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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x               QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 30, 2014

or

o                  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                 to                

Commission File No. 001-16501

Global Power Equipment Group Inc.

(Exact name of registrant as specified in its charter)

400 E. Las Colinas Blvd., Suite 400

Irving, TX 75039

(Address of principal executive offices) (Zip code)

(214) 574-2700

(Registrant’s telephone number, including area code)

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  x    No   o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  o

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule12b-2 of the Exchange Act).    Yes  o    No  x

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.    Yes  x    No  o

As of April 22, 2014 there were 17,112,645 shares of common stock of Global Power Equipment Group Inc. outstanding.

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GLOBAL POWER EQUIPMENT GROUP INC. AND SUBSIDIARIES

Form 10-Q

For the quarter ended March 31, 2014

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Part I—FINANCIAL INFORMATION

Item 1.                                  Financial Statements.

GLOBAL POWER EQUIPMENT GROUP INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

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

See accompanying notes to condensed consolidated financial statements (unaudited).

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GLOBAL POWER EQUIPMENT GROUP INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

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

See accompanying notes to condensed consolidated financial statements (unaudited).

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GLOBAL POWER EQUIPMENT GROUP INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

($ in thousands)

See accompanying notes to condensed consolidated financial statements (unaudited).

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GLOBAL POWER EQUIPMENT GROUP INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

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

See accompanying notes to condensed consolidated financial statements (unaudited).

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GLOBAL POWER EQUIPMENT GROUP INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

($ in thousands)

See accompanying notes to condensed consolidated financial statements (unaudited).

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GLOBAL POWER EQUIPMENT GROUP INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 1 – BUSINESS AND ORGANIZATION

Global Power Equipment Group Inc. (“Global Power,” “we,” “us,” “our,” or “the Company”) is a comprehensive provider of customer-engineered equipment, and modification and maintenance services for customers in the power generation, oil & gas, natural gas, infrastructure and process and industrial markets.  Our customers are in and outside the United States (“U.S.”) in both developed and emerging economies.

We design, engineer and manufacture a comprehensive range of gas and steam turbine auxiliary products, control houses and generator enclosures primarily used to enhance the efficiency and facilitate the operation of gas turbine power plants, sub-base and stand-alone tanks meeting UL listings UL142, UL2085 and ULC-S 601 and for other industrial pipeline compression stations, electric power transmissions and distribution systems.  With a strong competitive position in our product lines due to our technology, skilled work force and experience, we benefit from a large installed base of equipment throughout the world which provides us strong brand recognition and value.

We provide on-site specialty modification and maintenance services, outage management, facility upgrade services, specialty repair, brazed aluminum heat exchanger repair and maintenance, and other industrial and safety services to nuclear, fossil-fuel, industrial gas, liquefied natural gas, petrochemical and other industrial operations in the U.S. We have the capability to combine our services and equipment resources to offer turn-key solutions for aftermarket repair applications for the North American gas turbine power generation, energy infrastructure, process and cogeneration markets.

Our operations are grouped into three reportable segments:  Product Solutions, Nuclear Services and Energy Services.  Our Product Solutions segment is comprised of two primary product categories:  Electrical Solutions and Auxiliary Products.

·                  Our Electrical Solutions product category is comprised of Koontz-Wagner Custom Controls Holdings, LLC (“Koontz-Wagner”), including, following its merger with and into Koontz-Wagner (the “Merger”), the former operations of IBI, LLC (“IBI Power” or “IBI”). This product category focuses on manufacturing and integrating engineered packaged control house solutions and manufacturing custom power packaging and integration solutions, including control house systems, generator enclosures, and industrial tanks, for the energy, oil & gas and electrical industries.

·                  Our Auxiliary Products category is comprised of Braden Manufacturing, L.L.C. (“Braden”) which engineer and manufacture filter houses, inlet and exhaust systems, diverter dampers, selective catalytic emission reduction systems (commonly referred to as “SCR”) used in the power generation market.  Consolidated Fabricators Inc. (“CFI”), which engineer and manufacture complex equipment to support gas turbines and other power generation equipment, and, TOG Manufacturing Company, Inc. (“TOG”), which manufacture highly-engineered precision components for critical applications across a variety of industries including:  Power Generation, U.S. Defense Department and Off-Shore Drilling.

·                  Our Nuclear Services segment is comprised of the operations of Williams Plant Services, LLC and Williams Specialty Services, LLC (together, the “Williams business”).  Our Nuclear Services segment is focused on the nuclear maintenance and specialty services business.

