TDI 2013 Annual Report by Decker Design

Annual Report 2013 Transforming Power

TDI Power Financial Highlights 2013

S Tat e m e n t o f O p e r at i o n s d ata Dollars in thousands, except per share data

08.03.13 07.28.12 07.30.11

Net Sales

$79,773 $77,873 $87,179

Gross Profit

18,940 13,756 23,845

Operating Income (Loss)

143

(6,571)

2,589

Income (Loss) Before Provision for Income Taxes

190

(2,972)

2,674

Net Income (Loss)

(305)

(3,070)

2,267

Net Income (Loss) Per Share

(0.03)

(0.34)

0.25

F Y 2 0 1 3 Q u a r t e r l y N e t S a l e s F Y 2 0 1 3 Q u a r t e r l y N e t I n c o m e ( L o ss ) Dollars in millions

Dollars in millions

21.9

21.1 18.3

18.4

1.0

0.4

(0.4)

(1.4)

TDI Power’s overall financial results were due to increased operational efficiency and continued success of our business diversification efforts.

Dear Shareholders For our company and the industries TDI Power serves, Fiscal Year 2013 was a year of transformation. Despite two years of slow recovery in the semiconductor manufacturing equipment segment, which is traditionally TDI Power’s largest market, our long-term efforts to transform the company and diversify our business are bearing fruit. Buoyed by fourth quarter sales growth and a quarterly book-to-bill ratio of 1.3:1, we are pleased to report operating income of $143,000 for FY2013. This compares to an operating loss of $6.6 million for FY2012. Also in FY2013, TDI Power’s net loss after tax was $305,000, as compared to a $3.1 million loss the previous Fiscal Year. TDI Power’s overall financial results improved due to increased operational efficiency and continued success of our business diversification efforts. Capitalizing on our manufacturing transformation In Fiscal Year 2012, we opened our new factory in China’s Futian Free Trade Zone. By mid‑year FY2013, TDI Power completed the transfer of numerous manufacturing programs to this new facility. A lower cost basis, combined with lean operations, has enabled us to improve the efficiency of a critical part of our business; we began to fully realize the financial benefits of these improvements in the fourth quarter of Fiscal Year 2013. Additionally, back in FY2011 we implemented new supply chain practices, which in FY2013 continued to yield reduced material costs and significantly reduced inventory from $25.4 million in FY2012 to $19.8 million in FY2013. Further diversification in key markets In Fiscal Year 2013, TDI Power continued to target markets of the future: high tech and industrial. We have reconfigured our business, moving from a handful of key accounts to nearly two dozen major customers, across a diversified mix of industries. In FY2013, this diversification was a key factor in driving TDI Power’s revenues, in spite of the prolonged downturn in the semiconductor equipment manufacturing industry.

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To propel our future growth, TDI Power has continued to invest in new engineering talent. In FY2013 we energized our engineering resources with fresh, creative thinking and mechanical engineering expertise.

A major factor in automotive power conversion Consumers interest in electric automobiles is growing, as is the number of choices available to the consumer. From luxury sedans to performance models, TDI Power is well-represented. In Fiscal Year 2013 we shipped more than 20,000 power converters to leading manufacturers of electric vehicles — dramatic growth over our FY2012 sales of about 1,000 units. The expansion in our passenger vehicle business is in addition to established programs TDI Power has with manufacturers of industrial vehicles, such as tractors and other farm equipment. Engineering innovation fuels our transformation To propel our future growth, TDI Power has continued to invest in new engineering talent. In FY2013 we strengthened our engineering resources with fresh, creative thinking and mechanical engineering expertise. This new talent pool has accelerated TDI Power’s move into water-cooled LiquaCore® power technology and developed innovative ways to apply our solutions in new applications serving new markets. TDI Power’s new LiquaCore® anti-corrosion solution for marine, pipeline and oil drilling applications is one such example described in this Report. Other pages introduce you to our new LiquaBlade™ product and tell you more about our solutions for vehicle power. Dynamic sales and marketing In FY2013 we revamped our sales and marketing organization to complement TDI Power’s diversified approach to building the business. Our sales team is staffed with experts in target markets, and our marketing resources are more concentrated to reach new customers at industry trade shows. This dynamic approach accelerates the sales pipeline, and our overall business transformation.

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We are actively pursuing new opportunities based on future growth, and our management team is focused on guiding TDI Power through a continued challenging environment.

Looking ahead to FY2014 Given the cycles that have characterized TDI Power’s business over the past several years, we foresee continued volatility in our customers’ markets, but an overall upward trend as Fiscal Year 2014 progresses. With much internal transformation behind us, all of us at TDI Power are optimistic about FY2014. We are pursuing new opportunities for future growth, and our management team is focused on leading TDI Power to success. In the pages that follow we detail some of our market and product development initiatives, which we expect to aid our future growth. We deeply appreciate the support we’ve received from shareholders and look forward to your continued support in FY2014. Sincerely,

Joshua A. Hauser James M. Feely Chairman of the Board President and CEO

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Liq u a C o re ® T echn o l o gy

Transforming Our Business

This innovative three-phase DC power

LiquaBlade™ and LiquaRack™ products use LiquaCore® technology to open new doors of opportunity for TDI Power.

efficiency. We’ve combined this with our proven

technology is a game-changer. Leveraging cutting-edge silicon carbide technology allows us to convert higher input voltages with greater LiquaCore® technology in a high voltage three‑phase rectifier to deliver both superior power density and cooling simultaneously. Equally impressive, TDI Power’s LiquaCore®based products offer price points typically 20 percent lower than legacy air-cooled products. Small footprint, easy maintenance Configurable, scalable LiquaRack™ rack‑mounted systems deliver concentrated DC power in a footprint that is half the size of comparable air-cooled systems.

