·

Revenue was $157.9 million compared with $229.5 million, a $71.6 million decline. Items impacting revenue included:

o

The sale of various businesses and a plant closure had a combined negative impact to revenue of $21.8 million.

o

The timing of projects, as well as the decreased number and magnitude of projects, were the primary reasons for reduced revenue in both the Services and Mechanical Solutions segments.  Delays in completing projects was the primary reason for a $6.0 million decline in volume in Electrical Solutions.  

·

Cost reductions and expense management helped to drive a $3.4 million, or 13.2%, decline in general and administrative expenses. These measures also reduced selling and marketing expenses by $1.5 million, or 29.2%. Restatement expenses were down $2.0 million, as the restatement of 2014 and certain prior-period financial results was completed in March 2017.

·

The $0.8 million reduction in interest expense was the result of a lower average debt balance.

·

The income tax benefit was mainly related to a $2.2 million decrease in indefinite-lived intangible deferred tax liabilities resulting from the disposition of Hetsco, Inc., a wholly owned subsidiary (“Hetsco”).

·

Net loss was $31.7 million, or $1.81 per share.

·

At the end of the period, backlog was $215.5 million, of which $122.8 million, or 57.0%, was related to the Services segment.

·

In January, the Company sold the stock of Hetsco, to Chart Industries, Inc. (NASDAQ: GTLS) for net proceeds of $20.2 million.  

·

In March, Global Power completed the restatement of 2014 and certain prior-period financial results and filed the 2015 Report.  

·

In June, the Company secured a $45.0 million senior secured term loan, which matures in December 2021, and used part of the proceeds to repay in full all outstanding loans and obligations under the Company’s previous credit agreement.

·

Services revenue of $41.2 million was down $27.5 million due primarily to completion in 2016 of construction and support services for the restart of a new build nuclear reactor that contributed $19.8 million in revenue for the prior-year period. Also, approximately $3.1 million of the decline was related to the sale of Hetsco.

·

Services operating loss was $9.2 million, a $12.8 million decrease, due primarily to $13.1 million of costs recognized to reflect estimated losses on several large non-recurring fixed-price contracts under which Services performed change orders in the interest of keeping projects on track that are currently in dispute with the customer. In such cases, the costs are recognized when incurred, but revenue recognition is deferred subject to the resolution of the dispute. No estimated losses on contracts were recorded in the first quarter of 2016.

·

Revenue for the segment was $13.5 million, a $4.1 million decline,  mostly as the result of the closure of the Chattanooga facility, which led to the loss of a major customer.

·

Electrical Solutions operating loss increased $1.3 million to $4.0 million due primarily to a  $1.8 million increase in estimated losses on certain contracts.

·

Revenue was $16.7 million, down $19.7 million as the segment had declining demand for its products and was not able to replace projects. 

·

Despite measurable cost reduction efforts, the significant reduction in revenue was the primary cause of Mechanical Solutions’ $0.2 million operating loss compared with $1.5 million of operating income in the prior-year period.

·

Services revenue increased $2.2 million as the timing of a customer-scheduled nuclear facility outage more than offset the impact of the sale of Hetsco and completion of significant work in 2016 associated with the restart of a new build nuclear plant. Services revenue was up $16.7 million compared with the first quarter of 2017, given the impact of the timing of outage work.

·

Operating income for the segment was $3.1 million compared with an operating loss of $8.7 million in the second quarter of 2016. The $11.8 million increase was largely due to the non-recurrence of an $8.2 million loss related to net assets held for sale for Hetsco that was recognized in the prior-year period, a $2.6 million reduction of loss contract charges and a $0.7 million reduction in operating expenses from the reorganization of the Williams business unit.

·

Backlog at the end of the period was $122.8 million compared with $138.6 million at the end of 2016. Approximately $18.3 million of the decline in Services backlog was due to the completion of the spring outage work related to a maintenance and modification contract.

·

Revenue was $10.5 million in the quarter, down from $22.2 million in the second quarter of 2016. The decline was primarily related to the Chattanooga plant closure, which had a $5.5 million negative impact, and lower production volume due to delays in project completion. This had a $6.2 million negative impact on revenue.

·

Operating loss increased to $4.3 million compared with $0.5 million in the prior-year period due to the significant revenue decline and resulting $2.0 million decrease in gross profit. Additionally, estimated losses on certain contracts increased $2.0 million. The losses were the result of incurring liquidated damages from missed delivery dates and operating inefficiencies, primarily in the Houston facility.

·

Electrical Solutions backlog at June 30, 2017 increased $3.7 million from December 31, 2016 due to delays in production and shipments.

·

Revenue was $17.9 million, down $10.9 million, as the segment had declining demand for its products and was not able to replace projects.

·

Operating loss was $0.2 million compared with $1.8 million in the prior-year period, due primarily to an increase in gross profit of $1.1 million due to $2.0 million of loss contract accruals that were recorded in the same period of the prior year and measurable cost reduction efforts, offset by the significant reduction in revenue.

·

Mechanical Solutions backlog at June 30, 2017 was $33.1 million, a $4.7 million decline from December 31, 2016.

·

Sold the Mechanical Solutions segment and its related Mexico facility and equipment for total net proceeds of $44.5 million.

·

With proceeds from the sale of Mechanical Solutions, the Company reduced debt by $35.9 million in October 2017, including full repayment of a $10.0 million first-out term loan from August 2017, which enables the Company to avoid an increase in the facility’s payable-in-kind interest rate in 2018.

·

Realigned and strengthened management team within Electrical Solutions by adding experienced industry personnel in key operational leadership positions.

·

Initiated the process for the evaluation of strategic alternatives for Electrical Solutions segment, which could provide liquidity, pay down additional debt and provide the segment with increased investment capital.

·

Formed joint venture between Services business and prime construction contractor to supply craft labor for the new nuclear power plant construction at Plant Vogtle Units 3 &  4. The Services segment will also provide supervision and ancillary support services to the joint venture. The segment is well-positioned for a variety of potential multi-year, multi-discipline projects including, for example, site coatings, insulation and perimeter security. Later this month, the Georgia Public Service Commission is expected to issue final approval or denial related to continued construction at Plant Vogtle Units 3 & 4.

·

Awarded new nuclear and fossil-power contracts by long-standing customers of the Services segment.

·

Negotiated receipt of $6.4 million of outstanding receivables for pre-petition services rendered to a customer that filed for bankruptcy protection.  Expect  to be paid for the remaining $2.3 million in outstanding pre-petition receivables as well.

·

Became more current in the filing of our financial reports with the Securities and Exchange Commission, including filing the comprehensive Annual Report on Form 10-K for the year ended December 31, 2016 and the quarterly reports on Form 10-Q for the first and second quarters of 2017.

·

Seek a new asset-based lending facility, which would provide additional liquidity through new borrowings, the release of restricted cash that is currently collateral for standby letters of credit and the ability to issue new standby letters of credit.

·

Expand decommissioning business by leveraging nuclear experience and capabilities,  developing partnerships and pursuing new opportunities in this large and growing market.

·

Work toward a diversified pipeline of opportunities to compete in transmission and distribution, oil and  gas and petrochemical markets and consider potential market expansion opportunities in Canada.

·

Seek to refinance the term-loan debt pending a successful conclusion of the Electrical Solutions strategic alternatives process.

·

Focus on improving days sales outstanding and days payable outstanding.

·

Aggressively continue to reduce corporate and other operating costs.

·

Become current with the SEC by filing the annual report on Form 10-K for the year ended December 31, 2017 by April 2, 2018.

Three Months Ended March 31,

Three Months Ended June 30,

($ in thousands, except share and per share amounts)

2017

2016

2017

2016

Revenue

Services

$

41,232

$

68,729

$

57,981

$

55,809

Electrical Solutions

13,547

17,637

10,532

22,202

Mechanical Solutions

16,678

36,356

17,901

28,776

Total revenue

71,457

122,722

86,414

106,787

Cost of revenue

Services

47,187

59,125

51,227

50,345

Electrical Solutions

15,170

17,654

12,560

20,223

Mechanical Solutions

13,530

31,132

14,963

26,933

Total cost of revenue

75,887

107,911

78,750

97,501

Gross profit 

(4,430)

14,811

7,664

9,286

Gross margin

(6.2)%

Selling and marketing expenses

1,836

2,578

1,858

2,639

General and administrative expenses

11,223

13,059

11,107

12,652

Restatement expenses

1,720

2,913

713

1,542

(Gain) loss on sale of business and net assets held for sale

(239)

 —

 —

8,193

Depreciation and amortization expense(1)

1,274

2,216

1,228

2,193

Total operating expenses

15,814

20,766

14,906

27,219

Operating loss

(20,244)

(5,955)

(7,242)

(17,933)

Operating margin

(28.3)%

(4.9)%

(8.4)%

(16.8)%

Interest expense, net

1,708

2,660

2,108

1,997

Foreign currency gain

156

308

301

(129)

Other expense, net

(1)

(5)

 1

64

Total other expenses (income), net

1,863

2,963

2,410

1,932

Loss before income tax

(22,107)

(8,918)

(9,652)

(19,865)

Income tax expense (benefit)

(636)

867

541

247

Net loss

$

(21,471)

$

(9,785)

$

(10,193)

$

(20,112)

Loss per common share - basic and diluted

$

(1.23)

$

(0.57)

$

(0.58)

$

(1.16)

Weighted average common shares outstanding - basic and diluted

17,470,817

17,223,901

17,551,664

17,338,255

(1)

Excludes depreciation and amortization for the three months ended March 31, 2017 and 2016 of $0.3 million and $0.6 million, respectively, and for the three months ended June 30, 2017 and 2016 of $0.4 million and $0.6 million, respectively included in cost of revenue.

Six Months Ended June 30,

($ in thousands, except share and per share amounts)

2017

2016

Revenue

Services

$

99,213

$

124,538

Electrical Solutions

24,079

39,839

Mechanical Solutions

34,579

65,132

Total revenue

157,871

229,509

Cost of revenue

Services

98,414

109,470

Electrical Solutions

27,730

37,877

Mechanical Solutions

28,493

58,065

Total cost of revenue

154,637

205,412

Gross profit 

3,234

24,097

Gross margin

Selling and marketing expenses

3,694

5,217

General and administrative expenses

22,330

25,711

Restatement expenses

2,433

4,455

(Gain) loss on sale of business and net assets held for sale

(239)

8,193

Depreciation and amortization expense(1)

2,502

4,409

Total operating expenses

30,720

47,985

Operating loss

(27,486)

(23,888)

Operating margin

(17.4)%

(10.4)%

Interest expense, net

3,816

4,657

Foreign currency gain

457

179

Other expense, net

 —

59

Total other expenses (income), net

4,273

4,895

Loss before income tax

(31,759)

(28,783)

Income tax expense (benefit)

(95)

1,114

Net loss

$

(31,664)

$

(29,897)

Loss per common share - basic and diluted

$

(1.81)

$

(1.73)

Weighted average common shares outstanding - basic and diluted

17,511,232

17,280,866

(1)

Excludes depreciation and amortization for the six months ended June 30, 2017 and 2016 of $0.7 million and $1.2 million, respectively, included in cost of revenue.

March 31,

June 30,

December 31,

($ in thousands, except share and per share amounts)

2017

2017

2016

ASSETS

Current assets:

Cash and cash equivalents

$

6,544

$

8,509

$

2,805

Restricted cash

11,588

14,685

8,765

Accounts receivable, net of allowance of $1,545, $1,636 and $1,634, respectively

52,315

55,776

59,280

Inventories:

Raw material

4,313

4,872

4,210

Finished goods

629

753

699

Inventory reserve

(1,024)

(1,070)

(981)

Costs and estimated earnings in excess of billings

47,963

47,948

52,696

Assets held for sale

 —

 —

22,832

Other current assets

7,544

6,189

7,936

Total current assets

129,872

137,662

158,242

Property, plant and equipment, net

12,300

11,819

12,596

Goodwill

36,456

36,456

36,456

Intangible assets, net

24,129

23,457

24,801

Other long-term assets

754

641

747

Total assets

$

203,511

$

210,035

$

232,842

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable

$

22,182

$

19,868

$

19,076

Accrued compensation and benefits

16,320

12,146

10,640

Billings in excess of costs and estimated earnings

9,432

11,977

6,754

Accrued warranties

5,411

4,572

5,806

Liabilities related to assets held for sale

 —

 —

1,151

Other current liabilities

34,932

36,231

33,915

Total current liabilities

88,277

84,794

77,342

Long-term debt

25,873

43,500

45,341

Deferred tax liabilities

14,465

15,264

15,499

Other long-term liabilities

8,091

7,742

7,526

Total liabilities

136,706

151,300

145,708

Commitments and contingencies

Stockholders’ equity:

Common stock, $0.01 par value, 170,000,000 shares authorized and 18,916,983, 18,947,127 and 18,855,409 shares issued, respectively, and 17,565,465, 17,587,751 and 17,485,941 shares outstanding, respectively 

189

189

188

Paid-in capital

77,463

78,079

76,708

Accumulated other comprehensive income

(8,924)

(7,417)

(9,513)

Retained earnings

(1,910)

(12,103)

19,764

Treasury stock, at par (1,351,518, 1,359,376 and 1,369,468 common shares, respectively)

(13)

(13)

(13)

Total stockholders’ equity

66,805

58,735

87,134

Total liabilities and stockholders’ equity

$

203,511

$

210,035

$

232,842

Three Months ended March 31,

Six Months ended June 30,

(in thousands)

2017

2016

2017

2016

Operating activities:

Net loss

$

(21,471)

$

(9,785)

$

(31,664)

$

(29,897)

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

Deferred income tax expense (benefit)

(1,034)

247

(234)

465

Depreciation and amortization on plant, property and equipment and intangible assets