·                  Our Energy Services segment is comprised Hetsco, Inc. (“Hetsco”) and the operations of Construction & Maintenance Professionals, LLC and Williams Industrial Services, LLC.  Our Energy Services segment is focused on providing mission critical brazed aluminum heat exchanger repair, maintenance, and safety services to the industrial gas, liquefied natural gas and petrochemical industries and maintenance and specialty services to the industrial and fossil business.

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Effective as of January 1, 2013, our Board of Directors determined to change from a traditional month-end calendar close cycle to a 4-4-5 calendar close methodology during interim periods. Our fiscal year will continue to end on December 31. Under this methodology, each interim period is comprised of 13 weeks, which includes two 4-week months and one 5-week month, and begins on Monday and ends on Sunday. The 4-4-5 close methodology will change the accounting periods to month-end dates that would be different than the traditional last day of the standard month end. We will label our quarterly information using a calendar convention, that is, first quarter will be labeled as ending on March 31, second quarter as ending on June 30, and third quarter as ending on September 30. This change in methodology aligns our financial calendar to our payroll cycle simplifying our close process. The effects of this practice are modest and only exist within a reporting year. The reporting periods and applicable reports for 2014 are:

Acquisitions: During 2013, we completed the following acquisitions:

Each of the acquired businesses has been included in our results of operations since the date of closing. Due to the timing of these acquisitions and related operating results, our 2014 and 2013 operating results are not entirely comparable. See Note 3—Acquisitions.

NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation: These unaudited condensed consolidated financial statements have been prepared by us in accordance with accounting principles generally accepted in the U.S.  The information in the condensed consolidated financial statements, in the opinion of management, includes normal recurring adjustments and reflects all adjustments that are necessary for a fair statement of such financial statements.  We believe that the disclosures presented are adequate to represent materially correct interim financial statements.  These condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements and related notes for the year ended December 31, 2013 included in our Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission on March 17, 2014.

Principles of Consolidation: The accompanying consolidated financial statements include the accounts of Global Power and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

Use of Estimates: The preparation of financial statements in conformity with U.S. Generally Accepted Accounting Principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying footnotes. Actual results could vary materially from those estimates.

Reclassifications: Certain reclassifications have been made to prior years consolidated balances to conform with the current year presentation.

Discontinued Operations Presentation: In August 2011, we completed the sale of substantially all of the operating assets of our Deltak L.L.C. (“Deltak”) business unit. Discontinued operations are presented net of tax. The following notes relate to our continuing operations only unless otherwise noted.

Dollar Amounts: All dollar amounts (except share and per share amounts) presented in the tabulations within the notes to our consolidated financial statements are stated in thousands of dollars, unless otherwise noted.

Long-Lived Assets: Long-lived assets, such as property, plant, and equipment, and purchased intangible assets subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If circumstances require a long-lived asset to be tested for possible impairment, we first compare undiscounted cash flows expected to be generated by an asset to the carrying value of the asset. If the carrying value of the long-lived asset is not recoverable on an undiscounted cash flow basis, impairment is recognized to the extent that the carrying value exceeds its fair value. Fair value is determined through various valuation techniques including discounted cash flow models, quoted market values and third-party independent appraisals, as considered necessary. We group long-lived assets by legal entity for purposes of recognition and measurement of an impairment loss as this is the lowest level for which cash flows are independent.

Goodwill and Other Intangible Assets:   Goodwill is not amortized to expense, but rather, we test goodwill for impairment annually and more frequently if circumstances warrant. Impairment write-downs are charged to results of operations in the period in which the impairment is determined.

During the three months ended September 30, 2013, we changed our annual impairment testing date from December 31 to the first day of the fourth quarter, which we label as October 1.

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In 2012, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2012-02, “Intangibles—Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment,” which provides entities with the option to assess qualitative factors to determine whether the existence of events and circumstances indicates that it is more likely than not that the indefinite-lived intangible asset is impaired. The Company elected to bypass the qualitative assessment option and continue performing the first step of the goodwill impairment test.

In connection with our reportable segments, we also assess our reporting units that are operating segments or one level below the operating segment for impairment testing. We consider the management of operating activities, discrete financial information, similarities of economic characteristics, and the nature of the products, production processes, customers, distribution and regulatory environments. For impairment testing of goodwill and other indefinite-lived assets we test TOG as a separate reporting unit from Product Solutions with the remainder tested as the Auxiliary Products and Electrical Solutions product lines.  We test Hetsco as a separate reporting unit from Energy Solutions with the remainder tested as the Industrial Solutions reporting unit, and we test the Nuclear Solutions segment as a reporting unit.

