Pioneer announces second quarter 2012 results

FORT LEE, NJ, Aug 14, 2012 (MARKETWIRE via COMTEX) — Pioneer Power Solutions, Inc. (“Pioneer” or the “Company”), a manufacturer of specialty electrical equipment for applications in the utility, industrial and commercial segments of the electrical transmission and distribution industry, announced its results for the second quarter and six months ended June 30, 2012.

Second Quarter 2012 Highlights

— Revenue of $21.8 million, up 32.9% from $16.4 million in Q2 2011

— Gross margin was 21.8% of revenue, compared to 21.6% for the same period in the prior year

— Adjusted EBITDA of $1.9 million, compared to $1.3 million in Q2 2011

— Non-GAAP diluted EPS from continuing operations of $0.17, up from $0.11 in the comparable prior year period

Six Months Ended June 30, 2012 Highlights

— Revenue of $42.1 million, up 31.1% from $32.1 million during the first six months of 2011

— Gross margin of 22.2%, compared to 24.5% for the same period in the prior year

— Adjusted EBITDA of $3.8 million, compared to $3.4 million in the first two quarters of 2011

— Non-GAAP diluted EPS from continuing operations of $0.33, compared to $0.32 in the comparable prior year period

Nathan Mazurek, Pioneer’s Chairman and Chief Executive Officer, commented, “Through a balanced combination of internal and acquisition-driven growth, Pioneer extended its record of increasing year-over-year revenue during every period since we became public in late 2009.”

Mr. Mazurek continued, “Regarding our markets, we are seeing strong activity in several of our industrial sub-sectors, including oil and gas and the mining industry. We believe this trend has helped set the stage for a very strong finish to our fiscal year ending in December. When compared to this same point last year, our order backlog is now better-weighted towards high margin production and is also approximately 47% larger.”

Andrew Minkow, Pioneer’s Chief Financial Officer, added, “Our Adjusted EBITDA and non-GAAP net earnings per share grew 43.0% and 54.5%, respectively, in the second quarter of 2012 versus the same period last year. We expect to finish the year with approximately $80 to $85 million of revenue and non-GAAP earnings per share of $0.70 to $0.75, both at the high end of our guidance range.”

Results for Three Months and Six Months Ended June 30, 2012

Revenue

For the three months ended June 30, 2012, consolidated revenue increased by $5.4 million, or 32.9%, to $21.8 million, up from $16.4 million during the three months ended June 30, 2011. Approximately $1.6 million of the revenue increase reflects organic growth of businesses owned by us for more than one year. The remaining $3.8 million increase resulted from an additional six months of operations for the dry-type transformer business that we acquired in July 2011. Excluding the effect of this acquisition, revenue from our dry-type transformer products increased $1.5 million and was led by our distribution sales channel. Revenue from our liquid-filled transformer products increased by 0.5% during the three months ended June 30, 2012 (or up 4.9% on a constant currency basis) on stable demand from key utility and industrial customers.

For the six months ended June 30, 2012, consolidated revenue increased by $10.0 million, or 31.1%, to $42.1 million, up from $32.1 million during the six months ended June 30, 2011. Approximately $2.9 million of the revenue increase reflects organic growth of businesses we have owned for more than one year. The remaining $7.1 million increase in revenue resulted from an additional six months of operations for the dry-type transformer business that we acquired in July 2011. Excluding the effect of this acquisition, revenue from our dry-type transformer products increased $4.1 million, or 36.6% on a year-over-year basis, while revenue from our liquid-filled transformer products decreased 6.0% (3.3% in constant currency), during the six months ended June 30, 2012.

Gross Margins

For the three months ended June 30, 2012, our gross margin percentage increased to 21.8% of revenues, compared to 21.6% during the three months ended June 30, 2011. The 0.2% increase in gross margin was attributable to product mix, driven in particular by higher margins on our liquid-filled transformer products. Offsetting this increase was the continuing shift in our sales mix towards lower-margin, dry-type transformers sold primarily through our distribution channel. Additionally, organic and acquisition growth of this product line has increased it to approximately 52% of our total revenue during the three months ended June 30, 2012, as compared to only 37% during the same period of 2011.

For the six months ended June 30, 2012, our gross margin percentage decreased to 22.2% of revenues, compared to 24.5% during the six months ended June 30, 2011. The 2.3% decrease in gross margin was due to growth in dry-type transformer sales, which represented 53% of our consolidated revenue during the six months ended June 30, 2012, as compared to only 35% during the same period of 2011. Our gross margin percentage for liquid-filled products remained stable during the first six months of 2012, as compared to 2011, while our average gross margin on dry-type products declined by 3.1%. The decline in dry-type margins in 2012 resulted from significantly higher sales of less profitable designs, principally catalogue-type products sold through our distribution network to commercial construction customers.

Earnings from Continuing Operations and Earnings Per Diluted Share

Earnings from continuing operations were $0.9 million and $1.7 million during the three and six month periods ended June 30, 2012, respectively, as compared to $0.4 million and $1.6 million during the three and six month periods ended June 30, 2011. During 2012 as compared to 2011, earnings from continuing operations benefitted from a higher consolidated operating margin on increased sales, for the reasons described above, partially offset by increased interest expense and the effect of a higher effective income tax rate. Earnings from continuing operations per basic and diluted share were $0.15 and $0.29 for the three month and six month periods ended June 30, 2012, respectively, as compared to $0.07 and $0.27 for the three and six month periods ended June 30, 2011.