10-K 1 glpw-20161231x10k.htm 10-K 2016_Super_10K

 

 

UNITED STATES

SECURITIES AND EXCHANGE

COMMISSION

WASHINGTON, D.C. 20549


FORM 10‑K


ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2016

Commission File No. 001‑16501

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Global Power Equipment Group Inc.

(Exact name of registrant as specified in its charter)


Delaware
(State or other jurisdiction of
incorporation or organization)

73‑1541378
(I.R.S. Employer
Identification No.)

 

400 E. Las Colinas Blvd., Suite 400

Irving, TX 75039

(Address of registrant’s principal executive offices and zip code)

Registrant’s telephone number, including area code: (214) 574‑2700

 

Securities registered pursuant to Section 12(b) of the Act:

 

NONE

 

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, par value $0.01 per share


Indicate by check mark if the registrant is a well‑known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐  No ☒

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐  No ☒

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐  No ☒

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S‑T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☐  No ☒

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S‑K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10‑K or any amendment to this Form 10‑K. ☐ 

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non‑accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b‑2 of the Exchange Act:

 

 

 

 

 

 

Large accelerated filer

 

Accelerated filer

Non-accelerated filer

 

Smaller reporting company

(Do not check if a smaller reporting company)

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b‑2 of the Exchange Act). Yes ☐  No ☒

 

As of July 1, 2016, the last business day of our most recently completed second fiscal quarter, 10,999,968 shares of the registrant’s publicly traded common stock held by non-affiliates were outstanding with an aggregate market value of approximately $23,759,931 (based upon the closing price on July 1, 2016 of $2.16  per share).

 

As of September 5, 2017, there were 17,778,885 shares of common stock of Global Power Equipment Group Inc. outstanding.

 

 

 


 

Table of Contents

 

Explanatory Note 

1

Cautionary Note Regarding Forward-Looking Statements 

3

Part I 

5

Item 1.    Business.

5

Item 1A.  Risk Factors.

16

Item 1B. Unresolved Staff Comments.

37

Item 2. Properties.

38

Item 3. Legal Proceedings.

39

Item 4. Mine Safety Disclosures.

39

Part II 

40

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

40

Item 6. Selected Financial Data.

42

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. 

46

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

82

Item 8. Financial Statements and Supplementary Data.

83

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

83

Item 9A. Controls and Procedures.

84

Item 9B. Other Information.

87

Part III 

88

Item 10. Directors, Executive Officers and Corporate Governance. 

88

Item 11. Executive Compensation. 

97

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. 

115

Item 13. Certain Relationships and Related Transactions, and Director Independence.

118

Item 14. Principal Accountant Fees and Services. 

118

Part IV 

119

Item 15. Exhibits and Financial Statement Schedules. 

119

Item 16. Form 10-K Summary. 

119

 

Statements we make in this Annual Report on Form 10-K where we express a belief, expectation or intention or otherwise are not limited to recounting historical facts are forward‑looking statements. These forward‑looking statements are subject to various risks, uncertainties and assumptions, including those noted under the headings “Cautionary Note Regarding Forward-Looking Statements” and “Part I—Item 1A—Risk Factors” in this Annual Report on Form 10-K.

 

 

 


 

Explanatory Note

 

This Annual Report on Form 10-K (this “Form 10-K”) is a comprehensive filing for the fiscal year ended December 31, 2016, filed by Global Power Equipment Group Inc. (“Global Power,” the “Company,” “we,” “us” or “our,” unless the context indicates otherwise).

We experienced a significant delay in completing our Annual Report on Form 10-K for the year ended December 31, 2015 (the “2015 Report”), which included the restatement of certain prior period financial results. For additional information regarding this restatement and related matters, investors should refer to the 2015 Report. Because of the delay in filing our 2015 Report, we did not timely file our Quarterly Reports on Form 10-Q for the first three quarters of our 2016 fiscal year or this Form 10-K for the fiscal year ended December 31, 2016.

In order to provide stockholders a composite presentation of information, this filing includes more information than would routinely be included in an Annual Report on Form 10-K. This Form 10-K includes:

·

Audited balance sheets as of December 31, 2016 and 2015 and audited consolidated statements of operations, consolidated statements of comprehensive (loss) income, consolidated statements of stockholders’ equity and consolidated statements of cash flows for each of our fiscal years ended December 31, 2016, 2015 and 2014.

·

Selected Financial Data for our 2016, 2015, 2014, 2013 and 2012 fiscal years.

·

Management’s Discussion and Analysis for our fiscal years ended December 31, 2016 and 2015, including comparisons with the corresponding year-to-date periods in 2015 and 2014.

·

Management’s Discussion and Analysis for our fiscal quarters ended March 31, 2016, June 30, 2016 and September 30, 2016, including comparisons with the corresponding quarterly periods in 2015.

·

Unaudited condensed financial information for our fiscal quarters ended March 31, 2016, June 30, 2016 and September 30, 2016.

We believe that presenting all of the information for the periods indicated above in this Form 10-K allows investors and others to review all pertinent data in a single presentation. We have not filed and do not intend to file Quarterly Reports on Form 10-Q for any of our 2016 fiscal quarters.

On December 22, 2016, we sold three of our manufacturing facilities in Franklin, Indiana, Auburn, Massachusetts and Houston, Texas for $14.8 million and immediately leased the facilities back (the “sale-leaseback”) for a term of ten years. The net proceeds of $12.2 million were used to pay down our debt. We expect a net increase in our rental expense in 2017 as a result of this transaction.

In July 2016, we sold the stock of our wholly owned subsidiaries TOG Holdings, Inc. and TOG Manufacturing Company, Inc. (collectively, “TOG”), for $6.0 million in cash to Doncasters Group, subject to traditional post-closing working capital adjustments, escrow withholdings and disposition expenses. Proceeds from the sale of TOG were used to reduce debt.

Subsequent Events

Subsequent to December 31, 2016, we undertook several initiatives designed to restructure our operations, lower our operating costs, enhance our liquidity and reduce indebtedness.

In June 2017, funds affiliated with Centre Lane Partners, LLC (“Centre Lane”) purchased the outstanding debt from our then-existing lenders under our revolving credit agreement. Centre Lane assumed the credit agreement prior to the completion of a new, multi-year credit agreement entered into by the Company and Centre Lane, which replaced our revolving credit facility. In August 2017, the Company and Centre Lane entered into the first amendment to the credit agreement, which provided the Company with further funds in the form of a first-out term loan, which matures in September 2018.

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In January 2017, we sold the stock of our wholly owned subsidiaries, Hetsco Holdings, Inc. and Hetsco, Inc. (collectively, “Hetsco”) for $23.2 million in cash, inclusive of working capital adjustments. After transaction costs and an escrow withholding of $1.5 million, the net proceeds of $20.2 million were used to reduce debt. Reported as part of our Services segment, Hetsco provided brazed aluminum heat exchanger repair and maintenance and safety services to the industrial gas, liquefied natural gas and petrochemical industries. Following the sale of Hetsco, we no longer engage in these services and no longer maintain intellectual property related to the Hetsco trade name or brand. Unless otherwise specified, information contained in this report is as of December 31, 2016 and does not reflect the sale of Hetsco. For the year ended December 31, 2016, Hetsco contributed $22.4 million in revenue, $7.2 million in gross profit and an operating loss of $7.6 million, which included a loss on assets and liabilities held for sale of $8.3 million.

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Cautionary Note Regarding Forward‑Looking Statements

 

This Form 10-K and its exhibits contain or incorporate by reference various forward-looking statements that express a belief, expectation or intention or are otherwise not statements of historical fact. Forward-looking statements generally use forward-looking words, such as “may,” “will,” “could,” “project,” “believe,” “anticipate,” “expect,” “estimate,” “continue,” “potential,” “plan,” “forecast” and other words that convey the uncertainty of future events or outcomes. These forward-looking statements are not guarantees of our future performance and involve risks, uncertainties, estimates and assumptions that are difficult to predict. Therefore, our actual outcomes and results may differ materially from those expressed in these forward-looking statements. Investors should not place undue reliance on any of these forward-looking statements. Except as required by law, we undertake no obligation to further update any such statements, or the risk factors described in “Part I—Item 1A. Risk Factors,” to reflect new information, the occurrence of future events or circumstances or otherwise.

The forward-looking statements in this filing do not constitute guarantees or promises of future performance. The following important factors could cause actual outcomes and results to differ materially from those expressed in our forward-looking statements:

·

our high level of indebtedness;

·

our ability to make interest and principal payments on our debt and satisfy the other covenants contained in the Centre Lane Facility (as defined below);

·

our ability to generate sufficient cash resources to continue funding operations;

·

our pending putative securities class action;

·

the United States (“U.S.”) Securities and Exchange Commission (the “SEC”) Division of Enforcement’s pending formal investigation into possible securities law violations by the Company;

·

our material weaknesses in internal control over financial reporting and our ability to maintain effective controls over financial reporting in the future;

·

changes in our senior management, financial reporting and accounting teams;

·

our ability to timely prepare and file our periodic reports;

·

our ability to comply with certain financial covenants of our debt obligations;

·

a failure to implement our business strategies;

·

a failure to realize operating and growth initiatives and opportunities;

·

our competitive position;

·

market outlook and trends in our industry;

·

the results of the bankruptcy filing of Westinghouse Electric Company LLC (“Westinghouse”) and the effects of such filing on the construction of Plant Vogtle Units 3 and 4 and V.C. Summer Units 2 and 3, including construction delays, abandonment, cost overruns and the advisability and feasibility of completing such units;

·

our contract backlog and related amounts to be recognized as revenue;

·

our expected financial condition;

·

our future cash flows;

·

our expected results of operations;

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·

future capital and other expenditures;

·

availability of raw materials and inventories;

·

the impact of Hurricane Harvey or other natural disasters;

·

plans and objectives of management;

·

future exposure to currency devaluations or exchange rate fluctuations;

·

future income tax payments and utilization of net operating loss (“NOL”) and foreign tax credit carryforwards;

·

future compliance with orders of and agreements with regulatory agencies;

·

expected outcomes of legal or regulatory proceedings and their expected effects on our results of operations; and

·

any other statements regarding future growth, future cash needs, future operations, business plans and future financial results.

These forward-looking statements represent our intentions, plans, expectations, assumptions and beliefs about future events and are subject to risks, uncertainties and other factors, including unpredictable or unanticipated factors that we have not discussed in this Form 10-K. Many of those factors are outside our control and could cause actual results to differ materially from the results expressed or implied by the forward-looking statements.

In light of these risks, uncertainties and assumptions, the events described in the forward-looking statements might not occur or might occur to a different extent or at a different time than we have described. Investors should consider the areas of risk and uncertainty described above, as well as those discussed below under “Part I—Item 1A. Risk Factors.” Except as may be required by applicable law, we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, and we caution investors not to rely upon them unduly.

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Part I

 

Item 1.  Business.

Overview

Global Power and its wholly owned subsidiaries are comprehensive providers of custom-engineered solutions and maintenance and modification services for customers in the energy and industrial markets. As of December 31, 2016, customers were located inside and outside the U.S., in both developed and emerging economies.

We design, engineer and manufacture a comprehensive range of gas and steam turbine products, control houses and generator enclosures primarily used to enhance the efficiency and facilitate the operation of power plants and other industrial, energy and power related applications. We believe our customer relationships built over many years, the reliability and performance of our solutions, our ability to deliver complex, engineered solutions, our advanced engineering and execution capabilities, our worldwide manufacturing base and our leading installed base of equipment throughout the world have supported key parts of our business.

We provide on-site maintenance and modification services, outage management and craft labor, facility upgrade services, specialty coatings and roofing, asbestos and lead abatement, specialty aluminum welding, repair and maintenance of brazed aluminum heat exchangers and other industrial and safety services to nuclear, fossil fuel, industrial gas and liquefied natural gas (“LNG”), petrochemical and other industrial operations in the U.S. Subsequent to December 31, 2016, we sold our Hetsco business, which engaged in certain of these services. See “Explanatory Note” for additional information. We have the capability to combine our resources to offer solutions for aftermarket repair applications for the North American gas turbine power generation, petrochemical and cogeneration markets.

Including our predecessor entities, we have over 50 years of experience providing custom-engineered products that are critical for the operation of power plants and more than 32 years of experience providing complex outage shutdown services to operators of nuclear power plants and other industrial maintenance services.

As of December 31, 2016, we used the Braden, Consolidated Fabricators, Hetsco, IBI Power, Koontz-Wagner and Williams trade names and the logos for each of those businesses and for Global Power. These trade names and logos are the property of Global Power. Product names and company programs appearing throughout this Form 10-K are trademarks of Global Power. This Form 10-K also may refer to brand names, trademarks, service marks and trade names of other companies and organizations, and those brand names, trademarks, service marks and trade names are the property of their respective owners. Subsequent to December 31, 2016, we sold Hetsco which maintained some of the intellectual property assets described. See “Explanatory Note” for additional information.

Segments

In determining our reportable segments in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 280—Segment Reporting (“ASC 280”), we concluded that we have three reportable segments: Mechanical Solutions, Electrical Solutions and Services.

Mechanical Solutions

As of December 31, 2016, this reportable segment was comprised of Braden Manufacturing, LLC (“Braden”), Braden Europe, B.V. (“Braden Europe”) and Consolidated Fabricators (“CFI”). TOG was included in this segment until we sold all of the stock of TOG in July 2016. See “Explanatory Note” and “Part II—Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity Outlook” for additional information. Our Mechanical Solutions segment designs, engineers, manufactures, installs, commissions and provides services for the worldwide power generation markets. Mechanical Solutions’ products and services include filter houses, inlet and exhaust systems, diverter dampers, selective catalytic reduction systems (commonly referred to as “SCR”), auxiliary control skids and enclosures, expansion joints, air filtration elements, retrofit and upgrade solutions for natural gas turbine power plants and other industrial, energy and power-related applications. We also provide replacement parts, filter elements and aftermarket retrofit equipment to both original equipment manufacturers (“OEMs”) and end users. Our solutions are custom-engineered to meet project and customer-specific requirements. Our principal customers are utility-scale gas turbine OEMs, engineering, procurement and contractor (“EPC”) firms and the owner/operators that buy OEM equipment, such as electric utilities and independent power producers.

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Our technical and engineering capabilities enable us to design and manufacture a broad range of power plant and other industrial equipment to meet each customer’s specific performance requirements. We provide the following comprehensive range of solutions critical to the operation of power plants.

·

Inlet Systems.  Inlet systems are comprised of filter houses and air intake ducts that condition the air entering a turbine or engine (pulse-type or barrier filtration, temperature and moisture control, flow distribution and pressure drop optimization) and provide acoustical treatment for noise generated by the gas turbine air flow.

·

Exhaust Systems.  Exhaust systems, including diffusers, plenums, ducts and stacks, expansion joints and diverter dampers, direct the hot exhaust from the turbine to the atmosphere in the case of simple cycle operation or into a heat recovery steam generator (“HRSG”) when the power plant is operated as a combined cycle facility.

·

Selective Catalytic Reduction Systems.  SCR systems are used in simple cycle gas turbine facilities and are focused on removing oxides of nitrogen and carbon and other volatiles from exhaust gas.

·

Custom-Engineered Equipment Skids.  Custom-engineered, pre-packaged equipment skids, either enclosed or open to the elements, with or without HVAC, can be used for a wide variety of industrial equipment applications, allowing faster and lower cost equipment installation at a customer’s industrial site.

The contracts under which we sell our products are typically fixed-price contracts, most of which are “lump sum bid” contracts. Under lump sum bid contracts, we bid against other suppliers based on customer or project specifications. Many of our project destinations are outside the U.S.

Historically, Mechanical Solutions fabricated equipment through a combination of in-house manufacturing at our own facilities in the U.S. and Mexico and outsourced manufacturing in other countries around the world. However, beginning in 2016, all of our Mechanical Solutions businesses, except CFI, began exclusively using outsourced manufacturing facilities. Our network of high quality manufacturing partners, located in more than 20 countries, allows us to manufacture equipment worldwide and maintain a competitive cost structure. Outsourcing our gas turbine auxiliary product manufacturing enables us to meet increasing demand without internal manufacturing capacity limitations, to reduce our capital expenditure requirements and to respond to the particular sourcing initiatives of our customers, whether those initiatives call for global sourcing or for localized supply content. Our employees work closely with our international manufacturing partners to supervise the fabrication of our products at their facilities to ensure high levels of quality and workmanship. While we generally have proven, long-term relationships with our subcontractors, we also routinely search for additional subcontractors to enhance our ability to manufacture equipment at the lowest cost while maintaining high quality standards and on time delivery.

We maintain agreements with key third party fabricators, many of which require OEM approval. We conduct regular quality audits of our fabricators and, in some cases, maintain staff on-site. Subcontractors can sometimes take several years to qualify to meet our requirements and international standards, including OEM audit and approval.

Electrical Solutions

As of December 31, 2016, this reportable segment was comprised of Koontz-Wagner, the former operations of IBI Power following its merger with and into Koontz-Wagner and the portion of the Energy Packaged Power Solutions business that we acquired in the first quarter of 2015 from Siemens Industry, Inc. (“Siemens” and the “Siemens’ eHouse manufacturing operations”). Electrical Solutions focuses on custom engineering and manufacturing of integrated control house systems, engine generator packages and enclosures, industrial tanks and custom-engineered equipment skids for the energy, oil and gas, digital data storage and electrical industries. Our principal customers are turbine and reciprocating engine OEMs, switchgear and drive OEMs, backup and distributed power providers, EPC firms, electric utilities and owner/operators of independent electric power facilities, oil and gas midstream and downstream operations, information technology companies and other industrial companies. Our solutions are custom-engineered to meet customer-specific requirements.

