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Press release from Marketwire

Hammond Power Solutions Inc. Reports Quarter 2, 2012 Financial Results

STRONG REVENUES AND EARNINGS AS MOMENTUM CONTINUES HIGHLIGHTS FROM THE QUARTER (Dollar amounts are in thousands unless otherwise specified) - Revenue growth of 25% - Net Income growth of 312% - Order backlog increase of 19%

Thursday, July 26, 2012

Hammond Power Solutions Inc. Reports Quarter 2, 2012 Financial Results17:12 EDT Thursday, July 26, 2012GUELPH, ONTARIO--(Marketwire - July 26, 2012) - Hammond Power Solutions Inc. ("HPS") (TSX:HPS.A) a leading manufacturer of dry type, cast coil and oil filled transformers and related magnetics, today announced its financial results for the second quarter of 2012."I am pleased to report a robust Quarter 2, 2012 in terms of both sales and profit growth for Hammond Power Solutions Inc. As we know, the global economy has become increasingly challenging as the year has progressed, making our financial and market share performance even more gratifying," commented Bill Hammond, Chairman & Chief Executive Officer of Hammond Power Solutions Inc.SECOND QUARTER RESULTSSales for the quarter-ended June 30, 2012 were $65,486, up $13,156 or 25.1% from the comparative quarter last year, and were higher by $26,033 or 24.8% year-to-date, finishing at $131,140 compared to $105,107 last year. Due to an increase in new order booking activity from the same quarter last year, sales in the United States stated in U.S. dollars were $37,735 in Quarter 2, 2012, an increase of $8,488 or 29.0% from Quarter 2, 2011. Year-to-date sales in the U.S. were $74,306, an increase of $14,542 or 24.3%, when compared to $59,764 last year-to-date. The sales increases can be attributed to higher shipments in both the American and Canadian markets and its expanding international sales in Italy and India.Bill Hammond stated, "In North America we continued to see strong growth from the resource and utility sectors as well as distributor channel expansion but despite a global economic slowdown, we remain on a strong growing trend over 2011."Sales initiatives produced bookings growth resulting in an increase of 8.8% over Quarter 1, 2012 and 8.5% from Quarter 2, 2011. Bookings in Quarter 2, 2012 trended higher in North America and internationally. These increased booking rates resulted in a rise in order backlog of 5.6% from Quarter 1, 2012 and increased 19.3% from Quarter 2, 2011.The Company delivered stronger gross margin rates in Quarter 2, 2012 finishing at 24.5% versus 23.1% in Quarter 2, 2011 an increase of 1.4% of sales. On a year-to-date basis, gross margin rates were 24.1% compared to 23.8% in 2011, up 0.3% of sales. The Company's gross margin rates were impacted by negative selling price pressures, but did benefit from product mix and the favourable impact that a weaker Canadian dollar has on U.S. resale margins."Gross margin rates benefitted from the favourable impact that increased manufacturing throughput has on the absorption of our fixed factory cost structures, cost containment and improving labour efficiencies," Bill Hammond further commented.Total selling and distribution expenses were $6,525 in Quarter 2, 2012 versus $5,506 in Quarter 2, 2011, an increase of $1,019 or 18.5%. Year-to-date, selling and distribution costs were $12,784 versus $10,893 in 2011, an increase of $1,891 or 17.4%. Due to sales increases, variable selling expenses in Quarter 2, 2012 were impacted by higher freight and commission expense and increased salaries associated with strategic hires to support the sales strategies of the Company.The general and administrative expenses for Quarter 2, 2012 totaled $4,886, an increase of $122 or 2.6% when compared to Quarter 2, 2011 costs of $4,764. Almost all of this increase was attributed to additional general and administrative costs relating to its new Indian operation. Year-to-date, general and administrative costs are higher by $913 or 9.6%, totaling $10,424 when compared to $9,511 for 2011. On a year-to-date basis, the company has seen increases in stock option expense, costs related to the company's ongoing acquisition activities, investment in its information systems and general and administrative costs relating to its new Indian operation.The Company delivered another strong quarter of sales and gross margin contribution. This resulted in increased earnings from operations of $2,844 or 156.3% from the same quarter last year, finishing at $4,663 in the quarter, as compared to $1,819 in Quarter 2, 2011. On a year-to-date basis, earnings from operations were $8,420 versus $4,646 for the same period of 2011, an increase of $3,774 or 81.2%.The interest expense for Quarter 2, 2012 finished at $176 compared to $77 in Quarter 2, 2011 an increase of $99. Year-to-date interest cost was $300, an increase of $193 when compared to year-to-date 2011 expense of $107.The foreign exchange gain in Quarter 2, 2012 was $46, relating primarily to the transactional exchange gain pertaining to the Company's U.S. dollar trade accounts payable in Canada, compared to a foreign exchange loss of $180 in Quarter 2, 2011. For the first six months of 2012, the Company realized an exchange gain of $68 as compared to a foreign exchange loss of $482 for the same period of 