March 9, 2015

Global Power Reports Fourth Quarter and Full Year 2014 Results

  • Full year revenue of $538.5 million up 11% from last year
  • Fourth quarter revenue of $173.8 million up 23% from last year
  • Full year earnings per diluted share of $0.65, compared with $0.69 from last year
  • Full year adjusted EBITDA $30.2 Million up 25% from last year

IRVING, Texas, March 9, 2015 (GLOBE NEWSWIRE) -- Global Power Equipment Group Inc. (NYSE:GLPW) ("Global Power" or "Company") today reported its financial results for the fourth quarter and full year ended December 31, 2014.

Luis Manuel Ramírez, President and CEO of Global Power, commented, "We are proud we delivered on our strategy in 2014, making significant progress in transforming Global Power into a solutions-based company. We achieved our financial goals with revenue and adjusted EBITDA growth of 11% and 25%, respectively. In addition, we realized the benefits of the acquisitions we made in 2013, and I am pleased with the success we have had in diversifying our business across the energy technology value chain."

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.

FULL YEAR 2014 HIGHLIGHTS

  • Consolidated revenue increased 11.2% to $538.5 million with all business segments posting year-over-year gains.
  • Adjusted EBITDA grew 25.2% to $30.2 million.
  • Adjusted EBITDA margin increased 60 basis points to 5.6%.
  • Operating expenses as a percent of sales declined to 13.8% from 15.1% last year.
  • Customer base in Energy and Equipment Services markets expanded.

FULL YEAR 2014 CONSOLIDATED RESULTS

Consolidated revenue in 2014 increased 11.2% to $538.5 million when compared with the prior-year. Gross profit was $90.8 million, or 16.9% of sales. Higher gross profit resulted from improved margins in our Energy Services and Nuclear Services segments, partially offset by lower margins in our Product Solutions segment. Total operating expenses were $74.2 million, up 1.8% when compared with the prior-year. Operating income was $16.6 million, or 3.1% of sales, compared to $12.0 million, or 2.5% in the prior-year period.

Adjusted EBITDA from continuing operations was $30.2 million in 2014 compared with $24.1 million in the prior-year period. Adjusted EBITDA margin as a percent of sales improved 60 basis points to 5.6%.

Product Solutions

Product Solutions posted revenue of $222.2 million, up 6.8% when compared with the prior-year. We experienced increased demand across the natural gas value chain including infrastructure, utility scale power generation, distributed power and oil and gas. Gross margin was 20.3% for the year, down from 22.7% in 2013. The year-over-year margin decline was primarily driven by a decrease in the Electrical Solutions group gross profit attributable to labor inefficiency at one plant we acquired in 2013. Those inefficiencies were identified and corrective actions are being taken to return gross margin percentages to historical levels.

Energy Services

Energy Services' revenue was $69.7 million, up 69.2% when compared with the prior year. The revenue increase was primarily driven by mid-stream oil and gas market project work, our alliance contracts, and Hetsco construction and fabrication projects. Gross margins increased 90 basis points to 16.2% in 2014 from Hetsco's revenue mix, coupled with higher margin project work in the year.

Nuclear Services

Nuclear Services delivered revenue of $246.6 million, representing 5.0% growth from 2013. The increase in revenue was primarily attributable to a large fixed price project. Gross margin increased to 14.0% in 2014 from 13.4% last year as we achieved operational efficiencies.

FOURTH QUARTER 2014 CONSOLIDATED RESULTS

Consolidated revenue climbed 23% over last year as both the Nuclear and Energy Services business segments posted solid growth. Gross profit was $27.4 million, or 15.8% of sales compared with 20.8% last year. Total operating expenses in the quarter were $19.0 million, down 1.2% when compared with the prior-year period. As a percent of sales, operating expenses declined to 11.0% from 13.6% last year. Operating income was $8.4 million, or 4.8% of sales, compared to $10.2 million, or 7.2% of sales in the prior-year quarter. Adjusted EBITDA from continuing operations was $10.4 million in the fourth quarter compared with $13.5 million in the prior-year quarter. Adjusted EBITDA margin as a percent of sales declined by 350 basis points to 6.0%. Income from continuing operations decreased 45.8% to $5.9 million, or $0.35 per diluted share, compared to $10.9 million or $0.64 per diluted share in the prior year.