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Our technical and engineering capabilities enable us to design and manufacture the following products:

·

Custom-Engineered Equipment Skids.  Custom-engineered, pre-packaged electrical equipment skids can be used for a wide variety of industrial equipment applications, allowing faster and lower cost equipment installation at a customer’s industrial site.

·

Packaged Control Houses (“PCH”).   PCH are custom-engineered and designed, fully integrated fabricated metal buildings that house electrical power and control equipment, namely switchgear, motor control centers, variable frequency drives and utilities for the power generation, oil and gas processing and refining (midstream and downstream), industrial, utility and renewables market segments.

·

Generator Enclosure Packages and Sub-Base Tanks.  Custom-engineered and designed generator enclosure packages are fabricated metal buildings that are often sound attenuated and designed to meet site certification, visual, environmental, functional, size and sound requirements. The enclosure packages are used to house both prime and standby diesel/natural gas generators that range from 30 Kilowatts to 4,000 Kilowatts in a wide range of environments, from desert to arctic, in a fully integrated package, including all necessary systems for an operating generator package. We also offer sub-base and stand-alone tanks meeting the safety standards of UL LLC, an American safety consulting and certification company, including UL LLC listings UL 142, UL 2085 and ULC-S601.

The contracts under which we sell our products are fixed-price contracts, most of which are “lump sum bid” contracts. Our project destinations are primarily in the U.S.

Electrical Solutions continues to leverage its geographically broad North American manufacturing footprint to provide control houses, custom-engineered equipment skids and generator packages throughout the western hemisphere.

Services

As of December 31, 2016, this reportable segment was comprised of Williams Industrial Services Group, LLC (collectively with Williams Plant Services, LLC, Williams Specialty Services, LLC and Williams Industrial Services, LLC, the “Williams business”) and Hetsco. The Hetsco business was sold in January 2017. See “Explanatory Note” for additional information. Our Services segment provides a comprehensive range of maintenance, modification and construction support services for nuclear power plants and a wide range of utility and industrial customers in the fossil fuel, industrial gas, natural gas and petrochemical industries, as well as other industrial operations. We provide these services primarily on a direct hire basis, where we manage and perform the work ourselves. We can also act in a general contracting capacity where we manage multiple subcontractors and, in other cases, we are retained as a subcontractor on a project. We primarily operate in the U.S. The Hetsco business generated a portion of its revenue in 2016 from offshore repairs of installed aluminum heat exchangers, primarily in the Middle East, Africa and Asia. The services provided by our Services segment are designed to improve or sustain operating efficiencies and extend the useful lives of process equipment. We provide these services both on a constant presence basis and for discrete projects.

Our Services segment offerings include the following:

·

Nuclear Power Plant Maintenance, Modification and Construction.  We perform a full range of critical services for the nuclear facility market, including capital projects and facility upgrades, as well as routine maintenance and modification work.

·

Fossil Fuel, Industrial Gas, Natural Gas and Petrochemical Operations Modification and Construction.  We provide routine maintenance, repair and capital project services designed to extend plant life cycles.

·

Industrial Painting and Coatings.  We perform cleaning, surface preparation, coatings application, quality control and inspection testing on major coating projects for nuclear and fossil fuel power plants, industrial facilities and petrochemical plants.

·

Insulation.  We provide a variety of industrial insulation services, primarily in power generation installations.

·

Asbestos and Lead Abatement.  We provide abatement services for the removal of asbestos and heavy metal

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based coatings such as lead paint. We do not take ownership of hazardous materials and do not assume responsibility for the liability associated with the materials other than for our actions meeting applicable statutory and regulatory requirements.

·

Roofing Systems.  We replace, repair and upgrade industrial facility roofing systems, primarily at pulp and paper manufacturing facilities and nuclear power plant locations.

·

Specialty Welding Services.  Prior to the sale of the Hetsco business, we provided the following specialty services to manufacturers and users of aluminum heat exchangers:

o

Brazed Aluminum Heat Exchanger Repair, Maintenance and Safety Services. We routinely performed on-site repairs and associated mechanical and safety support services to users of aluminum heat exchangers used in air separation and gas or liquid processing applications.

o

Fabrication. We have the demonstrated capability to fabricate and assemble complete process systems into integrated solutions for the air and gas processing industries.

We provide these services throughout the U.S. with experienced craft laborers who are directed and managed by an experienced team of supervisors and project managers across our network. Our flexible staffing and equipment model enables us to meet seasonal and outage demand without being restricted by internal capacity limitations, thereby minimizing our fixed costs.

In 2016, our Services segment contracted for 72% of the services it provided on a cost-plus basis under contracts that provide for reimbursement of costs incurred plus an amount of profit. It contracted for 28% of the services it provided on a fixed-price basis.

We bid against other contractors based on customer specifications. Fixed-price contracts present certain inherent risks, including the possibility of ambiguities in the specifications received, problems with new technologies and economic and other changes that may occur over the contract period. Alternatively, because of efficiencies that may be realized during the contract term, fixed-price contracts may offer greater profit potential than cost-plus contracts.

For additional information about our segments, please refer to “Note 1—Business and Organization” and “Note 18—Segment Information” to our consolidated financial statements.

Market Overview

Gas Turbine Power Generation and Cogeneration Market.  All gas turbine power plants combine a gas turbine with a generator to produce electricity. In a simple cycle gas turbine plant, the hot exhaust coming out of the gas turbine is vented to the atmosphere through an exhaust stack. In a combined cycle plant, the hot exhaust coming out of the gas turbine is fed into a HRSG. The HRSG captures much of the heat from the gas turbine exhaust to generate steam, which in turn is used to power a steam turbine and generate more electricity before the exhaust is vented into the atmosphere. We manufacture products that are critical components of both simple cycle and combined cycle plants, including packaged control houses, cabinets and skids, or “balance of plant hardware,” filter houses, inlet and exhaust systems, SCRs and turbine and generator components. We also engineer and manufacture specialized diverter dampers that are used in some combined cycle plants between the gas turbine and the HRSG.

Utility-scale natural gas turbine power plants are built to meet growth in demand for electricity, replace aged power producing facilities or supplant less environmentally-friendly coal-fired power plants. According to Enerdata, a global energy intelligence organization, world electricity consumption stabilized in 2014 and 2015 after declining from the global recession. Demand began to rebound in 2016, but was still below historic growth trends.

We believe the driver for natural gas turbine facilities and related demand for our products and services are the advantages of natural gas turbine power generation plants versus other technologies, which include:

·

lower construction costs;

·

shorter construction periods;

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·

improved operating efficiency;

·

lower emissions (NOx, CO2 and other pollutants);

·

flexibility to expand plant capacity;

·

smaller geographical footprint; and

·

rapid start-up and shutdown time.

Oil and Gas Market.  The American Petroleum Institute defines the oil and gas industry as having three segments: Exploration and Production (“upstream”), Transportation (“midstream”) and Refining/Constituent Chemical Processing (“downstream”). We design, manufacture, integrate and package free standing metal interlocking panel buildings that house control systems, switch gear and generators. Our products are deployed globally into the upstream, midstream and downstream oil and gas markets. We produce specialty engineered products, such as flow control and customized skids. Our focus on lean manufacturing processes enables us to perform rapid, serial production of systems and solutions for large projects. We also provide installation, facility upgrade, repair and maintenance services for midstream and downstream operations such as pipeline terminals, compressor or pumping stations and storage operations, refineries and petrochemical processing facilities and LNG operations.

While the drivers for the three segments of the oil and gas industry can vary, we believe demand for certain of our products and services is driven by strength in the oil and gas production industry, which is subject to volatility in energy prices and demand.

The North American oil and gas market has benefited in recent years from advanced extraction methods such as hydraulic fracturing, which has led to pipeline expansions as well as the development of petrochemical facilities and gas separation and liquefaction projects. However, the price of oil began to decline in mid-2014 and dropped to a 14-year low in January 2016. Oil prices began to rise from that point, and the West Texas Intermediate price has been fluctuating around $40 to $50 per barrel since April 2016. The U.S. Energy Information Administration (“EIA”) reported as of July 25, 2017, that U.S. crude oil production is forecasted to average 9.3 million barrels per day for the year, up approximately 15% from 2016, and is expected to increase another 6.5% in 2018. Additionally, key members of the Organization of Petroleum Exporting Countries announced that they will continue the production cuts from the first half of 2017 into 2018. We believe these factors will continue to positively impact the U.S. oil production industry.

Power Generation Market and the Industrial Services Industry.   The U.S. industrial services industry is a multi-billion dollar industry, broadly defined as routine modification, maintenance and technical services provided to industrial facilities ranging from manufacturing facilities to power generation plants. The industry continues to benefit from a shift towards outsourcing as plant operators seek to alleviate financial constraints, reduce labor costs, increase labor utilization and productivity and eliminate operational redundancies.

We expect that power industry demand for these services will be driven by the following factors in the future:

·

Aging Power Generation Infrastructure Increases Demand for Plant Maintenance and Decommissioning Services.  According to the EIA, more than half of the electrical generating capacity in the U.S. was placed in service before 1990. Coupled with the relatively limited number of large-scale power generation facilities being constructed in the U.S., the efforts to maintain older plants of all types and to take advantage of newer and more efficient technologies at existing sites provide opportunities for companies providing services to plant operators. The low price of natural gas is driving demand for new and replacement generation capacity toward combined cycle gas powered plants, which are more economical to run. With natural gas pricing expected to remain low, this is also driving the conversions of simple cycle plants to combined cycle technology.

Further, approximately 90 nuclear reactors that have been in operation in the U.S. for more than 30 years require extensive ongoing engineering and maintenance services to support operations and improve performance. Nuclear power plants in the U.S. are subject to a rigorous program of U.S. Nuclear Regulatory Commission (“NRC”) oversight, inspection, preventive and corrective maintenance, equipment replacement and equipment testing. Nuclear power plants are required by the NRC to go offline to refuel at

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intervals of no more than 24 months and to perform condition monitoring and preventive maintenance during every refueling outage. Initially, commercial nuclear power plants in the U.S. were licensed to operate for 40 years, reflecting the amortization period generally used by electric utility companies for large capital investments. As of December 31, 2016, the NRC had extended the licenses of approximately 85 reactors. In all, about 90 reactors are expected to operate for up to 60 years, with owners undertaking an increase in modification, maintenance and construction capital projects to upgrade these facilities. Decommissioning work on retired nuclear reactors also provides future opportunities for growth.

·

International Natural Gas Turbine Power Generation Growth.  Our Mechanical Solutions segment has had demand for its products from the Middle East, Mexico, South Korea and Southeast Asia. Large, or jumbo, natural gas turbine power generation units represent approximately two-thirds of the new capacity demand. Small natural gas turbine units have also been in demand for portable power and remote/island power needs. The overall number of projects in the Middle East is continuing to rise, including plant upgrades and conversion from simple cycle to combined cycle technology. Among the factors driving this increase for natural gas turbines is operational flexibility, short construction time and the improvement in combined cycle gas turbine technology that has been developed by the major OEMs, which exceeds 60% efficiency.

·

North America Infrastructure Growth.  Record levels of natural gas production has driven transmission and distribution infrastructure development to reduce transportation bottlenecks and bring more natural gas to key markets. The value of low cost shale gas is transitioning from upstream to downstream users, including petrochemical facilities and power generation assets. Infrastructure growth provides opportunities for our Services segment to assist in the construction and maintenance of these facilities, while our Electrical Solutions segment can provide its products to the engineering and procurement contractors designing and building the plants as well as to the owner/operators.

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Nuclear Power Plant Services and New Nuclear Reactor Construction.  We are one of a limited number of companies qualified to perform comprehensive services in U.S. nuclear power plants under rules issued by the NRC. We are one of the few contractors with a qualified and audited Nuclear Quality Assurance (“NQA-1”) Program, which is required to perform contract services at the new build reactors. Under these rules, owners of nuclear facilities must qualify contractors by requiring the contractors to demonstrate that they will comply with NRC regulations on quality assurance, reporting of safety issues, security and control of personnel access and conduct. On the majority of our maintenance and project work, we directly hire the labor and provide the management and supervision to perform the work directly for the owner. In some cases, we act as a general contractor and subcontract portions of the work or, alternatively, subcontract our services to full scope EPC firms or general contractor firms. We maintain good relationships with the utilities, the EPC firms, the general contractor firms and relevant engineering firms. Revenue associated with construction-related projects and other comprehensive service provided at nuclear power plants totaled $125.6 million in 2016 and $255.6 million in 2015.

As of December 31, 2016, there were four new nuclear reactors at two U.S. sites in various stages of construction and commissioning: two at Plant Vogtle in Georgia and two at V.C. Summer in South Carolina. In 2015 and 2016, and continuing through August 2017, our Services segment has participated in several construction-related projects at Plant Vogtle Units 3 and 4 and V.C. Summer Units 2 and 3.

Revenue associated with construction projects at Plant Vogtle Units 3 and 4 totaled $20.0 million and $15.0 million in 2016 and 2015, respectively. On August 30, 2017, the owners of Plant Vogtle Units 3 and 4, along with the other co-owners, filed their recommendation with Georgia’s Public Service Commission to continue construction of Plant Vogtle’s nuclear expansion. Our Services segment has served as a subcontractor for nuclear expansion work at the Plant Vogtle Units 3 and 4 since 2011, and based on this announcement, we believe we can continue to expand the scope of that work. We expect the final decision to be made by the Georgia Public Service Commission after it reviews the recommendations made by the co-owners. In the event construction is discontinued, our Services segment will be adversely affected.

Revenue associated with construction-related projects at V.C. Summer Units 2 and 3 totaled $3.1 million and $1.7 million in 2016 and 2015, respectively. The owners of V.C. Summer Units 2 and 3 filed a petition with the Public Service Commission of South Carolina seeking approval of an abandonment plan of such units, which they later voluntarily withdrew. The ultimate status of V.C. Summer Units 2 and 3 is currently unclear. In the event the V.C. Summer units are abandoned, our Services segment will be adversely

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affected, although the volume of our services provided at this site was not material to our business as a whole.

We also had a significant role in the recent completion of construction activities at Watts Bar Unit 2 in 2016. Revenue associated with construction-related projects at Watts Bar Unit 2 totaled $26.6 million in 2016 and $92.8 million in 2015. 

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Industrial Gas and Natural Gas Markets.  Industrial gases are used in a variety of end markets and frequently require aluminum-brazed heat exchangers to address cryogenic production capabilities. The global industrial gas market is projected to grow, driven by emerging markets and energy demand. In addition, natural gas demand is expected to grow, particularly from petrochemical manufacturers, LNG processors and other companies in the refining and industrial gas industries that use natural gas as a feedstock. Subsequent to December 31, 2016, we sold our Hetsco business. Following that sale, our penetration into the industrial gas industry for the repair and maintenance of cryogenic gas production was eliminated.

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Standby and Distributed Power Generation.  Unlike central station generation, standby and distributed power generation equipment can sit on either side of the utility meter and may be owned by a utility, a customer or a third party. Peak energy demand requirements and higher costs, as well as transmission and distribution infrastructure limits, are driving investment into this space. The growth in industries with high power demand and sensitivity to power supply instability, such as datacenters, medical centers, universities and remotely located industrial loads, are straining the traditional power infrastructure. The electric power needs for these markets have been served by small-scale utility-owned diesel or gas engine generators strategically located to support distributed system operations. The power supply is trending toward larger (greater than 1,000 Kilowatts) diesel engine generator systems and expanding into alternative energy assets. Our Electrical Services segment serves the large and growing datacenter industry with customized generator enclosures and fuel tanks. Our experience in this industry enables us to extend our offerings into adjacent markets through the relationships developed with engine OEMs.

Business Strategy

Beginning in 2015 and continuing in 2017, we initiated a strategy to sell assets, aggressively manage working capital and reduce costs in order to improve liquidity and reduce debt. Currently, we are evaluating strategic alternatives for our Mechanical Solutions segment as we believe this segment’s customers, employees and suppliers could benefit from increased capital and increased investments to allow the segment to compete more effectively and pursue greater growth. Our strategy is also to leverage the strength of our brands (Braden, Consolidated Fabricators, Koontz-Wagner and Williams), capitalize on our industry knowledge and customer relationships and safely provide reliable service and high quality products on time for our customers. As part of our annual planning process, each of our businesses develops growth, productivity improvement and cost reduction initiatives. Each unit has specific initiatives with associated targets for revenue and cash flow. To achieve these goals, our domestic Mechanical Solutions and Electrical Solutions businesses must improve their operational performance, drive operational excellence, improve customer and supplier relationships and expand their customer base. Our Services business must increase the number of customers it serves, increase the number of services it offers and leverage its capabilities across more industries.

We pursue revenue and margin enhancement opportunities, including streamlining and consolidating operations, utilizing estimating and engineering technologies, deploying rigorous project management techniques, initiating various process improvement projects and employing experienced industry-recognized sales professionals.

We are also focused on increasing our margins through the application of lean manufacturing processes and continuous improvement in our operations. We are committed to delivering quality products and services on time for our customers. In addition to pursuing better execution on the shop floor and at our project sites, we have streamlined our selling and administrative functions to better serve our customers. We have implemented lean manufacturing processes to be closer to our customers and adjust faster to changing market conditions.

While headcount continues to decline, positions that have been replaced have been upgraded to expand our range of expertise and depth of knowledge. Our objective is to foster a workplace that will attract top people, challenge them with meaningful projects, reward them for their performance and advance their careers.

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Customers, Marketing and Seasonality

Mechanical Solutions.  Our Mechanical Solutions segment customers are utility-scale gas turbine OEMs, owner/operators, electric utilities and EPC firms. The end users of most of our products sold to OEMs and EPC firms are owners and operators of power plants, including electric utilities. We market our products and services globally through a sales network consisting of employees and independent representatives in various geographic areas, including the Americas, Europe, Asia and the Middle East. Our Mechanical Solutions segment is not materially impacted by seasonality, but rather is more impacted by the growth rates and cyclicality of the U.S. and international economies that we serve.

