7,387
Canada Pension Plan and Employment Insurance
4,100
4,058
Contributions to defined contribution plans
2,122
2,026
$ 75,292
$ 73,129
2024
2023
Cost of sales
$ 56,458
$ 56,036
Selling and distribution
14,565
13,606
General and administrative
4,269
3,487
$ 75,292
$ 73,129
Carrying
amount
Fair value
Carrying
amount
Fair value
Assets carried at amortized cost
Cash
$ 24,710
$ 24,710
$ 8,890
$ 8,890
Trade and other receivables
32,491
32,491
30,856
30,856
$ 57,201
$ 57,201
$ 39,746
$ 39,746
Liabilities carried at amortized cost
Bank indebtedness
$ 283
$ 283
$ 431
$ 431
Trade and other payables
26,386
26,386
24,815
24,815
Term loans
41,135
42,109
44,727
44,418
$ 67,804
$ 68,778
$ 69,973
$ 69,664
December 31, 2024
December 31, 2023
HAMMOND MANUFACTURING COMPANY LIMITED
Notes to Consolidated Financial Statements
Years ended December 31, 2024, and 2023
(amounts (except share amounts) in thousands of Canadian dollars)
www.hammondmfg.com
Annual Report 2024 60
Interest rates used to discount estimated cash flows, when applicable, are based on bank indication
rates for similar type arrangements.
26) Financial instruments and risk management:
Overview
The Group has exposure to the following risks from its use of financial instruments:
•
credit risk (b)
•
liquidity risk (c)
•
market risk (d)
•
foreign currency risk (e)
•
interest rate risk (f)
•
operational risk (g)
This note presents information about the Group’s exposure to each of the above risks, the Group’s
objectives, policies and processes for measuring and managing risk, and the Group’s management
of capital. Further quantitative disclosures are included throughout these consolidated financial
statements.
a)
Risk management framework:
The Board of Directors has overall responsibility for the oversight of the Group’s risk management
framework. The Board is responsible for monitoring the Group’s risk management policies.
The Group’s risk management policies are established to identify and analyze the risks faced by the
Group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk
management policies and systems are reviewed regularly to reflect changes in market conditions
and the Group’s activities. The Group, through its training and management standards and
procedures, aims to develop a disciplined and constructive control environment in which all
employees understand their roles and obligations.
The Group’s Audit Committee oversees how management monitors compliance with the Group’s
risk management policies and procedures and reviews the adequacy of the risk management
framework in relation to the risks faced by the Group. The Group’s Audit Committee is assisted in
its oversight role by the corporate finance group. The corporate finance group undertakes both
regular and ad hoc reviews of risk management controls and procedures, the results of which are
reported to the Audit Committee.
Bank indication interest rates
From
To
From
To
Nonsecured variable interest rates
3.75%
5.00%
7.20%
8.20%
Fixed rates
1 year secured
4.5%
5.5%
7.00%
7.80%
2 year secured
4.8%
5.5%
6.40%
7.25%
3 to 4 year secured
4.8%
5.5%
5.65%
6.80%
5 year secured
4.9%
5.7%
5.45%
6.60%
7 year secured
5.0%
5.8%
5.45%
6.60%
10 year secured
5.3%
5.9%
5.65%
6.80%
Rates fluctuate depending on currency and jurisdiction.
December 31, 2024
December 31, 2023
HAMMOND MANUFACTURING COMPANY LIMITED
Notes to Consolidated Financial Statements
Years ended December 31, 2024, and 2023
(amounts (except share amounts) in thousands of Canadian dollars)
www.hammondmfg.com
Annual Report 2024 61
b) Credit risk:
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial
instrument fails to meet its contractual obligations and arises principally from the Group’s receivables
from customers. The carrying amount of financial assets represents the maximum credit risk
exposure.
Cash carries minimal credit risk since it is held in reputable financial institutions.
Trade and other receivables:
The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each
customer. However, management also considers the demographics of the Group’s customer base,
including the default risk of the industry and country in which customers operate, as these factors
may have an influence on credit risk.