FLEXIBLE BALANCE SHEET

Cash and equivalents at year end were $8.8 million. Cash used in operations in 2014 was $9.8 million and $99.0 million was borrowed on the revolving credit line, of which $77.0 million was repaid in 2014. Capital expenditures on an accrual basis were $8.2 million (or 1.5% of sales) in 2014, half of which was for general maintenance purposes and the remainder for organic growth initiatives and IT systems infrastructure.

FULL YEAR 2014 ORDERS AND QUARTER END BACKLOG

Total backlog at the quarter end was $389.4 million, down from $417.0 million at the end of the prior quarter, and flat with the same quarter of the prior year.

Orders for Product Solutions in 2014 were $195.3 million. Backlog for Product Solutions at the quarter end was $152.5 million, down 13.7% from the prior-year period, and down 3.5% from the trailing quarter due to the timing of closing new contracts in the quarter. Approximately 89% of Product Solutions' backlog is expected to ship in 2015.

Orders for Energy Services in 2014 were $85.7 million, and its backlog was $26.3 million at quarter end. Approximately 100% of this backlog is expected to convert to revenue in 2015. Orders for Nuclear Services in 2014 were $260.6 million. Backlog was $210.7 million at quarter end, with approximately 84% expected to convert to revenue in 2015.

2015 OUTLOOK

  • Consolidated revenue projection is in the range of $550 million to $600 million.
    • Products business - driven by an improvement in market penetration in the power generation and energy markets.
    • Services business - continued growth in our Industrial and Hetsco businesses.
  • Gross margin improvement as a percent of revenue (20 to 30 basis points from 16.9% in 2014).
  • SG&A as a percent of sales is expected to be flat as compared to 2014.

Mr. Ramírez concluded, "Growth remains a key focus for our team and we are excited by our prospects in 2015 and beyond. We are well positioned to continue expanding our products and services offerings both organically and through acquisitions, while increasing our wallet share with existing customers and expanding into new market opportunities within the energy technology value chain. We see additional opportunity to improve our cost structure and manufacturing performance through efficiency initiatives. Our operations are very well positioned to benefit as key market trends improve around the world including natural gas power generation, and the refining, petrochemical and chemical complex. Our team remains focused on driving profitable growth and creating value for our shareholders."

ACQUISITION OF SIEMENS' EHOUSE MANUFACTURING

Global Power closed its acquisition of Siemens' eHouse manufacturing operations through its subsidiary Koontz-Wagner Custom Controls Holdings, LLC. The acquisition will enhance Global Power's manufacturing footprint and will serve as a platform to provide Global Power's customers with integrated solutions and expand its product and service portfolio.