Electrical Solutions.  Our Electrical Solutions segment customers are turbine and reciprocating engine OEMs, switchgear and drive OEMs, backup and distributed power providers, owner/operators (including industrial customers in the oil and gas midstream and downstream markets), electric utilities and EPC firms. The end users of most of our products sold to OEMs and EPC firms are owners and operators of power plants, process plants, refineries, pipelines, data centers and other industrial and commercial facilities such as wastewater treatment plants and hospitals. We focus our sales and marketing efforts on OEMs and EPC firms engaged by end users of our products, including the developers and operators of power plants, industrial and commercial facilities and data centers. Our Electrical Solutions segment is not materially impacted by seasonality, but rather is more impacted by the growth rates and cyclicality of the U.S. and international economies that we serve.

Services.  Our Services segment customers include major private and government-owned utilities throughout the U.S., as well as leaders in the U.S. pulp and paper and industrial sectors. We market our services using dedicated sales and marketing personnel as well as our experienced on-site operations personnel. We use our safety and service track record with long-term renewable contracts to expand our services and supplement existing contracts with small-to medium-sized capital projects. Our sales initiatives directly seek to apply operational strengths to specific facilities within our targeted industries and customers throughout the U.S. Our Services segment is materially impacted by seasonality, resulting in fluctuations in revenue and gross profit during our fiscal year. Generally, the second and fourth quarters are the peak periods for our Services segment, as those are periods of low electricity demand during which our customers schedule planned outages.

We depend on a relatively small number of customers for a significant portion of our revenue, and the loss of any of those customers would have a material adverse effect on our business. For a listing of our major customers, see “Note 16—Major Customers and Concentration of Credit Risk” to our consolidated financial statements.

Engineering, Design and Maintenance Capabilities

Mechanical Solutions and Electrical Solutions.  We provide original design, retrofit and upgrade engineering, installation, technical services and after sales maintenance and repair of our products. Our products are custom-designed and engineered to meet the specifications of our customers, including local, state, federal and international code requirements and certifications. Our engineers and designers use engineering and drafting programs such as AutoCAD®, Inventor® 3D modeling software, Solidworks® and other analytics applications.

Services.  Through our NQA-1 Program and other programs, we provide training, certifications and ongoing safety monitoring to all of our Services employees. We are one of a limited number of companies qualified to work anywhere in a U.S. nuclear facility and have been one of the leading providers of coatings at U.S. nuclear facilities for almost 40 years. In addition, we are one of a few contractors with the qualified and audited NQA-1 Program that is required to perform contract services at the new build reactors. For over 13 years, we have maintained a safety record in the top quartile of the industry, benefiting both us and our customers. We also maintain a broad range of professional certifications and memberships in national organizations relevant to the performance of many of the specialized services we provide.

Materials and Suppliers

The majority of materials we purchase are for our Mechanical Solutions and Electrical Solutions segments. The principal materials for our products are carbon steel plate, sheet steel, stainless steel products and other structural shapes, wire, cable and insulation. We obtain these materials from a number of U.S. and international suppliers. The markets for most of the materials we use are served by a large number of suppliers, and we believe that we can obtain required materials from more than one supplier. During 2016 and continuing into 2017, our relationships with certain suppliers to our domestic Mechanical Solutions and Electrical Solutions segments have been negatively impacted as we have delayed payments beyond contractual due dates due to liquidity constraints.

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Competition

Mechanical Solutions and Electrical Solutions.  We compete with a number of domestic and international companies. Some of our competitors are significantly larger than us and have significantly greater financial resources. Other competitors are small, typically privately held companies that are often less sensitive to project risk and onerous contract terms. The competitive landscape is defined not only by the specific product offering, but also by the geographic delivery footprint, total delivery cycle time (from order to title transfer), reputation, build quality, ability to design products to meet each customer’s unique specifications (including design elements and manufacturing methods impacting the total cost of ownership, designed ease of site installation and landed equipment footprint), and total project price. A project’s competitiveness can be influenced by any one or a number of these conditions.

Services.  Our competitors vary depending on plant geography and the scope of services to be rendered. Several national service providers, which are significantly larger and have significantly greater financial resources than we do, will often compete for larger maintenance and capital project opportunities that become available. These service providers include, among others, Day & Zimmermann and Chicago Bridge & Iron Company N.V. Additionally, smaller contractors that operate on a regional basis often compete for smaller opportunities associated with open shop labor sources. We believe that the key competitive factors in the services we offer are reputation, safety, price, service, quality, breadth of service capabilities and the ability to identify and retain qualified personnel. We believe our project management capabilities, including service diversity, long-term customer relationships, safety record and performance, differentiate us from our competitors. We also believe that the fact that we maintain a presence at several of our customers’ sites is a competitive advantage because it provides us with an intimate understanding of these facilities, which allows us to better identify our customers’ service needs. Specific to our customers that operate nuclear power plants, the barriers to entry include the requirement of NRC qualifications and safety standards.

Employees

As of December 31, 2016, we had 877 full- and part-time employees (excluding temporary staff and craft labor in our Services segment). The number of employees in our Services segment fluctuates greatly, depending on the timing and requirements for craft labor. Many of the craft labor employees for our Services segment are contracted through various union agreements. As of December 31, 2016, there were 732 craft labor employees for our Services segment, of which 443 were under collective bargaining agreements. At our Koontz-Wagner business, there are 44 employees who are covered under a collective bargaining agreement. We believe that our relationships with our employees, both full-time and temporary, are satisfactory. We are not aware of any circumstances related to our employees that are likely to result in a work stoppage at any of our facilities. In January 2017, we sold our Hetsco business, which resulted in a decrease in the number of our employees.

Insurance

We maintain insurance coverage for various aspects of our operations; however, we remain exposed to potential losses because we are subject to deductibles, coverage limits and self-insured retentions.

Typically, our contracts require us to indemnify our customers for third party injury, damage or loss arising from the performance of our services and provide for warranties for materials and workmanship. We may also be required to name the customer as an additional insured up to the limits of insurance available, or we may be required to purchase special insurance policies for specific customers or provide letters of credit in lieu of bonds to satisfy performance and financial guarantees on some projects.

We maintain performance and payment bonding lines to support our business. As of December 31, 2016, we maintained a revolving credit facility (as amended from time to time, the “Revolving Credit Facility”) that provided letters of credit. In June 2017, Centre Lane acquired the debt outstanding under the Revolving Credit Facility. We subsequently entered into the Centre Lane Facility and repaid the full balance outstanding under the Revolving Credit Facility. We require certain of our subcontractors to indemnify us and our customers and name us as an additional insured for activities arising out of such subcontractors’ work. We also require certain subcontractors to provide additional insurance policies, including surety bonds in favor of us, to secure such subcontractors’ work or as required by contract. It is possible that our insurance and the additional insurance coverage provided by our subcontractors will not fully protect us against a valid claim or loss under the contracts with our customers.

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Intellectual Property

We use a variety of trademarks, proprietary technologies and other intellectual property in the ordinary course of business in our segments. We rely upon our pending and issued patents, registered and unregistered trademark rights, nondisclosure and confidentiality agreements with our employees, subcontractors, customers and others and various other security measures to protect our intellectual property. Several patents related to exhaust systems will expire in 2017, a patent related to a filter element clip will expire in 2027, patents for an acoustic module enclosure door and an exhaust plenum for gas turbine will expire in 2032, a patent for an exhaust plenum for gas turbines will expire in 2033, and a patent for a method and apparatus for corrugating filter media will expire in 2034. We have patent applications pending for other products. We do not believe that any single patent or proprietary technology is material to our business, and we do not believe that our competitive position would be materially affected by competitors also using similar technologies and systems.

Compliance with Government Regulations

We are subject to certain federal, state and local environmental, occupational health, nuclear regulatory, export and product safety laws applicable in the countries in which we operate. We also purchase materials and equipment from third parties and engage subcontractors who are also subject to these laws and regulations. Below is a summary of certain laws and regulations applicable to our business.

·

Environmental.  We are subject to extensive and changing environmental laws and regulations in the U.S. and in international jurisdictions where we do business. These laws and regulations relate primarily to air and water pollutants and the management and disposal of hazardous materials. We are exposed to potential liability for personal injury or property damage caused by any release, spill, exposure or other accident involving such pollutants, substances or hazardous materials.

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Health and Safety Regulations.   We are subject to the requirements of the U.S. Occupational Safety and Health Act and comparable state and international laws. Regulations promulgated by these agencies require employers and independent contractors who perform construction services, including electrical and repair and maintenance, to implement work practices, medical surveillance systems and personnel protection programs to protect employees from workplace hazards and exposure to hazardous chemicals and materials. In recognition of the potential for accidents within various scopes of work, these agencies have enacted very strict and comprehensive safety regulations.

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NRC.  Owners of nuclear power plants are licensed to build, operate and maintain those plants by the NRC. Their license requires that they qualify their suppliers and contractors to ensure that the suppliers and contractors comply with NRC regulations. Our Services segment must demonstrate to its customers that we will comply with NRC regulations related to quality assurance, reporting of safety issues, security and control of personnel access and conduct.

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Other Regulatory Matters.  To the extent we export technical services, data and products outside of the U.S., we are subject to U.S. and international laws and regulations governing international trade and exports. These include, but are not limited to, the Foreign Corrupt Practices Act and the Export Administration Regulations and trade sanctions against embargoed countries, which are administered by the Office of Foreign Assets Control within the U.S.

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Department of the Treasury.  A failure to comply with these laws and regulations could result in civil or criminal sanctions, including the imposition of fines, the denial of export privileges and suspension or debarment from participation in U.S. government contracts.

While we believe that we operate safely and prudently and in material compliance with all environmental, occupational health, nuclear regulatory, export and product safety laws, there can be no assurance that accidents will not occur or that we will not incur substantial liability in connection with the operation of our business. We do not anticipate any material capital expenditures or material adverse effect on earnings or cash flows as a result of complying with these laws.

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Financial Information about Geographic Areas

For a discussion of our financial information related to geographic areas, see “Part II—Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Note 18—Segment Information” to our consolidated financial statements.

Backlog

For a discussion of our backlog, see “Part II—Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Backlog” and “Item 1A. Risk Factors—Risk Factors Related to Our Operations.”

History

Global Power was incorporated in 2001 under the laws of the State of Delaware and became the successor to GEEG Holdings, LLC, which was formed as a Delaware limited liability company in 1998. We and all of our U.S. subsidiaries filed voluntary petitions for relief under Chapter 11 of Title 11 of the U.S. Bankruptcy Code on September 28, 2006 and successfully emerged from bankruptcy pursuant to an approved Plan of Reorganization on January 22, 2008. Upon emergence, we issued 5,266,885 shares of our new common stock to pre-petition equity holders in exchange for stock held before the bankruptcy. On that same date, pursuant to a rights offering, a private placement and related backstop and our Management Incentive Co-Investment Plan, we issued an additional 9,589,138 shares of our new common stock in exchange for $72.5 million in net proceeds. The applicable price of our common stock in the rights offering was $7.65 per share. As part of the plan, we also entered into a $150.0 million credit facility, which was terminated in 2012 in connection with our entry into the Revolving Credit Facility. In June 2011, we received a court order for final decree closing the Chapter 11 Filing.

Available Information

We file reports with the SEC, including our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished to the SEC pursuant to the requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). However, we are not currently timely in our SEC reporting obligations. The general public may read and copy any materials that we file with the SEC at the SEC’s Public Reference Room located at 100 F Street N.E., Washington, DC 20549. The public may also obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site, www.sec.gov, which contains the Company’s reports, proxy and information statements and other information we have filed electronically with the SEC.

Copies of our annual reports are available at our website at www.globalpower.com under the heading “Investor Relations.” The information disclosed on our website is not incorporated by this reference and is not a part of this Form 10-K. We make available on our website, free of charge, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to these reports as soon as reasonably practicable after we electronically file with or furnish the reports to the SEC. The following corporate governance related documents are also available free on our website:

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Code of Business Conduct and Ethics;

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Corporate Governance Guidelines;

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Related Party Transactions Policy;

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Charter of the Audit Committee;

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Charter of the Compensation Committee;

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Charter of the Nominating and Corporate Governance Committee; and

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Procedures for Reporting Complaints Regarding Accounting or Auditing Matters of Global Power Equipment Group Inc.

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Item 1A. Risk Factors

Our business, financial condition and results of operations may be impacted by one or more of the following factors, any of which could cause actual results to vary materially from historical and current results or anticipated future results.

Risk Factors Related to Our Liquidity and Capital Resources

If we do not timely pay amounts due and comply with the covenants under our credit facilities, our business, financial condition and ability to continue as a going concern would be materially and adversely impacted.

Our consolidated financial statements have been prepared assuming that we will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. We incurred net losses in 2016, 2015 and 2014 and expect to incur further net losses in the operation of our businesses. Prior to May 2015, we were dependent on borrowings under our Revolving Credit Facility as a source of funding our operations. However, coincident with our announcement in May 2015 that we would have to restate our previously filed Form 10-K for the year ended December 31, 2014 and would not be able to file our first quarter 2015 Form 10-Q in a timely manner, we were no longer in compliance with various covenants under our Revolving Credit Facility. As a result, we were unable to make incremental borrowings against the Revolving Credit Facility after that time and operated under a series of waivers of default under our Revolving Credit Facility. In addition, beginning on July 22, 2016, the administrative agent under our Revolving Credit Facility exercised rights that enabled it to control rights over certain of our accounts by implementing a cash dominion process to use receipts of collateral to directly pay down debt, while allowing us to borrow subject to certain restrictions. As of December 31, 2016, we had $2.8 million in cash and cash equivalents and $45.3 million due on our Revolving Credit Facility, with $6.5 million available borrowing capacity.

In June 2017, Centre Lane acquired the debt outstanding under the Revolving Credit Facility. We subsequently completed a refinancing process and entered into a 4.5-year senior secured term loan (the “Initial Centre Lane Facility”) with an affiliate of Centre Lane. We entered into a first amendment to the senior secured term loan (the “Centre Lane Amendment” and, together with the Initial Centre Lane Facility, the “Centre Lane Facility”) in August 2017, which provided for a first-out term loan, which matures in September 2018. We used the proceeds from the Initial Centre Lane Facility to repay the full balance outstanding under the Revolving Credit Facility. The terms of the Centre Lane Facility are less favorable to us than the terms of the Revolving Credit Facility, and, among other things, require higher interest payments and subject us to restrictive covenants that significantly limit our operating flexibility and encumber our assets. Any default on the Centre Lane Facility could result in the outstanding principal balance under such facility becoming immediately due and payable. We do not currently have sufficient cash on hand to repay the balance, and a failure to do so would constitute a default.

Upon a default under the Centre Lane Facility, our senior secured lenders would have the right to accelerate the then-outstanding amounts under such facility and to exercise their rights and remedies to collect such amounts, which would include foreclosing on collateral constituting substantially all of our assets and those of our subsidiaries. Accordingly, a default could have a material adverse effect on our business. If our lenders under the Centre Lane Facility exercise their rights and remedies to the extent permitted by such facility and applicable law, we would likely be forced to seek bankruptcy protection and our investors could lose the full value of their investment in our common stock.

Our inability to generate sufficient cash flow to satisfy our debt obligations, to meet the covenants of the Centre Lane Facility and/or to obtain alternative financing in such circumstances could materially and adversely affect our business, financial condition, results of operations and cash flows. For additional information, see “Part II—Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” and “Note 11—Debt” to our consolidated financial statements.

We may not generate sufficient cash resources to continue funding our operations.

In order to have sufficient cash to fund our operations and continue as a going concern, we will likely need to successfully implement one or more of the following initiatives: raise additional equity or debt capital; or sell assets outside the ordinary course of business. If we are unsuccessful in these liquidity generating initiatives and do not have sufficient cash resources to operate our business, we may be forced to significantly curtail or cease our operations or seek bankruptcy protection. For additional information, see “Part II—Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” and “Note 11—Debt” to our consolidated financial statements.

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Our independent registered public accounting firm may include an explanatory paragraph in its audit opinion that accompanies our financial statements for the year ended December 31, 2017 indicating that our debt maturity and liquidity position raises substantial doubt about our ability to continue as a going concern.

In June 2017, Centre Lane acquired the debt outstanding under the Revolving Credit Facility, and we repaid the full outstanding balance under the Revolving Credit Facility and entered into the Initial Centre Lane Facility, as amended in August 2017. If we are unable to pay amounts due under the Centre Lane Facility, fail to satisfy the restrictive covenants under the Centre Lane Facility or otherwise breach or fail to develop and implement plans sufficient to alleviate the adverse effects of the foregoing before the completion of the audit of our consolidated financial statements for the year ended December 31, 2017, our independent registered public accounting firm may include an explanatory paragraph in its audit opinion that accompanies our 2017 financial statements, indicating that the terms of our indebtedness and related liquidity position raise substantial doubt about our ability to continue as a going concern.

The presence of any such explanatory paragraph may, among other negative effects, make it difficult for us to continue to negotiate acceptable payment terms with our vendors and customers or may result in one or more of our suppliers making demand for adequate assurance, which could include a demand for payment in advance. If we are unable to negotiate acceptable payment terms with our customers, or if any of our material suppliers were to successfully demand payment in advance, and we were unable to internally generate or externally raise cash in sufficient amounts to cover our resulting reduced liquidity, it could have a material adverse effect on our liquidity and may force us to seek bankruptcy protection. Other effects of such an explanatory paragraph may include difficulty obtaining future financing and negative perceptions among our customers and employees.

If our independent registered public accounting firm fails to stand for reappointment, any resulting need to engage a new auditor could significantly delay the filing of our future annual and quarterly reports with the SEC and adversely impact our business.

