Global Power Reports Gross Margin Expands 390 Basis Points on Revenue of $104.9 Million in First Quarter 2014

Product Solutions' Orders Nearly Triple Over Prior-Year Period

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| Source: Global Power Equipment Group Inc.

IRVING, Texas, May 2, 2014 (GLOBE NEWSWIRE) -- Global Power Equipment Group Inc. (Nasdaq:GLPW) ("Global Power" or "Company") today reported its financial results for the first quarter 2014.

Luis Manuel Ramírez, President and CEO of Global Power, commented, "We delivered a strong quarter and are off to a solid start for achieving our 2014 operational and financial goals. Our strategy to invest in the natural gas sector is working and our commercial efforts are yielding results. We have expanded our capabilities to more fully participate in increasing infrastructure investments. In addition, our business realignment, energized leadership and focus on providing value-added solutions are driving orders."

He continued, "Of note, our efforts at improving productivity and creating a portfolio of higher margin products and services resulted in adjusted EBITDA of $3.7 million in our historically weakest quarter. We see this as a solid indicator for the rest of the year."

FIRST QUARTER 2014 HIGHLIGHTS

  • Gross margin expanded to 17.6% compared with 13.7% on 10% lower revenue.
     
  • Revenue was $104.9 million, coming off strong deliveries in the fourth quarter.

    • Product Solutions delivered $38.9 million of revenue driven by investments in natural gas infrastructure, power generation, distributed power supply and the oil and gas space creating demand.  Electrical Solutions offset reduced Auxiliary Products revenue which represented $23.6 million in sales.
       
    • Energy Services' revenue of $8.9 million included the addition of Hetsco Inc. ("Hetsco"), which diversified the Company's offerings to the industrial gas processing, chemical/petrochemical and oil and gas industries. Hetsco, which was acquired in April 2013, added $3.6 million of revenue in the quarter. 
       
    • Nuclear Services had revenue of $57.1 million and included the completion of one outage contract and one in process that was completed in April 2014.
       
  • Earnings Before Interest, Taxes, Depreciation and Amortization ("adjusted EBITDA") was $3.7 million (refer to adjusted EBITDA Reconciliation table on page 7 for important disclosures regarding the use of non-GAAP measures). Operating income was $0.6 million.
     
  • Income after tax was essentially breakeven.
     
  • Product Solutions' orders were $49.8 million and backlog was a record $187.6 million.

Results for the 2014 first quarter include those of IBI LLC ("IBI"), acquired on July 9, 2013 and Hetsco, acquired on April 30, 2013.

FIRST QUARTER 2014 CONSOLIDATED RESULTS

Gross profit was $18.5 million, or 17.6% of sales. Higher gross profit was the result of expanded profit margins in the Company's Product Solutions and Energy Services segments which were driven by improved mix and increased productivity, despite lower volume for Energy Services. Total operating expenses in the quarter were $17.9 million, unchanged when compared with the prior-year period. Acquisitions and the associated depreciation and amortization added approximately $3.1 million of incremental operating expenses in the quarter. Operating income of $0.6 million, or 0.6% of sales, improved significantly from the prior-year period, on expanded gross profit, productivity and cost discipline. 

Adjusted EBITDA from continuing operations was $3.7 million in the first quarter compared with $1.3 million in the prior-year quarter. Adjusted EBITDA margin as a percent of sales was 3.5%. 

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. 

SOLID CASH GENERATION AND BALANCE SHEET

Cash from operations in the first quarter was $1.6 million. Cash and equivalents at quarter end was $14.7 million. During the quarter, $12.0 million was borrowed on the revolving credit line, of which $10.0 million was repaid within the period. At the end of the quarter, there was $115.9 million undrawn against the Company's $150 million revolving credit line.

Capital expenditures during the first quarter were $0.8 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.

FIRST QUARTER ORDERS AND BACKLOG

Orders for Product Solutions were $49.8 million, representing a book-to-bill ratio of 1.3x. Backlog for Product Solutions at quarter end was a record $187.6 million, up 6% from the trailing quarter.  Approximately 85% of Product Solutions' backlog is expected to ship in 2014.

Orders for Energy Services were $12.9 million in the quarter, with a book-to-bill ratio of 1.4x, and its backlog was $20.9 million at quarter end.  Approximately 80% of backlog is expected to convert to revenue in 2014.  

