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8-K - 8-K - BROADWIND, INC.a13-17720_18k.htm
EX-99.2 - EX-99.2 - BROADWIND, INC.a13-17720_1ex99d2.htm

Exhibit 99.1

 

 

Broadwind Energy Announces Second-Quarter 2013 Results

 

Highlights:

 

·                  New tower orders surged to $52 million; Backlog of $143 million up 4% from prior- year second quarter; $70 million tower order received in July

 

·                  Gross profit margin (ex. restructuring) rose to 7.4%, double prior-year second quarter

 

·                  Adjusted EBITDA of $2.7 million up significantly from $1.1 million in 2012 due to strong Towers and Weldments segment results

 

·                  Sale of idle tower facility for $12 million closed on April 22, 2013

 

·                  Strengthened balance sheet as of June 30: Cash and equivalents totaled $17.6 million, operating line of credit undrawn; Debt balance of $3.1 million outstanding

 

Cicero, Ill., August 1, 2013— Broadwind Energy, Inc. (NASDAQ: BWEN) today reported sales of $51.4 million for the second quarter of 2013, a 9% decrease compared to $56.3 million in the second quarter of 2012. The decline reflected weaker activity in the Gearing and Services segments, partly offset by stronger revenue in the Towers and Weldments segment due in part to a 42% increase in industrial weldments revenue compared to the prior-year second quarter.

 

The Company reported a net loss from continuing operations of $.2 million or $.01 per share in the second quarter of 2013, compared to a loss of $4.2 million or $.30 per share during the second quarter of 2012. The improvement was due to stronger operating results in the Towers and Weldments segment as well as the gain on the sale of the Company’s idle tower facility during the current-year quarter. The Company reported non-GAAP adjusted EBITDA (earnings before interest, taxes, depreciation, amortization, share-based payments and restructuring costs) of $2.7 million during the second quarter of 2013, compared to $1.1 million during the second quarter of 2012.

 

Peter C. Duprey, president and chief executive officer, stated, “Our second-quarter results showed the strength of our Towers and Weldments segment in which we booked $52 million of new orders during the period, and announced another $70 million after quarter-end. We have sold out our 2013 capacity, and are now booking orders well into 2014. We expect 2014 production to reach or exceed our design capacity of 500 towers. During the second quarter, we demonstrated a dramatic improvement in productivity and tower through-put compared with last year when we were experiencing production issues associated with manufacturing multiple tower types at the same time. Process improvements that we initiated in 2012 and a generally better mix of towers resulted in strong EBITDA in the quarter.

 



 

“Gearing had a challenging quarter and continues to be impacted by weak demand from customers in the mining and natural gas sectors. In addition, Gearing revenues were affected by production issues relating to a greater number of gearboxes versus loose gearing in the mix and delays associated with the first article qualification process for a new customer. These production issues have caused us to review our front-end processes as part of our continuous improvement efforts. We believe we are getting to the root cause of these manufacturing issues and feel confident that the turnaround in Gearing will be significantly underway by the end of the year.

 

“The Services segment also had a difficult quarter. New turbine installations were at an all-time industry low and wind-farm operators have redeployed staff that ordinarily would be supporting new installations to perform non-routine maintenance activities. As a result of the lower order rate, we have adjusted this segment’s expense structure to be more in line with its current revenue outlook. We believe this situation will improve as we approach the end of the year and construction efforts accelerate.

 

“Finally we have strengthened our balance sheet by achieving some major milestones, including selling our idle Brandon, South Dakota tower facility for $12 million, paying down additional debt of $6 million and ending the quarter with $18 million of cash.”

 

Orders and Backlog

 

The Company booked $59 million in new orders during the second quarter of 2013. Additionally, a $35 million tower order from 2010 was removed from backlog due to a change in the customer’s U.S. wind requirements. As a result, net orders for the second quarter of 2013 were $25 million, a 17% decrease compared to the prior-year second quarter. Towers and Weldments orders, which vary considerably from quarter-to-quarter, totaled $18 million, net of the $35 million cancellation noted above. Second-quarter net Gearing orders totaled $5 million, a 70% decrease from the prior-year second quarter, reflecting continued weakness in orders from natural gas and other industrial customers as well as less demand for wind replacement gearing. Net orders for Services totaled $3 million compared to $5 million in the prior-year quarter, due to weaker demand for field services, as a number of customers have insourced work during a period of low turbine construction activity.