Our independent registered public accounting firm goes through client reacceptance procedures annually to determine if they are willing to stand for reappointment. These procedures include, among other items, a risk assessment. Due to our risk profile, there is a chance we will not meet their minimum criteria for reacceptance. If we are unable to satisfy the requirements of those client reacceptance criteria, we may be required to change auditors, which could significantly delay the filing with the SEC of our 2017 annual and quarterly reports on Form 10-K or 10-Q, as applicable, and subsequent reports. Any such delay could result in a breach of the covenants in the Centre Lane Credit Agreement, reduce our trade credit based on our inability to deliver recent financial statements to our key vendors and delay our ability to become current in our SEC filings.

The limitations and covenants contained in the Centre Lane Facility constrain our ability to borrow additional money, sell assets and make acquisitions, which may impair our ability to fully implement elements of our business strategy and otherwise adversely affect our liquidity and financial condition.

The Centre Lane Facility contains a number of limitations and covenants that limit our ability and that of our subsidiaries to:

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borrow money or make capital expenditures;

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incur liens;

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pay dividends or make other restricted payments;

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merge or sell assets;

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enter into transactions with affiliates; and

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make acquisitions or investments.

The Centre Lane Facility provides for variable rates of interest. We will be liable for the greatest amount of interest permitted under such rates. Any increase in the London Interbank Offered Rate (“LIBOR”) may result in an increase in our interest rates on our outstanding debt and therefore negatively affect our cash flow and financial condition. Our obligations

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under the Centre Lane Facility are guaranteed by all of our wholly owned domestic subsidiaries, subject to customary exceptions. Our obligations are secured by first priority security interests on substantially all of our assets and those of our wholly-owned domestic subsidiaries. This includes 100% of the voting equity interests of our domestic subsidiaries and certain specified foreign subsidiaries and 65% of the voting equity interests of other directly owned foreign subsidiaries, subject to customary exceptions.

The Centre Lane Facility also includes additional restrictive covenants, including covenants that require us to maintain specified financial ratios beginning September 30, 2018. These restrictions could adversely affect our business because they include, among other things, limitations on our ability to take advantage of financings, mergers, acquisitions and other corporate opportunities that may be beneficial for our business. These restrictions also could have a material adverse effect on our ability to make capital expenditures and business acquisitions, restructure or refinance our indebtedness, accept certain business opportunities from customers or seek additional capital.

If we do not comply with the restrictive covenants, including failing to satisfy the required financial ratios, or obtain waivers as needed, our lenders could accelerate our debt and foreclose on our assets, and our shareholders may lose the full value of an investment in our common stock. Our ability to comply with the restrictive covenants in the Centre Lane Facility depends upon our ability to generate adequate earnings and operating cash flows or sell assets, which will be subject to our ability to successfully implement our business strategy, as well as other general economic and competition conditions and financial, business and other factors, many of which are beyond our control. We cannot assure investors that our business will generate sufficient cash flow from operations to fund our cash requirements and debt service obligations, and we may, in the future, face significant liquidity constraints. For additional information, see “Part II—Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” and “Note 11—Debt” to our consolidated financial statements.

If we become unable to obtain adequate surety bonding, it could reduce our ability to bid on new work, which could, in turn, have a material adverse effect on our future revenue and business prospects.

In line with industry practice, we are often required to provide performance and surety bonds to customers. These bonds provide credit support for the client if we fail to perform our obligations under the contract. If security is required for a particular project and we are unable to obtain a bond or letter of credit on terms commercially acceptable to us, we may not be able to pursue that project. In addition, bonding may be more difficult to obtain in the future or may only be available at significant additional cost. Our ability to obtain surety bonds is currently constrained, and any continued inability to obtain surety bonds on commercially reasonable terms could have a material adverse effect on our revenue and business prospects.

We are currently unable to obtain letters of credit, which could reduce our ability to bid on new work, which could have a material adverse effect on our future revenue and business prospects.

In line with industry practice, we are often required to provide letters of credit. These letters of credit provide credit support for the client if we fail to perform our obligations under the contract. The Centre Lane Facility does not provide letters of credit. If security is required for a particular project and we are unable to obtain a bond or letter of credit on terms commercially acceptable to us, we may not be able to pursue that project. Any continued inability to obtain surety bonds and letters of credit on commercially reasonable terms could have a material adverse effect on our revenue and business prospects.

We have recorded write-downs of our goodwill and other indefinite-lived assets. If we were required to write-down additional amounts, our results of operations and stockholders’ equity could be materially adversely affected.

We are required to review goodwill and indefinite-lived intangible assets for potential impairment at least annually in accordance with GAAP. As a result of our annual goodwill impairment analysis as of October 1, 2016, we determined that the fair value of our reporting units each exceeded their respective book values, and, accordingly, no impairment charge was necessary for the year ended December 31, 2016. During 2015, our common stock traded at a market price that was lower than its book value for a prolonged period. As a result of this impairment indicator, we recorded a non-cash charge of $47.2 million for the impairment of goodwill and trade names in the third quarter of 2015. We had $51.0 million of goodwill and trade names remaining on our consolidated balance sheet as of December 31, 2016. If we experience declines in revenue and gross profit or do not meet our current and forecasted operating budget, we may be subject to additional goodwill and/or other intangible asset impairments in the future. Because of the significance of our goodwill and intangible assets, and based on the magnitude of historical impairment charges, any future impairment of these assets could have a material adverse effect

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on our financial results. For additional information, see “Note 7—Goodwill and Other Intangible Assets” to our consolidated financial statements.

Changes to tax regulations, laws, accounting principles, future business operations or examinations by tax authorities can adversely impact our provision for income taxes and ability to use deferred tax assets.

Our ability to use our deferred tax assets is subject to volatility and could be adversely affected by earnings differing materially from our projections, changes in the valuation of our deferred tax assets and liabilities, expiration of or lapses in tax credits, changes in ownership as defined by Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”), and outcomes as a result of tax examinations or changes in tax laws, regulations and accounting principles. As a result, our income tax provisions are also subject to volatility from these changes, as well as changes in accounting for uncertain tax positions, or interpretations thereof.

For instance, on December 31, 2014, we recorded $44.9 million of non-cash valuation allowances on our deferred tax assets recorded in 2014 and prior years. We also recorded $16.9 million and $21.9 million of additional valuation allowances on substantially all U.S. and certain foreign deferred tax assets recorded during the years ended December 31, 2016 and 2015, respectively. These deferred tax assets remain available for use in future periods and will reduce our current tax expense in the year in which taxable income is generated to the extent that the deferred tax assets are not eliminated or limited under Code Sections 382 and 383.

Significant judgment is required in determining the recognition and measurement attributes prescribed in GAAP related to accounting for income taxes. In addition, GAAP applies to all income tax positions, including the potential recovery of previously paid taxes, which, if settled unfavorably, could adversely impact our provision for income taxes or additional paid in capital. We could also be subject to examinations of our income tax returns by the Internal Revenue Service and other tax authorities. We assess the likelihood of adverse outcomes resulting from these examinations in determining the adequacy of our provision for income taxes. There may be exposure that the outcomes from these examinations will have an adverse effect on our operating results and financial condition.

Our ability to use NOL carryforwards or other tax attributes may be subject to limitations under Sections 382 and 383 of the Code.

As of December 31, 2016, we have U.S. federal tax NOL carryforwards, foreign tax credits and general business tax credits of $157.9 million, $9.6 million and $0.4 million respectively. Generally, NOL, foreign tax credit and general business credit carryforwards may be used to offset future taxable income and thereby reduce or eliminate U.S. federal income tax liabilities. Section 382 of the Code limits a corporation’s ability to utilize NOL carryforwards to reduce tax liabilities if the corporation undergoes an “ownership change.” For these purposes, an ownership change is deemed to occur if there has been a change of more than 50% in the ownership of shareholders owning 5% or greater of the value of a corporation’s stock over a three year period. Code Section 383 applies the same limitations to foreign tax credit, general business credit and capital loss carryforwards after an ownership change.

Based upon our review of the issue, we have not experienced an ownership change as defined under Code Section 382 as of December 31, 2016. If additional equity is issued in the future, an ownership change pursuant to Code Section 382 may occur. In addition, an ownership change under Code Section 382 could be caused by circumstances beyond the Company’s control, such as market purchases or sales by certain 5% or greater shareholders of our stock. There is also a risk that, due to regulatory changes, such as suspensions on the use of NOLs or other unforeseen reasons, our existing NOLs could expire or otherwise be unavailable to offset future income tax liabilities. Thus, there can be no assurance that the Company will not experience an ownership change which would significantly limit the utilization of the Company’s NOL, foreign tax credit or general business credit carryforwards in calculating future federal tax liabilities.

We have incurred losses from operations in recent fiscal years, expect to incur further losses in the next several years and may not be able to achieve or maintain our profitability.

We incurred net losses in 2016, 2015 and 2014, and we expect to incur further net losses in the operation of our business. We incurred significant expenses during 2016 and 2015 related to, among other things, legal and accounting costs associated with the restatement of certain prior financial results. We have incurred, and are likely to continue to incur, additional costs for legal proceedings associated with the restatement. In addition, during 2014, we entered into an agreement to fulfill a project with a partner, whereby we were jointly and severally liable for the entire project. The project had certain liquidated damage clauses, including a clause that allows the customer the right to be made whole should the product not

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meet certain criteria. This can include a complete rebuild of the project. Although there is a wide range of potential liability, we accrued $4.4 million for the year ended December 31, 2016. See “Note 15—Commitments and Contingencies” to our consolidated financial statements. Investors should not consider our historical operating results as indicative of future operating results.

In addition, our Electrical Solutions segment may incur losses resulting from Hurricane Harvey in August 2017. The hurricane significantly impacted production at our Koontz-Wagner facility in Houston, Texas, which was almost completely shut down for nearly one week. Although work has resumed at that facility, we could incur substantial losses due to production delays, which are described in more detail below.

In addition, to become and remain profitable, we must successfully generate revenue, which requires us to, among other things, increase our cash flows from operations. A lack of capital resulting from any inability to generate sufficient cash flows from operations to fund our business and service our indebtedness would negatively impact our ability to achieve or maintain profitability.

If our profits do not increase to offset these increases in costs, our operating results will be adversely affected. We cannot provide assurance that we will be able to achieve or maintain profitability in the future.

Any inability to finance our business or repay the Centre Lane Facility, including due to deterioration of the credit markets, could adversely affect our business.

We intend to finance our existing operations and initiatives with existing cash and cash equivalents, investments, cash flows from operations and the Centre Lane Facility. In June 2017, we repaid the balance due under the Revolving Credit Facility; however, the Centre Lane Facility contains high interest rate payments, a number of restrictive covenants and other terms that limit our operating flexibility, including our ability to enter other investments or new lines of business. In addition, deterioration in the credit markets could adversely affect the ability of many of our customers to pay us on time and the ability of many of our suppliers to meet our needs on a competitive basis. Any inability to pay amounts due under the Centre Lane Facility or access necessary additional funds on acceptable terms or at all may negatively impact our business or operations.

We are exposed to market risks from changes in interest rates and foreign currency exchange rates.

We are subject to market risk exposure related to changes in interest rates and fluctuations in foreign currency exchange rates. Portions of our operations are located in foreign jurisdictions and a portion of our billings is paid in foreign currencies. Changes in foreign currency exchange rates or weak economic conditions in foreign markets could therefore cause fluctuations in revenue derived from foreign operations. For example, many foreign currencies have decreased in value against the U.S. dollar. Our receipt of such devalued foreign currencies for a project as to which a significant portion of our costs are incurred in U.S. dollars would adversely affect our revenue, as expressed in U.S. dollars, and our profit from that project. In addition, sales of products and services are affected by the value of the U.S. dollar relative to other currencies. Changes in foreign currency rates can also affect the costs of our products purchased or manufactured outside the U.S. Changes in interest rates or foreign currency exchange rates could have a material adverse effect on our results of operations and financial position.

Risk Factors Related to the Restatement of Prior Period Financial Statements and Our Internal Control over Financial Reporting

Audit, investigation, legal and expert services regarding the restatement and audit of our historical financial results, as well as recent legal proceedings, have required substantial attention from the Board of Directors (the “Board of Directors” or “Board”), have diverted financial resources away from the Company and management’s attention away from our usual business operations and may continue to adversely affect customer relationships and overall business, results of operations and financial condition.

Our Board, Audit Committee and members of management have devoted and expect to continue to devote substantial internal and external resources to legal matters resulting from the restatement and remediation efforts, the preparation and filing of this Form 10-K and the preparation and filing of future periodic reports. As a result of these efforts, we have incurred and expect that we will continue to incur significant incremental fees and expenses for additional audit services, financial and other consulting services and legal services, as well as the implementation and maintenance of systems and processes that will need to be updated, supplemented or replaced. These expenses, as well as the substantial time devoted

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by our Board and management toward identifying, addressing and remediating any internal weaknesses and legal costs related to our internal investigation and the ongoing SEC investigation, pending litigation and other actions related to the restatement, have had and could continue to have a material adverse effect on our business, results of operations and financial condition. Any future inquiries from legal proceedings or other actions by the SEC as a result of the restatement of our historical financial statements will, regardless of the outcome, likely consume a significant amount of our resources in addition to those resources already consumed in connection with the restatement itself and ongoing litigation matters. In addition, the restatement of our historical financial statements, delisting of our common stock from the New York Stock Exchange (“NYSE”) and constrained liquidity have hindered our ability to attract new customers and strained relationships with certain existing customers, making it challenging to increase the volume and scope of our work.

A pending putative securities class action, as well as an ongoing SEC investigation, could divert management’s focus, result in substantial expenses and have an adverse impact on our reputation, financial condition and results of operations.

The matters that led to our internal investigation and the restatement of our historical financial results expose us to greater than typical risks associated with litigation, regulatory proceedings and government enforcement actions. For instance, a putative shareholder class action is pending in the U.S. District Court for the Northern District of Texas alleging violations of the federal securities laws in connection with matters related to the restatement of our financial results. The second consolidated amended complaint filed by the lead plaintiff names the Company and three of our former officers as defendants. Please see “Item 3. Legal Proceedings” and “Note 15—Commitments and Contingencies” to our consolidated financial statements. We cannot predict the outcome of the lawsuit, the magnitude of any potential losses or the effect such litigation may have on us or our operations. Regardless of the outcome, lawsuits and investigations involving us, or our current or former officers and directors, could result in significant expenses and divert attention and resources of our management and other key employees. We could be required to pay damages or other penalties or have injunctions or other equitable remedies imposed against us or our current or former directors and officers. In addition, we are generally obligated to indemnify our current and former directors and officers in connection with lawsuits, governmental investigations and related litigation or settlement amounts. Such amounts could exceed the coverage provided under our insurance policies. Any of these factors could harm our reputation, business, financial condition, results of operations or cash flows.

In addition, the Division of Enforcement of the SEC is conducting a formal investigation into possible securities law violations by us relating to our disclosures concerning certain financial information, including our cost of sales and revenue recognition, as well as related accounting issues. We are cooperating with the SEC in its investigation. Please see “Item 3. Legal Proceedings.” At this time, we cannot predict the outcome or the duration of the SEC investigation or any other legal proceedings or any enforcement actions or other remedies that may be imposed on us as a result of the SEC investigation. Any action by the SEC could result in sanctions against us and certain of our current and former officers and directors. A protracted investigation could impose substantial additional costs and distractions, regardless of its outcome. Furthermore, publicity surrounding the foregoing or any enforcement actions resulting from the SEC’s investigation, even if ultimately resolved favorably for us, could have a material adverse impact on our reputation, business, financial condition and results of operations.

Our failure to maintain effective internal control over financial reporting and disclosure controls and procedures could have a material adverse effect on our business.

We are required to maintain internal control over financial reporting and disclosure controls and procedures in order to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our consolidated financial statements for external purposes in accordance with U.S. generally accepted accounting principles (“GAAP”). In connection with our internal investigation and the restatement, we determined that we had material weaknesses in our internal control environment and internal control activities. As of December 31, 2016, these material weaknesses continued to exist. We therefore concluded that, as of the end of the period covered by this report, our internal control over financial reporting and our disclosure controls and procedures were not effective. Until we fully remediate these deficiencies, it may be more difficult for us to report results accurately and on time. While we are working to address the internal control over financial reporting and other issues raised by our restatement process, we cannot be certain that our efforts will be successful or that we will be able to maintain adequate controls over our financial processes and reporting in the future. As of the date of this filing, the remediation process is ongoing. See “Part II—Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure” and “Part II—Item 9A. Controls and Procedures.”

Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur undetected, and it is possible that additional significant deficiencies or material weaknesses in our internal control over financial reporting may be identified in the future. Any failure of our internal controls could result in additional material

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misstatements in our consolidated financial statements, significant deficiencies, material weaknesses, costs, failure to timely meet our periodic reporting obligations and a loss of investor confidence. It would also adversely affect the results of periodic management evaluations and could have a material adverse effect on our business, financial condition, results of operations or cash flow. If our internal controls are deemed inadequate in the future, our current external auditors could resign, and the process of retaining new auditors could limit our access to capital for an extended period of time.

Our failure to implement new accounting standards during the required time periods could result in our inability to file future periodic reports in a timely manner and lead to additional material weaknesses in internal control over financial reporting, beyond those disclosed in this report.

The FASB has issued new accounting guidance on revenue recognition that will change both the way revenue is accounted for and disclosed and will result in changes in internal controls. These changes in internal controls will reach beyond finance and accounting and will have an impact on other areas of our business, such as information technology and operations. Due to the delay in filing our 2015 Report and this Form 10-K, we have recently begun assessing the standard and its impact on our financial statement reporting and operations. Although we have begun initial discussions with external resources to assist us in our implementation, at this time, we are unable to determine how long the assessment and implementation will take to complete.

Our business operations depend upon our new senior management team and the ability of our other employees to successfully perform their roles.

