News Column

Global Power Reports 13% Backlog Growth and Gross Margin Expansion of 150 Basis Points in Second Quarter 2014

July 31, 2014

On track to deliver 2014 as plannedAchieved highest quarterly order level in Company history

IRVING, Texas, July 31, 2014 (GLOBE NEWSWIRE) -- Global Power Equipment Group Inc. (NYSE:GLPW) ("Global Power" or "Company") today reported its financial results for the second quarter 2014.

Luis Manuel RamÍrez, President and CEO of Global Power, commented, "We have strong order levels, our backlog is building and the team is executing to plan. Our proactive commercial programs and collaboration among our businesses are presenting us with new opportunities which we believe will drive growth beyond the energy expansion cycle. Further, we believe that the internal infrastructure investments we're making are positioning us to capitalize on those opportunities and provide us with operating leverage and improved profitability."

He added, "As previously announced, the transfer of our common stock listing to the New York Stock Exchange in July represents an important milestone for our Company. We believe that this will raise our Company's profile and strengthen the Global Power brand."

Second Quarter 2014 Highlights

Growth

• Consolidated orders for the quarter represent a Company record at $166.1 million, up 170% over the trailing first quarter, driven by natural gas focus.• Consolidated backlog increased 13% to $434.6 million over trailing first quarter, representing the second highest level in Company history, driven by services segments; approximately $255.0 million of backlog is convertible in second half of 2014.

Productivity and Efficiency

• Adjusted EBITDA was up 14% to $5.2 million(see adjusted EBITDA Reconciliation table on page 9 for important disclosures regarding the use of non-GAAP measures).• Income from continuing operations improved 16% to $0.9 million, or $0.06 per diluted share, on $114.7 million of revenue, which was about flat compared with the prior year.

Delivery

• Segments delivered improved performance. • Product Solutions' revenue grew 65% to $59.2 million with gross margin of 19.6%.• Energy Services' gross margin expanded 7 percentage points to 20.8% on a 4% increase in revenue to $14.1 million.• Nuclear Services' revenue mix and solid project execution helped deliver 13.9% gross margin on revenue of $41.4 million.

Results for the 2014 second quarter include those of IBI, LLC, acquired on July 9, 2013 and consolidated into Koontz-Wagner Custom Controls Holdings, LLC on January 1, 2014 and Hetsco, Inc. ("Hetsco") acquired on April 30, 2013.

Second Quarter 2014 Consolidated Results

Gross profit was $20.3 million, or 17.7% of sales. Compared with the prior year, higher gross profit was the result of a greater revenue contribution from the Product Solutions segment which traditionally carries higher margins than the historic services business, which was primarily Nuclear. Additionally, improved gross profit margin in the Energy Services segment, which benefitted from a full quarter including the results of Hetsco, and in the Nuclear Services segment, which benefitted from strong performance on fixed price contract work, had a positive impact on consolidated gross margin. Total operating expenses in the quarter were $18.8 million, up 11.6% when compared with the prior-year period. The acquired businesses, including the associated depreciation and amortization, added approximately $2.2 million of incremental operating expenses in the quarter. Operating income was $1.5 million, or 1.3% of sales.

Adjusted EBITDA from continuing operations was $5.2 million in the second quarter compared with $4.5 million in the prior-year quarter. Adjusted EBITDA margin as a percent of sales improved by 60 basis points to 4.5%.

Global Power believes that when used in conjunction with measures prepared in accordance with GAAP, adjusted EBITDA, which is a non-GAAP measure, helps in the understanding of its operating performance. See the attached tables for additional important disclosures regarding Global Power's use of adjusted EBITDA as well as a reconciliation of GAAP income from continuing operations to adjusted EBITDA from continuing operations.