We did not identify any impairment of our recorded goodwill from our most recent annual testing, which was performed as of October 1, 2013. If certain events occur which might indicate goodwill has been impaired, the goodwill is tested for impairment when such events occur. We have not identified any such events and, accordingly, have not tested goodwill for impairment during the three months ended March 31, 2014.

Adoption of New Accounting Pronouncements:

In March 2014, the FASB issued ASC Update  2014-06 “Technical Corrections and Improvements Related to Glossary Terms” (the “Update”). The amendments in the Update relate to glossary terms and cover a wide range of Topics in the Codification.  These amendments are presented in four sections — Deletion of Master Glossary Terms (Section A), Addition of Master Glossary Term Links (Section B), Duplicate Master Glossary Terms (Section C), and Other Technical Corrections Related to Glossary Terms (Section D).  The amendments in this Update represent changes to clarify the Master Glossary of the Codification, or make improvements to the Master Glossary that are not expected to result in substantive changes to the application of existing guidance or create a significant administrative cost to most entities.  Additionally, the amendments will make the Master Glossary easier to understand, as well as reduce the number of terms that appear in the Master Glossary.  The amendments resulting from this Update do not have transition guidance and will be effective upon issuance for both public and private companies.  The immediate adoption of this standard in March 2014 did not have an impact on our consolidated financial statements, and there was no material impact to our financial statement disclosures.

NOTE 3—ACQUISITIONS

During 2013, we acquired 100% equity in two businesses, which included one products company and one industrial gas services company, all based in the U.S. These acquisitions allow us to expand our products and service offerings internationally and in the U.S.  A summary of the acquisitions is as follows:

Each of the acquired businesses has been included in our results of operations since the date of closing. Due to the timing of each acquisition and related operating results, our 2014 and 2013 operating results are not entirely comparable.

On July 9, 2013, we acquired IBI Power, a leading manufacturer of custom power packaging and integration solutions, including control house systems, generator enclosures and industrial tanks. The aggregate consideration paid consisted of $18.6 million in cash, after final working capital adjustments and other adjustments of which $0.7 million was paid in January, 2014.  IBI merged with and into Koontz-Wagner and its financial results are included in our Product Solutions segment as of the acquisition date.

On April 30, 2013, we acquired Hetsco, a global provider of mission critical brazed aluminum heat exchanger repair, maintenance and safety services to the industrial gas, liquefied natural gas and petrochemical industries. The aggregate acquisition price consisted of $32.4 million in cash, after final working capital adjustments. The financial results of the Hetsco acquisition have been included in our Energy Services segment as of the acquisition date.

We funded the purchase of the IBI Power and Hetsco acquisitions (together, the “2013 Acquisitions”) through a combination of cash on hand and draws on our $150.0 million credit facility (as amended or supplemented from time to time, the “Revolving Credit Facility”).

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The following table summarizes the consideration paid for the 2013 Acquisitions and presents an allocation of these amounts to the net tangible and identifiable intangible assets based on the estimated fair values as of the respective acquisition dates.

The purchase price was preliminarily allocated based on estimated fair values as of the acquisition date.  These allocations require the significant use of estimates and are based on the information that was available to management at the time these consolidated financial statements were prepared.  The estimated fair values and useful lives acquired have been supported by third party valuation.  The fair values remain subject to potential adjustments including, but not limited to, assessment of income tax related assets and liabilities.

Acquired intangible assets in 2013 of $32.1 million consisted of customer relationships, trade names and noncompete agreements. The amortization period for these intangible assets, except trade names which are indefinite, ranges from five to seven years. We recorded $1.2 million of amortization expense related to these intangible assets during the three months ended March 31, 2014.  The major classes of intangible assets are as follows:

The estimated future aggregate amortization expense of intangible assets from the 2013 Acquisitions as of March 31, 2014 is set forth below:

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The goodwill associated with the IBI Power acquisition is deductible for tax purposes whereas the goodwill associated with the Hetsco acquisition is not deductible for tax purposes.

The following unaudited pro forma information has been provided for illustrative purposes only and is not necessarily indicative of results that would have occurred had the 2013 Acquisitions of IBI Power and Hetsco as if they occurred on January 1, 2013, nor are they necessarily indicative of future results.