We have experienced significant turnover in our senior management in recent years. In March 2015, we announced the departure of our former President and Chief Executive Officer (“CEO”) and the appointment of Terence J. Cryan as our new President and CEO. In September 2015, we announced the departure of our former Chief Financial Officer and the appointment of Craig E. Holmes as Senior Vice President of Finance. In March 2017, we announced the retirement of Timothy M. Howsman, who served as our Principal Financial Officer, the subsequent appointment of Mr. Holmes as the Company’s Chief Financial Officer and Principal Financial Officer and the appointment of Mark F. Jolly, who had been serving as Vice President Finance, as the Company’s Chief Accounting Officer and Principal Accounting Officer. In July 2017, we announced the resignation of Mr. Cryan as our President and CEO and the appointment of Mr. Holmes and Tracy D. Pagliara, formerly our Senior Vice President, Chief Administrative Officer, General Counsel and Secretary, as Co-Presidents and Co-CEOs. Charles E. Wheelock was simultaneously appointed Vice President, Administration, General Counsel and Secretary. In August 2017, we announced the cessation of Mr. Jolly’s employment as our Chief Accounting Officer and Principal Accounting Officer and the appointment of Erin Gonzalez as our Chief Financial Officer and Principal Financial and Accounting Officer. In addition, we have had significant turnover of management and other personnel in our domestic Mechanical Solutions and Electrical Solutions segments.

We have made significant changes to our business in a short interval of time, which can be disruptive to our employees and business, and may add to the risk of control failures, including a failure in the effective operation of our internal controls over financial reporting or our disclosure controls and procedures. Changes to company strategy can create uncertainty, may negatively impact our ability to execute quickly and effectively, and may ultimately be unsuccessful.

As new employees gain experience in their roles, we could experience inefficiencies or a lack of business continuity due to loss of historical knowledge and a lack of familiarity of those employees with business processes, operating requirements, policies and procedures (some of which are new) and key information technologies and related infrastructure used in our day-to-day operations and financial reporting. It is important to our success that these key employees quickly adapt to, and excel in, their new roles. Their failure to do so could result in operational and administrative inefficiencies and added costs that could adversely impact our results of operations, our stock price and our customer relationships and may make recruiting for future management positions more difficult. In addition, if we were to lose the services of any one or more key employees, whether due to death, disability or termination of employment, our ability to successfully implement our business strategy, financial plans and other objectives could be significantly impaired. Any of the above factors could also impede our ability to remediate the material weaknesses in our internal controls. See “Part II—Item 9A. Controls and Procedures.” If we do not effectively manage our business through these management transitions, our business and results of operations could be adversely affected.

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As a result of our inability to prepare and timely file periodic reports, we face limitations in our ability to issue securities and engage in certain transactions, which could adversely affect our business.

We are required to comply with Section 13 of the Exchange Act. We did not file any Quarterly Reports on Form 10-Q or any Annual Report on Form 10-K from the May 2015 announcement of our intention to restate our financial results until March 15, 2017, when we filed the 2015 Report, which restated our prior period financial statements and provided our 2015 financial information. Even after the filing of this Form 10-K, we will remain delinquent in our SEC reporting obligations because we have not filed any of our periodic reports for our 2017 quarterly periods. We will not be eligible to use “short form” registration statements that would allow us to incorporate by reference our SEC reports into our registration statements, or to use “shelf” registration statements, until we have filed all of our periodic reports in a timely manner for a period of 12 months. After we become current in our SEC filing obligations, we may use Form S-1 to register a sale of our stock to raise capital. However, such registration statement cannot be used until we are current in our disclosure obligations, and even then, would likely increase transaction costs and be time consuming, which may adversely affect our ability to raise capital in a timely manner. Our failure to remain current in our SEC reporting obligations has resulted in our inability to permit use of our existing registration statement on Form S-8 or file a new registration statement on Form S-8, which would be used to register the issuance and sales of securities under our equity incentive plans. As a result, our ability to grant awards to adequately incentivize and retain skilled employees, including key employees needed to complete the remediation of the material weaknesses in our internal controls, could be adversely affected. See “Part II—Item 9A. Controls and Procedures.” In addition, delays in filing our periodic reports may impact our ability to solicit shareholder consent for certain potential capital-raising transactions. These restrictions could increase the costs of selling securities publicly, significantly delay such sales or transactions and adversely affect our business.

We have not held an annual meeting of our shareholders since May 2015. As a result, our shareholders have not had the opportunity to elect directors since May 2015, and we cannot assure investors when such an opportunity will arise.

Our bylaws and the Delaware General Corporation Law state that we must hold an annual meeting of our shareholders for the election of directors and other business as may be properly brought before the meeting. However, because of our delayed periodic report filings, we have not held an annual meeting of our shareholders since May 2015. Therefore, our shareholders have not had the opportunity to vote in an election of our directors since that time. We plan to hold an annual shareholders’ meeting after we become current in our SEC reporting obligations; however, if we do not become current in our SEC reporting obligations, or if we otherwise fail to hold annual shareholders’ meetings in the future, it may be more challenging for our shareholders to vote on the election of our directors.

Risk Factors Related to Our Operations

A substantial portion of the revenue from our Services segment is related to services performed at nuclear power plants, and reduced investment in or increased regulation related to nuclear power plants would have a material adverse effect on our business and prospects.

The demand for the services provided at nuclear power plants by our Services segment is directly tied to the number of nuclear power facilities that utilize our Services segment. Additionally, U.S. nuclear capacity and electricity generation are expected to decline due to continuing low natural gas prices and the rapid expansion of low cost renewable energy and new technologies in the U.S., displacing more traditional sources of power, including nuclear power. Public support for nuclear power has also softened because of pricing, environmental and safety concerns. Declining demand for U.S. nuclear power generation and related construction and maintenance budgets would have a material adverse effect on our business, operations and cash flow.

Very few new nuclear reactors are under construction in the U.S., and several nuclear reactors are undergoing decommissioning. Pricing pressure has resulted in a decrease in the maintenance budgets for existing nuclear plants. Other new construction projects are being discontinued or reevaluated. For example, in July 2017, the owners of V.C. Summer Units 2 and 3 filed a petition with the Public Service Commission of South Carolina seeking approval of an abandonment plan of such units. Although they later voluntarily withdrew the petition, they expressed uncertainty as to whether they could recover their costs for the new units, and the ultimate fate of the project is unclear.

In addition, decreases in state and federal government subsidies and increased regulation would also negatively impact the demand for nuclear power and the services we provide. For instance, the NRC has broad authority under federal law to impose safety-related and other licensing requirements for the operation of nuclear generation facilities, and events at

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nuclear facilities or other events impacting the industry generally could lead to additional requirements and regulations on all nuclear generation facilities and could negatively impact the demand for nuclear power and the services we provide.

If our costs exceed the estimates we use to set the fixed-prices of our contracts, our earnings will be reduced.

The contracts under which we sell our products are generally fixed-price contracts, most of which are “lump sum bid” contracts. Fixed-price contracts present certain inherent risks, including the possibility of ambiguities in the specifications received, erroneous or incomplete cost estimates, problems with new technologies and economic and other changes that may occur over the contract period.

In addition, we have a limited ability to recover any cost overruns. Contract prices are established based in part on our projected costs, which are subject to a number of assumptions. The costs that we incur in connection with each contract can vary, sometimes substantially, from our original projections. Because of the large scale and complexity of our contracts, unanticipated changes may occur, such as customer budget decisions, design changes, delays in receiving permits and cost increases, as well as delays of drawings and equipment in delivery of our products. Unanticipated cost increases or delays may occur as a result of several factors, including:

·

increases in the cost of commodities (primarily steel plate), labor or freight;

·

unanticipated technical problems (for example, difficulties in designing products that integrate well with new generations of gas turbines);

·

suppliers’ or subcontractors’ failure to perform (for example, substandard welding by a subcontractor), requiring modified execution plans or re-work; and

·

decreases in labor efficiency realized.

We often are contractually subject to liquidated damages or late delivery fees in the event that we fail to perform our obligations in a timely manner. Such damages or fees can be significant and may have a negative impact on our profit margins and financial results.

Cost increases or overruns that we cannot pass on to our customers or our payment of liquidated damages or other penalties under our contracts will lower our earnings. In addition, increases in commodity prices may adversely affect our gross margins.

If we are unable to control the quality or timely production of products manufactured or services provided because of internal operational issues or poor subcontractor performances, our reputation could be adversely affected, and we could lose customers. In the event of subcontractor insolvency, if we are unable to recover any advance progress payments made to subcontractors, our profitability could be adversely affected.

We rely on subcontractors to manufacture and assemble a substantial portion of our products and services. Our subcontractors account for a significant percentage of our manufacturing and service costs. The quality and performance of our subcontractors is not entirely under our control. Our subcontractors may not always meet the requisite level of quality control or our delivery schedules. The failure of our subcontractors to produce quality products or perform quality services in a timely manner could adversely affect our reputation and result in the cancellation of orders for our products, significant warranty and repair costs and the loss of customers. In addition, our contracts with customers may contain liquidated damages or late delivery fees, and triggering such provisions could result in significant financial penalties, or, even if not triggered, could affect our ability to recognize revenue in a given period. Due to on going operational adjustments, we currently have several projects in the Electrical Solutions segment that may result in significant claims under such provisions.

Other potential consequences of the failure of our subcontractors to meet our standards include a potential need to move subcontract manufacturing to other vendors in different locations, resulting in increased costs. We also make advance progress payments to subcontractors in anticipation of their completion of our orders and may be unable to recover those advances if a subcontractor fails to complete an order. The occurrence of any of the above may adversely affect our profitability and cash flow.

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We operate our business in regions subject to natural disasters, including hurricanes, and other severe catastrophic events, such as acts of war and terrorism, and any disruption to our business resulting from natural disasters will adversely affect our revenue and results of operations.

We operate our business in regions subject to natural disasters and other severe catastrophic events. Any disaster could adversely affect our ability to conduct business and provide products and services to our customers, and the insurance we maintain may not be adequate to cover our losses resulting from any business interruption resulting from a natural disaster or other catastrophic events.

Most recently, our Koontz-Wagner operations in Houston, Texas were impacted by Hurricane Harvey in August 2017. The severe weather conditions directly affected production at that facility, which was largely shut down for nearly one week. Although work has resumed at that facility, the hurricane resulted in significant production delays, and we are currently assessing the impact this will have on our contractual obligations to certain customers. Should the impact result in delivery delays, this could result in liquidated damages to be assessed or the potential loss of customers. In addition, many of our employees have been displaced by the hurricane or have departed to assist with the hurricane recovery efforts. At this time, we do not know when we will have a full staff.

We may declare the existence of a force majeure event under our contracts with certain customers, but we could incur liabilities for failure to meet the requirements of those agreements, especially if the counterparties dispute our invocation of the force majeure provisions of those agreements.

It will be several weeks or months before we are able to fully assess the extent of the damage and the implications to our business. Currently, there is uncertainty as to the magnitude of the losses associated with this event and whether such losses would have a material effect on our consolidated financial statements.

These and any future disruptions to our operations, including acts of war, terrorism or other force majeure, could have a material adverse impact on our liquidity, financial condition and results of operations.

We may not be able to compete successfully against current and future competitors.

The industry in which we operate is highly competitive. Some of our competitors and potential competitors are less leveraged than we are, have greater financial or other resources than we have and may be better able to withstand adverse market conditions within the industry. Our competitors typically compete aggressively on the basis of pricing, and such competition may continue to impact our ability to attract and retain customers or maintain the rates we charge. To the extent that we choose to match our competitors’ prices, it would result in lower margins and, as a result, could harm our results of operations. Should we choose not to match, or remain within a reasonable competitive distance from, our competitors’ pricing, we may face a loss of sales volume and, as a result, such decision could harm our results of operations. In addition, our future growth will depend on our ability to gauge the direction of the commercial and technological progress in our markets that may be adopted by our competitors, as well as our ability to fund and successfully develop, manufacture and market new and improved products in a changing environment. However, any such developments would likely require additional financing, and we may not be able to obtain the necessary financing on acceptable terms, if at all. A failure to keep pace with our competitors or the technological innovations in the markets we serve could have a material adverse impact on our business.

Our profitability and financial condition may be adversely affected by risks associated with the energy and power generation industries, such as price and supply and demand fluctuations for oil and natural gas.

Our Mechanical Solutions and Electrical Solutions segments are exposed to risks associated with the use of natural gas and oil as energy sources. These risks, which are not subject to our control, include the volatility of natural gas and oil prices, the lower demand for power generation from natural gas, a slowdown in the construction of oil and gas infrastructure, a general softening of the downstream industry and a slowdown in the discovery or development of natural gas and/or oil reserves. While higher natural gas and oil prices generally result in increased infrastructure spending by customers in our Mechanical Solutions and Electrical Solutions segments, sustained high energy prices could be an impediment to economic growth and could result in reduced infrastructure spending by such customers. Higher prices could also decrease spending on power generation equipment and related infrastructure, an important component to the success of our Mechanical Solutions and Electrical Solutions segments. Further, if the discovery or development of natural gas and/or oil reserves slows or stops, customers would likely reduce capital spending on mainline pipe, gas gathering and compressor systems and other related infrastructure, resulting in less demand for the portfolio of products of our Mechanical Solutions and Electrical Solutions

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segments. If the profitability of those segments were to decline, our overall profitability, results of operations and cash flows could also be adversely affected. The significant increase in the North American supply of natural gas due to ongoing development of unconventional shale formations has also resulted in low natural gas prices for the past several years. Lower natural gas and oil prices sometimes result in decreased spending by certain customers in our Mechanical Solutions and Electrical Solutions segments, which could likewise adversely affect our overall profitability, results of operations and cash flows. Our Services segment is also sensitive to the price of natural gas. Low natural gas prices mean gas-fired power generation is more competitive with coal and nuclear power generation, resulting in reduced spending by those customers.

Our future revenue and operating results may vary significantly from reporting period to reporting period.

Our quarterly and annual revenue and earnings have varied in the past and are likely to vary in the future. Our product sales contracts contain customer-specific delivery terms that, coupled with other factors beyond our control, may result in uneven recognition of revenue and earnings over time. Customer-imposed delays and changes to billing terms can significantly impact the timing of revenue recognition and lengthen our cash conversion cycle. Due to our relatively large average contract size, our product sales volume during any given period may be concentrated in relatively few orders, intensifying the magnitude of these fluctuations. Furthermore, some of our operating costs are fixed. As a result, we may have limited ability to reduce our operating costs in response to unanticipated decreases in our revenue or the demand for our products in any given reporting period. Therefore, our operating results in any reporting period may not be indicative of our future performance. Because we must make significant estimates related to potential costs when we recognize revenue on a percentage-of-completion basis, these costs may change significantly from reporting period to reporting period based on new project information. In addition, most of our product revenue is based on fixed-price contracts, and the relative profitability can vary significantly between contracts. As a result, our profitability can vary from reporting period to reporting period based on the specific contract mix.

We may not be able to maintain or expand our business outside of the U.S. due to numerous factors outside our control.

Our international operations are subject to a number of risks inherent in doing business outside the U.S., including:

·

labor unrest;

·

regional economic uncertainty;

·

political instability, including unrest in the Middle East;

·

relations between the U.S., China and Russia;

·

restrictions on the transfer of funds into or out of a country;

·

currency exchange rate fluctuations;

·

export duties and quotas;

·

expropriations;

·

U.S. and international customs, tariffs and other regulations;

·

current and changing regulatory environments;

·

potentially adverse tax consequences;

·

availability of financing;

·

unfavorable commercial terms and conditions; and

·

potential for adverse dispute resolution outcomes.

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These factors may impact our ability to meet product delivery commitments in foreign countries that could result in a decline in revenue or profitability and could adversely affect our ability to maintain or expand our business outside the U.S.

We conduct our operations on a worldwide basis and are subject to risks associated with doing business outside the U.S.

We have manufacturing subcontractors in many areas outside of the U.S., including China, South Korea, Indonesia, Poland, the Middle East and Mexico, and increasing our manufacturing footprint to localize in emerging markets is an important element of our strategy. There are a number of risks associated with doing business internationally, including, but not limited to, the following:

·

exposure to local economic and political conditions;

·

the impact of social unrest, such as risks of terrorism or other hostilities;

·

currency exchange rate fluctuations and currency controls;

·

export and import restrictions; and

·

the potential for shortages of trained labor.

In particular, there has been social unrest in the Middle East and Mexico, and any increased violence in or around our subcontractors’ manufacturing facilities could impact our business by disrupting our supply chain and the delivery of products to customers.

In addition, the increased violence in or around our subcontractors’ manufacturing facilities could present several risks to employees who may be directly affected by the violence, and such violence may result in a decision by them to relocate from the area or may make it difficult for us or our subcontractors, to recruit or retain talented employees. The likelihood of such occurrences and their potential effects are unpredictable and vary from country to country. Any such occurrences could be harmful to our business and our financial results.

A material portion of our revenue is from sales of equipment for gas turbine power plants. During periods of declining construction of new gas turbine power plants, the market for our products is significantly diminished.

The demand for our products depends on the continued construction of gas turbine power generation plants. The power generation equipment industry has experienced cyclical periods of slow growth or decline. During periods of decreased demand for new gas turbine power plants, our customers may be more likely to decrease expenditures on the types of products and systems that we supply and, as a result, our future revenue may decrease. These projects typically require funding from a healthy credit market as well. If credit markets are tight, funding could be difficult to obtain, therefore delaying or even cancelling these types of projects entirely. Because our growth strategy includes focusing on the natural gas growth trend, a rise in the price or a shortage in the supply of natural gas could affect the profitability, or operations, of gas turbine power plants, which could adversely affect our future revenue. These and other factors may temper demand for our products. If prices of natural gas in a particular geographic area are so high, or the supply of natural gas is so limited, as to make the construction of new gas turbine power plants or oil and gas infrastructure uneconomical in that geographic area, we may not derive any future revenue from projects in that geographic region unless and until those factors are reversed.