 

At June 30, 2013, backlog totaled $143 million, up from $137 million at June 30, 2012. Subsequent to quarter-end, the Company announced new tower orders of $87 million, $17 million of which were included in backlog as of June 30, 2013.

 

Segment Results

 

Towers and Weldments

 

Broadwind Energy fabricates specialty weldments for wind, oil and gas, mining and other industrial applications, specializing in the production of wind turbine towers.

 

Towers and Weldments segment sales totaled $37.5 million in the second quarter of 2013, compared to $37.0 million in the second quarter of 2012. Tower section volume in the second quarter of 2013 was down 12% compared to the prior year. The prior-year production consisted of a greater number of lighter, lower-value sections as compared to the current-year second quarter. Additionally, $4.4 million of completed tower sections remained in inventory at quarter-

 

2



 

end because a customer first article qualification process was not completed as planned. Revenue for these sections will be included in the third-quarter results. Consistent with the Company’s strategic focus on diversifying end markets, industrial weldments sales of $3.2 million increased 42% compared to the prior-year period, more than offsetting the tower shortfall noted above. Non-GAAP adjusted EBITDA for the second quarter was $5.3 million; nearly triple the prior-year second quarter adjusted EBITDA of $1.8 million. The dramatic improvement was the result of improved operating efficiencies and a less variable and more profitable mix of towers. During the second quarter of 2012, productivity suffered due to the production of multiple tower types in that quarter. Towers and Weldments segment operating income for the second quarter of 2013 was $4.1 million, up $3.5 million from the second quarter of 2012 due to the factors described above.

 

Gearing

 

Broadwind Energy engineers, builds and remanufactures precision gears and gearboxes for oil and gas, mining, steel and wind applications.

 

Gearing segment sales totaled $10.4 million in the second quarter of 2013, compared to $14.1 million in the second quarter of 2012. The 26% decrease was due primarily to lower demand from mining and natural gas customers as well as protracted manufacturing issues with a new line of gearboxes for an industrial customer. Gearing segment non-GAAP adjusted EBITDA for the second quarter of 2013 was a loss of $.1 million, decreasing from $1.3 million in the prior-year second quarter due in part to lower volumes and lower margins, partly offset by reductions in fixed costs and lower compensation, bad debt and other professional expenses. Gearing segment operating loss for the second quarter of 2013 increased to $3.9 million, from $1.6 million in the prior-year second quarter. The increased operating loss was partly attributable to $.7 million of higher restructuring charges and $.5 million of accelerated amortization as well as the factors described above.

 

Services

 

Broadwind Energy specializes in non-routine drivetrain and blade maintenance services. The Company also offers comprehensive installation support and field services to the wind industry.

 

Revenue from the Services segment was $4.1 million in the second quarter of 2013, compared with $5.7 million in the second quarter of 2012. The 29% decrease was due in large part to depressed field service activity as a result of very low wind turbine installations across the United States, reflecting the curtailment of development work in late 2012 in response to the uncertainty regarding the production tax credit as mentioned above. This has resulted in wind farm operators insourcing non-routine maintenance projects during this same period. Non-GAAP adjusted EBITDA loss for the second quarter of 2013 was $.6 million, compared with $.5 million in the prior-year second quarter. As a result of the 29% drop in sales, the Company reduced headcount during the quarter and reduced SGA costs compared to the prior-year second quarter. Services segment operating loss of $1.3 million in the second quarter of 2013, increased $.2 million, from a loss of $1.1 million in the second quarter of 2012, reflecting $.1 million of additional restructuring charges in the current-year second quarter as well as the factors described above.