Webcast and Conference Call

Global Power Equipment Group will host a conference call and live webcast Monday, March 9th 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 Monday, March 23, 2015. To listen to the archived call, dial (858) 384-5517, and enter conference ID number 13602086. 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. 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 2015 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 9, 2015 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 December 31, (1) Variance
  2014 2013 $ %
Products revenue $ 66,138 $ 78,793 (12,655) -16.1%
Services revenue 107,658 62,752 44,906 71.6%
Total revenue 173,796 141,545 32,251 22.8%
Products cost of revenue 54,321 59,360 (5,039) -8.5%
Services cost of revenue 92,066 52,676 39,390 74.8%
Total cost of revenue 146,387 112,036 34,351 30.7%
Gross profit 27,409 29,509 (2,100) -7.1%
Gross profit percentage 15.8% 20.8%    
Selling and marketing expenses 2,509 2,362 147 6.2%
General and administrative expenses 14,438 14,869 (431) -2.9%
Depreciation and amortization expense(2) 2,087 2,031 56 2.8%
Total operating expenses 19,034 19,262 (228) -1.2%
Operating income 8,375 10,247 (1,872) -18.3%
Operating margin 4.8% 7.2%    
Interest expense, net 536 410 126 30.7%
Other expense (income), net 736 (85) 821 -965.9%
Income from continuing operations before income tax 7,103 9,922 (2,819) -28.4%
Income tax expense (benefit) 1,173 (1,014) 2,187 -215.7%
Income from continuing operations 5,930 10,936 (5,006) -45.8%
Discontinued operations:        
Income from discontinued operations, net of tax 47 (47) -100.0%
(Loss) gain on disposals, net of tax 0.0%
Income from discontinued operations 47 (47) -100.0%
Net income $ 5,930 $ 10,983 (5,053) -46.0%
Earnings per common share:        
Basic earnings per common share from continuing operations $ 0.35 $ 0.64 (0.29) -45.3%
Basic earnings per common share from discontinued operations 0.01 (0.01) -100.0%
Basic earnings per common share $ 0.35 $ 0.65 (0.30) -46.2%
Weighted average common shares outstanding - basic 17,072,655 16,989,847 82,808 0.5%
Diluted earnings per common share from continuing operations $ 0.35 $ 0.64 (0.29) -45.3%
Diluted earnings per common share from discontinued operations 0.0%
Diluted earnings per common share $ 0.35 $ 0.64 (0.29) -45.3%
Weighted average common shares outstanding - diluted 17,093,987 17,030,183 63,804 0.4%
         
(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 December 31, 2014 and 2013 of $451 and $387 included in cost of revenue, respectively.
 
GLOBAL POWER EQUIPMENT GROUP INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
($ in thousands, except share and per share amounts)
         
  Years Ended December 31, Variance
  2014 2013 $ %
Products revenue $ 222,250 $ 208,194 14,056 6.8%
Services revenue 316,295 276,024 40,271 14.6%
Total revenue 538,545 484,218 54,327 11.2%
Products cost of revenue 177,144 160,983 16,161 10.0%
Services cost of revenue 270,571 238,231 32,340 13.6%
Total cost of revenue 447,715 399,214 48,501 12.1%
Gross profit 90,830 85,004 5,826 6.9%
Gross profit percentage 16.9% 17.6%    
Selling and marketing expenses 9,814 9,319 495 5.3%
General and administrative expenses 55,892 57,041 (1,149) -2.0%
Depreciation and amortization expense(1) 8,535 6,599 1,936 29.3%
Total operating expenses 74,241 72,959 1,282 1.8%
Operating income 16,589 12,045 4,544 37.7%
Operating margin 3.1% 2.5%    
Interest expense, net 1,710 893 817 91.5%
Other (income) expense, net (288) 83 (371) -447.0%
Income from continuing operations before income tax 15,167 11,069 4,098 37.0%
Income tax expense (benefit) 4,017 (437) 4,454 -1019.2%
Income from continuing operations 11,150 11,506 (356) -3.1%
Discontinued operations:        
(Loss) income from discontinued operations, net of tax (1) 279 (280) -100.4%
(Loss) gain on disposals, net of tax 0.0%
(Loss) Income from discontinued operations (1) 279 (280) -100.4%
Net income $ 11,149 $ 11,785 (636) -5.4%
Earnings per common share:        
Basic earnings per common share from continuing operations $ 0.66 $ 0.68 (0.02) -2.9%
Basic earnings per common share from discontinued operations 0.02 (0.02) -100.0%
Basic earnings per common share $ 0.66 $ 0.70 (0.04) -5.7%
Weighted average common shares outstanding - basic 17,005,589 16,919,981 85,608 0.5%
Diluted earnings per common share from continuing operations $ 0.65 $ 0.68 (0.03) -4.4%
Diluted earnings per common share from discontinued operations 0.01 (0.01) -100.0%
Diluted earnings per common share 0.65 $ 0.69 (0.04) -5.8%
Weighted average common shares outstanding - diluted 17,034,922 17,045,095 (10,173) -0.1%
         
(1) Excludes depreciation and amortization expense for the years ended December 31, 2014 and 2013 of $1,736 and $1,435 included in cost of revenue, respectively.
 
