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Q2 Report 2012 For the six months ended June 30, 2012

2 Q2 REPORT HAMMOND POWER SOLUTIONS

Inside n Letter to Shareholders n Mangements Discussion Analysis r Selected Annual and Quarterly Financial Information r Consolidated Statements of Financial Position r Consolidated Statements of Ear

blank 4 Q2 REPORT HAMMOND POWER SOLUTIONS

Fellow Shareholders, I am pleased to report a robust Quarter 2, 2012 in terms of both sales and profit growth for Hammond Power Solutions Inc. HPS. Overall, compared to the same quarter in 2011, sales

Managements Discussion Analysis Second Quarter 2012 Dollars are in thousands unless otherwise stated. Overview Hammond Power Solutions Inc. HPS or the Company is the North American leader for the d

Managements Discussion Analysis Second Quarter 2012 Dollars are in thousands unless otherwise stated U.S. dollar is higher by 3.0 1.00 USD 1.01 CAD versus 1.00 USD 0.98 CAD over the first six mon

Managements Discussion Analysis Second Quarter 2012 Dollars are in thousands unless otherwise stated. Selling and Distribution Expenses Total selling and distribution expenses were 6,525 in Quarter

Managements Discussion Analysis Second Quarter 2012 Dollars are in thousands unless otherwise stated Interest Expense The interest expense for Quarter 2, 2012 finished at 176 compared to 77 in Quar

Managements Discussion Analysis Second Quarter 2012 Dollars are in thousands unless otherwise stated. Net Earnings continued EBITDA and adjusted EBITDA is calculated as outlined in the following ta

Managements Discussion Analysis Second Quarter 2012 Dollars are in thousands unless otherwise stated U.S. to Canadian foreign exchange rates, changing economic conditions, and competitive pricing p

Managements Discussion Analysis Second Quarter 2012 Dollars are in thousands unless otherwise stated. Contingent Liabilities Management is not aware of any contingent liabilities. Controls and Pro

Managements Discussion Analysis Second Quarter 2012 Dollars are in thousands unless otherwise stated Purchase of PanElectro Technic Private Limited PETE On February 23, 2012, HPS signed an agreemen

Managements Discussion Analysis Second Quarter 2012 Dollars are in thousands unless otherwise stated. Risks and uncertainties continued The Company is very cognizant of these risks and continually

Managements Discussion Analysis Second Quarter 2012 Dollars are in thousands unless otherwise stated GlobalNorth American economy continued The Company believes that by being an agile organization

Managements Discussion Analysis Second Quarter 2012 Dollars are in thousands unless otherwise stated. New accounting pronouncements The International Accounting Standards Board IASB has issued the

Managements Discussion Analysis Second Quarter 2012 Dollars are in thousands unless otherwise stated Presentation of other comprehensive income OCI In June 2011, the IASB issued an amended version

Managements Discussion Analysis Second Quarter 2012 Dollars are in thousands unless otherwise stated. Selected Annual and Quarterly Financial Information The information contained in the following

Consolidated Statements of Financial Position unaudited As at tabular amounts in thousands of dollars June 30, 2012 December 31, 2011 Assets Current assets Cash Accounts receivable Inventories Inc

Consolidated Statements of Earnings unaudited Quarter Ending tabular amounts in thousands of dollars Six Months Ending July 2, 2011 June 30, 2012 131,140 99,512 31,628 12,784 10,424 8,420 July 2,

Consolidated Statements of Comprehensive Income unaudited Quarter Ending tabular amounts in thousands of dollars Six Months Ending June 30, 2012 2,811 July 2, 2011 682 June 30, 2012 5,329 Ju

Consolidated Statements of Changes in Equity unaudited For the six months ended June 30, 2012 tabular amounts in thousands of dollars Share capital 12,987 Contributed surplus 1,525 AOCI 935

Consolidated Statements of Changes in Equity unaudited For the six months ended July 2, 2011 tabular amounts in thousands of dollars Share capital 12,968 Contributed surplus 968 AOCI 1,267 R

Consolidated Statements of Cash Flows unaudited Six Months Ending tabular amounts in thousands of dollars June 30, 2012 July 2, 2011 Cash flows from operating activities Net earnings Adjustments f

Notes to Unaudited Consolidated Interim Financial Statements Quarters ended June 30, 2012 and July 2, 2011 tabular amounts in thousands of dollars The accompanying consolidated interim financial state

Notes to Unaudited Consolidated Interim Financial Statements 5. Intangible assets The Group had acquisitions of intangible assets for the six months ended June 30, 2012 in the amount of 498,000 2011

Notes to Unaudited Consolidated Interim Financial Statements b Stock option plan During the six months ended June 30, 2012, the Company granted 129,000 options 2011 171,667 of which 83,000 vested i

Notes to Unaudited Consolidated Interim Financial Statements 8. Business combination continued The acquisition was accounted for using the purchase method whereby identified assets acquired and liab

HAMMOND POWER SOLUTIONS Q2 REPORT 29

Hammond Power Solutions Inc. Canada Corporate Head Office 595 Southgate Drive Guelph, Ontario N1G 3W6 Phone 519 8222441 15 Industrial Road Walkerton, Ontario N0G 2V0 Phone 519 8813552 Distribution Cen

Corporate Officers and Directors William G. Hammond Chairman and Chief Executive Officer Corporate Head Office 595 Southgate Drive Guelph, Ontario N1G 3W6 Chris R. Huether Corporate Secretary and C

hammondpowersolutions.com

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