Environmental laws and regulations have played a part in the increased use of gas turbine technology in various jurisdictions. These laws and regulations may change, or other jurisdictions may adopt similar laws and regulations. Changes in existing laws and regulations could result in a reduction in the building and refurbishment of gas turbine power plants or oil and gas infrastructures. In addition, stricter environmental regulation could result in our customers seeking new ways of generating electricity that do not require the use of our products. Policymakers continue to focus on emissions from gas turbine power plants, and attempts to reduce or regulate emissions could increase the cost of gas turbine power plants and result in our customers switching to alternative sources of power.

Other current power technologies, improvements to these technologies and new alternative power technologies that compete or may compete in the future with gas turbine power plants could affect our sales and profitability. Any change in the power generation industry that results in a decline in the construction of new power plants or a decline in the upgrading of existing power plants could materially adversely affect our sales.

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A small number of major customers account for a significant portion of our revenue, and the loss of any of these customers could negatively impact our business.

We depend on a relatively small number of customers for a significant portion of our revenue. In 2016, three customers accounted for 43.0% of our consolidated revenue. In 2015, four customers accounted for 61.6% of our consolidated revenue. In 2014, four customers accounted for 58.4% of our consolidated revenue. For a listing of our major customers, see “Note 16—Major Customers and Concentration of Credit Risk” to our consolidated financial statements. We expect to continue to depend upon a relatively small number of customers for a significant percentage of our revenue. Because our major customers represent a large part of our business, the loss of any of our major customers could negatively impact our business and results of operations. Several of our customers have the ability to internally source some of the products we manufacture. Any increase in this activity could reduce our sales. Our business volume with each of our largest customers is highly dependent on power generation capacity additions for our Mechanical Solutions and Electrical Solutions segments and on operations and maintenance budgets for U.S. utilities for our Services segment. Fluctuations in any of these factors could materially adversely impact our performance results.

We are subject to potential insolvency or financial distress of third parties, including our customers and suppliers.

We are exposed to the risk that third parties to various arrangements who owe us money or goods, or who purchase products and services from us, will be unable to perform their obligations or continue to place orders due to insolvency or financial distress. If such third parties fail to perform their obligations under arrangements with us, we may be forced to replace the underlying commitment at current or above market prices or on other terms that are less favorable to us, or we may have to write off receivables in the case of a customer failing to pay.

If a customer becomes insolvent or files for bankruptcy, our ability to recover accounts receivable from that customer would be adversely affected and any payment we received during the preference period prior to a bankruptcy filing may be potentially recoverable by the bankruptcy estate. Any of the foregoing could adversely impact our results of operations, financial position and liquidity.

In March 2017, Westinghouse, a subsidiary of Toshiba Corporation, filed a voluntary petition to reorganize under Chapter 11 of the U.S. Bankruptcy Code. As of December 31, 2016, our accounts receivable from Westinghouse was $4.7 million. As of the bankruptcy filing date, we had $8.7 million of accounts receivable from Westinghouse, none of which has been collected. Westinghouse has stated that it intends to continue normal business operations. However, a number of uncertainties surround the Westinghouse Chapter 11 proceedings. We could be adversely affected if the owner of Plant Vogtle Units 3 and 4 decides to discontinue construction of this plant resulting from construction delays or cost overruns resulting from the Westinghouse bankruptcy filing. The owners of V.C. Summer Units 2 and 3 initially filed an abandonment plan to cease construction of such units; however, the owners later voluntarily withdrew this petition.

The dollar amount of our backlog, as stated at any time, is not necessarily indicative of our future revenue.

Our backlog consists of firm orders or blanket authorizations from our customers. Backlog may vary significantly from reporting period to reporting period due to the timing of customer commitments. The time between receipt of an order and actual completion, or delivery, of our products varies from a few weeks, in the case of inventoried precision parts, to a year or more, in the case of custom-designed gas turbine products, SCR systems and other major plant components. However, backlog may not be indicative of future operating results, and projects in our backlog may be cancelled, modified or otherwise altered by our customers. To the extent projects are delayed, the timing of our revenue could be affected. If a customer cancels an order, we may be reimbursed for the costs we have incurred. Typically, however, we have no contractual right to the full amount of the revenue reflected in our backlog contracts in the event of cancellation. In addition, projects may remain in our backlog for extended periods of time. Furthermore, a portion of our backlog for multi-year service maintenance contracts is based on what we expect to perform in the next twelve months of work and is therefore not necessarily supported by a firm purchase order. If that work does not materialize, then our backlog would be negatively impacted, as that work would be considered a “cancellation.” Revenue recognition occurs over extended periods of time and is subject to unanticipated delays. Fluctuations in our reported backlog levels also result from the fact that we may receive a small number of relatively large orders in any given reporting period that may be included in our backlog. Because of these large orders, our backlog in that reporting period may reach levels that may not be sustained in subsequent reporting periods. Our backlog, therefore, is not necessarily indicative of our future revenue or of long-term industry trends.

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The success of our Services segment is partially dependent upon maintaining our safety record, and an injury to or death of one of our employees could result in material liabilities to our company.

The activities we conduct at our and our customers’ facilities present a risk of injury or death to our employees, customers or visitors to our operations, notwithstanding our efforts to comply with safety regulations. We may be unable to avoid material liabilities for an injury or death, and our workers’ compensation and other insurance policies may not be adequate or may not continue to be available on terms acceptable to us, or at all, which could result in material liabilities to us. In addition, our ability to obtain new business and retain our current business, particularly in our Services segment, is partially dependent on our continuing ability to maintain a safety record that exceeds the industry average. If we fail to maintain superior safety performance, or if serious accidents occur in spite of our safety procedures, our revenue and results of operations could be materially and adversely affected.

Changes in our credit profile and market conditions can affect our relationships with suppliers, vendors and subcontractors, which could have a material adverse effect on our liquidity and our business, reputation and results of operations.

We rely significantly on third-party suppliers and vendors to obtain necessary materials, and on subcontractors to perform certain manufacturing and services. Although we are not dependent on any single supplier, vendor or subcontractor, any substantial limitation on the availability of or deterioration in our relationship with required suppliers or subcontractors would negatively impact our operations.

Changes in our credit profile can affect the way such third parties view our ability to make payments and may induce them to shorten the payment terms of their invoices or require credit enhancement. For instance, as a result of delays in our payments, certain suppliers and subcontractors have imposed less favorable payment terms on us, including requirements to provide them with additional security in the form of prepayments, surety bonds or letters of credit. The imposition of burdensome payment terms or collateral requirements could have a material adverse impact on our liquidity and our ability to make payments to other parties. This in turn could cause us to be unable to operate our business at the desired productivity levels, which might adversely affect our profitability and cash flow. In other cases, our relationships with certain third parties have been terminated, requiring us to rely on new firms for certain products and services, which may cost more and be of inferior quality.

In addition, changes in market and economic conditions could increase the risk of a lack of available suppliers or subcontractors. If any supplier or subcontractor upon which we rely is unable or unwilling to meet its obligations under present or future agreements with us, we may be forced to pay higher prices to obtain necessary products or services and may suffer an interruption in our ability to provide our services and products to customers.

To the extent we cannot engage quality subcontractors or acquire equipment or materials on acceptable terms, we would not be able to meet the full demands of our customers, which would have a material adverse effect on our business, reputation and results of operations.

Our former operating unit has been named as a defendant in asbestos personal injury lawsuits.

As discussed in “Note 15—Commitments and Contingencies” to our consolidated financial statements, our former operating unit has been named as a defendant in a limited number of asbestos personal injury lawsuits. Neither we, nor our predecessors, ever mined, manufactured, produced or distributed asbestos fiber, the material that allegedly caused the injury underlying these actions. The bankruptcy court’s discharge order issued upon our emergence from bankruptcy extinguished the claims made by all plaintiffs who had filed asbestos claims against us before that time. We believe the bankruptcy court’s discharge order should serve as a bar against any later claim filed against us, including any of our subsidiaries, based on alleged injury from asbestos at any time before our emergence from bankruptcy. In all of the asbestos cases finalized post-bankruptcy, we have been successful in having such claims dismissed without liability. Moreover, during 2012, we secured insurance coverage that will help to reimburse the defense costs and potential indemnity obligations of our former operating unit relating to these claims. Nonetheless, findings of liability on our part in any of these cases that were filed against us after we emerged from bankruptcy that remain unresolved could have an adverse effect on our financial position, results of operations or liquidity.

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Compliance with environmental, health, safety and other related laws and regulations is costly, and our ongoing operations may expose us to related liabilities.

Our operations are subject to laws and regulations governing the discharge of materials into the environment or otherwise related to the protection of the environment or human health and safety. We are subject to various U.S. federal statutes and the regulations implementing them, as well as similar laws and regulations at the state and local levels and in other countries in which we operate. If we fail to comply with environmental laws or regulations, we may be subject to significant liabilities for fines, penalties or damages, or lose or be denied significant operating permits.

In addition, we may be subject to product liability allegations involving claims of personal injury or property damage. The sale and servicing of complex, large-scale equipment used in a variety of locations and climates and integrating a variety of manufactured and purchased components entails an inherent risk of disputes and liabilities related to the operation and performance of the equipment and the health and safety of the workers who operate and come into contact with the machinery. Because our products are used primarily in power plants, claims could arise in different contexts, including fires, explosions and power surges, which can result in significant property damage or personal injury, and equipment failure, which can result in personal injury or damage to other equipment in the power plant.

The insurance policies we maintain to cover claims of this nature are subject to deductibles and recovery limitations as well as limitations on contingencies covered, and we may, therefore, suffer losses from these claims for which no insurance recovery is available. Such losses could have a material adverse effect on our business.

The effects of providing warranties for our products could result in significant unanticipated costs and could adversely affect our financial condition.

We generally provide warranties for terms of three years or less on our products. These warranties require us to repair or replace faulty products. The need to repair or replace products with design or manufacturing defects could temporarily delay the sale of new products and adversely affect our reputation. Any substantial payments made or costs incurred under our warranty program could have a material adverse effect on our business, financial condition, results of operations and cash flow.

Expiration of the Price-Anderson Act’s indemnification authority could have adverse consequences for our Services segment.

We provide services to the nuclear industry through our Services segment. The Price-Anderson Act promotes the nuclear industry by offering broad indemnification to commercial nuclear power plant operators and the U.S. Department of Energy (“DOE”) for liabilities arising out of nuclear incidents at power plants licensed by the NRC and at DOE nuclear facilities. That indemnification protects not only the NRC licensee or DOE prime contractor, but also others like us who may be doing work under contract or subcontract for a licensed power plant or under a DOE prime contract. The Energy Policy Act of 2005 extended the period of coverage to include all nuclear power reactors issued construction permits through December 31, 2025. If the Price-Anderson Act’s indemnification authority expires, a problem related to our provision of services at a nuclear facility could lead to a damage claim against us for which we might not be entitled to indemnification. In addition, any well-publicized problem with those services, whether actual or perceived, could adversely affect our reputation and reduce demand for our services.

Our revenue could be adversely affected if our patents and other intellectual property rights are unable to protect our proprietary products.

Our success depends significantly on our ability to protect our intellectual property rights to the technologies and know-how used in our proprietary products and software programs. We rely on patent protection, as well as a combination of trade secret, unfair competition and similar laws and nondisclosure, confidentiality and other contractual restrictions to protect our proprietary rights. However, these legal means afford only limited protection and may not adequately protect our rights or permit us to gain or keep any competitive advantage. We also rely on unpatented proprietary technology. We cannot provide assurance that we can meaningfully protect all of our rights in our unpatented proprietary technology, or that others will not independently develop substantially equivalent proprietary products or processes or otherwise gain access to our unpatented proprietary technology.

If we were required to commence legal actions to enforce our intellectual property or proprietary rights or to defend ourselves against claims that we are infringing on the intellectual property or proprietary rights of others, we could incur

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substantial losses and/or costs and divert management’s attention from operations. Any such losses or diverted attention could have a material adverse effect on our business, results of operations or cash flow.

Our failure to attract and retain qualified personnel, including engineers, skilled workers and key officers, could have an adverse effect on us.

Our ability to attract and retain qualified professional and/or skilled personnel in accordance with our needs, either through direct hiring, subcontracting or acquisition of other firms employing such professionals, is an important factor in determining our future success. The market for these professionals is competitive, and there can be no assurance that we will be successful in our efforts to attract and retain needed personnel. Our ability to successfully execute our business strategy depends, in part, on our ability to attract and retain highly qualified, experienced mechanical, design, structural and software engineers, service technicians and marketing and sales personnel in our Mechanical Solutions, Electrical Solutions and Services segments. Demand for these workers can, at times, be high and the supply extremely limited. Our success is also highly dependent upon the continued services of our key officers, and we do not maintain key employee insurance on any of our executive officers.

The restatement of our historical financial results and the poor financial performance of our domestic Mechanical Solutions and Electrical Solutions segments have caused significant employee turnover and made it more challenging to recruit and retain qualified personnel. If we are unable to retain qualified personnel, the roles and responsibilities of those employees will need to be filled, which may require that we devote time and resources to identifying, hiring and integrating new employees. In addition, the failure to attract and retain key employees, including officers, could impair our ability to sustain or expand our operations, provide services to our customers and conduct our business effectively.

Demand for our products and services is cyclical and vulnerable to economic slowdowns and reductions in private industry and government spending. In times of general economic contraction, our revenue, profits and financial condition may be adversely affected and will not necessarily rise in tandem with general economic expansion.

The industries we serve historically have been, and will likely continue to be, cyclical in nature and vulnerable to general slowdowns in the U.S. and international economies. Consequently, our results of operations have fluctuated and may continue to fluctuate depending on the level of demand for products and services from these industries.

Orders for new electrical power generation capacity are placed by our customers and have long lead times. Consequently, our bookings and revenue may rise or fall sharply as total industry orders tend to follow pronounced cycles of general expansion and contraction. During a contraction phase, limited investment in new projects, deferrals of planned projects and project cancellations may significantly reduce our potential recognition of revenue and profits. At the end of an expansion phase, any existence of excess capacity will negatively affect power prices, which will result in a reduction in new orders. In addition to being cyclical in nature, our revenue does not correlate precisely with changes in actual or forecasted new capacity due to timing differences in revenue recognition.

During periods of declining demand for power, many of our customers may face budget shortfalls or may delay capital expenditures, which could result in a decrease in the overall demand for our products and services. Our customers may find it more difficult to obtain project financing due to limitations on the availability of credit and other uncertainties in the global credit markets. In addition, our customers may demand better pricing terms and their ability to timely pay our invoices may be affected in times of economic slowdown. Any such reduction in private industry or government spending could have a material adverse effect on our revenue, net income or overall financial condition.

Information technology vulnerabilities and cyberattacks on our networks could have a material adverse impact on our business.

We rely upon information technology to manage and conduct business, both internally and with our customers, suppliers and other third parties. Internet transactions involve the transmission and storage of data, including, in certain instances, customer and supplier business information. Accordingly, maintaining the security of our computers and other electronic devices, computer networks and data storage resources is a critical issue for us and our customers and suppliers because security breaches could result in reduced or lost ability to carry on our business and loss of and/or unauthorized access to confidential information. We have limited personnel and other resources to address information technology reliability and security of our computer networks and respond to known security incidents to minimize potential adverse impact. Information security risks have generally increased in recent years because of the proliferation of new technologies and the increased sophistication and activities of perpetrators of cyber-attacks. Experienced hackers, cybercriminals and

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perpetrators of threats may be able to penetrate our network security and misappropriate or compromise our confidential information or that of third parties, create system disruptions or cause shutdowns. These perpetrators of cyberattacks also may be able to develop and deploy viruses, worms, malware and other malicious software programs that attack our information and networks or otherwise exploit any security vulnerabilities of our information and networks. Techniques used to obtain unauthorized access to or sabotage systems change frequently and often are not recognized until long after being launched against a target, so we may be unable to anticipate these techniques or to implement adequate preventative measures. A breach of our information technology systems and security measures as a result of third party action, malware, employee error, malfeasance or otherwise could materially adversely impact our business and results of operations and expose us to customer, supplier and other third party liabilities. Any damage, security breach, delay or loss of critical data associated with our systems may delay or prevent certain operations and may have a material adverse effect on our financial condition, results of operations and cash flows. As cyber threats continue to evolve, we may be required to expend additional significant resources to continue to enhance our information security measures and/or to investigate and remediate any information security vulnerabilities.

Our failure to comply with applicable governmental privacy laws and regulations in the U.S. and internationally could substantially impact our business, operations, financial position and cash flows.

We are subject to extensive and evolving federal, state and foreign privacy laws and regulations. Changes in privacy and data security laws or regulations or new interpretations of existing laws or regulations could have a negative effect on our operating methods and costs. Failure to comply with such regulations could result in the termination or loss of contracts, the imposition of contractual damages, private and government civil litigation, civil sanctions, damage to our reputation or, in certain circumstances, criminal penalties, any of which could have a material adverse effect on our results of operations, financial position, cash flows, business and prospects. Determining compliance with such regulations is complicated by the fact that many of these laws and regulations have not been fully interpreted by governing regulatory authorities or the courts, and many of the provisions of such laws and regulations are open to a range of interpretations. There can be no assurance that we are, or have been, in compliance with all applicable existing laws and regulations or that we will be able to comply with new laws or regulations.