The Group has established a credit policy under which each new customer is analyzed individually
for creditworthiness before the Group’s standard payment and delivery terms and conditions are
offered. The Group’s review includes external ratings, when available, and in some cases bank
references. Purchase limits are established for each customer, which represents the maximum open
amount without requiring approval from management. Customers that fail to meet the Group’s
benchmark creditworthiness may transact with the Group only on a prepayment basis.
In monitoring customer credit risk, customers are grouped according to their credit characteristics,
including whether they are an individual or legal entity, whether they are a wholesale, retail or end-
user customer, geographic location, industry, aging profile, maturity and existence of previous
financial difficulties. Trade and other receivables relate mainly to the Group’s wholesale customers.
Customers that are graded as “high risk” are placed on a restricted customer list and monitored by
the accounts receivable department, and future sales are made on a prepayment basis.
The Group does not require collateral in respect of trade and other receivables.
The Group establishes an allowance for doubtful accounts that represents its estimate of expected
credit losses that could arise from the failure or inability of customers to make payments when due.
This allowance is determined based on historical data of payment statistics for similar financial
assets and historical credit losses, adjusted for forward looking factors, specific to the debtor and
the economic environment.
The Company is exposed to financial risk that arises from the credit quality of the entities to which
it sells products and services. The Company sells to a variety of companies in a number of different
industries and geographic areas. As a result, the requirement for an industry specific or geographic
reserve is minimal.
The carrying amount of financial assets represents the maximum credit exposure which was as
follows at the reporting date:
December 31, 2024
December 31, 2023
Cash and receivables:
Cash
$ 24,710
$ 8,890
Trade and other receivables
32,491
30,856
$ 57,201
$ 39,746
HAMMOND MANUFACTURING COMPANY LIMITED
Notes to Consolidated Financial Statements
Years ended December 31, 2024, and 2023
(amounts (except share amounts) in thousands of Canadian dollars)
www.hammondmfg.com
Annual Report 2024 62
The maximum exposure to credit risk for cash and receivables at the reporting date by geographic
region was:
The following table reflects the net details of trade receivables as at December 31, 2024 and
December 31, 2023:
The following table provides the roll forward of the allowance for doubtful accounts:
December 31, 2024
December 31, 2023
Cash and receivables:
Canada
$ 17,458
$ 16,090
US
38,030
22,113
UK
1,567
1,412
Australia
146
131
$ 57,201
$ 39,746
Gross
Impairment
Carrying
value
Gross
Impairment
Carrying
value
Aging of trade receivables:
1 – 30 days
$ 13,713
-
$
$ 13,713
$ 15,127
-
$
$ 15,127
31 – 60 days
13,850
-
13,850
12,053
-
12,053
61 – 90 days
4,031
-
4,031
2,462
-
2,462
Over 90 days
564
(356)
208
1,253
(541)
712
Trade receivables
$ 32,158
(356)
$
$ 31,802
$ 30,895
(541)
$
$ 30,354
December 31, 2023
December 31, 2024
December 31, 2024
December 31, 2023
Allowance at beginning of year
$ 541
$ 409
Actual accounts written off
(68)
(130)
Increase (decrease) in Provision
(117)
262
Allowance at end of period
$ 356
$ 541
Allowance for doubtful accounts as % of net trade
receivable
1.1%
1.8%
December 31, 2024
December 31, 2023
Trade receivables
$ 32,158
$ 30,895
Employee receivables
4
15
Other receivables
685
487
32,847
31,397
Estimated credit losses
(356)
(541)
Trade and other receivables
$ 32,491
$ 30,856
HAMMOND MANUFACTURING COMPANY LIMITED
Notes to Consolidated Financial Statements
Years ended December 31, 2024, and 2023
(amounts (except share amounts) in thousands of Canadian dollars)
www.hammondmfg.com
Annual Report 2024 63
c) Liquidity risk:
Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated
with its financial liabilities that are settled by delivering cash or another financial asset. The Group’s
approach to managing liquidity is to ensure, as much as possible, that it will always have sufficient
liquidity to meet its liabilities when due, under both normal and stressful conditions, without incurring
unacceptable losses or risking damage to the Group’s reputation.