First Half 2014 Consolidated Results

Gross profit was $38.7 million, or 17.6% of sales. Higher gross profit resulted from improved margins in all operating segments. Total operating expenses were $36.7 million, up 5.8% when compared with the prior-year period. The acquired businesses, including the associated depreciation and amortization, added approximately $5.1 million of incremental operating expenses. Operating income was $2.1 million, or 0.9% of sales.

Adjusted EBITDA from continuing operations was $8.9 million in the first half compared with $5.9 million in the prior-year period. Adjusted EBITDA margin as a percent of sales improved by 150 basis points to 4.0%.

Global Power believes that when used in conjunction with measures prepared in accordance with GAAP, adjusted EBITDA, which is a non-GAAP measure, helps in the understanding of its operating performance. See the attached tables for additional important disclosures regarding Global Power's use of adjusted EBITDA as well as a reconciliation of GAAP income from continuing operations to adjusted EBITDA from continuing operations.

Flexible Balance Sheet

Cash and equivalents at quarter end was $15.6 million. During the second quarter, cash used in operations was $2.7 million and $18.0 million was borrowed on the revolving credit line, of which $12.0 million was repaid within the period. At the end of the quarter, there was $107.2 million undrawn against the Company's $150.0 million revolving credit line.

Capital expenditures during the second quarter were $0.4 million. For 2014, capital expenditures are expected to be approximately $10.0 million, half of which is for general maintenance purposes and the remainder for organic growth initiatives.

Second Quarter Orders and Backlog

Orders for Product Solutions were $35.6 million, or $23.6 million lower than sales for the quarter. Backlog for Product Solutions at quarter end was $165.0 million, up 13.5% from the prior-year period, and down from the trailing quarter due to the strong shipments in the quarter.  Approximately 75% of Product Solutions' backlog is expected to ship in 2014.

Orders for Energy Services were $45.7 million in the quarter, exceeding sales by $31.6 million, and its backlog was $51.8 million at quarter end. Approximately 57% of backlog is expected to convert to revenue in 2014. 

Orders for Nuclear Services were $84.8 million, exceeding sales by $43.4 million.  Backlog was $217.9 million at quarter end, with approximately 48% expected to convert to revenue in 2014. 

Backlog for Nuclear Services and Energy Services is comprised of expected maintenance work to be performed over the next twelve months as well as defined projects.

2014 Outlook Remains Unchanged

• Consolidated revenue is expected to be in the range of $525.0 million to $550.0 million. • Product Solutions - expected to improve on stronger power generation and oil and gas markets, and full year of acquisition revenue.• Energy Services - expected to improve primarily due to a full year of acquisition revenue.• Nuclear Services - expected to be down modestly, primarily due to fewer outages.• Gross margin is expected to improve moderately as a percent of revenue (20 to 30 basis points from 17.6% in 2013).• Operating expenses are expected to moderately decline as a percent of revenue (30 to 40 basis points from 15.1% in 2013).

Mr. RamÍrez concluded, "Our experienced leadership team has been in place for nearly a year now and is driving the execution of our commercial-focused and solutions-oriented strategy. Our wins in the marketplace coupled with our operational progress demonstrate the establishment of our platform supporting our strategic goals. We believe we are on track to deliver our long-term goals."

Webcast and Conference Call

Global Power Equipment Group will host a conference call and live webcast tomorrow at 9:00 a.m. Central Time (10:00 a.m. ET). A slide presentation that accompanies the discussion on the call will also be available on the Company's website at www.globalpower.com. Global Power's conference call can be accessed by dialing (201) 493-6780. Alternatively, the webcast can be monitored at http://ir.globalpower.com/.

A telephonic replay will be available from 12:00 p.m. CT (1:00 p.m. ET) the day of the teleconference until Friday, August 15, 2014. To listen to the archived call, dial (858) 384-5517, and enter conference ID number 13585613. Alternatively, an archive of the webcast will be available on the Company's website at http://ir.globalpower.com/. A transcript will also be posted to the website, once available.

About Global Power

Texas-based Global Power Equipment Group Inc. is a design, engineering and manufacturing firm providing a broad array of equipment and services to the global power infrastructure, energy and process industries. It is comprised of three segments. Product Solutions includes two primary product categories: Auxiliary Products designs, engineers and manufactures a comprehensive portfolio of equipment for utility-scale natural gas turbines while Electrical Solutions provides custom configured electrical houses and generator enclosures for the midstream oil & gas industry, the power generation market to include distributed and backup power as well as other industrial and commercial operations. Energy Services provides lifecycle maintenance, repair, construction and fabrication services for the industrial, chemical/petrochemical process, oil and gas and power generation industries. Nuclear Services provides on-site specialty support, outage management and maintenance services to domestic utilities' nuclear power facilities. The Company routinely provides information at its website: www.globalpower.com.

Forward-looking Statement Disclaimer

This press release contains "forward-looking statements" within the meaning of that term set forth in the Private Securities Litigation Reform Act of 1995. These statements reflect our current views of future events and financial performance and are subject to a number of risks and uncertainties.  Our actual results, performance or achievements may differ materially from those expressed or implied in the forward-looking statements. Risks and uncertainties that could cause or contribute to such material differences include, but are not limited to, decreased demand for new gas turbine power plants, reduced demand for, or increased regulation of, nuclear power, loss of any of our major customers, cost increases and project cost overruns, unforeseen schedule delays, poor performance by our subcontractors, cancellation of projects, competition for the sale of our products and services, shortages in, or increases in prices for, energy and materials such as steel that we use to manufacture our products, damage to our reputation, warranty or product liability claims, increased exposure to environmental or other liabilities, failure to comply with various laws and regulations, failure to attract and retain highly-qualified personnel, loss of customer relationships with critical personnel, effective integration of acquisitions, modification of preliminary 2014 outlook, volatility of our stock price, deterioration or uncertainty of credit markets, and changes in the economic, social and political conditions in the United States and other countries in which we operate, including fluctuations in foreign currency exchange rates, the banking environment or monetary policy. Other important factors that may cause actual results to differ materially from those expressed in the forward-looking statements are discussed in our filings with the Securities and Exchange Commission (the "SEC"), including the section of our Annual Report on Form 10-K filed with the SEC on March 17, 2014 titled "Risk Factors." Except as may be required by applicable law, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, and we caution you not to rely upon them unduly.

Financial Tables Follow.

GLOBAL POWER EQUIPMENT GROUP INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share amounts)
(unaudited)
 Three Months Ended
 June 30(1),Variance
 20142013$%
         
Product Solutions revenue$59,171$35,930$23,241 64.7%
Nuclear Services revenue 41,430 66,435 (25,005) -37.6%
Energy Services revenue 14,138 13,600 538 4.0%
Total revenue 114,739 115,965 (1,226) -1.1%
         
Cost of revenue 94,477 97,162 (2,685) -2.8%
         
Gross profit 20,262 18,803 1,459 7.8%
Gross margin17.7%16.2%    
Operating expenses        
Selling and marketing expenses 2,474 2,462 12 0.5%
General and administrative expenses 14,179 12,812 1,367 10.7%
Depreciation and amortization expense(2) 2,141 1,559 582 37.3%
Total operating expenses 18,794 16,833 1,961 11.6%
         
Operating income 1,468 1,970 (502) -25.5%
Operating margin1.3%1.7%    
         
Interest expense, net 340 190 150 78.9%
Other (income) expense, net (94) 154 (248) -161.0%
Income from continuing operations before income tax 1,222 1,626 (404) -24.8%
         
Income tax expense 358 884 (526) -59.5%
Income from continuing operations 864 742 122 16.4%
         
Discontinued operations:        
Loss from discontinued operations, net of tax (90) (1) (89) NM
         
Net income$774$741$33 4.5%
         
Basic income (loss) per weighted average common share:        
Income from continuing operations$0.06$0.04$0.02 50.0%
Loss from discontinued operations (0.01) (0.01) NM
Income per common share - basic$0.05$0.04$0.01 25.0%
         
Weighted average number of shares of common stock outstanding - basic 17,070,615 16,956,925 113,690 0.7%
         
Diluted income per weighted average common share:        
Income from continuing operations$0.06$0.04$0.02 50.0%
Loss from discontinued operations (0.01) (0.01) NM
Income per common share - diluted$0.05$0.04$0.01 25.0%
         
Weighted average number of shares of common stock outstanding - diluted 17,075,189 16,967,356 107,833 0.6%
         
(1)  The Company uses a 4-4-5 close methodology, which changes the accounting periods to month-end dates that could be different from the traditional last day of the month, but labels quarterly information using a calendar convention, that is, second quarter will be labeled as ending on March 31, second quarter as ending on June 30, and third quarter as ending on September 30.
         
(2) Excludes depreciation and amortization expense for the three months ended June 30, 2014 and 2013 of $373 and $291, respectively, included in cost of revenue.
 
GLOBAL POWER EQUIPMENT GROUP INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share amounts)
(unaudited)
         
 Six Months Ended    
 June 30(1),Variance
 20142013$%
         
Product Solutions revenue$98,102$74,824$23,278 31.1%
Nuclear Services revenue 98,492 131,448 (32,956) -25.1%
Energy Services revenue 23,027 26,403 (3,376) -12.8%
Total revenue 219,621 232,675 (13,054) -5.6%
         
Cost of revenue 180,881 197,906 (17,025) -8.6%
         
Gross profit 38,740 34,769 3,971 11.4%
Gross margin 17.6% 14.9%    
Operating expenses        
Selling and marketing expenses 4,297 4,685 (388) -8.3%
General and administrative expenses 27,933 27,366 567 2.1%
Depreciation and amortization expense(2) 4,455 2,632 1,823 69.3%
Total operating expenses 36,685 34,683 2,002 5.8%
         
Operating income 2,055 86 1,969 2,289.5%
Operating margin 0.9% 0.0%    
         
Interest expense, net 753 276 477 172.8%
Other expense, net 176 4 172 4,300.0%
Income (loss) from continuing operations before income tax 1,126 (194) 1,320 NM
         
Income tax expense 334 265 69 26.0%
Income (loss) from continuing operations 792 (459) 1,251 NM
         
Discontinued operations:        
Loss from discontinued operations, net of tax (97) (41) (56) NM
         
Net income (loss)  $ 695  $ (500)  $ 1,195 NM
         
Basic income (loss) per weighted average common share:        
Income (loss) from continuing operations  $ 0.05  $ (0.03)  $ 0.08 NM
Loss from discontinued operations (0.01) (0.01) NM
Income (loss) per common share - basic  $ 0.04  $ (0.03)  $ 0.07 NM
         
Weighted average number of shares of common stock outstanding - basic 17,033,816 16,865,070 168,746 1.0%
         
Diluted income (loss) per weighted average common share:        
Income (loss) from continuing operations  $ 0.05  $ (0.03)  $ 0.08 NM
Loss from discontinued operations (0.01) (0.01) NM
Income (loss) per common share - diluted  $ 0.04  $ (0.03)  $ 0.07 NM
         
Weighted average number of shares of common stock outstanding - diluted 17,040,130 16,865,070 175,060 1.00%
         
(1)  The Company uses a 4-4-5 close methodology, which changes the accounting periods to month-end dates that could be different from the traditional last day of the month, but labels quarterly information using a calendar convention, that is, second quarter will be labeled as ending on March 31, second quarter as ending on June 30, and third quarter as ending on September 30.
         
(2)  Excludes depreciation and amortization expense for the six months ended June 30, 2014 and 2013 of $801 and $649, respectively, included in cost of revenue.
     
GLOBAL POWER EQUIPMENT GROUP INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
     
 June 30,December 31,
 20142013
ASSETS(Unaudited)  
Current assets:    
Cash and cash equivalents$15,559$13,942
Restricted cash 71 120
Accounts receivable, net of allowance of $573 and $557, respectively 73,761 93,484
Inventories 8,456 6,476
Costs and estimated earnings in excess of billings 61,495 41,804
Deferred tax assets 3,301 3,301
Other current assets 8,475 8,215
     
Total current assets 171,118 167,342
Property, plant and equipment, net 19,896 20,644
Goodwill 106,884 109,930
Intangible assets, net 61,833 60,594
Deferred tax assets 7,471 7,630
Other long-term assets 980 1,258
     
Total assets$368,182$367,398
     
LIABILITIES AND STOCKHOLDERS' EQUITY    
Current liabilities:    
Accounts payable$17,233$19,664
Accrued compensation and benefits 16,198 14,798
Billings in excess of costs and estimated earnings 11,323 12,757
Accrued warranties 1,683 3,261
Other current liabilities 6,852 8,483
     
Total current liabilities 53,289 58,963
Long-term debt 31,000 23,000
Other long-term liabilities 5,950 5,844
     
Total liabilities 90,239 87,807
Commitments and contingencies    
Stockholders' equity:    
Common stock, $0.01 par value, 170,000,000 shares authorized and 18,386,443 and 18,294,998 shares issued, respectively, and 17,071,780 and 17,059,943 shares outstanding, respectively 184 183
Paid-in capital 70,228 69,049
Accumulated other comprehensive income 3,039 3,473
Retained earnings 204,504 206,898
Treasury stock, at par (1,263,708 and 1,235,055 common shares, respectively) (12) (12)
     
Total stockholders' equity 277,943 279,591
     
Total liabilities and stockholders' equity$368,182$367,398
 
GLOBAL POWER EQUIPMENT GROUP INC.
     
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
     
 Six Months Ended
 June 30,
 20142013
Operating activities:    
Net income (loss)  $ 695  $ (500)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:    
Deferred income tax benefit provision (970) (974)
Depreciation and amortization on plant, property and equipment and intangible assets 5,044 3,281
Amortization on deferred financing costs 113 91
Stock-based compensation 1,744 2,504
Changes in operating assets and liabilities, net of businesses acquired and sold (7,743) 23,870
     
Net cash used in operating activities (1,117) 28,272
     
Investing activities:    
Acquisitions, net of cash acquired (32,970)
Net transfers of restricted cash 49
Proceeds from sale of equipment 66
Purchase of property, plant and equipment (1,236) (2,489)
     
Net cash used in investing activities (1,187) (35,393)
     
Financing activities:    
Repurchase of stock-based awards for payment of statutory taxes due on stock-based compensation (566) (1,531)
Debt issuance costs 9
Dividends paid (3,088) (3,141)
Proceeds from long-term debt 30,000 30,000
Payments of long-term debt (22,000) (10,000)
     
Net cash provided by financing activities 4,355 15,328
Effect of exchange rate changes on cash (434) (31)
Net change in cash and cash equivalents 1,617 8,176
     
Cash and cash equivalents, beginning of period 13,942 31,951
     
Cash and cash equivalents, end of period  $ 15,559  $ 40,127
         
GLOBAL POWER EQUIPMENT GROUP INC.
         
ADJUSTED EBITDA RECONCILIATION
(in thousands)
(unaudited)
         
 Three Months EndedSix Months Ended
 June 30,June 30,
 2014201320142013
         
GAAP income (loss) from continuing operations  $ 864  $ 742  $ 792  $ (459)
Add back:        
Income tax expense 358 884 334 265
Interest expense, net 340 190 753 276
Depreciation and amortization 2,515 1,850 5,257 3,281
Stock based compensation 1,093 875 1,744 2,504
         
Non-GAAP adjusted EBITDA from continuing operations(1)  $ 5,170  $ 4,541  $ 8,880  $ 5,867
         
(1) Adjusted EBITDA from continuing operations represents income from continuing operations adjusted for income taxes, interest, depreciation and amortization, and stock based compensation. The Company believes adjusted EBITDA from continuing operations is an important supplemental measure of operating performance and uses it to assess performance and inform operating decisions. However, adjusted EBITDA from continuing operations is not a GAAP financial measure. The Company's calculation of adjusted EBITDA from continuing operations should not be used as a substitute for GAAP measures of performance, including net cash provided by operations, operating income and net income. The Company's method of calculating adjusted EBITDA from continuing operations may vary substantially from the methods used by other companies and investors are cautioned not to rely unduly on it.
         
GLOBAL POWER EQUIPMENT GROUP INC. 
SEGMENT DATA
 ($ in thousands)
  Three Months Ended Six Months Ended
 6/30/20146/30/20136/30/20146/30/2013
Product Solutions (unaudited) (unaudited)
Revenue$59,171$35,930$98,102$74,824
Gross Profit 11,583 8,562 21,454 14,519
Gross Margin 19.6% 23.8% 21.9% 19.4%
       
Energy Services        
Revenue 14,138 13,600 23,027 26,403
Gross Profit 2,935 1,876 4,521 3,399
Gross Margin20.8%13.8%19.6%12.9%
         
Nuclear Services        
Revenue 41,430 66,435 98,492 131,448
Gross Profit 5,744 8,365 12,765 16,851
Gross Margin13.9%12.6%13.0%12.8%
       
Consolidated      
Revenue 114,739 115,965 219,621 232,675
Gross Profit 20,262 18,803 38,740 34,769
Gross Margin17.7%16.2%17.6%14.9%
 
Shipping/Service Days by Quarter
           
 Q1Q2Q3Q4Total
           
2014 62 64 63 66 255
           
2013 58 64 63 65 250
           
GLOBAL POWER EQUIPMENT GROUP INC.
           
BACKLOG BY SEGMENT
(in thousands) (unaudited)
 June 30,September 30,December 31,March 31,June 30,
 20132013201320142014
Product Solutions$145,307$174,907$176,621$187,560$164,963
Energy Services 20,226 18,105 17,028 20,890 51,768
Nuclear Services 243,331 215,389 196,674 174,503 217,911
Total$408,864$408,401$390,323$382,953$434,642
           
PRODUCT SOLUTIONS ORDERS 
(in thousands) (unaudited)
 
 Q1Q2Q3Q4Total
2014$49,776$35,588    $85,364
2013$55,899$51,039$64,277$80,506$251,721
             
PRODUCT SOLUTIONS SHIPMENTS BY GEOGRAPHY 
($ in thousands) (unaudited)
 
2014
Products Shipped toQ1 Q2Q3Q4Total% of total
Middle East$366$14,021    $14,387 15%
North America 24,849 30,500     55,349 57%
Asia 4,193 3,062     7,255 7%
South America 2,720 1,319     4,039 4%
Europe & Other 6,803 10,269     17,072 17%
Total $38,931$59,171    $98,102100%
             
 
2013
Products Shipped toQ1 Q2Q3Q4Total% of total
Middle East$9,065$14,615$10,695$6,198$40,573 20%
North America 20,919 14,676 27,375 45,740 108,710 52%
Asia 4,129 1,315 7,399 10,781 23,624 11%
South America 3,668 1,325 8,544 8,244 21,781 10%
Europe & Other 1,113 3,999 564 7,829 13,505 7%
Total $38,894$35,930$54,577$78,792$208,193100%

CONTACT: Investor Relations Contact: Shawn SeversonThe Blueshirt Group (415) 489-2198 shawn@blueshirtgroup.com

Source: Global Power Equipment Group Inc.


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