GLOBAL POWER EQUIPMENT GROUP INC.
CONSOLIDATED BALANCE SHEETS
($ in thousands, except share and per share amounts)
     
     
  December 31,
  2014 2013
ASSETS    
Current assets:    
Cash and cash equivalents  $ 8,810  $ 13,942
Restricted cash 1 120
Accounts receivable, net of allowance of $787 and $557, respectively 115,351 93,484
Inventories 8,279 6,476
Costs and estimated earnings in excess of billings 57,918 41,804
Deferred tax assets 5,011 3,301
Other current assets 6,945 8,215
Total current assets 202,315 167,342
Property, plant and equipment, net 22,847 20,644
Goodwill 106,884 109,930
Intangible assets, net 59,070 60,594
Deferred tax assets 2,590 7,630
Other long-term assets 841 1,258
Total assets $ 394,547 $ 367,398
LIABILITIES AND STOCKHOLDERS' EQUITY    
Current liabilities:    
Accounts payable  $ 18,856  $ 19,664
Accrued compensation and benefits 21,213 14,798
Billings in excess of costs and estimated earnings 14,459 12,757
Accrued warranties 1,996 3,261
Other current liabilities 5,583 8,483
Total current liabilities 62,107 58,963
Long-term debt 45,000 23,000
Other long-term liabilities 6,237 5,844
Total liabilities 113,344 87,807
Commitments and contingencies (Note 15)    
Stockholders' equity:    
Common stock, $0.01 par value, 170,000,000 shares authorized and 18,395,472 and 18,294,998 shares issued, respectively, and 17,129,119 and 17,059,943 shares outstanding, respectively 184 183
Paid-in capital 71,528 69,049
Accumulated other comprehensive income (2,252) 3,473
Retained earnings 211,756 206,898
Treasury stock, at par (1,266,353 and 1,235,055 common shares, respectively) (13) (12)
Total stockholders' equity 281,203 279,591
Total liabilities and stockholders' equity  $ 394,547  $ 367,398
 
 
GLOBAL POWER EQUIPMENT GROUP INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
($ in thousands)
     
     
     
     
  Years Ended December 31,
  2014 2013
Operating activities:    
Net income  $ 11,149  $ 11,785
Adjustments to reconcile net income to net cash provided by operating activities:    
Deferred income tax provision (benefit) 3,331 (2,051)
Depreciation and amortization on plant, property and equipment and intangible assets 10,271 8,034
Amortization on deferred financing costs 229 184
Loss on disposals of equipment 635
Stock-based compensation 3,081 4,145
Changes in operating assets and liabilities, net of businesses acquired and sold (38,514) (2,359)
Net cash (used in) provided by operating activities (9,818) 19,738
Investing activities:    
Acquisitions, net of cash acquired (725) (49,451)
Proceeds from sale of business, net of restricted cash and transaction costs 306
Net transfers of restricted cash 119
Proceeds from sale of equipment 174 71
Purchase of property, plant and equipment (7,632) (5,196)
Net cash used in investing activities (8,064) (54,270)
Financing activities:    
Repurchase of stock-based awards for payment of statutory taxes due on stock-based compensation (602) (1,752)
Debt issuance costs (171)
Dividends paid (6,140) (6,215)
Proceeds from long-term debt 99,000 65,000
Payments of long-term debt (77,000) (42,000)
Net cash provided by (used in) financing activities 15,258 14,862
Effect of exchange rate changes on cash (2,508) 1,661
Net change in cash and cash equivalents (5,132) (18,009)
Cash and cash equivalents, beginning of year 13,942 31,951
Cash and cash equivalents, end of year  $ 8,810  $ 13,942
 