The unaudited pro forma consolidated results during the three months ended March 31, 2014 and 2013 have been prepared by adjusting our historical results to include the 2013 Acquisitions of IBI Power and Hetsco occurred on January 1, 2013. These unaudited pro forma consolidated historical results were then adjusted for the following:

·                  a net reduction in interest expense during the three months ended March 31, 2013,

·                  there was no adjustment to interest expense for the three months ended March 31, 2014,

·                  an increase in amortization expense due to the incremental intangible assets recorded related to the 2013 acquisitions of IBI Power and Hetsco,

·                  a change in depreciation expense relating to the net impact of adjusting acquired property and equipment to the acquisition date fair values,

·                  adjustments to reflect the impact of $1.7 million of transaction costs related to the acquisition of IBI Power and Hetsco,

·                  adjustments to tax effect the pro forma results of the acquisition of IBI Power and Hetsco at Global Power’s estimated domestic statutory tax rate of 39% for all periods, and

·                  a net increase in stock compensation expense associated with restricted stock granted as a part of the Hetsco acquisition offset by a reduction in stock compensation expense resulting from the cancellation of Hetsco’s previous stock grants.

The unaudited pro forma results do not include any adjustments to eliminate the impact of cost savings or other synergies that may result from the 2013 Acquisitions. As noted above, the unaudited pro forma results of operations do not purport to be indicative of the actual results that would have been achieved by the combined company for the periods presented or that may be achieved by the combined company in the future.

NOTE 4—EARNINGS PER SHARE

Basic earnings per common share is calculated by dividing net income by the weighted average common shares outstanding during the period. Diluted earnings per common share is based on the weighted average common shares outstanding during the period, adjusted to include the incremental effect of common shares that would be issued upon the conversion of warrants and the vesting and release of restricted stock awards.

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Basic and diluted earnings per common share are calculated as follows:

During the three months ended March 31, 2014, there were 147,611 outstanding stock equivalents that were anti-dilutive and excluded from the computations of diluted earnings per common share. During the three months ended March 31, 2013, there were 501,041 outstanding stock equivalents that were anti-dilutive and excluded from the computations of diluted earnings per common share. Excluded from the calculation of both basic and diluted earnings per common share are the unvested performance-based, both Operating Margin and Relative TSR Performance Objective, restricted stock awards for which performance targets had not been set by the Board of Directors of 255,084 as of March 31, 2014. There were 60,370 performance-based stock awards outstanding as of March 31, 2013.

NOTE 5 –INCOME TAXES

The overall effective income tax rate for continuing operations during the three months ended March 31, 2014 and 2013 was as follows:

The effective income tax rate differs from the statutory federal income tax rate of 35% primarily because of state and foreign income taxes and permanent differences.

As of March 31, 2014 and March 31, 2013, we would need to generate approximately $81.4 million and $104.2 million, respectively, of future financial taxable income to realize our deferred tax assets.

As of both March 31, 2014 and December 31, 2013, we provided for a liability of $4.7 million for unrecognized tax benefits related to various federal, foreign and state income tax matters, which was included in long-term deferred tax assets and other long-term liabilities.  If recognized, the entire amount of the liability would affect the effective tax rate.  As of March 31, 2014, we had accrued approximately $2.3 million in other long-term liabilities for potential payment of interest and penalties related to uncertain income tax positions.

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NOTE 6—DEBT

Revolving Credit Facility.  As of March 31, 2014, we had $25.0 million outstanding under our Revolving Credit Facility and we were in compliance with all financial and other covenants under the Revolving Credit Facility.  During the three months ended March 31, 2014 we borrowed $12.0 million on our Revolving Credit and we repaid $10.0 million of the $12.0 million in March 2014.  The weighted average borrowings were 2.5%.

The Revolving Credit Facility allows for borrowings up to $150.0 million, subject to outstanding standby letters of credit and other restrictions.  The facility has a $75.0 million revolving letter of credit facility and provides access to multi-currency funds.  The Revolving Credit Facility has a maturity date of February 21, 2017.

