Broadwind Energy, Inc. Announces First Quarter 2013 Results

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Broadwind Energy, Inc. Announces First Quarter 2013 Results

Solid Start to Year; Backlog Up Sharply


CICERO, Ill.--(BUSINESS WIRE)-- Broadwind Energy, Inc. (Nasdaq: BWEN):

Highlights:

  • Towers segment orders surged to $81 million during the quarter—Broadwind 3/31/13 backlog of $169 million, up 37% sequentially
  • Q1 sales of $45.7 million, down 16% from prior-year quarter as Tower production gradually re-started following PTC renewal; Services revenue doubled from 2012
  • Adjusted EBITDA of $1.3 million exceeds Management's $1.0 million outlook; strong improvements in Towers and Services
  • Operating line of credit balance rose to $6.2 million at 3/31/13; $13.8 million available under line
  • Following quarter-end, total debt significantly reduced, as portion of net proceeds from sale of Brandon facility used to repay $3.5 million mortgage balance and pay off line of credit

Broadwind Energy, Inc. (NAS: BWEN) today reported sales of $45.7 million for the first quarter of 2013, a 16% decrease compared to $54.4 million in the first quarter of 2012. The decline reflected 15% lower tower section volume as well as $4.5 million lower steel content in towers shipped and reduced gearing sales, offset by increased services revenue, which was double the prior-year first quarter.

The Company reported a net loss from continuing operations of $4.8 million or $.34 per share in the first quarter of 2013, compared to a loss of $3.9 million or $.28 per share during the first quarter of 2012. The increased loss was primarily due to accelerated amortization expense associated with a customer intangible, and higher restructuring costs. The Company reported non-GAAP adjusted EBITDA (earnings before interest, taxes, depreciation, amortization, share-based payments and restructuring) of $1.3 million during the first quarter of 2013, compared to $1.4 million during the first quarter of 2012.

Peter C. Duprey, president and chief executive officer, stated, "Our first-quarter performance was largely in line with our outlook. Our Towers segment's profitability doubled from last year on lower volumes and the Services segment's advance toward breakeven EBITDA offset weaker performance by our Gearing segment. Following the down-turn at the end of 2012, the Towers segment's momentum that we anticipated on the heels of the PTC renewal and improved dynamics in the tower market is coming to fruition, as evidenced by the sharp increase in tower orders we've recently announced. We are close to filling our planned tower capacity for 2013 and have a solid start on bookings for 2014. In Gearing, the shift in our production mix from loose gearing to enclosed drives caused throughput issues in the quarter that we are resolving. We continue to work closely with our natural gas and mining customers to develop new product and service offerings during this period of weak demand in these markets. Our facility consolidation is progressing well, and is on track for substantial completion by year-end. In Services, our performance was encouraging since the first quarter is that segment's most seasonally challenging quarter. We continue to focus on further diversifying our customer mix and are introducing new product offerings to reduce turbine maintenance costs and maximize performance. Finally, during April, we completed a major objective of our footprint consolidation with the sale of our idle Brandon tower facility, which lowered our expense base and our debt, and provides added liquidity to support revenue growth."

Orders and Backlog

The Company booked $91.9 million in net new orders during the first quarter of 2013, a $73.7 million increase from the prior-year quarter. Towers and Weldments orders, which vary considerably from quarter-to-quarter, totaled $80.5 million, representing the highest quarterly order activity for this segment in more than three years. First quarter net Gearing orders totaled $11.7 million, an 8% increase from the weak prior-year period, with increased demand for wind turbine replacement gearing offsetting some continued weakness in orders from natural gas and other industrial customers. Net orders for Services totaled $(.3) million compared to $5.0 million in the prior-year quarter, reflecting a cancellation of a $2.8 million order for industrial drivetrain assembly work, and weaker demand for field services, as a number of customers have insourced work during a period of low turbine construction activity.

At March 31, 2013, backlog totaled $169 million, up from $123 million at December 31, 2012.

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 $30.0 million in the first quarter of 2013, compared to $35.2 million in the first quarter of 2012, decreasing 15% from the prior-year quarter. Q1 2013 tower section volume was down 15% compared to the prior-year quarter and also included a greater mix of fabrication-only towers, which reduced reported revenues by $4.5 million on a comparable basis. These factors were partially offset by increased sales of industrial weldments. Consistent with the Company's end market diversification strategy, weldments sales of $3.9 million more than doubled from the prior year. Non-GAAP adjusted EBITDA for the first quarter was $3.3 million in 2013, compared to $2.3 million in 2012. The increase was due primarily to a higher margin mix of towers, and improved labor productivity due to less variability in production. Towers and Weldments segment operating income for the first quarter of 2013 was $2.0 million, double the 2012 level of $1.0 million.

Gearing

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

Gearing segment sales totaled $10.7 million in the first quarter of 2013, compared to $16.0 million in the first quarter of 2012. The 33% decrease was due primarily to production delays related to the Company's strategy to shift from loose gearing to enclosed drives, and due to lower industrial sales resulting from softer demand in these customers' end markets. Gearing segment non-GAAP adjusted EBITDA for the first quarter of 2013 was $.1 million, decreasing from $1.8 million in the prior-year first quarter, due to lower volumes, partially offset by reductions in fixed costs and lower compensation, bad debt and other professional expenses. Gearing segment operating loss for the first quarter of 2013 was $2.9 million, compared to a loss of $1.1 million in 2012, and included the $.5 million impact of accelerating the amortization of customer intangibles, in addition to 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 $7.5 million in the first quarter of 2013, compared with $3.4 million in the first quarter of 2012, an increase of $4.1 million. This increase was primarily the result of increased drivetrain service revenue, partially offset by lower blade maintenance and field service repair activity compared to the prior-year quarter. Non-GAAP adjusted EBITDA loss improved in the first quarter to near break-even, compared to a loss of $1.0 million in the prior year as a result of higher drivetrain service activity and lower operating expenses. Services segment operating loss decreased in the first quarter of 2013 to $.7 million, compared to a loss of $1.6 million in the first quarter of 2012, reflecting the factors described above.