 

3



 

Corporate and Other

 

Corporate and other expenses totaled $2.3 million in the second quarter of 2013, compared with $1.9 million in the second quarter of 2012. The increase in expense was primarily attributable to increased employee compensation partly offset by lower legal expense.

 

Cash and Liquidity

 

During the quarter, operating working capital decreased $14.0 million to $9.5 million or 5% of annualized second-quarter 2013 sales. The decrease from March 31, 2013 was due primarily to an increase in customer deposits of $13.4 million at June 30, 2013 related to the significant tower orders announced during the quarter.

 

Cash and equivalents surged to $17.6 million at June 30, 2013, an increase of $16.7 million from March 31, 2013 due primarily to the reduction in working capital noted above. Additionally, as previously announced, the Company completed the sale of its idle Brandon, South Dakota tower facility during the second quarter of 2013, realizing net proceeds of $11.8 million, of which $3.5 million was used to repay the underlying mortgage debt. At June 30, 2013, the Company’s $20 million line of credit was not drawn.

 

About Broadwind Energy, Inc.

 

Broadwind Energy (NASDAQ: BWEN) applies decades of deep industrial expertise to innovate integrated solutions for customers in the energy and infrastructure markets. From gears and gearing systems for wind, oil and gas and mining applications to wind towers, to comprehensive remanufacturing of gearboxes and blades, to operations and maintenance services, and industrial weldments, we have solutions for the energy needs of the future. With facilities throughout the U.S., Broadwind Energy’s talented team of 800 employees is committed to helping customers maximize performance of their investments-quicker, easier and smarter. Find out more at www.bwen.com.

 

Forward-Looking Statements

 

This release includes various forward-looking statements related to future, not past, events.Statements in this release that are not historical are forward-looking statements. These statements are based on current expectations and we undertake no obligation to update these statements to reflect events or circumstances occurring after this release. Such statements are subject to various risks and uncertainties that could cause actual results to vary materially from those stated. Such risks and uncertainties include, but are not limited to: expectations regarding our business, end-markets, relationships with customers and our ability to diversify our customer base; the impact of competition and economic volatility on many of the industries in which we compete; our ability to realize revenue from customer orders and backlog; the impact of regulation on our end-markets, including the wind energy industry in particular; the sufficiency of our liquidity and working-capital; our restructuring plans and the associated cost-savings; our ability to preserve and utilize our tax net operating loss carry-forwards; and other risks and uncertainties described in our filings with the Securities and Exchange Commission.

 

4



 

BWEN INVESTOR CONTACT: Joni Konstantelos, 708.780.4819 joni.konstantelos@bwen.com

 

LHA — Jody Burfening/Carolyn Capaccio, 212.838.3777, ccapaccio@lhai.com

 

5



 

BROADWIND ENERGY, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS)

 

 

 

June 30,

 

December 31,

 

 

 

2013

 

2012

 

 

 

(Unaudited)

 

 

 

ASSETS

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

Cash and cash equivalents

 

$

17,261

 

$

516

 

Short-term investments

 

606

 

 

Restricted cash

 

331

 

330

 

Accounts receivable, net of allowance for doubtful accounts of $279 and $453 as of June 30, 2013 and December 31, 2012, respectively

 

22,877

 

20,039

 

Inventories, net

 

36,810

 

21,988

 

Prepaid expenses and other current assets

 

3,202

 

3,836

 

Assets held for sale

 

2,190

 

8,042

 

Total current assets

 

83,277

 

54,751

 

Property and equipment, net

 

72,972

 

79,889

 

Intangible assets, net

 

6,125

 

7,454

 

Other assets

 

686

 

816

 

TOTAL ASSETS

 

$

163,060

 

$

142,910

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

Lines of credit and notes payable

 

$

 

$

955

 

Current maturities of long-term debt

 

356

 

352

 

Current portions of capital lease obligations

 

1,274

 

2,217

 

Accounts payable

 

28,644

 

16,377

 

Accrued liabilities

 

6,293

 

6,012

 

Customer deposits

 

