Global Power Equipment Group Inc. Expects to Restate Fiscal 2004 and Quarterly 2005 Results Due to Misreported Gross Profit on
March 08 2006 - 3:02PM
PR Newswire (US)
Details for March 9, 2006 9:00 AM EST Conference Call TULSA, Okla.,
March 8 /PRNewswire-FirstCall/ -- Global Power Equipment Group Inc.
(NYSE:GEG), a leading design, engineering and manufacturing firm
providing a broad array of equipment and services to the global
energy, power infrastructure and process industries, today
announced it expects to restate fiscal 2004, interim periods for
the second, third and fourth quarters of fiscal 2004 and quarterly
2005 results. Previously issued financial statements for such
periods should not be relied upon. The Company also provided a
preliminary earnings estimate for the fourth quarter, which ended
December 31, 2005. Restatement Management has become aware of
previously unrecognized expenses related to a Heat Recovery
equipment project in China that was substantially completed in
December 2004. This led management to further review the revenue
and cost recognition for this project as well as a separate
Auxiliary Power equipment project that had also been sold through
the Company's Chinese trading company, Global Power Equipment
(Shanghai) Co., Ltd. ("GPESH"), in 2004. Following this review, the
Company, in conjunction with the Company's Board of Directors and,
after discussion with the Company's independent registered public
accounting firm, has determined that gross profit was inadvertently
overstated in total for these projects, and that a restatement is
required. Currently, management believes that a restatement will
result in an unaudited adjustment to prior period financial
statements for the second, third and fourth quarters of 2004 and
for the first, second and third quarters of 2005 that could
cumulatively decrease previously reported operating income by
approximately $7 million. The Company expects to include restated
financial results for the fiscal year ended December 31, 2004,
including the second, third and fourth quarters of 2004 and the
first, second and third quarters of 2005 in its Annual Report on
Form 10-K for the fiscal year ended December 31, 2005. The Company
is providing additional information regarding the restatement,
including a discussion of related internal control issues, in a
Form 8-K filed on March 8, 2006 and expects to file its Form 10-K
on or before March 31, 2006. Preliminary Earnings Estimate - Fourth
Quarter 2005 Global Power Equipment Group's preliminary earnings
estimate is a loss of between $11 to $13 million for the fourth
quarter of 2005, or between $0.23 to $0.28 per diluted share, on
revenues of approximately $116 million. This estimate excludes the
possible impact from a potential goodwill impairment and/or an
increase in deferred tax asset valuation allowance, which are under
review as a result of the fourth quarter 2005 loss. These potential
non-cash charges could be material. Commenting on the fourth
quarter loss, Al Brousseau, Global Power Equipment Group's
president and chief executive officer stated, "During the fourth
quarter 2005 the Company experienced unexpected cost overruns on
several Heat Recovery projects that negatively impacted our
earnings. I am now personally spearheading a major initiative
within our Heat Recovery segment that mirrors the investment we
made during the second half of 2005 to overhaul our Auxiliary Power
segment to prevent similar cost overruns in the future. We will
discuss this plan and what it means at length on tomorrow morning's
conference call." The Company expects to report a firm backlog at
December 31, 2005 of approximately $387 million compared to $384
million at the end of September 2005 and $309 million at December
31, 2004. At December 31, 2005, the Company had cash and cash
equivalents of $21 million. Credit Agreement Amendment The Company
also announced that it entered into an amendment to its credit
facility that waives compliance with various existing financial
covenants through September 30, 2006, waives any potential breaches
of representations, warranties and covenants relating to the
restatement of prior period results and establishes new financial
terms and covenants. The Company will be providing a more detailed
summary of the amendment to its credit facility in the Form 8-K,
filed on March 8, 2006. Earnings Estimate - 2006 Based upon
information management currently has evaluated, in conjunction with
this release the Company currently estimates 2006 diluted earnings
per share of between $0.10 and $0.16, excluding an estimated $0.01
per diluted share of restructuring charges and $0.02 per diluted
share of share-based payment charges. These earnings are based on
projected 2006 revenues of between $475 and $500 million and
assumes a 38 percent tax rate. The Company will host a conference
call on March 9, 2006 at 9:00 AM EST. The numbers to call for this
interactive teleconference are: within the United States and Canada
(800) 675-4431, outside North America (303) 752-5840. A playback of
the call will be available from 1:00 p.m. EST on March 9 through
midnight EST on March 24, 2006, by calling: within North America
(800) 675-9924, outside North America (303) 750-0857. The replay ID
code is 30806. To listen to the conference call over the Internet,
please visit the Company's home page at http://www.globalpower.com/
. This release contains disclosure of estimated earnings per
diluted share for fiscal 2006 that exclude the effect of estimated
restructuring and share- based payment charges, which is a non-GAAP
financial measure within the meaning of Regulation G promulgated by
the Securities and Exchange Commission. A reconciliation of
estimated earnings per diluted share excluding restructuring and
share-based payment charges to estimated earnings is included in
the exhibits to this release. About Global Power Equipment Group
Oklahoma based Global Power Equipment Group Inc. is a leading
design, engineering and manufacturing firm providing a broad array
of equipment and services to the global energy, power
infrastructure and process industries. The Company designs,
engineers and manufactures a comprehensive portfolio of equipment
for gas turbine power plants and power-related equipment for
industrial operations, and has 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,
repair and general plant services. Additional information about
Global Power Equipment Group may be found at
http://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, including the audit of the
Company's restated financial statements, the completion and audit
of the Company's 2005 financial statements, ability to remain in
compliance with, or obtain waivers under the Company's loan
agreements, decreased demand for new gas turbine power plants, the
loss of any of our major customers, the cancellation of projects,
project cost overruns, including increases in prices for energy or
for materials such as steel, and unforeseen schedule delays,
competition for the sale of our products or services, poor
performance by our subcontractors, warranty and product liability
claims and changes in the economic, social and political conditions
in the countries in which we operate, including fluctuations in
foreign currency exchange rates. Additional information concerning
these factors and some of the other 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 ended December 31, 2004, and
other reports on file with the U.S. Securities and Exchange
Commission. The Company assumes no obligation to update publicly
such forward-looking statements, whether as a result of new
information, future events or otherwise. Company Contact: Bob
Zwerneman Director of Investor Relations (918) 274-2398 GLOBAL
POWER EQUIPMENT GROUP INC. RECONCILIATION OF NON-GAAP ESTIMATED
EARNINGS TO A GAAP BASIS Twelve Months Ended December 31, 2006 (Low
estimate) (High estimate) Estimated earnings per share on a
non-GAAP basis $0.10 $0.16 Impact of estimated restructuring
charges (0.01) (0.01) Impact of estimated share-based payment
charges (A) (0.02) (0.02) Estimated earnings per share on a GAAP
basis $0.07 $0.13 (A) Includes the estimated effect of SFAS 123R
for stock based compensation. DATASOURCE: Global Power Equipment
Group Inc. CONTACT: Bob Zwerneman, Director of Investor Relations
of Global Power Equipment Group Inc., +1-918-274-2398 Web site:
http://www.globalpower.com/
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