1,607

2,834

3,170

5,638

Amortization of deferred financing costs

35

59

81

116

Loss on disposals of property, plant and equipment

30

39

45

39

(Gain) loss on sale of business and net assets held for sale

(239)

 —

(239)

8,193

Bad debt expense

(51)

23

(9)

(233)

Stock-based compensation

1,006

790

1,858

1,366

Payable-in-kind interest

78

 —

531

 —

Changes in operating assets and liabilities, net of business sold:

Accounts receivable

6,548

30,895

3,974

17,624

Inventories

42

(1,139)

(508)

(250)

Costs and estimated earnings in excess of billings

5,634

(21,941)

6,553

(11,749)

Other current assets

4,432

(2,005)

5,940

(132)

Other assets

480

219

244

145

Accounts payable

3,008

(6,083)

446

(2,365)

Accrued and other liabilities

4,065

6,174

168

6,744

Accrued warranties

(404)

(160)

(1,251)

(1,423)

Billings in excess of costs and estimated earnings

2,596

305

5,136

(4,538)

Net cash provided by (used in) operating activities

6,362

472

(5,759)

(10,257)

Investing activities:

Proceeds from sale of business, net of restricted cash and transaction costs

20,206

 —

20,206

 —

Net transfers of restricted cash

(2,815)

(175)

(2,608)

(3,129)

Proceeds from sale of property, plant and equipment

14

44

14

 5

Purchase of property, plant and equipment

(301)

(425)

(583)

(508)

Net cash provided by (used in) investing activities

17,104

(556)

17,029

(3,632)

Financing activities:

Repurchase of stock-based awards for payment of statutory taxes due on stock-based compensation

(185)

(110)

(223)

(153)

Debt issuance costs

(57)

 —

(1,704)

 —

Dividends paid

(9)

 —

(9)

 —

Proceeds from long-term debt

83,100

 —

161,599

 —

Payments of long-term debt

(102,647)

(500)

(165,515)

(1,000)

Net cash provided by (used in) financing activities

(19,798)

(610)

(5,852)

(1,153)

Effect of exchange rate changes on cash

71

275

286

219

Net change in cash and cash equivalents

3,739

(419)

5,704

(14,823)

Cash and cash equivalents, beginning of year

2,805

22,239

2,805

22,239

Cash and cash equivalents, end of quarter

$

6,544

$

21,820

$

8,509

$

7,416

Supplemental Disclosures:

Cash paid for interest

$

1,863

$

1,697

$

3,416

$

3,343

Cash paid for income taxes, net of refunds

$

86

$

229

$

992

$

789

Noncash repayment of revolving credit facility

$

 —

 —

$

(36,224)

 —

Noncash upfront fee related to senior secured term loan facility

$

 —

 —

$

(3,150)

 —

Three Months Ended March 31, 2017

($ in thousands)

Services

Electrical Solutions

Mechanical Solutions

Corporate

Consolidated

Revenue

$

41,232

$

13,547

$

16,678

$

 —

$

71,457

Gross profit

$

(5,955)

$

(1,623)

$

3,148

$

 —

$

(4,430)

Gross margin

(14.4)%

(12.0)%

 —

(6.2)%

Operating loss

$

(9,206)

$

(4,024)

$

(235)

$

(6,779)

$

(20,244)

Operating margin

(22.3)%

(29.7)%

(1.4)%

 —

(28.3)%

Three Months Ended June 30, 2017

($ in thousands)

Services

Electrical Solutions

Mechanical Solutions

Corporate

Consolidated

Revenue

$

57,981

$

10,532

$

17,901

$

 —

$

86,414

Gross profit

$

6,754

$

(2,028)

$

2,938

$

 —

$

7,664

Gross margin

(19.3)%

 —

Operating income (loss)

$

3,085

$

(4,313)

$

(207)

$

(5,807)

$

(7,242)

Operating margin

(41.0)%

(1.2)%

 —

(8.4)%

Six Months Ended June 30, 2017

($ in thousands)

Services

Electrical Solutions

Mechanical Solutions

Corporate

Consolidated

Revenue

$

99,213

$

24,079

$

34,579

$

 —

$

157,871

Gross profit

$

799

$

(3,651)

$

6,086

$

 —

$

3,234

Gross margin

(15.2)%

 —

Operating loss

$

(6,121)

$

(8,337)

$

(442)

$

(12,586)

$

(27,486)

Operating margin

(6.2)%

(34.6)%

(1.3)%

 —

(17.4)%

June 30,

March 31,

December 31,

(in thousands)

2017

2017

2016

Services

$

122,778

$

149,474

$

138,567

Electrical Solutions

59,622

52,469

55,891

Mechanical Solutions

33,100

36,894

37,792