21,586

 

4,063

 

Liabilities held for sale

 

 

3,860

 

Total current liabilities

 

58,153

 

33,836

 

 

 

 

 

 

 

LONG-TERM LIABILITIES:

 

 

 

 

 

Long-term debt, net of current maturities

 

2,767

 

2,956

 

Long-term capital lease obligations, net of current portions

 

436

 

641

 

Other

 

2,299

 

2,169

 

Total long-term liabilities

 

5,502

 

5,766

 

 

 

 

 

 

 

COMMITMENTS AND CONTINGENCIES

 

 

 

 

 

 

 

 

 

 

 

STOCKHOLDERS’ EQUITY:

 

 

 

 

 

Preferred stock, $0.001 par value; 10,000,000 shares authorized; no shares issued or outstanding

 

 

 

Common stock, $0.001 par value; 30,000,000 shares authorized; 14,476,727 and 14,197,792 shares issued and outstanding as of June 30, 2013 and December 31, 2012, respectively

 

14

 

14

 

Additional paid-in capital

 

374,914

 

373,605

 

Accumulated deficit

 

(275,523

)

(270,311

)

Total stockholders’ equity

 

99,405

 

103,308

 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

 

$

163,060

 

$

142,910

 

 

6



 

BROADWIND ENERGY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(IN THOUSANDS, EXCEPT PER SHARE DATA)

 

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

 

2013

 

2012

 

2013

 

2012

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

$

51,363

 

$

56,311

 

$

97,027

 

$

110,754

 

Cost of sales

 

47,573

 

54,236

 

90,616

 

106,058

 

Restructuring

 

1,206

 

416

 

1,661

 

805

 

Gross profit

 

2,584

 

1,659

 

4,750

 

3,891

 

 

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES:

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

5,145

 

5,578

 

10,541

 

11,461

 

Intangible amortization

 

665

 

215

 

1,330

 

430

 

Restructuring

 

107

 

25

 

708

 

100

 

Total operating expenses

 

5,917

 

5,818

 

12,579

 

11,991

 

Operating loss

 

(3,333

)

(4,159

)

(7,829

)

(8,100

)

 

 

 

 

 

 

 

 

 

 

OTHER (EXPENSE) INCOME, net:

 

 

 

 

 

 

 

 

 

Interest expense, net

 

(227

)

(238

)

(618

)

(500

)

Other, net

 

180

 

247

 

515

 

610

 

Restructuring

 

3,241

 

(71

)

2,966

 

(71

)

Total other (expense) income, net

 

3,194

 

(62

)

2,863

 

39

 

 

 

 

 

 

 

 

 

 

 

Net loss from continuing operations before provision for income taxes

 

(139

)

(4,221

)

(4,966

)

(8,061

)

(Benefit) provision for income taxes

 

14

 

10

 

36

 

30

 

LOSS FROM CONTINUING OPERATIONS

 

(153

)

(4,231

)

(5,002

)

(8,091

)

LOSS FROM DISCONTINUED OPERATIONS, NET OF TAX

 

 

 

(210

)

 

NET LOSS

 

$

(153

)

$

(4,231

)

$

(5,212

)

$

(8,091

)

 

 

 

 

 

 

 

 

 

 

NET LOSS PER COMMON SHARE - BASIC AND DILUTED:

 

 

 

 

 

 

 

 

 

Loss from continuing operations

 

$

(0.01

)

$

(0.30

)

$

(0.35

)

$

(0.58

)

Loss from discontinued operations

 

 

 

(0.01

)

 

Net loss

 

$

(0.01

)

$

(0.30

)

$

(0.36

)

$

(0.58

)

 

 

 

 

 

 

 

 

 

 

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING - Basic and diluted

 

14,422

 

13,991

 

14,345

 

13,985

 

 

7



 

BROADWIND ENERGY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

 

 

 

Six Months Ended June 30,

 

 

 

2013

 

2012

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

Net loss

 

$

(5,212

)

$

(8,091

)

Loss from discontinued operations

 