The Group uses planning tools to identify future cash flow requirements.
The Group has a $30,000 (2023 – $30,000) overdraft facility that is secured against inventory and
accounts receivable. If drawn upon, interest would be payable at the rate of bank prime (2023 - bank
prime). The Company had available unused credit facilities in the amount of $30,000 at December
31, 2024 (2023 - $30,000) to meet fluctuations in working capital requirements.
The Group has available a line of credit to finance new equipment purchases of which it has available
$10,000 (2023 - $10,000).
In 2015, the Group successfully applied for and was approved by the Federal Economic
Development Agency for Southern Ontario for an interest free loan up to $3,462 on eligible spending.
As at December 31, 2024, the Group received $3,462 of this funding (2023 - $3,462). The present
value of this funding of $2,646 was set up as long-term debt and $815 which reflects the interest
savings that have been offset to property, plant and equipment. Repayment of this loan was over
five years and started in January of 2020. As at December 31, 2024 the present value of the funding
is $Nil (2023 – $601).
The following are the contractual maturities of financial liabilities, including estimated interest
payments and excluding the impact of netting arrangements. It is not expected that the cash flows
included in the maturity analysis will occur significantly earlier or at materially different amounts.
HAMMOND MANUFACTURING COMPANY LIMITED
Notes to Consolidated Financial Statements
Years ended December 31, 2024, and 2023
(amounts (except share amounts) in thousands of Canadian dollars)
www.hammondmfg.com
Annual Report 2024 64
d) Market risk:
Market risk is the risk that changes in market prices, such as foreign exchange rates and interest
rates, will affect the Group’s income or the value of its holdings of financial instruments. The
objective of market risk management is to manage and control market risk exposures within
acceptable parameters, while optimizing the return.
e) Foreign currency risk:
The Group has a substantial number of transactions denominated in US dollars and is exposed to
risk with respect to fluctuations in exchange rates between Canadian and US dollars. The Group
holds smaller positions in other foreign currencies. The Group does not use derivative instruments
to reduce its exposure to foreign currency risk. As a result, variations in foreign exchange rates
could cause unanticipated fluctuations in the Group’s operating results.
The following chart depicts the foreign currency positions.
December 31, 2024
Carrying
amount
Contractual
cash flows
2025
2026
2027 to
2028
Thereafter
Non-derivative financial liabilities
Term loans
41,135 (48,200) (42,879) (1,692) (3,308) (321)
Lease obligations
15,310 (18,164) (4,066) (3,348) (4,676) (6,074)
Trade and other payables
26,386 (26,386) (26,386)
- -
-
Bank indebtedness
283 (283) (283)
- -
-
Total
83,114 (93,033) (73,614) (5,040) (7,984) (6,395)
December 31, 2023
Carrying
amount
Contractual
cash flows
2024
2025
2026 to
2027
Thereafter
Non-derivative financial liabilities
Term loans
$ 44,727 $ (54,337) $ (47,324) $ (1,692) $ (3,385) $ (1,936)
Lease obligations
11,293 (13,086) (2,930) (2,914) (3,400) (3,842)
Trade and other payables
24,815 (24,815) (24,815)
- -
-
Bank indebtedness
431 (431) (431)
- -
-
Total
$ 81,266 $ (92,669) $ (75,500) $ (4,606) $ (6,785) $ (5,778)
Currency
Accounts payable
Dec 31, 2024
Dec 31, 2023
Dec 31, 2024 Dec 31, 2023
Australia
AUD
62
65
(29)
(18)
Europe
EURO
238
300
(27)
(53)
New Zealand
NZD
30
95
-
-
Taiwan
TWD
50
50
(617)
(4,375)
UK
GBP
424
400
(536)
(530)
US
USD
12,612
11,940
(4,380)
(5,118)
Accounts receivable
HAMMOND MANUFACTURING COMPANY LIMITED
Notes to Consolidated Financial Statements
Years ended December 31, 2024, and 2023
(amounts (except share amounts) in thousands of Canadian dollars)
www.hammondmfg.com
Annual Report 2024 65
Long-term debt and lease liabilities denominated in foreign currencies may affect the amount of
principal and interest payments ultimately recorded.