LiquaRack™ utilizes highly engineered liquid coolant and electrical distribution systems.

Maintenance on our liquid-cooled systems is a breeze. TDI Power’s liquid and electrical connections can be “hot swapped” while the unit is fully operating, with no system downtime. This is a critical requirement in a wide range of industries with applications that require reliability and continuous availability. Applications across industries LiquaCore® technology can be easily deployed in multiple applications, allowing TDI Power to expand our presence in established markets as

LiquaBlade™ power modules can be removed while the system operates, for easy maintenance.

well as enter new ones. We are actively marketing LiquaBlade™ and AT LEFT Chris Hewitt,

Electrical Engineer and Emily Berthoud, Associate Buyer, with a 100,000 watt LiquaRack™ system.

LiquaRack™ solutions for a multitude of applications including: • industrial heating • automotive • environmental • medical • shipboard • corrosion control • and aerospace.

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C ath o dic P r o tecti o n

A 21st-century Overhaul TDI Power’s ICCP technology is a state-of-the-art solution to the age-old problem of corrosion.

High-value steel structures are often protected from corrosion using a technique called Impressed Current Cathodic Protection (ICCP). ICCP uses a DC power supply to impress an electric current that counteracts the natural galvanic reaction of metal in salt water that produces corrosion. TDI Power is a leading supplier of ICCP power supplies to the marine marketplace. Today, hundreds of vessels, from barges to supertankers, along with deep-sea oil platforms, are being protected from corrosion with our air-cooled products. Ship’s power supply (440AC) TDI AC-DC power supply

Ship’s hull

Seawater

VDC

Current emitting anode

High power air cooled system for rugged shipboard environments.

Electron flow forced by DC circuit Natural electron flow due to galvanic action

TDI Power’s ICCP solution for vessels uses a DC system to force current flow that negates a galvanic reaction, protecting the steel hull from corrosion and degradation.

AT LEFT Krzysztof Dabrowski, Electrical Engineer, and Jessica Kulig, Mechanical Engineer, with conceptual design for the new marine ICCP unit utilizing LiquaBlade™ technology.

Expanding our footprint in 2014 We are introducing this year both watercooled and oil-filled products specifically designed to provide higher performance and longer life for ICCP applications. Our designs feature power converters capable of withstanding the severe environmental stresses found in marine environments, TDI Power’s solutions provide numerous benefits to the end customer: compact size, low operating cost and high reliability, for years of trouble-free service.

Low power unit features a unique environmentally sealed rectifier for harsh environments.

Solutions for every need Ideal for smaller vessels, onshore well heads, oil tanks or similar applications, our 2.5kW unit features TDI Power’s unique, oilfilled Environmentally Sealed Power Module™ (ESPM) that is impervious to the effects of weather and airborne contaminants. For larger structures, TDI Power will be introducing a 15kW water-cooled unit. It uses our LiquaBlade™ module, including an air to water heat exchanger and electrical connection and control features critical to large-scale deployments.

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E L E C T R I C A u t o m o ti v e

Transportation Revolution In Fiscal Year 2014, TDI Power will introduce it’s new Gen-II 12-volt converter, for both consumer and industrial automotive users.

In Fiscal Year 2013, TDI Power shipped over 20,000 units of a 12-volt converter that powers electronic systems in an award‑winning performance electric automobile. We are also now producing a similar product for one of the world’s premier luxury vehicle brands, which has selected TDI Power’s converter for its first all-electric passenger sedan. Fast growth for EVs Our success in this market segment is driven by consumers’ growing interest in all-electric vehicles. Spurred by high

Gen-I automotive grade converter

gasoline prices and rising environmental consciousness, sales of electric vehicles (EVs) more than doubled in the first half of 2013, compared to the same period in 2012.1 Although the percentage of all-electric vehicles currently on the road is still low, this segment of the automotive market is growing. For example, in the first 30 months after the Toyota Prius debuted in 1999, approximately 50,000 units were sold. In the first 30 months since plug-in electrics were

On-board converters are deployed in the world’s most successful electric vehicles.

released in December 2010, cumulative sales were 112,724.

From automobiles, onward TDI Power is playing a pivotal role not just in the electric automotive industry, but in AT LEFT Nestor Candelo,

Principal Engineer, and Wendy Bohdan, Program Management Financial Analyst with a Gen‑II automotive DC-DC converter.

industrial vehicles’, as well. Building on our experience in electrifying machinery, we will apply our expertise to realize new industrial opportunities in FY2014.

1 2

Source: US Department of Energy. Source: Argonne National Lab. For period ending June 30, 2013. T D I P O W E R 2 0 13 A N N U A L R E P O R T | Pa g e 9

Board of Directors

Corporate Headquarters

Alan R. Blake

36 Newburgh Road

James B. Clark

Hackettstown, NJ 07840 Tel: 908.850.5088

James M. Feely

Fax: 908.979.1181

President and Chief Executive Officer

Investor Relations

Joshua A. Hauser

Toll Free: 866.260.4547

Chairman of the Board

E-mail: ir@tdipower.com

William M. Kearns, Jr. Chief Technology Officer

Stephen Seltzer Bernard N. Silver

Registrar and Transfer Agent

Continental Stock Transfer & Trust Co. 17 Battery Plaza New York, NY 10004 212.509.4000 www.continentalstock.com

Charles A. McCleary Secretary and General Counsel

Gary J. Mulcahy