210

 

 

Loss from continuing operations

 

(5,002

)

(8,091

)

 

 

 

 

 

 

Adjustments to reconcile net cash used in operating activities:

 

 

 

 

 

Depreciation and amortization expense

 

8,033

 

7,860

 

Impairment charges

 

288

 

 

Stock-based compensation

 

972

 

1,289

 

Allowance for doubtful accounts

 

(174

)

254

 

Common stock issued under defined contribution 401(k) plan

 

337

 

 

(Gain) loss on disposal of assets

 

(3,657

)

92

 

Changes in operating assets and liabilities:

 

 

 

 

 

Accounts receivable

 

(2,664

)

1,246

 

Inventories

 

(14,822

)

(15,362

)

Prepaid expenses and other current assets

 

535

 

1,526

 

Accounts payable

 

11,869

 

16,817

 

Accrued liabilities

 

385

 

(222

)

Customer deposits

 

17,523

 

(8,607

)

Other non-current assets and liabilities

 

153

 

832

 

Net cash provided by (used in) operating activities of continuing operations

 

13,776

 

(2,366

)

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

Proceeds from sale of logistics business and related note receivable

 

 

175

 

Purchases of available for sale securities

 

(606

)

 

Purchases of property and equipment

 

(2,729

)

(2,165

)

Proceeds from disposals of property and equipment

 

12,453

 

87

 

Decrease in restricted cash

 

 

646

 

Net cash provided by (used in) investing activities of continuing operations

 

9,118

 

(1,257

)

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

Payments on lines of credit and notes payable

 

(80,209

)

(1,954

)

Proceeds from lines of credit and notes payable

 

75,208

 

 

Proceeds from sale-leaseback transactions

 

 

1,000

 

Principal payments on capital leases

 

(1,148

)

(627

)

Net cash used in financing activities of continuing operations

 

(6,149

)

(1,581

)

 

 

 

 

 

 

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

 

16,745

 

(5,204

)

CASH AND CASH EQUIVALENTS, beginning of the period

 

516

 

13,340

 

CASH AND CASH EQUIVALENTS, end of the period

 

$

17,261

 

$

8,136

 

 

8


 


 

BROADWIND ENERGY, INC. AND SUBSIDIARIES

SELECTED SEGMENT FINANCIAL INFORMATION

(IN THOUSANDS)

 

 

 

Three Months Ended June 30

 

Six Months Ended June 30,

 

 

 

2013

 

2012

 

2013

 

2012

 

 

 

(unaudited)

 

(unaudited)

 

REVENUES:

 

 

 

 

 

 

 

 

 

Towers and Weldments

 

$

37,507

 

$

36,995

 

$

67,536

 

$

72,164

 

Gearing

 

10,445

 

14,063

 

21,164

 

30,096

 

Services

 

4,065

 

5,695

 

11,549

 

9,137

 

Corporate and Other

 

(654

)

(422

)

(3,222

)

(643

)

Total revenues

 

$

51,363

 

$

56,331

 

$

97,027

 

$

110,754

 

 

 

 

 

 

 

 

 

 

 

OPERATING (LOSS) PROFIT:

 

 

 

 

 

 

 

 

 

Towers and Weldments

 

$

4,103

 

$

561

 

$

6,105

 

$

1,566

 

Gearing

 

(3,882

)

(1,632

)

(6,743

)

(2,753

)

Services

 

(1,260

)

(1,139

)

(1,962

)

(2,763

)

Corporate and Other

 

(2,293

)

(1,948

)

(5,229

)

(4,150

)

Total operating loss

 

$

(3,332

)

$

(4,158

)

$

(7,829

)

$

(8,100

)

 

The Company reports its financial results in accordance with U.S. generally accepted accounting principles (GAAP). However, the Company’s management believes that certain non-GAAP financial measures may provide users of this financial information with meaningful comparisons between current results and results in prior operating periods. Management believes that these non-GAAP financial measures can provide additional meaningful reflection of underlying trends of the business because they provide a comparison of historical information that excludes certain infrequently occurring or non-operational items that impact the overall comparability. See the table below for supplemental financial data and corresponding reconciliations to GAAP financial measures for the three and six months ended June 30, 2013 and 2012. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, the Company’s reported results prepared in accordance with GAAP.