We are subject to interest rate changes on our LIBOR-based variable interest rate under our Revolving Credit Facility.  As of March 31, 2014, a maximum of $115.9 million was available under our Revolving Credit Facility.  Our ability to borrow this maximum amount is governed by a number of provisions of our Revolving Credit Facility, some of which have the effect of limiting the amount that we can borrow based upon such factors as the Company’s compliance with certain leverage ratios and other financial covenants or the use of the proceeds of the relevant drawdown, in each case as of a particular date or time.  In practice, these provisions of our Revolving Credit Facility mean that we may not be permitted to borrow the full $150.0 million of our Revolving Credit Facility and the amount we are allowed to borrow under our Revolving Credit Facility will likely be materially less than the difference between our actual borrowings and $150.0 million for the foreseeable future.  As of March 31, 2014, we pay an unused line fee of .20% pursuant to the terms of our Revolving Credit Facility.

Letters of Credit and Bonds.  In line with industry practice, we are often required to provide letters of credit, surety and performance bonds to customers.  These letters of credit and bonds provide credit support and security for the customer if we fail to perform our obligations under the applicable contract with such customer.

The interest rate on letters of credit issued under the Revolving Credit Facility letter of credit was 1.25% per annum as of March 31, 2014.  Should we need to borrow additional amounts against the Revolving Credit Facility, we would incur an interest rate of LIBOR or a specified base rate, plus in each case, an additional margin based on our consolidated leverage ratio.  The Revolving Credit Facility includes additional margin ranges on base rate loans between 0.25% and 1.25% and between 1.25% and 2.25% on LIBOR-based loans.

As of March 31, 2014, our outstanding stand-by letters of credit totaled approximately $9.1 million for our U.S. entities and $5.9 million (U.S. dollars) for non-U.S. entities.  Currently there are no amounts drawn upon these letters of credit.  In addition, as of March 31, 2014, we had outstanding surety bonds on projects of approximately $29.6 million.

Deferred Financing Costs.  As of March 31, 2014, we had unamortized deferred financing fees on our Revolving Credit Facility of $0.7 million and interest expense associated with the amortization of less than $0.1 million for the three months ending March 31, 2014 and none for the three months ended March 31, 2013.

NOTE 7—COMMITMENTS AND CONTINGENCIES

Litigation and Claims: We are from time to time party to various lawsuits, claims and other proceedings that arise in the ordinary course of our business. With respect to all such lawsuits, claims and proceedings, we record a reserve when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. We do not believe that the resolution of any currently pending lawsuits, claims and proceedings, either individually or in the aggregate, will have a material adverse effect on our financial position, results of operations or liquidity. However, the outcomes of any currently pending lawsuits, claims and proceedings cannot be predicted, and therefore, there can be no assurance that this will be the case.

Deltak Claims: By purchase agreement dated August 5, 2011, referred to as the 2011 Purchase Agreement, we sold substantially all of the assets of our Deltak business unit to Hamon Acquisitions, Inc. (n/k/a Hamon Deltak, Inc.) (an indirect wholly owned subsidiary of Hamon & Compagnie International SA) (the “Buyer”). Under the 2011 Purchase Agreement, we retained certain liabilities relating to the assets sold to the Buyer. The 2011 Purchase Agreement established escrow accounts totaling $7.0 million set aside for contingencies, of which $6.2 million was initially subject to a five year escrow term and $0.8 million was subject to scheduled releases.  We previously recorded $3.1 million in short-term restricted cash and $3.8 million, which was subject to a five year escrow term, was previously recorded in other long-term assets.   During 2013, we received two claims for indemnification from the Buyer in connection with the activities of our Deltak business unit.  Under the terms of the settlement agreement, $0.1 million of the remaining escrow was classified as short-term restricted cash as of December 31, 2013.  On February 4, 2014, less than $0.1 million of the purchase price held in escrow related to the sale of the assets of Deltak was released to Global Power.

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Asbestos Cases: A former operating unit of Global Power 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 emergence from bankruptcy extinguished the claims made by all plaintiffs who had filed asbestos claims against us before that time. We also 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 emergence from bankruptcy. In any event in all of the asbestos cases finalized post-bankruptcy, we have been successful in having such cases 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. We intend to vigorously defend all currently active actions, just as we defended the other actions that have since been dismissed, all without liability, and we do not anticipate that any of these actions will have a material adverse effect on our financial position, results of operations or liquidity. However, the outcomes of any legal action cannot be predicted and, therefore, there can be no assurance that this will be the case.

Contingencies: On June 28, 2013, we announced a change in senior leadership in our Nuclear and Energy Services segments.  We subsequently filed a Form 8-K disclosing anticipated separation costs of approximately $0.5 million pursuant to a Separation Agreement relating to this change in leadership. On July 17, 2013, we rescinded the Separation Agreement and therefore have not accrued any of the previously disclosed separation costs in the consolidated balance sheet and statement of operations as of March 31, 2014 and December 31, 2013.

