Global Power Equipment Group Inc. (OTC Pink: GLPW) supplies customized engineered equipment, maintenance and modification services to energy, power infrastructure, and processing industries around the world. Shares of the power equipment company are down over 25% through afternoon trading on Thursday, September 29, 2016. Over the past three months, Global Power Equipment Group Inc. has seen average daily volume of 55,253 shares. However, nearly 325,800 shares or dollar volume of $1,179,396, has already exchanged hands through afternoon trading Thursday.
Shares of Global Power Equipment Group Inc. are diving Thursday after the company released a corporate update. The company continues to work towards regain “current reporting” status with the U.S. Securities and Exchange Commission. Management has stated that they expect the process to be completed by December 31, 2016. However, Global Power Equipment Group Inc. continues to work on restating cost of goods sold, “goodwill and trade name impairments,” deferred tax discrepancies, and more. In addition, management says they are working with creditors of the company to amend credit agreements, defaults, and more. Overall, Global Power Equipment Group Inc. says they hold total debt of $61 million and cash and cash equivalents of only $13 million. Here is the full press release of the corporate update:
Global Power Equipment Group Inc. Press Release:
IRVING, Texas, Sept. 28, 2016 (GLOBE NEWSWIRE) — Global Power Equipment Group Inc. (GLPW) (“Global Power” or the “Company”) today provided an update on the timing of when it expects to file its financial statements as well as its liquidity initiatives and financial position. It also announced expected goodwill and trade name impairments and valuation allowance on deferred tax assets.
Financial Restatement Process and 2016 Financial Statements
The Company noted that it is in the process of completing ongoing restatement activities. This involves the finalization of cost of goods sold restatement entries, the determination of goodwill and trade name impairments, resulting adjustments to tax provisions and the valuation allowance on deferred tax assets as well as the audit. Given the time required to finalize these efforts, the Company’s best estimate, at this point in time, is that it expects to become current with its Securities and Exchange Commission reporting obligations no later than December 31, 2016. Becoming current includes the filing of an Annual Report on Form 10-K for 2015 (with audited restated consolidated financial statements and related information for 2014 and 2013 and unaudited restated selected financial data for 2012 and 2011) and three 2016 Quarterly Reports on Form 10-Q. The Company intends to provide a further update on the anticipated timing of these filings no later than October 31, 2016.
Liquidity Initiatives and Financial Position
While continuing to work with its current lenders, Global Power has retained a global investment bank to identify new debt financing alternatives. Throughout the restatement process, Global Power and its lenders have engaged in regular and constructive dialogue regarding its February 21, 2012 credit agreement. The Company has entered into several amendments and limited waivers with the lenders, which were described in Current Reports on Form 8-K, each as previously filed with the Securities and Exchange Commission. To date, the lenders have reached accommodations with Global Power, and Global Power expects to continue the ongoing dialogue with a view to addressing existing defaults and finalizing the restatement under arrangements acceptable to all parties. In addition, the Company’s other liquidity initiatives, including the marketing processes for the sale of the Braden Mexico facility and the sale-leasebacks regarding the Company’s other owned manufacturing facilities, are progressing. The incremental cash gained from these efforts will be used to reduce debt. Currently, the Company’s total debt is approximately $61 million, and cash and equivalents (including restricted cash) are approximately $13 million.
Expected Non-cash Goodwill and Trade Name Impairments and Valuation Allowance on Deferred Tax Assets
During 2015, Global Power’s stock traded at a market price that was lower than its book value for a prolonged period. As a result of this and other factors, the Company performed intangible asset impairment tests and currently expects to record a non-cash charge in the range of $50 million to $60 million for the impairment of goodwill and trade names. The Company also expects to record a non-cash valuation allowance as of December 31, 2014, recognizing a reserve on the value of deferred tax assets recorded in 2014 and prior years in the range of $35 million to $45 million. Accordingly, substantially all U.S. deferred tax assets recorded during the year ended December 31, 2015 are also expected to be reserved.
About Global Power Equipment Group Inc.
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. The Products segment includes two primary product categories: Mechanical Solutions (formerly 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 a variety of industries. The Services segment provides lifecycle maintenance, repair, on-site specialty support, outage management, construction and fabrication services for the power generation, industrial, chemical/petrochemical processing, and oil and gas industries. The Company provides information at its website: www.globalpower.com.