Hammond Power Solutions Inc. Announces Quarter 2, 2013 Results Managing Through a Challenging Economy

Hammond Power Solutions Inc. ("HPS") (TSX:HPS.A) a leading manufacturer of dry-type and cast resin transformers and related magnetics, today announced its financial results for the second quarter of 2013.

Bill Hammond, Chairman & Chief Executive Officer of Hammond Power Solutions Inc. commented, "I think it's fair to say that the North American economy, specifically the Canadian market and the mining sector are in much worse shape than anyone forecasted 7-8 months ago. Our solid core competencies, financial strength, broad geographical presence and market diversification will serve HPS in withstanding the current economic instability."

SECOND QUARTER RESULTS

Sales for the quarter-ended June 29, 2013 were $59,072, a decline of $6,414 or 9.8% from the Quarter 2, 2012 sales of $65,486. Year-to-date sales were $122,744 in 2013 and $131,140 in 2012, a decrease of $8,396 or 6.4%. As a result of a slowdown in OEM order booking and sales activity U.S. sales were $36,016 in Quarter 2, 2013, a decrease of $1,397 or 3.7% from Quarter 2, 2012. Canadian sales were $18,610 for the quarter, a decrease over Quarter 2, 2012, of $4,536 or 19.6% year to date were $39,882 in 2013 compared to $48,116 in 2012 a drop of $8,234 or 17.1%. International sales in Quarter 2, 2013 were $4,446 versus $4,927 in Quarter 2, 2012, a decrease of $481 or 9.8%. Our recently acquired Italian acquisition, Marnate Trasformatori s.r.l. ("Marnate") contributed $1,404 in International sales for the quarter. Year-to-date international sales were $11,661 in 2013 compared to $9,109 in 2012, an increase of $2,552 or 28%.

The Company realized an increase in bookings of 17.6% over Quarter 1, 2013 and also increased 3.4% as compared against Quarter 2, 2012. Due to the sluggishness of the North American, European and Asian economies, year to date bookings were lower by 5.3%.

Gross margin rates for Quarter 2, 2013 finished at 23.9% versus 24.5% in Quarter 2, 2012, a decrease of 0.6% of sales. The year-to-date margin rate was 24.0% in 2013 which was comparable to the 2012 rate of 24.1%.

Bill Hammond further commented, "Despite current market pressures, the Company is holding on to margin rates for the year."

Total selling and distribution expenses were $6,617 in Quarter 2, 2013 versus $6,525 in Quarter 2, 2012, an increase of $92 or 1.4%. These expenses represent 11.2% of sales in Quarter 2, 2013 and 10.0% of sales in Quarter 2, 2012. Year-to-date selling and distribution expenses were $13,159 or 10.7% of sales in 2013, compared to $12,784 or 9.7% of sales in 2012. The Quarter 2, 2013 selling and distribution expenses include international operation expenses of $287 versus $258 in Quarter 2, 2012. Year-to-date international operation expenses include $594 in 2013 and $578 in 2012.

The general and administrative expenses for Quarter 2, 2013 totaled $5,916, an increase of $1,030 or 21.1% when compared to Quarter 2, 2012 expenses of $4,886. This represents 10.0% of sales in Quarter 2, 2013 as compared to 7.5% of sales in Quarter 2, 2012. The Quarter 2, 2013 general and administrative expenses include international operation expenses of $905 versus $516 in Quarter 2, 2012. The Company also continued with its investment in information technology, research and development and employee training and recruitment in the Quarter. Year-to-date general and administrative expenses were $11,311 or 9.2% of sales in 2013, compared to $10,424 or 7.9% of sales in 2012.

Quarter 2, 2013 earnings from operations decreased by $3,064 or 65.8% from the same quarter last year, finishing at $1,599 compared to $4,663 in Quarter 2, 2012. The year-to-date earnings from operations were $4,958 in 2013 compared to $8,420 in 2012, a decrease of $3,462 or 59%. The reduction was a result of the decrease in sales, slight decrease in margin rates and increased general and administrative expenses.

Interest expense for Quarter 2, 2013 finished at $293 compared to $176 in Quarter 2, 2012, an increase of $117 or 66.5%. Year-to-date interest cost was $462, an increase of $162 when compared to the 2012 year-to-date expense of $300. The increase in interest expense for the quarter and year-to-date was a result of higher operating debt levels related to the assumption of debt associated with the earlier year purchase of Marnate.

Net earnings for Quarter 2, 2013 decreased by $2,301, finishing at $510 compared to net earnings of $2,811 in Quarter 2, 2012. Year-to-date net earnings were $2,417 in 2013 and $5,329 in 2012, a decrease of $2,912 or 54.7%. Net earnings for the quarter and year were lower as a result of the weaker sales, softer margins, a higher effective income tax rate and increased general and administrative expenses.