Orders for Nuclear Services were $34.9 million, with a book-to-bill ratio of 0.6x in the quarter.  Backlog was $174.5 million at quarter end, with approximately 64% 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 million to $550 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, "We believe our strategy to diversify our offerings, customers and markets is positioning us well to recognize our long-term growth and solid returns. Our focus to help customers deliver value has created new opportunities to develop solutions that should ultimately yield strengthened, sustained earnings power.  We also expect that the process and productivity improvements we are executing will drive us toward our long-term goals."

Webcast and Conference Call

Global Power Equipment Group will host a conference call and live webcast today 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, May 16, 2014. To listen to the archived call, dial (858) 384-5517, and enter conference ID number 13579883.  Alternatively, an archive of the webcast will be available on the Company's website at www.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, 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    
  March 31,(1) Variance
  2014 2013 $ %
Product Solutions revenue $ 38,931 $ 38,894 $  37 0.1%
Energy Services revenue 8,889 12,804 (3,915) -30.6%
Nuclear Services revenue 57,062 65,012 (7,950) -12.2%
Total revenue   104,882  116,710  (11,828) -10.1%
Cost of revenue  86,404  100,744  (14,340) -14.2%
Gross profit  18,478  15,966  2,512 15.7%
Gross margin 17.6% 13.7%    
Operating expenses:        
Selling and marketing expenses  1,823  2,223  (400) -18.0%
General and administrative expenses  13,754  14,554  (800) -5.5%
Depreciation and amortization expense(2)  2,314  1,073  1,241 115.6%
Total operating expenses 17,891 17,850 41 0.2%
Operating income (loss)  587  (1,884)  2,471 NM
Operating margin 0.6% -1.6%    
Interest expense, net  413  86  327 380.2%
Other (income) expense, net  270  (150)  420 NM
Loss from continuing operations before income tax  (96)  (1,820)  1,724 NM
Income tax benefit  (24)  (619)  595 NM
Loss from continuing operations  (72)  (1,201)  1,129 NM
Discontinued operations:        
Loss from discontinued operations   (7)  (40)  33 NM
Net loss  $   (79)  $ (1,241)  $ 1,162 NM
         
Basic and diluted earnings per weighted average common share:        
Loss from continuing operations  $   —  $ (0.07)  $ 0.07 NM
Loss from discontinued operations  —  —  — NM
Loss per common share - diluted  $   —  $ (0.07)  $ 0.07 NM
Weighted average number of shares of common stock outstanding – basic and diluted 17,090,074 16,772,195  317,879  1.9%
         
(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, first 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 March 31, 2014 and 2013 of $428 and $358, respectively, included in cost of revenue.

 

 
GLOBAL POWER EQUIPMENT GROUP INC.
 
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
     
  March 31, December 31,
  2014 2013
ASSETS    
Current assets:    
Cash and cash equivalents  $ 14,693  $ 13,942
Restricted cash 71 120
Accounts receivable, net of allowance of $697 and $557, respectively 69,875 93,484
Inventories 8,318 6,476
Costs and estimated earnings in excess of billings 58,509 41,804
Deferred tax assets 3,301 3,301
Other current assets 7,892 8,215
Total current assets 162,659 167,342
Property, plant and equipment, net 20,457 20,644
Goodwill 106,884 109,930
Intangible assets, net 63,243 60,594
Deferred tax assets 6,507 7,630
Other long-term assets 1,115 1,258
Total assets  $ 360,865  $ 367,398
     
LIABILITIES AND STOCKHOLDERS' EQUITY    
Current liabilities:    
Accounts payable  $  13,498  $ 19,664
Accrued compensation and benefits 19,916 14,798
Billings in excess of costs and estimated earnings 9,054 12,757
Accrued warranties 2,290 3,261
Other current liabilities 7,179 8,483
Total current liabilities 51,937 58,963
 Long-term debt 25,000 23,000
Other long-term liabilities 5,904 5,844
Total liabilities 82,841 87,807
Commitments and contingencies    
Stockholders' equity:    
Common stock, $0.01 par value, 170,000,000 shares authorized and 18,381,931 and 18,294,998 shares issued, respectively, and 17,121,812 and 17,059,943 shares outstanding, respectively 184 183
Paid-in capital 69,201 69,049
Accumulated other comprehensive income 3,385 3,473
Retained earnings 205,266 206,898
Treasury stock, at par (1,260,119 and 1,235,055 common shares, respectively) (12) (12)
Total stockholders' equity 278,024 279,591
Total liabilities and stockholders' equity  $ 360,865  $  367,398

 

 
GLOBAL POWER EQUIPMENT GROUP INC.
 