Corporate and Other

Corporate and other expenses totaled $2.9 million in the first quarter of 2013, compared with $2.2 million in the first quarter of 2012. The increase in expense was primarily attributable to increased restructuring expense of $.5 million and increased professional fees.

Cash and Liquidity

During the quarter, operating working capital increased $1.9 million to $23.5 million or 13% of annualized first quarter 2013 sales. The increase from December 31, 2012 was due primarily to increases in inventory and in trade receivables as the Company built working capital to meet expanded tower demand.

The Company's outstanding balance at March 31, 2013 on its $20 million line of credit was $6.2 million, and net debt was $14.3 million. Under the terms of this borrowing structure, cash balances remain at a minimum when the credit line is drawn. As a result, cash and equivalents totaled $.9 million at first quarter-end 2013. After quarter-end, the Company completed the sale of its idle Brandon tower facility, realizing net proceeds of $11.8 million, of which $3.5 million was used to repay the underlying mortgage debt.

About Broadwind Energy, Inc.

Broadwind Energy (NAS: 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.

 
 
BROADWIND ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
    
March 31,December 31,
20132012
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents$537$516
Restricted cash331330
Accounts receivable, net of allowance for doubtful accounts of $298
and $453 as of March 31, 2013 and December 31, 2012, respectively26,50820,039
Inventories, net30,05221,988
Prepaid expenses and other current assets4,1843,836
Assets held for sale 8,039  8,042 
Total current assets 69,651  54,751 
Property and equipment, net77,98579,889
Intangible assets, net6,7907,454
Other assets 751  816 
TOTAL ASSETS$155,177 $142,910 
 
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Lines of credit and notes payable$6,172$955
Current maturities of long-term debt330352
Current portions of capital lease obligations1,7492,217
Accounts payable24,88016,377
Accrued liabilities5,8156,012
Customer deposits8,2124,063
Liabilities held for sale 3,609  3,860 
Total current liabilities 50,767  33,836 
 
LONG-TERM LIABILITIES:
Long-term debt, net of current maturities2,8162,956
Long-term capital lease obligations, net of current portions539641
Other 2,240  2,169 
Total long-term liabilities 5,595  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; 14,357,053
and 14,197,792 shares issued and outstanding as of March 31, 2013 and
December 31, 2012, respectively1414
Additional paid-in capital374,171373,605
Accumulated deficit (275,370) (270,311)
Total stockholders' equity 98,815  103,308 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY$155,177 $142,910 
 
 
BROADWIND ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
  
Three Months Ended March 31,
2013  2012
 
 
Revenues$45,664$54,443
Cost of sales43,04351,822
Restructuring 455  389 
Gross profit 2,166  2,232 
 
OPERATING EXPENSES:
Selling, general and administrative5,3965,883
Intangible amortization665215
Restructuring 601  75 
Total operating expenses 6,662  6,173 
Operating loss (4,496) (3,941)
 
OTHER (EXPENSE) INCOME, net:
Interest expense, net(391)(262)
Other, net335363
Restructuring (275) - 
Total other (expense) income, net (331) 101 
 
Net loss from continuing operations before provision for income taxes(4,827)(3,840)
Provision for income taxes 22  20 
LOSS FROM CONTINUING OPERATIONS(4,849)(3,860)
LOSS FROM DISCONTINUED OPERATIONS, NET OF TAX (210) - 
NET LOSS$(5,059)$(3,860)
 
 
NET LOSS PER COMMON SHARE - BASIC AND DILUTED:
Loss from continuing operations$(0.34)$(0.28)
Loss from discontinued operations (0.01) - 
Net loss$(0.35)$(0.28)
 
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING - Basic and diluted14,26713,980
 
 
BROADWIND ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
  
Three Months Ended March 31,
2013  2012
CASH FLOWS FROM OPERATING ACTIVITIES:  
Net loss$(5,059)$(3,860)
Loss from discontinued operations 210    - 
Loss from continuing operations(4,849)(3,860)
 
Adjustments to reconcile net cash used in operating activities:
Depreciation and amortization expense3,9863,950
Impairment charges288-
Stock-based compensation427665
Allowance for doubtful accounts(154)134
Common stock issued under defined contribution 401(k) plan138-
Loss on disposal of assets1523
Changes in operating assets and liabilities:
Accounts receivable(6,314)1,988
Inventories(8,064)(9,007)
Prepaid expenses and other current assets(503)932
Accounts payable8,0517,588
Accrued liabilities(92)(1,118)
Customer deposits4,149(2,729)
Other non-current assets and liabilities 82    35 
Net cash used in operating activities of continuing operations (2,840)   (1,399)
 
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of logistics business and related note receivable-125
Purchases of property and equipment(1,375)(715)
Proceeds from disposals of property and equipment4
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