Global Power Reports Financial Results for 2016; Provides Operational Update and Announces Strategic Initiative

IRVING, Texas–(BUSINESS WIRE)–Global
Power Equipment Group Inc. (OTC: GLPW) (“Global Power” or the
“Company”) today reported its financial results for the full year ended
December 31, 2016, as well as for the first, second and third quarters
of 2016. Reporting of the Company’s 2016 financial results was delayed
because of the time it took to prepare, audit and file the Company’s
2015 Annual Report on Form 10-K, which included restated results from
prior-year periods.

The Company also reported on its operational progress in 2017 and its
current strategic actions.

Craig Holmes and Tracy Pagliara, Co-Presidents and Co-CEOs of Global
Power, commented, “We continue to advance our efforts to address
financial, operational and strategic challenges. We have sold non-core
assets, refinanced our debt, realigned management teams in our domestic
products businesses and measurably cut costs.”

They added, “We are currently evaluating strategic alternatives for our
Mechanical Solutions segment. We believe this segment’s customers,
employees and suppliers could benefit from a new strategic partner that
can provide increased liquidity and capital for the business to compete
more effectively and pursue greater growth in its end markets. In the
meantime, we are committed to continuing to leverage our strong brands
and remain focused on delivering quality products and services. We also
are working to strengthen each of our business segments by seeking to
increase project scope with existing customers while pursuing
opportunities to diversify our markets and customer base.”

As expected, revenue in 2016 declined $170.4 million primarily due to
the reduction in Services segment revenue.

• Revenue for Mechanical Solutions declined $6.2 million, related to the
  July 2016 sale of TOG Holdings, Inc. and its wholly owned subsidiary,
  TOG Manufacturing Company, Inc. (collectively “TOG”). TOG’s revenue
  was $3.6 million in 2016 and $9.8 million in 2015. The decline in
  revenue was also attributable to a $6.7 million decrease for inlet
  systems projects, lower after-market parts sales and quality and
  execution issues in prior years with major OEM customers in its United
  States-based business. Currently, the Company believes these issues
  have been mostly resolved. Additionally, revenue in 2015 was adversely
  impacted by $3.9 million in liquidated damages. Approximately 66%, or
  $74.3 million, of Mechanical Solutions revenue was from sales outside
  the United States.
• Revenue for Electrical Solutions decreased $7.9 million due to lower
  sales of control houses, while 2015 revenue benefited from a $9.9
  million multi-unit generator enclosures shipment.
  The vast
  majority of Electrical Solutions revenue was generated in the United
  States.

• Revenue for Services declined $65.1 million due to the loss of a
  maintenance and modification contract in mid-2015 and the related
  project work associated with that contract. In addition, approximately
  $66.4 million of the decline in revenue was due to the completion of a
  nuclear facility construction project, which was commissioned to
  restart service in the latter half of 2016. Furthermore, revenue in
  2015 benefited $27.3 million from the 18-month outage schedule
  associated with another maintenance and modification contract
  customer. Services revenue in both periods included revenue associated
  with Hetsco Holdings, Inc. and its wholly owned subsidiary, Hetsco,
  Inc. (collectively “Hetsco”), which were sold in January 2017 in order
  to reduce debt. Hetsco’s revenue was $22.4 million in 2016 and $23.7
  million in 2015.
  Services revenue was primarily generated
  in the United States.

• Gross profit improved on lower revenue for Mechanical Solutions
  because of improved project execution, a $4.3 million reduction in
  warranty expense and a $3.9 million reduction in liquidated damages in
  its domestic business.
• Electrical Solutions gross profit improvement primarily reflected
  efficiencies gained from facility rationalization, which included the
  closure of its Chattanooga, Tennessee plant, and $2.5 million in lower
  warranty expense.
• Services gross profit declined on lower revenue. The lost maintenance
  and modification contract, completion of construction on a nuclear
  facility and the timing of a customer outage had a $17.9 million
  negative impact on gross profit. Partially offsetting the decline was
  the addition of $3.0 million in gross profit on multi-year fixed price
  nuclear and fossil fuel projects.

• Reduced selling and marketing expenses were principally the result of
  a $0.9 million decline in bad debt expense, $0.6 million in lower
  sales commissions due to lower revenue, $0.3 million reduction in
  travel and entertainment expense and $0.2 million less for recruiting
  expense.
• General and administrative expenses declined $7.8 million when
  excluding $0.7 million in disposition costs associated with the Hetsco
  and TOG sales, and a $0.6 million charge related to the facility
  closure in Chattanooga. The majority of the decline in 2016 was due to
  reduced headcount and related lower compensation and benefit expense,
  along with reduced travel costs.
• Restatement expenses were down from the prior year. Restatement
  expenses primarily consisted of fees for legal and accounting services
  associated with the restatement of the Company’s historical financial
  results.

Consolidated operating loss for 2016 improved primarily due to $47.8
million in impairment expenses that impacted 2015.

• Mechanical Solutions operating income improved on higher gross profit
  and the elimination of $24.4 million in impairment expense recorded in
  2015. Additionally, Mechanical Solutions reduced operating costs by
  $4.0 million, of which $0.7 million were attributable to TOG, which
  was sold in July 2016. Mechanical Solutions operating results included
  $0.8 million and $1.5 million of operating expenses associated with
  TOG in 2016 and 2015, respectively.
• Electrical Solutions operating loss improved on higher gross profit
  and the elimination of $19.1 million in impairment expense recorded in
  2015. Operating loss in 2015 had the benefit of a $3.2 million bargain
  purchase gain.
• Services operating income was down to approximately breakeven as a
  result of lower gross profit of $13.6 million, the $8.3 million loss
  recorded for the pending sale of Hetsco and a $1.2 million loss on a
  sale-leaseback, partially offset by a reduction of $4.2 million of
  impairment charges recorded in 2015. Excluding those impacts,
  operating expenses for Services were down $6.7 million due to various
  cost reduction initiatives. Services operating income included Hetsco
  losses of $7.6 million and $5.3 million in 2016 and 2015, respectively.
• Corporate operating expenses decreased primarily due to reduced
  restatement expenses.

• Interest expense reflects the impact of a weighted average interest
  rate of 10.2% in 2016 compared with 5.0% in 2015 on lower average debt
  balances.
• Income tax expense in 2016 primarily relates to foreign taxes imposed
  on the net income of our foreign subsidiaries.
• As expected, 2016 Adjusted EBITDAwas slightly positive and
  improved from 2015 primarily due to lower sales and marketing and
  general and administrative expenses after adjustments for
  non-recurring items in both years. Adjusted EBITDA is defined as
  consolidated net income before interest expense-net, income tax
  expense (benefit), franchise taxes, depreciation and amortization,
  impairment expense, bargain purchase gain, foreign currency gain,
  other expense, net, stock-based compensation, restatement costs, asset
  disposition costs, net loss on sale-leasebacks, loss on sale of
  business and net assets held for sale, bank restructuring costs,
  facility closure costs and severance costs.

Adjusted EBITDA is not a measure determined in accordance with generally
accepted accounting principles in the United States, commonly known as
GAAP. Nevertheless, Global Power believes that providing non-GAAP
information such as Adjusted EBITDA is important for investors and other
readers of Global Power's financial statements, as they are used as
analytical indicators by Global Power's management to better understand
operating performance. Because Adjusted EBITDA is a non-GAAP measure and
is thus susceptible to varying calculations, Adjusted EBITDA, as
presented, may not be directly comparable with other similarly titled
measures used by other companies.

See NOTE 1 – Non-GAAP Financial Measures and the attached tables for
additional important disclosures regarding Global Power’s use of
Adjusted EBITDA, as well as the attached tables that reconcile net
income to Adjusted EBITDA.

Liquidity Update

As of September 5, 2017, the Company had $29.3 million in cash and
equivalents, including $14.0 million in restricted cash, and an
outstanding gross debt balance of approximately $60.9 million.

Given its restrictions under its lending facility, the Company funded
operations with working capital during 2016.

In June 2017, the Company refinanced its borrowings with a new $45.0
million credit facility. This term loan has a maturity date of December
16, 2021. In August 2017, the lenders amended the credit agreement to
provide an additional $10.0 million term loan to the Company to address
working capital needs. The additional $10.0 million loan matures on
September 30, 2018. Borrowings under the new facility initially bear
interest at LIBOR plus 9% per year, payable in cash, plus 10% payable
in-kind (“PIK”) interest. Beginning January 1, 2018, the PIK interest
rate will increase to 15% per year if the Company chooses not to make an
elective principal payment of $25.0 million. The Company may voluntarily
prepay the term loans at any time in a minimum amount of $1.0 million of
the outstanding principal amount, plus any accrued, but unpaid, interest
on the aggregate amount of the term loans being prepaid, plus a defined
prepayment premium ranging from 0% to 3% based on the timing of the
prepayments.

While the expansion of the term loan has provided the Company with a
certain amount of incremental liquidity, the Company’s overall liquidity
remains constrained. To address its liquidity constraints and better
focus its resources, the Company has initiated processes to sell its
manufacturing facility in Mexico as well as its office facility in the
Netherlands. The Company is also evaluating strategic alternatives
relating to its Mechanical Solutions segment.

First Half 2017 Operational Review and
Financial Result Estimates

Cautionary Note Regarding Preliminary Estimates

All statements in this press release regarding the Company’s
preliminary 2017 financial results, including its revenue, are
forward-looking statements based on the Company’s initial review of the
results in the first half of 2017. There is significant risk that actual
results could differ significantly from the preliminary estimates
contained in this press release. Investors are cautioned not to
place undue reliance on the 2017 guidance. The preliminary
information should not be viewed as a substitute for full financial
statements prepared in accordance with GAAP and is not necessarily
indicative of the results to be achieved for any periods.

The Company’s independent registered public accounting firm has not
audited or reviewed the preliminary 2017 estimates.

In its 2016 Annual Report on Form 10-K (the “2016 10-K”), the Company
disclosed that its internal controls over financial reporting were not
effective as of December 31, 2016, due to the material weaknesses
described in the 2016 10-K, and those material weaknesses have not been
remediated as of the date of this press release. The material
weaknesses in the Company’s internal controls significantly increase the
risk that the preliminary 2017 information provided herein may need to
change. For additional information about the Company’s internal control
over financial reporting, see the 2016 10-K.

• Preliminary revenue for the first six months of 2017 is currently
  estimated to be down approximately $60 million compared with the first
  six months of 2016.
  • Preliminary Mechanical Solutions revenue is currently estimated to
    have declined approximately $31 million in the first half of 2017
    because two large orders in its Netherlands-based business were
    not replicated during the period and domestic sales continued to
    be weak due to prior-year quality and on-time delivery issues.
  • Preliminary Electrical Solutions revenue is currently estimated to
    have declined approximately $15 million, of which $9.3 million
    relates to the closure of a production facility. Lower
    productivity related to ongoing operational issues in the Houston
    plant has impacted gross margins.
  • Preliminary Services revenue is currently estimated to have
    declined approximately $14 million, of which $8.7 million was
    related to the sale of Hetsco in January 2017.

Mechanical Solutions: This segment provides
custom-designed and engineered auxiliary equipment for utility-scale
natural gas turbine power plants. Backlog at June 30, 2017 was down
approximately $5 million from $37.8 million at the end of 2016.
Significant cost reductions were implemented in the domestic operations
to better align costs with lower revenue and backlog. This segment’s
operations in Europe performed well in 2016 and continue to meet
expectations, although revenue in 2017 has been down somewhat due to
timing of projects.

Electrical Solutions: This segment provides
custom-designed and engineered electrical control houses, generator
enclosures and fuel tanks. Backlog at June 2017 was up approximately $5
million from backlog of $55.9 million at the end of 2016. Changes in
project selection and pricing helped to improve operating results in
2016, although operational challenges within the segment continued into
2017. Organizational changes were made in August 2017 to improve
operational effectiveness, although material improvement in financial
results will likely not be realized until 2018.

Services: This segment provides a comprehensive range of
maintenance, modification and construction services, primarily for
nuclear power plants, but also for other utilities, power plant
operators and industrial customers. Its strategy for growth is to expand
scope with current customers and diversify by leveraging its
capabilities for new applications, customers and markets. Targeted
markets for strategic growth include nuclear decommissioning, oil and
gas mid-stream and downstream, transmission and distribution, pipeline
and electric substations and government. As a result of the recently
announced recommendation to complete construction of the two-reactor
expansion of Plant Vogtle, a nuclear power plant near Augusta, Georgia,
Services expects to continue its work as a subcontractor on that
project, pending final approval from the Georgia Public Service
Commission. Plant Vogtle Units 3 and 4 will be the first new units built
in the United States in the last three decades and are currently the
only new units being actively constructed in the country. Backlog at
June 30, 2017 was down approximately $20 million from $138.6 million at
the end of 2016 due primarily to the completion of a maintenance and
modification contract outage in the first half of 2017. Services backlog
is comprised of maintenance and modification contract work expected to
be performed over the next 12 months as well as construction contracts
and master service agreements.

Strategic Outlook

Mr. Holmes and Mr. Pagliara commented, “We are pleased with the progress
being made by our Services segment to expand its project scope and
diversify its revenue stream. It has been safely helping plant owners
and operators enhance operations for over 50 years and is capable of
becoming a larger and more profitable business.”

They concluded, “While our Electrical Solutions segment had setbacks
during the past year, we are encouraged that recent management and
organizational changes have begun to improve our operations and restore
our customers’ confidence in us. As to the Mechanical Solutions segment,
it has inherent value in its brand, worldwide product advances and
renewed focus on process and quality in its U.S. operations. Mechanical
Solutions could also have better future growth opportunities as a part
of a well-capitalized organization with greater resources. Our
objectives are to better capitalize Global Power and generate improved
financial performance.”

Update on Financial Reporting for 2017

The Company expects to file its quarterly reports for 2017 by the end of
the year and its 2017 annual report on Form 10-K by the filing deadline
at the end of March 2018. Once current with its filings, Global Power
plans to hold an annual meeting of shareholders and to apply for listing
on a national securities exchange.

Webcast and Teleconference

The Company will host a webcast and conference call on Wednesday,
September 13, 2017, at 9:00 am Central Time / 10:00 am Eastern Time. The
call can be accessed by dialing 201-493-6780 or the webcast and
accompanying slide presentation can be found at www.globalpower.com.

An audio replay of the call will be available from 12:00 pm CT (1:00 pm
ET) on the day of the teleconference until the end of day on September
20, 2017. To listen to the audio replay, call 412-317-6671 and enter
conference ID number 13669379. Alternatively, you may access the webcast
replay at http://ir.globalpower.com/,
where a transcript will be posted once available.

NOTE 1 – Non-GAAP Financial Measures

In addition to reporting net income, a U.S. GAAP measure, we present
Adjusted EBITDA (earnings before interest expense-net, income tax
(benefit) expense, depreciation and amortization, and unusual gains or
charges), which is a non-GAAP measure. The Company’s management believes
Adjusted EBITDA is an important measure of operating performance because
it allows management, investors and others to evaluate and compare the
performance of its core operations from period to period by removing the
impact of the capital structure (interest), tangible and intangible
asset base (depreciation, amortization and impairment expense), taxes
and unusual gains or charges (bargain purchase gain, foreign currency
gain, other expense-net, stock-based compensation, restatement expenses,
asset disposition costs, net loss on sale-leasebacks, losses on sale of
business and net assets held for sale, bank restructuring costs,
facility exit costs and severance costs), which are not always
commensurate with the reporting period in which such items are included.
Adjusted EBITDA is not calculated through the application of GAAP and is
not the required form of disclosure by the U.S. Securities and Exchange
Commission (the “SEC”). As such, it should not be considered as a
substitute for the GAAP measure of net income and, therefore, should not
be used in isolation from, but in conjunction with, the GAAP measure.
The use of any non-GAAP measure may produce results that vary from the
GAAP measure and may not be comparable to a similarly defined non-GAAP
measure used by other companies. See the attached Adjusted EBITDA
Reconciliation table on page 14.

About Global Power

Global Power is a design, engineering and manufacturing firm providing a
broad array of equipment and services to the global energy and
industrial markets. The Company reports in three operating segments. The
Mechanical Solutions segment designs, engineers and manufactures a
comprehensive portfolio of equipment for utility-scale natural gas
turbines. The Electrical Solutions segment 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.

Forward-looking Statement Disclaimer

This press release contains “forward-looking statements” within the
meaning of the term set forth in the Private Securities Litigation
Reform Act of 1995. The forward-looking statements include statements or
expectations regarding the Company’s ability to comply with the terms of
its debt instruments, the timing and the Company’s ability to file its
2017 financial results and regain SEC reporting compliance, the timing
or outcome of its strategic alternative initiatives with its products
businesses, the expected timing of shipments, preliminary estimates of
2017 financial results, ability to strengthen the Services segment,
impact of recent senior leadership changes, ability to register its
shares for listing on a national exchange, the expected timing of the
Company’s next shareholder meeting and related matters. These statements
reflect our current views of future events and financial performance and
are subject to a number of risks and uncertainties, including our
ability to comply with the terms of our credit facility. Our actual
results, performance or achievements may differ materially from those
expressed or implied in the forward-looking statements.

Contacts

Investor Relations:
Kei Advisors LLC
Deborah K.
Pawlowski ,716-843-3908
[email protected]

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