With respect to trans-border data flows from the European Economic Area (the “EEA”), we have historically relied on the U.S. European Union (“E.U.”) and the U.S.-Swiss Safe Harbor Frameworks, as agreed to by the U.S. Department of Commerce and the E.U. and Switzerland, respectively, as a means to legally transfer European personal information from Europe to the U.S. and to process that information in the U.S. However, on October 6, 2015, the European Court of Justice (“ECJ”) invalidated the legal basis for the U.S.-E.U. Safe Harbor framework, and the Swiss data protection authorities later invalidated the U.S.-Swiss Safe Harbor framework. As a result, we have begun to undertake efforts to conform transfers of personal information from the EEA based on current regulatory obligations, the guidance of data protection authorities and evolving best practices. Despite these efforts, we may be unsuccessful in establishing conforming means of transferring such data from the EEA. The legitimacy of these alternate means is subject to differing interpretations among various European jurisdictions and, as a result, we may experience hesitancy, reluctance or refusal by European or multi-national clients to use our services due to the potential risk exposure they may face as a result of the ECJ ruling and the current data protection obligations imposed on them by certain data protection authorities. Furthermore, the ECJ’s decision may result in different European data protection regulators applying differing standards for the transfer of personal data, which could result in increased regulation, cost of compliance and limitations on data transfers for us and our clients. These developments could harm our business, financial condition and results of operations. The current and future status of the data protection laws, policies and enforcement within the United Kingdom are now increasingly uncertain in light of the vote to leave the E.U., exacerbating the potential impact of regulatory uncertainty.

On July 12, 2016, the European Commission and U.S. Department of Commerce announced that the E.U.-U.S. Privacy Shield Framework had been accepted. We adopted a Privacy Shield Policy that is compliant with that framework on September 23, 2016 and received confirmation from the Commerce Department that our self-certification had been finalized and became effective January 26, 2017. We have begun training our human resources and information technology teams on the Privacy Shield Policy and our obligations. While we believe our efforts will allow us to comply with the requirements of the E.U.-U.S. Privacy Shield Framework, noncompliance or alleged noncompliance with European privacy laws could result in fines and other penalties and could have a negative effect on our existing business and on our ability to attract and retain new customers.

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The supply and cost of materials we use in manufacturing our products fluctuate and could increase our operating costs.

Steel is a significant portion of the raw materials used in our products. Local shortages of steel plate sometimes arise, and it is possible that an adequate supply of steel will not continue to be available in all locations on terms acceptable to us. The materials we use in our products are subject to price fluctuations that we cannot control. Changes in the cost of raw materials can have a significant effect on our gross margins. Rapid increases in material prices are difficult to pass through to customers. An inability to pass on these higher costs could negatively impact our results of operations or financial condition.

Our participation in multiemployer pension plans could adversely impact our liquidity and results of operations.

During 2016, we contributed to approximately 60 multiemployer pension plans throughout the U.S. and historically, we have contributed to over 150 multiemployer pension plans in which we still have withdrawal liabilities. We believe that our responsibility for potential withdrawal liabilities associated with participating in multiemployer pension plans is limited because the building and construction trades exemption pursuant to the Employee Retirement Income Security Act of 1974 should apply to the substantial majority of our plan contributions. However, pursuant to the Pension Protection Act of 2006 and other applicable laws, we are exposed to other potential liabilities associated with plans that are underfunded. As of December 31, 2016, we had been notified that certain pension plans were in critical funding status. Currently, certain plans are developing, or have developed, a rehabilitation plan that may call for a reduction in participant benefits or an increase in future employer contributions. Therefore, in the future, we could be responsible for potential surcharges, excise taxes and/or additional contributions related to these plans, which could impact our liquidity and results of operations. While we continue to actively monitor, assess and take steps to limit our potential exposure to any surcharges, excise taxes, additional contributions and/or withdrawal liabilities, any market conditions or the number of participating employers remaining in each plan may result in a reorganization, insolvency or mass withdrawal that could have a material adverse effect on the funded status of the multiemployer plans and our potential withdrawal liability.

Foreign exchange risks may affect our ability to realize a profit from certain projects or to obtain projects.

We generally attempt to denominate our contracts in U.S. dollars or in the currencies of our expenditures. However, we do enter into contracts that subject us to foreign exchange risks, particularly to the extent contract revenue is denominated in a currency different than the contract costs. We may seek to minimize our exposure from foreign exchange risks by limiting foreign currency contracts to those currencies where we have ongoing operating expenditures or entering into hedge contracts if there are limited ongoing expenditures in the same currencies. However, these actions may not always eliminate all foreign exchange risks, and such risks have the potential to have an adverse effect on our business, financial condition, cash flow or profit.

Extensive government legislation and regulatory initiatives could increase costs and impose burdensome operating restrictions that may cause operational delays.

Members of the U.S. Congress and the U.S. Environmental Protection Agency (“EPA”) may implement more stringent regulations for hydraulic fracturing, the process of injecting water, sand and chemicals at high pressure underground, which releases natural gas. Currently, Congress and the EPA are studying environmental contamination related to hydraulic fracturing and the impact of fracturing on public health. In March 2015, Congress introduced legislation to regulate hydraulic fracturing and require disclosure of the chemicals used in the hydraulic fracturing process. Additionally, some states have adopted, and others are considering, regulations that could restrict hydraulic fracturing. In March 2015, the Bureau of Land Management issued a final rule to regulate hydraulic fracturing on federal and Indian land. In June 2016, a federal judge held that the Bureau of Land Management had no authority to issue such regulations, and the decision was appealed to the Tenth Circuit Court of Appeals. However, the current administration has indicated it does not intend to contest the decision and has proposed a repeal of the standards altogether. The ultimate status of such regulation is currently unknown.

Additionally, the EPA has focused its energy on more rulemaking to curb emissions of methane, smog forming volatile organic compounds and toxic air pollutants from oil and gas sources. Through the New Source Performance Standards, EPA has finalized and plans to finalize in 2016 rules that clarify definitions and implement more stringent emission controls on associated equipment like tanks and compressors used to process and transport natural gas. In August 2015, the EPA finalized rules that clarified the definitions of “low pressure wells” and “storage vessel,” which may affect plant construction. Any new laws, rules, regulations or permitting requirements regarding the oil and natural gas industries could lead to delays in the construction of new gas turbine power plants and/or increased operating costs for existing gas turbine power plants, which could negatively impact demand for our products.

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A change in our product mix could adversely affect our results of operations.

Our results may be affected by a change in our product mix on which our gross margin depends. Changes in our product mix may result from marketing activities to existing customers and needs communicated to us from existing and prospective customers. Our outlook, budgeting and strategic planning assume a certain product mix of sales. If actual results vary from this projected mix or products and services, our financial results could be negatively impacted.

We are subject to anti-bribery laws in the countries in which we operate. Failure to comply with these laws could result in our becoming subject to penalties and the disruption of our business activities.

Many of the countries in which we transact business have laws that restrict the offer or payment of anything of value to government officials or other persons with the intent of gaining business or favorable government action. We are subject to these laws, as well as being governed by the U.S. Foreign Corrupt Practices Act restricting these types of activities. In addition to prohibiting certain bribery-related activity with foreign officials and other persons, these laws provide for recordkeeping and reporting obligations. Any failure by us, our subcontractors, agents or others who work for us on our behalf to comply with these legal and regulatory obligations could impact us in a variety of ways that include, but are not limited to, significant criminal, civil and administrative penalties. The failure to comply with these legal and regulatory obligations could also result in the disruption of our business activities and have a material adverse effect on our business and results of operations.

A change in tax laws, treaties or regulations, or their interpretation, of any country in which we operate could increase our tax burden and otherwise adversely affect our financial condition, results of operations and cash flows.

A change in tax laws, treaties or regulations, or their interpretation, of any country in which we operate could result in a higher tax rate on our earnings, which could result in a significant negative impact on our earnings and cash flows from operations. We continue to assess the impact of various legislative proposals, including U.S. federal and state proposals, and modifications to existing tax treaties that could result in a material increase in our taxes. We cannot predict whether any specific legislation will be enacted or the terms of any such legislation. However, if such proposals were to be enacted, or if modifications were to be made to certain existing treaties, the consequences could have a material adverse impact on us, including increasing our tax burden, increasing costs of our tax compliance or otherwise adversely affecting our financial condition, results of operations and cash flows.

Work disruptions resulting from the expiration of our collective bargaining agreements or otherwise could result in increased operating costs and adversely affect our operating performance.

Certain of our temporary Services segment craft employees are represented by labor unions with which we have collective bargaining agreements. There can be no assurance that we will not experience labor disruptions associated with a lengthy strike or the expiration or renegotiation of collective bargaining agreements or other work stoppage at our facilities or customer locations, which could adversely affect our operating performance and may result in additional expenses and possible loss of revenue.

Risk Factors Related to Our Common Stock

The market price for our common stock is volatile, and our stockholders may not be able to resell their shares of common stock at or above the purchase price paid.

The market price of our common stock fluctuates significantly and may be affected by numerous factors (some of which are beyond our control), including:

·

The risk factors described in this Item 1A;

·

Actual or anticipated fluctuations in our operating results and financial condition;

·

Changes in laws or regulations and court rulings and trends in our industry;

·

The significant concentration of ownership of our common stock in the hands of a small number of investors;

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·

Changes in supply and demand of components and materials;

·

Changes in tax or accounting standards affecting our industry;

·

A shortfall in operating revenue or net income from that expected by securities analysts and investors;

·

Changes in securities analysts’ estimates of our financial performance or the financial performance of our competitors or companies in our industry;

·

General conditions in our customers’ industries; and

·

The degree of trading liquidity in our common stock and general market conditions.

From December 31, 2012 to September 5, 2017 the closing price of our common stock ranged from $20.86 to $1.62 per share. Continued declines in the price of our common stock could impede our ability to obtain additional capital, attract and retain qualified employees and reduce the liquidity of our common stock. In addition, the reduced stock price also increases the cost to us, in terms of dilution, of using our equity for employee compensation.

The stock market has from time to time experienced significant price and volume fluctuations that have particularly affected the market prices for the common stock of similarly situated companies. These broad market fluctuations may adversely affect the market price of our common stock.

We are currently subject to securities class action lawsuits filed against us. If additional suits were to be filed against us, regardless of the outcome, it could result in substantial costs and a diversion of our management’s attention and resources, which could also negatively impact the market price of our stock.

Delisting of our common stock from the NYSE and subsequent quotation on the OTC Pink® Marketplace—Limited Information Tier (“OTC”) operated by the OTC Markets Group Inc. may continue to decrease the value of our common stock and prevent certain investors from investing or achieving a meaningful degree of liquidity.

On March 30, 2016, we announced that we expected the NYSE to initiate procedures to delist our common stock, including the issuance of a delisting notice, and that we planned to disclose the receipt of such notice in a subsequent Current Report on Form 8-K. We subsequently received that notice, and the NYSE suspended trading in our common stock, effective March 30, 2016, and our common stock was subsequently delisted. As a result, our common stock is now quoted on the OTC. We cannot assure investors that our common stock will be listed on a national exchange such as the NASDAQ Stock Market, the NYSE or another securities exchange once we become current in our filing obligations with the SEC.

Based upon the fact that our common stock is no longer registered for trading on a national exchange and that the value of our issued and outstanding common stock has decreased in value, there may be investment loss for stockholders or certain stockholders may no longer be permitted to invest in our common stock. Bid quotations on the OTC can be sporadic and may not provide any meaningful liquidity to investors. An investor may find it difficult to dispose of shares or obtain accurate quotations as to the market value of our common stock. As a result of these limitations, our common stock has fewer market makers, lower trading volumes and larger spreads between bid and asked prices than securities listed on a national stock exchange or automated quotation system would typically have.

Because there may be a limited market and generally low volume of trading in our common stock, the share price of our common stock is more likely to be affected by broad market fluctuations, general market conditions, fluctuations in our operating results, changes in the market’s perception of our business and announcements made by us, our competitors or parties with whom we have business relationships. There may also be fewer institutional investors willing to hold or acquire our common stock. The lack of liquidity in our common stock may make it difficult for us to issue additional securities for financing or other purposes or to otherwise arrange for any financing that we may need in the future.

We are also no longer subject to the NYSE’s rules, such as corporate governance requirements or the minimum market capitalization and stockholders’ equity criteria. Without required compliance with such standards, investor interest in our common stock may decrease. The delisting of our common stock from the NYSE may also result in other negative implications, including the potential loss of confidence by customers, strategic partners and employees and the loss of investor and media interest in us and our common stock.

35


 

We do not currently expect to pay any cash dividends on our common stock, so investors may not receive any return on investment unless investors sell their shares of common stock for a price greater than that which investors paid for them.

On May 30, 2012, our Board adopted a dividend policy pursuant to which we would pay quarterly dividends on our common stock; however, we have not paid any dividends since March 2015. The costs associated with the restatement of our historical financial results, as well as related matters, has presented a significant financial burden on our company, and the continued operation and expansion of our business has required substantial funding. In addition, as of December 31, 2016, our Revolving Credit Facility prevented us from paying dividends. As of September 5, 2017, our Centre Lane Facility continues to prohibit us from paying dividends. Therefore, we do not anticipate paying dividends on our common stock in the foreseeable future.

Any future determination with respect to the payment of dividends will be at the discretion of the Board and will depend upon our financial condition, results of operations, capital requirements, general business conditions, terms of financing arrangements and other factors that our Board may deem relevant. Future dividends, their timing and amount will be subject to capital availability and periodic determinations by our Board that cash dividends are in the best interest of our stockholders and are in compliance with all of our respective laws and agreements applicable to the declaration and payment of cash dividends and may be affected by, among other factors: our views on potential future capital requirements for organic initiatives and strategic transactions, including acquisitions; debt service requirements; our credit rating; changes to applicable tax laws or corporate laws; limitations in our Centre Lane Facility; and changes to our business model. Our dividend payments may change from time to time, and we cannot provide assurance that we will declare dividends of any particular amounts or at all. If we do not pay dividends, then our common stock may be less valuable because a return on investment will occur only if our stock price increases, and such appreciation may not occur.

Actions of activist shareholders could be disruptive and potentially costly, and the possibility that activist shareholders may seek changes that conflict with our strategic direction could cause uncertainty about the strategic direction of our business.

Activist investors may attempt to effect changes in our strategic direction and how our business is governed, or to acquire control over us to increase short term stockholder value by advocating corporate actions such as financial restructuring, increased borrowing, special dividends, stock repurchases or even sales of assets or the entire company. In fact, in June 2016, we entered into an election and nomination agreement with certain of our significant stockholders that had filed a Schedule 13D with the SEC with respect to the Company. Pursuant to that agreement, we agreed to appoint two additional directors to our Board, one of whom would serve as a representative of those investors. Among other things, we also agreed to various standstill provisions and to include the investors’ designees in our slate of nominees for election as directors at our next two annual meetings of stockholders. The agreement also provides that, because the Company has not held its 2016 Annual Meeting of Stockholders, the significant stockholders have the right to terminate the agreement at any time after January 1, 2017.

While we welcome varying opinions from all shareholders, activist campaigns that contest or conflict with our strategic direction could have an adverse effect on our results of operations and financial condition, as responding to proxy contests and other actions by activist shareholders can disrupt our operations, be costly and time consuming and divert the attention of our Board and senior management from the pursuit of business strategies. In addition, perceived uncertainties as to our future direction as a result of changes to the composition of our Board may lead to the perception of a change in the direction of our business, instability or lack of continuity which may be exploited by our competitors, may cause concern to our current or potential customers, may result in the loss of potential business opportunities and may make it more difficult to attract and retain qualified personnel and business partners. These types of actions could cause significant fluctuations in our stock price based on temporary or speculative market perceptions or other factors that do not necessarily reflect the underlying fundamentals and prospects of our business.

Future sales of our common stock and any of our other efforts to raise additional capital may depress our stock price.

Sales of a substantial number of shares of our common stock in the public market or otherwise, either by us, a member of management or a major stockholder, or the perception that such sales could occur, could depress the market price of our common stock and have a material adverse effect on our ability to raise capital through the sale of additional equity securities. We may seek additional capital through a combination of private and public equity and debt offerings. To the extent that we raise additional capital through the sale of equity or convertible debt securities, investor ownership interest will be diluted, and the terms may include liquidation or other preferences that adversely affect investor rights as a stockholder. Additional debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to

36


 

take specific actions such as incurring additional debt, making capital expenditures or declaring dividends. Any of the above could cause a decline in our stock price.

 

Item 1B.  Unresolved Staff Comments.

 

None.

37


 

Item 2.  Properties.

Our corporate office is currently located in Irving, Texas. Below is a summary of our owned and leased properties as of December 31, 2016.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

Owned/Leased

  

Approximate

  

 

  

 

Location

 

Expiration Date

 

Sq. Footage

 

Principal Uses

 

Segment

Irving, Texas

 

Leased (10/21/19)

 

11,000

 

Administrative office (corporate headquarters)

 

Corporate

Monterrey, Mexico

 

Owned(4)

 

135,000

 

Manufacturing and administrative office

 

Mechanical Solutions

Auburn, Massachusetts

 

Leased (12/21/26)

 

55,000

 

Manufacturing and administrative office

 

Mechanical Solutions

South Bend, Indiana

 

Leased(1)

 

110,000

 

Manufacturing and administrative office

 

Electrical Solutions

Chattanooga, Tennessee

 

Leased(2)

 

105,000

 

Manufacturing and administrative office

 

Electrical Solutions

Caldwell, Idaho

 

Leased (6/30/23)

 

58,000

 

Manufacturing and administrative office

 

Electrical Solutions

Heerlen, The Netherlands

 

Leased (9/30/21)

 

26,700

 

Administrative office

 

Mechanical Solutions

Heerlen, The Netherlands

 

Owned(4)

 

14,800

 

Administrative office

 

Mechanical Solutions

Baghdad, Iraq

 

Leased (1/8/18)

 

200

 

Branch office

 

Mechanical Solutions

Tulsa, Oklahoma

 

Leased (3/31/24)

 

49,900

 

Manufacturing and administrative office

 

Mechanical Solutions

Tulsa, Oklahoma

 

Leased (1/31/18)(3)

 

2,000

 

Administrative office

 

Mechanical Solutions

Shanghai, China

 

Leased (11/17/18)

 

1,200

 

Administrative office

 

Mechanical Solutions

Shanghai, China

 

Leased (6/30/18)

 

1,600

 

Warehouse facility

 

Mechanical Solutions

Houston, Texas

 

Leased (12/21/26)

 

114,400

 

Manufacturing and administrative office

 

Electrical Solutions

Florence, South Carolina

 

Leased (3/31/17)(3)

 

25,120

 

Warehouse facility and administrative office

 

Services

Atlanta, Georgia

 

Leased (3/31/23)

 

24,000

 

Administrative office

 

Services

Elmhurst, New York

 

Leased (10/31/17)

 

8,200

 

Warehouse facility and administrative office

 

Services


(1)We lease four facilities in South Bend, Indiana. These leases expire on December 31, 2017, February 2, 2018, July 26, 2019 and September 24, 2020.