GLOBAL POWER EQUIPMENT GROUP INC.
ADJUSTED EBITDA RECONCILIATION
($ in thousands)
(unaudited)
         
         
Adjusted EBITDA Reconciliation ($ in thousands) Three Months Ended December 31, Twelve Months Ended December 31,
  2014 2013 2014 2013
GAAP Income from continuing operations  $ 5,930  $ 10,936  $ 11,150  $ 11,506
Add back:        
Income tax expense (benefit) 1,173 (1,014) 4,017 (437)
Interest expense, net 536 410 1,710 893
Depreciation and amortization 2,538 2,418 10,271 8,034
Stock based compensation 265 716 3,081 4,145
Non-GAAP adjusted EBITDA from continuing operations(1) 10,442 13,466 30,229 24,141
         
         
(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 Twelve Months Ended
  December 31, 2014 December 31, 2013 December 31, 2014 December 31, 2013
  (unaudited) (unaudited) (audited) (audited)
Product Solutions        
Revenue $ 66,138 $ 78,793 $ 222,250 $ 208,194
Gross Profit 11,817 19,433 45,106 47,211
Gross Margin 17.9% 24.7% 20.3% 22.7%
         
Nuclear Services        
Revenue 78,944 53,550 246,624 234,852
Gross Profit 11,326 8,246 34,439 31,512
Gross Margin 14.3% 15.4% 14.0% 13.4%
         
Energy Services        
Revenue 28,714 9,202 69,671 41,172
Gross Profit 4,266 1,830 11,285 6,281
Gross Margin 14.9% 19.9% 16.2% 15.3%
         
Consolidated        
Revenue 173,796 141,545 538,545 484,218
Gross Profit 27,409 29,509 90,830 85,004
Gross Margin 15.8% 20.8% 16.9% 17.6%
               
SHIPPING / SERVICE DAYS BY QUARTER              
                   
                   
  Q1   Q2   Q3   Q4   Total
FY14 62   64   63   66   255
FY13 58   64   63   65   250
 
GLOBAL POWER EQUIPMENT GROUP INC.
BACKLOG BY SEGMENT
($ in thousands) (unaudited)
     
     
     
  December 31,
  2014 2013
Backlog    
Product Solutions  $ 152,466  $ 176,621
Nuclear Services 210,689 196,674
Energy Services 26,259 17,028
Total 389,414 390,323
               
PRODUCT SOLUTIONS ORDERS              
($ in thousands) (unaudited)              
                   
                   
  Q1   Q2   Q3   Q4   Total
FY14 49,776   35,588   47,433   62,521   195,318
FY13 55,899   51,039   64,277   80,506   251,721
 
PRODUCT SOLUTIONS REVENUE BY GEOGRAPHIC REGION
($ in thousands) (unaudited)
             
             
             
             
2014
Products Shipped to Q1 Q2 Q3 Q4 Total % of total
Middle East 366 14,021 11,249 13,849 39,485 17.8%
North America 24,849 30,500 31,850 44,470 131,669 59.2%
Asia 4,193 3,062 6,980 4,097 18,332 8.2%
South America 2,720 1,319 366 314 4,719 2.1%
Europe & Other 6,803 10,269 7,565 3,408 28,045 12.6%
Total 38,931 59,171 58,010 66,138 222,250 100.0%
             
2013
Products Shipped to Q1 Q2 Q3 Q4 Total % of total
Middle East 9,065 14,615 10,695 6,198 40,573 19.5%
North America 20,919 14,676 27,375 45,740 108,710 52.2%
Asia 4,129 1,315 7,399 10,781 23,624 11.3%
South America 3,668 1,325 8,544 8,244 21,781 10.5%
Europe & Other 1,113 3,999 564 7,829 13,505 6.5%
Total 38,894 35,930 54,577 78,792 208,193 100.0%
CONTACT: Investor Relations Contact:

         Shawn Severson

         The Blueshirt Group

         (415) 489-2198

         shawn@blueshirtgroup.com

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