NOTE 8—STOCKHOLDERS’ EQUITY

Dividends:  In May 2012, our Board of Directors approved a quarterly cash dividend policy. The terms of our Revolving Credit Facility limit the amount of cash dividends we can pay and such terms are defined in the Revolving Credit Facility. The following table sets forth certain information relating to the Company’s cash dividends declared to common stockholders of the Company during the three months ended March 31, 2014:

Dividend equivalents equal to the dividends payable on the same number of shares of our common stock were accrued on unvested restricted stock awards. No dividend equivalents are paid on any unvested restricted stock awards that are forfeited prior to the vesting date. Dividend equivalents are paid out in cash at the vesting date on restricted stock awards. A non-cash accrual of $0.2 million for unpaid dividend equivalents for unvested restricted stock awards was included in the accompanying consolidated balance sheet as of March 31, 2014. In addition, accumulated dividend equivalents of less than $0.1 million were paid upon the vesting and release of 86,934 restricted stock awards during the three months ended March 31, 2014.

Stock Repurchase Program:  In May 2012, our Board of Directors authorized a program to repurchase up to two million shares of our common stock until the earlier of June 30, 2014 or a determination by the Board of Directors to discontinue the repurchase program.  We repurchased 421,731 shares of common stock during the year ended December 31, 2012 for $6.8 million under the repurchase program.  During the three months ended March 31, 2014 and 2013, we did not repurchase any shares of common stock.

Foreign Currency Translation:  Foreign assets and liabilities are translated using the exchange rate in effect at the balance sheet date, and results of operations are translated using an average rate during the period. Translation adjustments are accumulated and reported as a component of accumulated other comprehensive income. We had foreign currency translation adjustments resulting in a less than $0.1 million unrealized loss and $0.8 million unrealized loss for the three months ended March 31, 2014 and 2013, respectively. Our foreign earnings are considered permanently reinvested and, therefore, we do not have any corresponding deferred taxes for our unremitted earnings.

Stock-Based Compensation: During the three months ended March 31, 2014, we vested 66,167 shares of stock-based compensation to employees and recorded a $0.5 million non-cash accrual related to the payment of statutory taxes due on the awards that was unpaid as of March 31, 2014.

We granted 110,903 shares of restricted stock awards subject only to service conditions to employees and directors during the three months ended March 31, 2014 at a weighted-average fair value price per share of $19.66.  These service-based restricted stock awards will vest ratably over one, three or four years.

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We also granted 90,623 restricted stock awards subject to performance conditions during the three months ended March 31, 2014 at a weighted-average fair value price per share of $19.89.  Of these, 10,000 performance-based restricted stock awards will vest at the end of a one year performance period subject to meeting or exceeding a $30.0 million EBITDA target.  The remaining 80,623 performance-based restricted stock awards will cliff vest at the end of a three year performance period subject to multiple target levels of operating margin. If the minimum target set in the agreement is not met, none of the shares would vest and no compensation expense would be recognized and any previously recognized compensation expense would be reversed. The actual number of shares that will ultimately vest is dependent on achieving fixed thresholds between the minimum and maximum performance condition and ranges between 0% and 200% the number of units originally granted. We recognize stock-based compensation expense related to performance awards based upon our determination of the potential likelihood of achievement of the performance target at each reporting date, net of estimated forfeitures.

We also granted 80,623 market-based restricted stock awards during the three months ended March 31, 2014 which, in addition to being subject to continuing employment requirements are subject to a market condition in the form of a total shareholder return (“TSR”) modifier. The actual number of shares that cliff vest at the end of the three-year vesting period is determined based on our TSR relative to the Russell 2000 over the related three-year performance period. Depending on the level of achievement, the actual number of shares that vest may range from 0% to 200% of the awards originally granted.

We estimate the fair value of our market-based restricted stock awards on the date of grant using a Monte Carlo simulation valuation model. This pricing model uses multiple simulations to evaluate our probability of achieving various stock price levels to determine our expected TSR performance ranking. Expense is only recorded for the number of market-based restricted stock awards granted, net of estimated forfeitures. The assumptions used to estimate the fair value of market-based restricted stock awards granted during the three months ended March 31, 2014 were as follows:

NOTE 9—OTHER SUPPLEMENTAL INFORMATION

Other current assets consist of the following:

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Other long-term assets consist of the following:

Other current liabilities consist of the following: