Exhibit 99.1
Global Power Equipment Group Inc.
Reports Second Quarter FY2004 EPS of $0.01
Higher Steel Costs Impact Margins, Bookings Outlook Favorable
TULSA, Oklahoma, July 26, 2004 – Global Power Equipment Group Inc. (NYSE: GEG), a leading design, engineering and fabrication firm providing a broad array of equipment and services to diversified global companies engaged in the power and process industries, today reported financial results for the second quarter ended June 26, 2004.
Global Power Equipment Group reported earnings for the second quarter of fiscal 2004 of $0.3 million, or $0.01 per diluted share, on revenues of $57.0 million. This compares to net earnings of $4.8 million, or $0.11 per diluted share, on revenues of $64.0 million for the second quarter of fiscal 2003. For the six months ended June 26, 2004, the Company reported net earnings of $1.1 million, or $0.02 per diluted share, on revenues of $112.1 million. This compares to net earnings for the same period last year of $11.7 million, or $0.26 per diluted share, on revenues of $141 million. First half 2004 earnings include the effect of restructuring charges totaling $2.3 million or $0.03 per share.
The Company’s gross profit for the second quarter of 2004 totaled $9.1 million representing a 16.0 percent gross margin compared to a gross profit of $17.0 million and a gross margin of 26.5 percent in the second quarter last year. While the Company had already anticipated lower margins for 2004, sharply higher steel costs resulted in lower gross profit in the most recent quarter. The speed and magnitude of steel price increases during 2004 has limited the ability of the Company to recover all of these increased costs from customers on fixed price projects. For the first six months of 2004, the Company’s gross profit totaled $20.9 million representing an 18.7 percent gross margin compared to 27.1 percent in the same period of 2003.
The Company generated EBITDA (earnings before income taxes, plus interest, depreciation and amortization) of $1.4 million for the second quarter of 2004, down from the $9.2 million recorded during the same period in 2003. The decrease in EBITDA was principally due to the lower gross margin during the second quarter of 2004. The Company had cash and cash equivalents of $31.2 million on hand at the end of the second quarter of 2004, down from $53.4 million from the end of March 2004. The decline in cash since the end of March was due primarily to higher working capital costs for work in progress, primarily in China.
“Although we have taken active steps to further reduce our overall manufacturing costs by initiating the process to close two facilities in North America, the greater than 50% increase in steel prices has impacted our gross margin” stated Larry Edwards, Global Power Equipment Group’s chairman, president and chief executive officer. “While steel prices are not anticipated to rise significantly during the balance of the year, the effect of this key input has caused us to reassess our current fiscal year earnings prospects.”
“While our second quarter bookings were below earlier expectations, we believe we have the opportunity to increase our backlog significantly during the second half of this year” Mr. Edwards continued. “We are actively pursuing a number of very large international power projects and the outlook for awards is very promising. In China, our purchase of Nanjing Boiler Works enhances our overall supply capability, particularly for the second round bundle buy of gas turbines the central government of China is currently negotiating with the OEMs.”
Global Power Equipment Group Inc.
Second Quarter 2004 Earnings – Page 2
At the end of the second quarter, the Company’s firm backlog totaled $171 million compared to $200 million at the end of March 2004 and $223 million at the end of June 2003. Approximately 76 percent of the Company’s new bookings during the first six months of 2004 originated from projects outside of the United States compared to 42 percent during the first half of 2003.
Earnings Estimate
Based upon information management currently has evaluated, in conjunction with this release, management has revised its fiscal year 2004 revenue and earnings guidance as follows: revenue of between $210 million and $240 million and diluted earnings per share of between $0.09 and $0.12, before the effect of previously announced estimated management restructuring charges of approximately $2.7 million or $0.04 per diluted share. Additional restructuring costs relating to the previously announced merger of Consolidated Fabricators, Inc. and Braden Manufacturing, LLC of approximately $2.0 million to $3.0 million or $0.03 to $0.04 per share will be recorded during the second half of 2004. The Company establishes a third quarter 2004 earnings estimate of approximately $0.01 to $0.03 per diluted share on estimated revenues of approximately $55 to $65 million and gross margins of 15.5 to 16.5 percent, before the effect of an estimated $1.5 million of restructuring charges applicable to the third quarter as noted above.
Non-GAAP Financial Measures
This release contains disclosure of EBITDA and estimated earnings per diluted share for fiscal 2004 and the third quarter of 2004 that exclude the effect of estimated restructuring charges, which are non-GAAP financial measures within the meaning of Regulation G promulgated by the Securities and Exchange Commission. A reconciliation of EBITDA to net income available to common stockholders and of estimated earnings per diluted share excluding restructuring charges to estimated earnings per diluted share are included in the exhibits to this release.
About Global Power Equipment Group
Oklahoma based Global Power Equipment Group Inc. (NYSE: GEG) is a leading designer, engineer and fabricator of a comprehensive portfolio of equipment for gas turbine power plants and power-related equipment for industrial operations, with over 30 years of power generation industry experience. The Company’s equipment is installed in power plants and in industrial operations in more than 40 countries on six continents and believes, in its product lines, it has one of the largest installed bases of equipment for power generation in the world. In addition, the Company provides its customers with value-added services including engineering, retrofit, maintenance and repair. Additional information about Global Power Equipment Group may be found at www.globalpower.com.
Statements contained in this release regarding the Company’s or management’s intentions, beliefs, expectations, or predictions for the future, including, but not limited to, those regarding anticipated operating results, are forward looking statements within the meaning of U.S. federal securities laws and are subject to a number of risks, assumptions and uncertainties that could cause the Company’s actual results to differ materially from those projected. Information concerning some of the factors that could cause actual results to differ materially from those in, or implied by, the forward looking statements are set forth under “Risk Factors” in the Company’s Form 10-K for the period ending December 27, 2003, and other reports on file with the U.S. Securities and Exchange Commission.
Company Contact:
Bob Zwerneman
Director of Investor Relations
(918) 274-2398
Global Power Equipment Group Inc., 6120 S. Yale, Suite 1480, Tulsa, OK 74136 U.S.A.
Phone: 1-918 488-0828 FAX: 1-918 488-8389
Global Power Equipment Group Inc.
Second Quarter 2004 Earnings – Page 3
GLOBAL POWER EQUIPMENT GROUP INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
Three Months Ended | Six Months Ended | |||||||||||
June 26, 2004 | June 28, 2003 | June 26, 2004 | June 28, 2003 | |||||||||
Revenues | $ | 57,021 | $ | 64,002 | $ | 112,147 | $ | 141,028 | ||||
Cost of sales | 47,892 | 47,052 | 91,205 | 102,860 | ||||||||
Gross profit | 9,129 | 16,950 | 20,942 | 38,168 | ||||||||
Selling and administrative expenses | 8,541 | 8,655 | 18,802 | 18,119 | ||||||||
Operating income | 588 | 8,295 | 2,140 | 20,049 | ||||||||
Interest expense | 111 | 394 | 311 | 892 | ||||||||
Income before income taxes | 477 | 7,901 | 1,829 | 19,157 | ||||||||
Income tax provision | 181 | 3,081 | 695 | 7,471 | ||||||||
Net income available to common stockholders | $ | 296 | $ | 4,820 | $ | 1,134 | $ | 11,686 | ||||
Basic income per common share | ||||||||||||
Weighted average shares outstanding - basic | 46,325 | 44,209 | 45,991 | 44,099 | ||||||||
Net income available to common stockholders | $ | 0.01 | $ | 0.11 | $ | 0.02 | $ | 0.26 | ||||
Diluted income per common share | ||||||||||||
Weighted average shares outstanding - diluted | 46,949 | 45,756 | 46,839 | 45,618 | ||||||||
Net income available to common stockholders | $ | 0.01 | $ | 0.11 | $ | 0.02 | $ | 0.26 |
Global Power Equipment Group Inc., 6120 S. Yale, Suite 1480, Tulsa, OK 74136 U.S.A.
Phone: 1-918 488-0828 FAX: 1-918 488-8389
Global Power Equipment Group Inc.
Second Quarter 2004 Earnings – Page 4
GLOBAL POWER EQUIPMENT GROUP INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
June 26, 2004 | December 27, 2003 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 31,187 | $ | 51,315 | ||||
Accounts receivable, net of allowance of $1,119 and $1,325 | 41,067 | 42,582 | ||||||
Inventories | 4,563 | 3,013 | ||||||
Costs and estimated earnings in excess of billings | 62,034 | 40,706 | ||||||
Deferred tax assets | 14,515 | 17,315 | ||||||
Other current assets | 11,900 | 3,983 | ||||||
Total current assets | 165,266 | 158,914 | ||||||
Property, plant and equipment, net | 19,421 | 20,740 | ||||||
Deferred tax assets | 51,882 | 55,094 | ||||||
Goodwill, net | 45,000 | 45,000 | ||||||
Other assets | 1,687 | 1,248 | ||||||
Total assets | $ | 283,256 | $ | 280,996 | ||||
LIABILITIES AND EQUITY | ||||||||
Current liabilities: | ||||||||
Current maturities of long-term debt | $ | 17,642 | $ | 14 | ||||
Accounts payable | 14,172 | 18,974 | ||||||
Accrued compensation and employee benefits | 4,006 | 7,285 | ||||||
Accrued warranty | 15,196 | 15,004 | ||||||
Billings in excess of costs and estimated earnings | 64,739 | 53,293 | ||||||
Other current liabilities | 4,638 | 5,203 | ||||||
Total current liabilities | 120,393 | 99,773 | ||||||
Other long-term liabilities | 1,888 | 1,888 | ||||||
Long-term debt, net of current maturities | 4 | 24,949 | ||||||
Commitments and contingencies | ||||||||
Stockholders’ equity | ||||||||
Common stock | 463 | 452 | ||||||
Paid-in capital deficit | (19,547 | ) | (25,492 | ) | ||||
Accumulated comprehensive income | 2,111 | 2,616 | ||||||
Retained earnings | 177,944 | 176,810 | ||||||
Total stockholders’ equity | 160,971 | 154,386 | ||||||
Total liabilities and equity | $ | 283,256 | $ | 280,996 | ||||
Global Power Equipment Group Inc., 6120 S. Yale, Suite 1480, Tulsa, OK 74136 U.S.A.
Phone: 1-918 488-0828 FAX: 1-918 488-8389
Global Power Equipment Group Inc.
Second Quarter 2004 Earnings – Page 5
GLOBAL POWER EQUIPMENT GROUP INC.
CALCULATION OF EBITDA
(in thousands)
Three Months Ended | Six Months Ended | |||||||||||
June 26, 2004 | June 28, 2003 | June 26, 2004 | June 28, 2003 | |||||||||
Income before income taxes | $ | 477 | $ | 7,901 | $ | 1,829 | $ | 19,157 | ||||
Add back: | ||||||||||||
Interest expense | 111 | 394 | 311 | 892 | ||||||||
Depreciation and amortization | 825 | 898 | 1,663 | 1,806 | ||||||||
EBITDA (a) | $ | 1,413 | $ | 9,193 | $ | 3,803 | $ | 21,855 | ||||
(a) | EBITDA represents income before income taxes plus interest, depreciation and amortization. While considered the most common definition used by investors and financial analysts, the EBITDA presented above may not be comparable to similarly titled measures reported by other companies. The Company believes that EBITDA, while providing useful information, should not be considered in isolation or as an alternative to other financial measures determined under GAAP. |
GLOBAL POWER EQUIPMENT GROUP INC.
RECONCILIATION OF NON-GAAP ESTIMATED EARNINGS TO A GAAP BASIS
Three Months Ended September 25, 2004 | Twelve Months Ended December 25, 2004 | |||||||||||||||
(Low estimate) | (High estimate) | (Low estimate) | (High estimate) | |||||||||||||
Estimated earnings per share on a non-GAAP basis | $ | 0.01 | $ | 0.03 | $ | 0.09 | $ | 0.12 | ||||||||
Impact of estimated restructuring charges | (0.02 | ) | (0.02 | ) | (0.08 | ) | (0.07 | ) | ||||||||
Estimated earnings per share on a GAAP basis | $ | (0.01 | ) | $ | 0.01 | $ | 0.01 | $ | 0.05 | |||||||