2011.Net earnings surged in Quarter 2, 2012, increasing by $2,129 or 312.1%, finishing at $2,811 compared to $682 in Quarter 2, 2011. On a year-to-date basis, net earnings finished at $5,329 an increase of $3,076 or 136.5% when compared to year-to-date 2011 net earnings of $2,253. Net earnings were positively impacted by the 25.1% growth in sales, increased gross margin rates and a 26.2% increase in gross margin dollars as compared to Quarter 2, 2011.Net cash generated by operating activities for Quarter 2, 2012 was $10,476 versus cash used of $6,504 in Quarter 2, 2011 a difference of $16,980. Year-to-date cash generated from operations was $7,146 compared to 2011 cash used of $8,846, a change of $15,992.Non-cash operating working capital generated cash of $6,455 compared to a usage of cash of $8,394 for the same quarter last year resulting in an overall increase difference of $14,849. Quarter 2, 2012 cash generation was primarily a net result of a decrease in inventory of $1,795, a decrease in accounts receivable of $1,971 and an increase in accounts payable of $1,743. For the first six months of 2012, the change in non-cash working capital was a net usage of cash of $884, as compared to a net usage of cash in working capital of $14,188 in the first six months of 2011, a decrease in cash usage of $13,304.The Company's overall debt, net of cash was $11,369 in Quarter 2, 2012 compared to a net debt position of $7,520 in Quarter 2, 2011, a reduction in cash position of $3,849. The major contributing factors to this were the purchase of PETE for $15,410 and the change in non-cash working capital.Mr. Hammond concluded, "We are cautiously optimistic about the next several quarters. Booking rates are strong from almost all markets and we continue to expand our penetration of the geographies we serve. We believe that it is prudent to remain cautious and conservative in how we manage and grow our Company."THREE MONTHS ENDED:(dollars in thousands)June 30, 2012July 2, 2011ChangeSales$65,486$52,330$13,156Earnings from Operations$4,663$1,819$2,844Exchange Loss/(Gain)$(46)$180$(226)Net Earnings$2,811$682$2,129Earnings per shareBasic.24.06.18Diluted.24.06.18Cash (Used) Provided by Operations$10,476$(6,504)$16,980SIX MONTHS ENDED:(dollars in thousands)June 30, 2012July 2, 2011ChangeSales$131,140$105,107$26,033Earnings from Operations$8,420$4,646$3,774Exchange Loss/(Gain)$(68)$482$(550)Net Earnings$5,329$2,253$3,076Earnings per shareBasic0.460.20.26Diluted0.460.20.26Cash (Used in) Provided by Operations$7,146$(8,846)$15,992 NOTE: ALL NUMBERS HAVE BEEN STATED UNDER IFRS TELECONFERENCEHammond Power Solutions Inc. will hold a conference call on Friday, July 27, 2012 at 10:00 a.m. EST, to discuss the Company's financial results for the Second quarter 2012.Listeners may attend the conference by dialing:1-416-340-2216 or 1-866-226-1792Instant replay Access Information:Local access:905-694-9451Toll Free access:800-408-3053Pass code:1338265Caution Regarding Forward-Looking InformationThis press release contains "forward-looking information" within the meaning of applicable securities laws. The forward-looking information contained in this press release is subject to known and unknown risks, uncertainties and other factors that are not within the control of HPS. Generally, this forward-looking information can be identified by the use of forward-looking terminology such as "outlook", "anticipate", "project", "target", "believe", "estimate", "expect", "intend", "should", "scheduled", "will", "plan" and similar expressions. Forward-looking information is subject to known and unknown risks, uncertainties and other factors that may cause HPS's actual results, level of activity, performance or achievements to be materially different from those expressed or implied by such forward-looking information and developed based on assumptions about such risks, uncertainties and other factors set out herein.A discussion of factors that may affect HPS' actual results, performance, achievements or financial position is contained in the filings by HPS with the Canadian securities regulatory authorities, including HPS' Annual Information Form. This list is not exhaustive of the factors that may affect our forward-looking information. These and other factors should be considered carefully and readers should not place undue reliance on such forward-looking information. HPS disclaims any intent or obligations to update or revise publicly any forward-looking statements whether as a result of new information, estimates or options, future events or results or otherwise, unless required to do so by law.About Hammond Power Solutions Inc.Hammond Power Solutions Inc., ("HPS" or the "Company") is the North American leader for the design of custom electrical engineered magnetic as well as the leading manufacturer of standard electrical dry type transformers. Advanced engineering capabilities, high quality products and fast responsive service to customers' needs has established the Company as a technical and innovative leader in the electrical and electronic industries. The Company has manufacturing facilities in Canada, the United States, Mexico, Italy and India.FOR FURTHER INFORMATION PLEASE CONTACT: Dawn HendersonHammond Power Solutions Inc.Manager Investor Relations(519) 822-2441 x414