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

June 30,

 

June 30,

 

 

 

2013

 

2012

 

2013

 

2012

 

 

 

(unaudited)

 

(unaudited)

 

Operating loss

 

$

(3,333

)

$

(4,159

)

$

(7,829

)

$

(8,100

)

Depreciation and amortization

 

3,842

 

3,739

 

7,648

 

7,395

 

Restructuring

 

1,313

 

441

 

2,369

 

905

 

Other income

 

180

 

247

 

515

 

610

 

Share-based compensation and other stock payments

 

702

 

788

 

1,325

 

1,638

 

Adjusted EBITDA

 

$

2,704

 

$

1,056

 

$

4,028

 

$

2,448

 

 

9



 

Towers and Weldments Segment

 

 

 

Three Months Ended June 30

 

Six Months Ended June 30,

 

 

 

2013

 

2012

 

2013

 

2012

 

 

 

(unaudited)

 

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

Operating Profit

 

$

4,103

 

$

561

 

$

6,105

 

$

1,566

 

Depreciation

 

949

 

904

 

1,901

 

1,780

 

Share-based compensation and other stock payments

 

116

 

167

 

245

 

365

 

Other Income

 

115

 

171

 

273

 

358

 

Restructuring Expense

 

37

 

 

115

 

 

Total Adjusted EBITDA (Non-GAAP)

 

$

5,320

 

$

1,803

 

$

8,639

 

$

4,069

 

 

Gearing Segment

 

 

 

Three Months Ended June 30

 

Six Months Ended June 30,

 

 

 

2013

 

2012

 

2013

 

2012

 

 

 

(unaudited)

 

(unaudited)

 

Operating Loss

 

$

(3,882

)

$

(1,632

)

$

(6,742

)

$

(2,753

)

Depreciation

 

1,874

 

2,165

 

3,740

 

4,327

 

Amortization

 

665

 

215

 

1,330

 

430

 

Share-based compensation and other stock payments

 

131

 

141

 

211

 

298

 

Other Income (Expense)

 

 

 

(15

)

13

 

Restructuring Expense

 

1,158

 

441

 

1,559

 

848

 

Total Adjusted EBITDA (Non-GAAP)

 

$

(54

)

$

1,330

 

$

83

 

$

3,163

 

 

Services Segment

 

 

 

Three Months Ended June 30

 

Six Months Ended June 30,

 

 

 

2013

 

2012

 

2013

 

2012

 

 

 

(unaudited)

 

(unaudited)

 

Operating Loss

 

$

(1,260

)

$

(1,139

)

$

(1,962

)

$

(2,763

)

Depreciation

 

342

 

439

 

655

 

824

 

Share-based compensation and other stock payments

 

128

 

95

 

168

 

187

 

Other Income (Expense)

 

65

 

75

 

256

 

238

 

Restructuring Expense

 

114

 

 

233

 

47

 

Total Adjusted EBITDA (Non-GAAP)

 

$

(611

)

$

(530

)

$

(650

)

$

(1,467

)

 

Corporate and Other

 

 

 

Three Months Ended June 30

 

Six Months Ended June 30,

 

 

 

2013

 

2012

 

2013

 

2012

 

 

 

(unaudited)

 

(unaudited)

 

Operating Loss

 

$

(2,293

)

$

(1,948

)

$

(5,229

)

$

(4,150

)

Depreciation

 

12

 

16

 

23

 

34

 

Share-based compensation and other stock payments

 

326

 

385

 

701

 

788

 

Other Income (Expense)

 

 

 

 

 

Restructuring Expense

 

4

 

 

460

 

11

 

Total Adjusted EBITDA (Non-GAAP)

 

$

(1,951

)

$

(1,547

)

$

(4,045

)

$

(3,317

)

 

10