Sensitivity Analysis:
An average one-cent decrease of the Canadian dollar against the US dollar in 2024 would have
increased net product sales by $1,126 (2023 - $1,078) and increased income from operations by
$1,235 (2023 - $1,183). Inversely, a one cent increase in the Canadian dollar against the US dollar
in 2024 would have had the equal but opposite effect. This analysis assumes that all other variables
remain constant. As noted, the Company does deal in other currencies but the level of impact of
these currencies would not be significant.
f)
Interest rate risk:
Interest rate risk arises from the possibility that the cash flows related to a financial instrument
fluctuate as a result of changes in market interest rates. The Group is exposed to financial risk that
arises from the interest rate differentials between the market interest rate and the rates on its cash,
bank indebtedness, and its float rate term loans. Changes in variable interest rates could cause
unanticipated fluctuations in the Group’s operating results.
Sensitivity Analysis:
A one percent increase in the variable rates charged on ending 2024 bank indebtedness would
increase annual interest expense by $Nil (2023 - $4). This analysis assumes that all other variables
remain constant. Inversely, a one percent decrease in the variable rates charged on ending 2024
bank indebtedness would have had the equal but opposite effect.
Currency
Dec 31, 2024
Dec 31, 2023
Dec 31, 2024
Dec 31, 2023
UK
GBP
-
-
(2,826)
(1,541)
US
USD
(1,225)
(1,267)
(330)
(556)
Long-term debt
Lease Liabilities
HAMMOND MANUFACTURING COMPANY LIMITED
Notes to Consolidated Financial Statements
Years ended December 31, 2024, and 2023
(amounts (except share amounts) in thousands of Canadian dollars)
www.hammondmfg.com
Annual Report 2024 66
g)
Operational risk:
Operational risk is the risk of direct or indirect loss arising from a wide variety of causes associated
with the Group’s processes, personnel, technology and infrastructure, and from external factors
other than credit, liquidity and market risks such as those arising from legal and regulatory
requirements and generally accepted standards of corporate behavior.
The Group’s objective is to manage operational risk to balance the avoidance of financial losses and
damage to the Group’s reputation with overall cost effectiveness and to avoid control procedures
that restrict initiative and creativity.
The primary responsibility for the development and implementation of controls to address
operational risk is assigned to senior management within each business unit. This responsibility is
supported by the development of overall Group standards for the management of operational risk in
the following areas:
•
requirements for appropriate segregation of duties, including the independent authorization
of transactions
•
requirements for the reconciliation and monitoring of transactions
•
compliance with regulatory and other legal requirements
•
documentation of controls and procedures
•
requirements for the periodic assessment of operational risks faced, and the adequacy of
controls and procedures to address the risks identified
•
requirements for the reporting of operational losses and proposed remedial action
•
development of contingency plans
•
training and professional development
•
ethical and business standards
•
risk mitigation, including insurance, when this is effective.
Compliance with Group standards is supported by a program of periodic reviews undertaken by the
corporate finance group. The results of the reviews are discussed with the management of the
business unit to which they relate, with summaries submitted to the Audit Committee and senior
management of the Group.
Capital management:
In order to manage capital, the Group regularly identifies and assesses risks that threaten the ability
to meet the Company’s capital management objectives and determines the appropriate strategy to
mitigate these risks.
The Group’s objectives when managing capital are to:
•
maintain financial flexibility to preserve its ability to meet financial obligations
•
deploy capital to provide an appropriate investment return to its shareholders
•
maintain capital structure that allows multiple financing options to the Group should a
financing need arise.
HAMMOND MANUFACTURING COMPANY LIMITED
Notes to Consolidated Financial Statements
Years ended December 31, 2024, and 2023
(amounts (except share amounts) in thousands of Canadian dollars)
www.hammondmfg.com
Annual Report 2024 67
The Group defines its capital as follows:
•
equity
•
long-term debt, including the current portion
•
cash and cash equivalents and short-term borrowings
The Group is subject to externally imposed capital requirements through the covenants of its facility
arrangements with the bank. The covenants measure Debt to Total Net Worth and Debt Service
Ratio. The Group is in compliance with its covenants at December 31, 2024 and has been in
compliance with its covenants through 2023 and 2024. There were no changes to the Group’s
approach to capital management during 2024. Neither the Company, nor any of its subsidiaries, is
subject to externally imposed capital requirements.
27) Segment disclosures:
The continuing operations of the Company are in one operating segment, electrical and electronic
components.
The Company and its subsidiaries operate in Canada, the US, the UK and Australia.
Geographic segments
Year ended:
December 31, 2024
December 31, 2023
Net product sales:
Canada:
Sales to customers
$ 78,882
$ 80,643
US:
Sales to customers
151,909
143,958
All other countries:
Sales to customers
14,107
13,684
Net product sales
$ 244,898
$ 238,285
Non-current assets:
Canada:
Non-current assets
$ 81,417
$ 74,561
US:
Non-current assets
1,592
1,923
All other countries:
Non-current assets
5,695
3,067
Total
Non-current assets
$ 88,704
$ 79,551
HAMMOND MANUFACTURING COMPANY LIMITED
Notes to Consolidated Financial Statements
Years ended December 31, 2024, and 2023
(amounts (except share amounts) in thousands of Canadian dollars)
www.hammondmfg.com
Annual Report 2024 68
28) Related party transactions:
a)
Key management includes the Company’s directors and members of the executive
management team. Compensation awarded to key management included:
b)
The Company purchased $1,718 of products from RITEC in 2024 (2023 - $4,474). The
Company sold $6 of products to RITEC in 2024 (2023 - $3). These transactions were made in
the normal course of business and have been recorded at the exchange amounts, being the
amount agreed to by the two parties.
All outstanding trade balances with related parties are to be settled in cash within six months of
the reporting date. None of the balances are secured. Receivables as at December 31, 2024
were $229 (2023 - $140) while payables were Nil (2023 - $45). Trade receivables and payables
to related parties are included within trade and other receivables and trade and other payables
on the Consolidated Statement of Financial Position.
c)
The Chairman of the Company, Robert Frederick Hammond, through direct and indirect
ownership of Class A and Class B voting shares, effectively controls the Company.
d)
Consolidated entities:
The year end for each of the entities listed in the table above is December 31.
December 31, 2024
December 31, 2023
Salaries and short-term employee benefits
$ 1,241
$ 893
Dividend payouts to Key Management
271
247
Total Renumeration
1,512
1,140
Years ended:
Country of
incorporation
December 31,
2024
December 31,
2023
Les Fabrications Hammond (Quebec) Inc. /
Hammond Manufacturing (Quebec) Inc. Canada
100
100
Hammond Electronics Pty Limited
Australia
100
100
Hammond Electronics Limited
UK
100
100
Subsidiary of above:
Hammond Electronics Asia Limited
Taiwan
100
100
Hammond Electronics B.V.
Netherlands
100
100
Hammond Manufacturing Company Inc.
US
100
100
Subsidiaries of above:
Hammond Holdings Inc.
US
100
100
Paulding Electrical Products, Inc
US
100
100
HAMMOND MANUFACTURING COMPANY LIMITED
% Ownership interest
HAMMOND MANUFACTURING COMPANY LIMITED
Notes to Consolidated Financial Statements
Years ended December 31, 2024, and 2023
(amounts (except share amounts) in thousands of Canadian dollars)
www.hammondmfg.com
Annual Report 2024 69
29) Subsequent Events
On February 1, 2025, the President of the United States initiated executive orders to impose new tariffs
on all imports originating from Canada, Mexico, and China. The order has been signed for an additional
25% duty on imports into United States of Canadian-origin and Mexico-origin products and a 10% duty
on China-origin products. This excludes Canadian energy resources that are subject to an additional
10% duty. This decision was postponed until March 4th by The President.
In addition to the above there could be retaliatory tariffs or other trade protectionist measures. The
company will assess the impact as details become available. At this time, an estimate of impact is not
available as the final implementation amounts and impact of retaliatory amounts have not been finalized.
30) Reclassification
Certain reclassifications have been made to the comparative to align with the current presentation
requirements.
www.hammondmfg.com
Annual Report 2024 70
THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK
Hammond O.S. & Son -
built radios, amplifiers, and
battery eliminators
Transition into
manufacture of
Transformers, Wire
Wound Resistors
and Broadcast
Racks/Cabinets
Added NEMA
Enclosures
New Factory built
on Speedvale/
Edinburgh Road
Hammond goes
Public on Toronto
Stock Exchange
Hammond
Manufacturing
re-branded to
current identify
Dry-Type Transformer Business
split off under new company,
Hammond Power Solutions.
Shares of Hammond power
solutions distributed as a
separate public company
Guelph Operations
Expands with an
additional state-of-the-art
Manufacturing Facility.
Hammond
Celebrates 100
Years in Business
Hammond expands to the
UK opening in Basingstoke
Hammond Rack and
Cabinet Division
celebrates 85 years.
Backyard Workshop - Charging
batteries, installing antennas,
custom machining
Through
the Years
1917
1927
1930
1950
1955
1986
1976
2000
2016
2017
1980’s
2019
Additional contractor
product capacity
added in Ontario
2023
*Members of the Audit Committee and Compensation Committee
Head Office
Hammond
Manufacturing
394 Edinburgh Rd N,
Guelph, ON, N1H 1E5
P. (519) 822 2960
F. (519) 822 0715
ir@hammfg.com
Québec
Les Fabrications
Hammond
(Québec) Inc.
985 Rue Bergar,
Laval, QC, H7L 4Z6
P. (450) 975 1884
F. (450) 975 2098
sales@hammfg.com
USA
Hammond
Manufacturing
Company Inc.
475 Cayuga Rd,
Cheektowaga, NY
14225
P. (716) 630 7030
F. (716) 630 7042
sales@hammfg.com
United Kingdom
Hammond
Electronics Ltd.
1 Onslow Close,
Kingsland Business Park,
Basingstoke, Hampshire,
RG24 8QL, England
P. +44 1256 812812
F. +44 1256 332249
sales@hammond-electronics.co.uk
Australia
Hammond
Electronics Pty. Ltd.
11-13 Port Rd,
Queenstown
SA 5014
P. +61 8 8240 2244
F. +61 8 8240 2255
australia@hammfg.com
HM-2024- AnnualReport
Corporate Directory
1-519-822-2960 (Canada) | 1-800-526-2266 (USA) | www.hammondmfg.com | @hammondmfg
Directors
Robert F. Hammond
Chairman and CEO
*Edward Sehl
Principal - Sehl Consulting
*Paul Quigley
President - Quigley Group Inc.
Sheila Hammond B.A., B.Ed., M.Sc.
Registered Marriage & Family Therapist
Officer & Director, Eramosa Group Ltd.
Officers / Senior Management
Robert F. Hammond
Chairman and CEO
Alexander Stirling
Secretary and Executive VP
Mike Hobbs
CFO
Ross N. Hammond
Assistant Secretary
*Michael Fricker
CFO at Sarku Japan
Director of Tippet Foundation
Director for Odd Burger Corporation
*Blaine Witt
Vice President – Senior Consultant of Witt Holding Company Inc.
Sarah Hansen
Western Regional Sales Manager at Hammond Manufacturing Canada Limited
Director of Eramosa Group Ltd.
Director of DKH Engineering Services Inc.
Auditors
KPMG LLP
SHAW GIBBS Limited, UK
Australian Independent Audit Services
Legal Counsel
Borden Ladner Gervais
Transfer Agent and Registrar
Computershare Investor
Services Inc.
Stock Listing
Toronto Stock Exchange
Symbol: HMM.A
Bankers
Royal Bank of Canada (in Canada)
HSBC (Rest of World)