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
     
  Three Months Ended
March 31,
  2014 2013
Operating activities:    
Net loss  $ (79)  $ (1,241)
Adjustments to reconcile net income to net cash provided by operating activities:    
Deferred income tax benefit  (7)  (1,086)
Depreciation and amortization on plant, property and equipment and intangible assets  2,632  1,431
Amortization on deferred financing costs  56  45
Stock-based compensation  651  1,629
Changes in operating assets and liabilities, net of businesses acquired and sold  (1,647)  7,720
Net cash provided by operating activities  1,606  8,498
     
Investing activities:    
Net transfers of restricted cash 49  —
Purchase of property, plant and equipment  (796)  (788)
Net cash (used in) investing activities  (747)  (788)
     
Financing activities:    
Repurchase of stock-based awards for payment of statutory taxes due on    
stock-based compensation  (498)  (585)
Debt issuance costs  8   —
Dividends paid  (1,530)  (1,518)
Proceeds from long-term debt issuance  12,000  —
Payments of long-term debt  (10,000)  —
Net cash (used in) financing activities  (20)  (2,103)
Effect of exchange rate changes on cash  (88)  (1,103)
Net change in cash and cash equivalents  751  4,504
Cash and cash equivalents, beginning of period  13,942  31,951
Cash and cash equivalents, end of period  $ 14,693  $ 36,455

 

GLOBAL POWER EQUIPMENT GROUP INC.
 
ADJUSTED EBITDA RECONCILIATION
(in thousands)
(unaudited
         
    Three Months Ended
March 31,
 
    2014 2013  
         
  GAAP (loss) from continuing operations $   (72) $ (1,201)  
  Add back:      
  Income tax benefit (24) (619)  
  Interest expense, net 413 86  
  Depreciation and amortization 2,741 1,431  
  Stock based compensation 651 1,629  
         
  Non-GAAP adjusted EBITDA from continuing operations(1) $ 3,709 $  1,326  
         
(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
  3/31/2014 3/31/2013
Product Solutions (unaudited)
Revenue $ 38,931 $ 38,894
Gross Profit 9,871 5,957
Gross Margin 25.4% 15.3%
 
Energy Services    
Revenue 8,889 12,804
Gross Profit 1,586 1,523
Gross Margin 17.8% 11.9%
 
Nuclear Services    
Revenue 57,062 65,012
Gross Profit 7,021 8,486
Gross Margin 12.3% 13.1%
 
Consolidated    
Revenue 104,882 116,710
Gross Profit 18,478 15,966
Gross Margin 17.6% 13.7%

 

 
Shipping/Service Days by Quarter
           
  Q1 Q2 Q3 Q4 Total
           
2014 62 64 63 66 255
           
2013 58 64 63 65 250
 
 
GLOBAL POWER EQUIPMENT GROUP INC.
           
BACKLOG BY SEGMENT
(in thousands) (unaudited)
       
 
  March 31, June 30, September 30, December 31, March 31,
  2013 2013 2013 2013 2014
Product Solutions $130,198 $145,307 $174,907 $176,621 $187,560
Energy Services 21,989 20,226 18,105 17,028 20,890
Nuclear Services 235,077 243,331 215,389 196,674 174,503
Total $387,264 $408,864 $408,401 $390,323 $382,953
 
PRODUCT SOLUTIONS ORDERS
(in thousands) (unaudited)
 
  Q1 Q2 Q3 Q4 Total
2014 $49,776       $49,776
2013 $55,899 $51,039 $64,277 $80,506 $251,721
   
PRODUCT SOLUTIONS SHIPMENTS BY GEOGRAPHY
($ in thousands) (unaudited)
 
   
2014  
Products Shipped to Q1 Q2 Q3 Q4 Total % of total  
Middle East $366       $366 1%  
North America 24,849       24,849 64%  
Asia 4,193       4,193 11%  
South America 2,720       2,720 7%  
Europe & Other 6,803       6,803 17%  
Total $38,931       $38,931 100%  
2013  
Products Shipped to Q1 Q2 Q3 Q4 Total % 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 $78,792 208,193 100%  
Investor Relations Contact:
Deborah K. Pawlowski
Kei Advisors LLC
(716) 843-3908