(2)We lease two facilities in Chattanooga, Tennessee. These leases expire on November 30, 2019 and June 30, 2023.

(3)We terminated the Tulsa, Oklahoma office lease and Florence, South Carolina lease in March and May 2017, respectively.

(4)We are currently engaged in a process to sell our owned property in The Netherlands and Monterrey, Mexico.

38


 

Item 3.  Legal Proceedings.

Shareholder Litigation

A putative shareholder class action, captioned Budde v. Global Power Equipment Group Inc., is pending in the U.S. District Court for the Northern District of Texas. This action and another action were filed on May 13, 2015 and June 23, 2015, and on July 29, 2015, the court consolidated the two actions and appointed a lead plaintiff. On May 1, 2017, the lead plaintiff filed a second consolidated amended complaint that names the Company and three of our former officers as defendants. It alleges violations of the federal securities laws arising out of matters related to our restatement of certain financial periods and claims that the defendants made material misrepresentations and omissions of material fact in certain public disclosures during the putative class period in violation of Sections 10(b) and 20(a) of the Exchange Act and Rule 10b-5, as promulgated thereunder. The plaintiffs seek class certification on behalf of persons who acquired our stock between September 7, 2011 and May 6, 2015, monetary damages of “more than $200 million” on behalf of the putative class and an award of costs and expenses, including attorneys’ fees and experts’ fees. We intend to defend against this action. On June 26, 2017, the Company and the individual defendants filed a motion to dismiss the complaint. On August 23, 2017, the lead plaintiff filed its opposition to that motion. Defendants have until September 22, 2017 to file a reply in further support of their motion. Litigation is subject to many uncertainties and the outcome of this action is not predictable with assurance. At this time, we are unable to predict the possible loss or range of loss, if any, associated with the resolution of this litigation, or any potential effect such may have on us or our business or operations.

SEC Investigation

The Division of Enforcement of the SEC is conducting a formal investigation into possible securities law violations by Global Power relating to disclosures we made concerning certain financial information, including our cost of sales and revenue recognition, as well as related accounting issues. We are cooperating with the SEC in its investigation, including through the production of documents to, and the sharing of information with, the SEC Enforcement Staff. At this time, we cannot predict the outcome or the duration of the SEC investigation or any other legal proceedings or any enforcement actions or other remedies that may be imposed on us arising out of the SEC investigation.

For a description of our material pending legal and regulatory proceedings and settlements, see “Note 15—Commitments and Contingencies” and “Note 20—Subsequent Events” to our consolidated financial statements.

Item 4.  Mine Safety Disclosures.

Not applicable.

39


 

Part II

Item 5.  Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Market Price of Our Common Stock  

Our common stock traded on the NYSE through March 30, 2016. Effective March 30, 2016, the NYSE suspended trading in our securities. Our securities were officially delisted from the NYSE on April 18, 2016. Our shares are currently quoted on the OTC under the symbol “GLPW.” The high and low bid information for each quarter since January 1, 2015, as traded on the NYSE through March 30, 2016 and on the OTC beginning March 31, 2016, is as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

2016

  

2015

 

 

 

High

  

 

Low

  

 

Dividends Declared

 

 

High

  

 

Low

  

 

Dividends Declared

1st Quarter

 

$

3.54

 

$

2.50

 

 

— 

 

$

14.10

 

$

12.06

 

$

0.09

2nd Quarter

 

$

2.54

 

$

1.50

 

 

— 

 

$

13.75

 

$

7.42

 

 

— 

3rd Quarter

 

$

5.16

 

$

2.01

 

 

— 

 

$

7.98

 

$

3.49

 

 

— 

4th Quarter

 

$

4.83

 

$

2.90

 

 

— 

 

$

5.80

 

$

3.39

 

 

— 

 

The high and low bid information for each quarter since January 1, 2017, as traded on the OTC is as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

2017

 

 

 

High

  

 

Low

  

 

Dividends Declared

1st Quarter

 

$

5.40

 

$

4.01

 

 

— 

2nd Quarter

 

$

4.50

 

$

3.21

 

 

— 

3rd Quarter (through September 5, 2017)

 

$

3.50

 

$

2.46

 

 

— 

 

The OTC quotations above reflect inter-dealer prices, without retail mark-up, mark down or commissions and may not represent actual transactions. Such quotes are not necessarily representative of actual transactions or of the value of our securities.

The trading volume for our common stock is relatively limited. An active trading market may not continue to provide adequate liquidity for our existing stockholders or for persons who may acquire our common stock in the future.

Holders

As of September 5, 2017, there were 17,778,885 shares of our common stock outstanding and 133 holders of record of our common stock. We believe that the number of beneficial holders of our common stock is substantially greater than the number of holders of record.

Dividends

We have not paid dividends to holders of our common stock since March 2015, and the terms of our Revolving Credit Facility, as amended, prevented us from paying dividends as of December 31, 2016. Although in June 2017, we repaid the amounts outstanding under the Revolving Credit Facility, the terms of our Centre Lane Facility currently prevent us from paying dividends. In addition, declaration and payment of future dividends would depend on many factors, including, but not limited to, our earnings, financial condition, business development needs, regulatory considerations and the terms of our Centre Lane Facility, and is at the discretion of our Board of Directors. We currently have no plan in place to pay cash dividends. See “Part I—Item 1A. Risk Factors—We do not currently expect to pay any cash dividends on our common stock, so investors may not receive any return on investment unless investors sell their shares of common stock for a price greater than that which investors paid for them.

40


 

Recent Sales of Unregistered Securities

During the fiscal year ended December 31, 2016, we did not sell any of our equity securities in transactions that were not registered under the Securities Act of 1933, as amended (the “Securities Act”).

Securities Authorized for Issuance under Equity Compensation Plans

The disclosure required by this Item is included under “Part III—Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters” of this Form 10-K.

Purchases of Equity Securities by the Company and Affiliated Purchasers

Neither we, nor any “affiliated purchaser,” as defined in SEC Rule 10b-18(a)(3), purchased any of our equity securities during the years ended December 31, 2016, 2015 or 2014.

Equity Compensation Plan Information

For a discussion of our equity compensation plan information, see “Part III—Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.”

Five Year Stock Performance Table

The stock price performance graph below shall not be deemed soliciting material or to be filed with the SEC or subject to Regulation 14A or 14C under the Exchange Act or to the liabilities of Section 18 of the Exchange Act, nor shall it be incorporated by reference into any past or future filing under the Securities Act or the Exchange Act, except to the extent we specifically request that it be treated as soliciting material or specifically incorporate it by reference into a filing under the Securities Act or the Exchange Act.

Picture 2

The following graph illustrates the five-year cumulative total return on investments in our common stock (GLPW), our peer group and the Russell 2000 Index. These indices are prepared by Zacks Investment Research, Inc. Our common stock is quoted on the OTC market and was previously listed on the NYSE. The shareholder return shown below is not necessarily indicative of future performance. Total return, as shown, assumes $100 invested on December 31, 2011 in shares of our

41


 

common stock, shares of our peer group and the Russell 2000 Index, all with cash dividends reinvested. The calculations exclude trading commissions and taxes.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

12/11

  

12/12

  

12/13

  

12/14

  

12/15

  

12/16

GLPW

100.00

 

73.32

 

85.40

 

61.62

 

15.64

 

21.21

Russell 2000

100.00

 

116.35

 

161.52

 

169.42

 

161.95

 

196.45

Peer Group(1)

100.00

 

113.54

 

164.00

 

128.96

 

130.69

 

161.07


(1)

The companies in our peer group are: Aegion Corporation, Astec Industries, AZZ, Inc., BWX Technologies, Inc. (formerly Babcock & Wilcox), CECO Environmental Corp., Chicago Bridge & Iron Company N.V., Donaldson Company, Inc., Dycom Industries, Inc., Graham Corporation, Matrix Service Company, MYR Group Inc., Powell Industries, Inc., Team, Inc. and Willbros Group, Inc. We selected these companies pursuant to Item 201(e) of Regulation S-K under the Exchange Act.

.

 

Item 6.  Selected Financial Data.

Five-Year Summary of Selected Financial Data

The following selected financial data are derived from the (i) audited consolidated financial statements for the years ended December 31, 2016, 2015 and 2014, (ii) audited consolidated statement of operations for the year ended December 31, 2013, (iii) unaudited consolidated balance sheets as of December 31, 2013 and 2012 and (iv) unaudited consolidated statement of operations for the year ended December 31, 2012, and should be read in conjunction with “Part I—Item 1A. Risk Factors,” “Part II—Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Part II—Item 8. Financial Statements and Supplementary Data” and our consolidated financial statements and the related notes included in this Form 10-K.

42


 

These historical results are not necessarily indicative of results to be expected for any future periods.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands, except share and per share data)

 

Year Ended December 31,

 

Statement of Operations

  

2016

 

2015

 

2014

 

2013

 

2012

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(unaudited)

 

Total revenue

 

$

418,588

 

$

589,003

 

$

539,053

 

$

465,914

 

$

463,286

 

Gross profit

 

 

48,989

 

 

52,597

 

 

73,334

 

 

80,810

 

 

72,448

 

Gross profit percentage

 

 

11.7

%

 

8.9

%

 

13.6

%

 

17.3

%

 

15.6

%

Operating expenses

 

 

65,297

 

 

75,818

 

 

77,118

 

 

72,825

 

 

61,218

 

Restatement expenses

 

 

6,738

 

 

14,385

 

 

— 

 

 

— 

 

 

— 

 

Loss on sale of business and net assets held for sale

 

 

8,812

 

 

— 

 

 

— 

 

 

— 

 

 

— 

 

Loss on sale-leasebacks, net

 

 

1,857

 

 

— 

 

 

— 

 

 

— 

 

 

— 

 

Impairment expense

 

 

— 

 

 

47,755

 

 

— 

 

 

— 

 

 

— 

 

Bargain purchase gain

 

 

— 

 

 

(3,168)

 

 

— 

 

 

— 

 

 

— 

 

Operating (loss) income

 

 

(33,715)

 

 

(82,193)

 

 

(3,784)

 

 

7,985

 

 

11,230

 

Interest expense, net

 

 

8,398

 

 

4,484

 

 

1,820

 

 

893

 

 

1,563

 

Foreign exchange (gain) loss

 

 

(217)

 

 

(1,014)

 

 

(65)

 

 

(199)

 

 

254

 

Other expense (income), net

 

 

15

 

 

12

 

 

34

 

 

(28)

 

 

308

 

(Loss) income from continuing operations before income tax

 

 

(41,911)

 

 

(85,675)

 

 

(5,573)

 

 

7,319

 

 

9,105

 

Income tax expense (benefit)

 

 

1,702

 

 

(6,946)

 

 

41,661

 

 

(1,840)

 

 

(3,266)

 

(Loss) income from continuing operations

 

 

(43,613)

 

 

(78,729)

 

 

(47,234)

 

 

9,159

 

 

12,371

 

(Loss) income from discontinued operations(1)

 

 

— 

 

 

— 

 

 

(1)

 

 

279

 

 

24

 

Net (loss) income

 

$

(43,613)

 

$

(78,729)

 

$

(47,235)

 

$

9,438

 

$

12,395

 

(Loss) earnings per share from continuing operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

(2.51)

 

$

(4.59)

 

$

(2.78)

 

$

0.54

 

$

0.73

 

Diluted

 

$

(2.51)

 

$

(4.59)

 

$

(2.78)

 

$

0.54

 

$

0.72

 

Common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average shares outstanding

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

17,348,286

 

 

17,151,810

 

 

17,005,589

 

 

16,919,981

 

 

16,885,259

 

Diluted

 

 

17,348,286

 

 

17,151,810

 

 

17,005,589

 

 

17,045,095

 

 

17,247,723

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31,

 

Balance Sheet

 

2016

 

2015

 

2014

 

2013

 

2012

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(unaudited)

 

Current assets

 

$

158,242

 

$

172,035

 

$

190,672

 

$

169,824

 

$

183,124

 

Total assets

 

 

232,842

 

 

301,030

 

 

361,643

 

 

362,324

 

 

331,244

 

Current liabilities

 

 

77,342

 

 

79,201

 

 

76,090

 

 

63,768

 

 

63,947

 

Long-term debt

 

 

45,341

 

 

70,000

 

 

45,000

 

 

23,000

 

 

— 

 

Stockholders’ equity

 

 

87,134

 

 

130,767

 

 

212,818

 

 

269,712

 

 

262,617

 

Cash dividends declared per common share

 

 

— 

 

$

0.09

 

$

0.36

 

$

0.36

 

$

0.27

 


(1)

Discontinued operations includes the results of our Deltak, LLC business unit (the “Deltak business unit”), which was sold in 2011.

43


 

Quarterly Financial Data – Unaudited

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands, except share and per share data)

 

For the Quarter Ended

 

Statement of Operations

  

December 31, 2016

 

September 30, 2016

 

June 30, 2016

 

March 31, 2016

 

Total revenue

 

$

103,635

 

$

85,444

 

$

106,787

 

$

122,722

 

Gross profit

 

 

11,955

 

 

12,937

 

 

9,286

 

 

14,811

 

Gross profit percentage

 

 

11.5

%

 

15.1

%

 

8.7

%

 

12.1

%

Operating expenses

 

 

14,066

 

 

15,894

 

 

17,484

 

 

17,853

 

Restatement expenses

 

 

1,151

 

 

1,132

 

 

1,542

 

 

2,913

 

Loss on sale of business and net assets held for sale

 

 

124

 

 

495

 

 

8,193

 

 

— 

 

Loss on sale-leasebacks, net

 

 

1,857

 

 

— 

 

 

— 

 

 

— 

 

Operating loss

 

 

(5,243)

 

 

(4,584)

 

 

(17,933)

 

 

(5,955)

 

Interest expense, net

 

 

1,977

 

 

1,764

 

 

1,997

 

 

2,660

 

Foreign exchange (gain) loss

 

 

(479)

 

 

83

 

 

(129)

 

 

308

 

Other expense (income), net

 

 

65

 

 

(109)

 

 

64

 

 

(5)

 

Loss from continuing operations before income tax

 

 

(6,806)

 

 

(6,322)

 

 

(19,865)

 

 

(8,918)

 

Income tax expense

 

 

180

 

 

408

 

 

247

 

 

867

 

Net loss

 

$

(6,986)

 

$

(6,730)

 

$

(20,112)

 

$

(9,785)

 

Loss per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.40)

 

$

(0.39)

 

$

(1.16)

 

$

(0.57)

 

Diluted

 

$

(0.40)

 

$

(0.39)

 

$

(1.16)

 

$

(0.57)

 

Common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average shares outstanding

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

17,433,754

 

 

17,396,079

 

 

17,338,255

 

 

17,223,901

 

Diluted

 

 

17,433,754

 

 

17,396,079

 

 

17,338,255

 

 

17,223,901

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of the Quarter Ended

Balance Sheet

 

December 31, 2016

 

September 30, 2016

 

June 30, 2016

 

March 31, 2016

 

Current assets

 

$

158,242

 

$

157,821

 

$

172,368

 

$

167,240

 

Total assets

 

 

232,842

 

 

248,348

 

 

270,073

 

 

293,454

 

Current liabilities

 

 

77,342

 

 

77,482

 

 

78,062

 

 

79,763

 

Long-term debt

 

 

45,341

 

 

54,103

 

 

69,000

 

 

69,500

 

Stockholders’ equity

 

 

87,134

 

 

95,650

 

 

102,103

 

 

122,770

 

Cash dividends declared per common share

 

 

— 

 

 

— 

 

 

— 

 

 

— 

 

.

44


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands, except share and per share data)

 

For the Quarter Ended

 

Statement of Operations

  

December 31, 2015

 

September 30, 2015

 

June 30, 2015

 

March 31, 2015

 

Total revenue

 

$

144,424

 

$

124,162

 

$

174,276

 

$

146,141

 

Gross profit

 

 

8,945

 

 

14,932

 

 

17,948

 

 

10,772

 

Gross profit percentage

 

 

6.2

%

 

12.0

%

 

10.3

%

 

7.4

%

Operating expenses

 

 

18,162

 

 

18,486

 

 

18,720

 

 

20,450

 

Restatement expenses

 

 

5,974

 

 

6,796

 

 

1,615

 

 

— 

 

Impairment expense

 

 

 4

 

 

47,751

 

 

— 

 

 

— 

 

Bargain purchase gain

 

 

— 

 

 

— 

 

 

— 

 

 

(3,168)

 

Operating loss

 

 

(15,195)

 

 

(58,101)

 

 

(2,387)

 

 

(6,510)

 

Interest expense, net

 

 

2,076

 

 

953

 

 

830

 

 

625

 

Foreign exchange (gain) loss

 

 

151

 

 

(55)

 

 

144

 

 

(1,254)

 

Other expense (income), net