Net cash generated by operating activities for Quarter 2, 2013 was $1,429 versus $10,476 in Quarter 2, 2012, a decrease of $9,047 as a result of an increase in non-cash working capital and lower net earnings. Year-to-date cash generated by operating activities was $418 in 2013 and $7,146 in 2012, a difference of $6,728.

The Company continued with its regular quarterly dividend program, paying five cents ($0.05) per Class A Subordinate Voting Share of HPS and five cents ($0.05) per Class B Common Share of HPS on June 27, 2013. "This regular quarterly dividend demonstrates our confidence in our operational strategies," Mr. Hammond commented.

Mr. Hammond concluded, "While there continues to be economic challenges we are encouraged by the increased activity in the electrical industry and anticipate that our business development strategies and increased market share will add to our financial results in the second half of the year."

THREE MONTHS ENDED:                                                         
(dollars in thousands)                                                      
                                                                            
----------------------------------------------------------------------------
                                             June 29,   June 30,            
                                                 2013       2012     Change 
----------------------------------------------------------------------------
Sales                                          59,072     65,486  $  (6,414)
----------------------------------------------------------------------------
Earnings from Operations                        1,599      4,663     (3,064)
----------------------------------------------------------------------------
Exchange Loss/(Gain)                              122        (46)       168 
----------------------------------------------------------------------------
Net Earnings                                      510      2,811     (2,301)
----------------------------------------------------------------------------
Earnings per share                                                          
  Basic                                           .04       0.24      (0.20)
  Diluted                                         .04       0.24      (0.20)
----------------------------------------------------------------------------
Cash provided by operations                     1,429     10,476     (9,047)
----------------------------------------------------------------------------
                                                                            
SIX MONTHS ENDED:                                                           
(dollars in thousands)                                                      
                                                                            
----------------------------------------------------------------------------
                                             June 29,   June 30,            
                                                 2013       2012     Change 
----------------------------------------------------------------------------
Sales                                       $ 122,744  $ 131,140  $  (8,396)
----------------------------------------------------------------------------
Earnings from Operations                    $   4,958  $   8,420  $  (3,462)
----------------------------------------------------------------------------
Exchange Loss/(Gain)                        $     114  $     (68) $     182 
----------------------------------------------------------------------------
Net Earnings                                $   2,417  $   5,329  $  (2,912)
----------------------------------------------------------------------------
Earnings per share                                                          
  Basic                                          0.20       0.46      (0.26)
  Diluted                                        0.20       0.46      (0.26)
----------------------------------------------------------------------------
Cash provided by operations                 $     418  $   7,146  $  (6,728)
----------------------------------------------------------------------------

TELECONFERENCE

Hammond Power Solutions Inc. will hold a conference call on Thursday, July 25, 2013 at 10:00 a.m. EST, to discuss the Company's financial results for the second quarter 2013.

Listeners may attend the conference by dialing:

1-416-340-8061 / 1-866-225-0198 / 1-800-6578-9898                           
                                                                            
Instant Replay                                                              
Dial in numbers     905-694-9451 or 1-800-408-3053                          
Pass code           6306081                                                 
End date            August 8, 2013                                          

Caution Regarding Forward-Looking Information

This press release contains forward-looking statements that involve a number of risks and uncertainties, including statements that relate to among other things, HPS's strategies, intentions, plans, beliefs, expectations and estimates, and can generally be identified by the use of words such as "may", "will", "could", "should", "would", "likely", "expect", "intend", "estimate", "anticipate", "believe", "plan", "objective" and "continue" and words and expressions of similar import. Although HPS believes that the expectations reflected in such forward-looking statements are reasonable, such statements involve risks and uncertainties, and undue reliance should not be placed on such statements. Certain material factors or assumptions are applied in making forward-looking statements, and actual results may differ materially from those expressed or implied in such statements. Important factors that could cause actual results to differ materially from expectations include but are not limited to: general business and economic conditions (including but not limited to currency rates); changes in laws and regulations; legal and regulatory proceedings; and the ability to execute strategic plans. HPS does not undertake any obligation to update publicly or to revise any of the forward-looking statements contained in this document, whether as a result of new information, future events or otherwise, except as required by law.

ABOUT HAMMOND POWER SOLUTIONS INC.

Hammond Power Solutions Inc. (TSX:HPS.A) is a North American leader for the design and manufacture of dry-type custom electrical engineered magnetics, electrical dry-type and cast resin transformers. Leading edge engineering capabilities, high quality products, and responsive service to customers' needs have all served to establish HPS as a technical and innovative leader in the electrical and electronic industries.

HPS has operations in Canada, the United States, Mexico, India and Italy.

Contacts: Hammond Power Solutions Inc. Dawn Henderson Manager Investor Relations [phone] [e-mail]