Broadwind Energy Announces Q4 and Full-Year 2012 Results Second Year of Transformation Complete; Firmly on Path to Profitability Business Wire CICERO, Ill. -- February 27, 2013 Broadwind Energy, Inc. (NASDAQ: BWEN): Q4 Highlights: *Order intake of $69 million increased from prior-year quarter; year-end backlog rose 23% from September 30, 2012 to $123 million *Q4 sales of $44.9 million, down 18% from prior-year quarter, due to expiration of the Production Tax Credit (PTC) at the end of the year *SGA expenses (excluding restructuring costs) declined 24% to $5.0 million from Q4 of the prior year *Adjusted EBITDA increased to $.7 million from prior-year loss of $1.0 million, driven by improved efficiencies and operating expense reductions *Operating working capital reduced $17.7 million from Q3 2012 to $21.6 million, 12% of Q4 annualized sales *Operating line of credit paid down by $16.6 million during the quarter; balance outstanding less than $1 million at 12/31/12 Broadwind Energy, Inc. (NASDAQ: BWEN) reported sales of $44.9 million for the fourth quarter of 2012, an 18% decrease compared to $55.1 million in the fourth quarter of 2011. As expected, the decrease reflects the acceleration of wind tower shipments into earlier quarters in anticipation of the expiration of the Production Tax Credit at the end of 2012. The Company reported a net loss from continuing operations of $5.9 million or $.41 per share in the fourth quarter of 2012, compared to a loss of $5.7 million or $.41 per share during the fourth quarter of 2011. The slight increase in net loss was primarily due to increased amortization expense associated with a customer intangible. The Company reported non-GAAP adjusted EBITDA (earnings before interest, taxes, depreciation, amortization, share-based payments and restructuring) of $.7 million during the fourth quarter of 2012, compared to an adjusted EBITDA loss of $1.0 million during the fourth quarter of 2011. The progress reflected significantly improved operating results for all segments, partially offset by the impact of 17% lower tower volume throughput in the fourth quarter. For the full-year 2012, sales of $210.7 million exceeded full-year 2011 sales by 13%, reflecting growth in all operating segments. For the full-year 2012, the loss from continuing operations narrowed to $17.9 million, from a $20.7 million loss reported in 2011. The Company reported non-GAAP adjusted EBITDA of $5.5 million, up sharply from an adjusted EBITDA loss of $2.1 million for full-year 2011 due primarily to improved operating results in the Gearing and Services segments, and lower Corporate expenses. These were partially offset by weaker Towers and Weldments segment results reflecting the operational challenges experienced earlier in the year. Peter C. Duprey, president and chief executive officer, stated, “Owing to our strategy to transform Broadwind Energy by diversifying our customer base and our revenue composition, we have successfully navigated a very difficult year caused by uncertainties due to the expiration of the Production Tax Credit. Our efforts to combat these severe headwinds improved our EBITDA $1.6 million from the fourth quarter of 2011. In the fourth quarter, Towers segment operations were particularly challenged by deliveries accelerating ahead of the PTC expiration and then falling off sharply as year-end approached. Our Services business booked record orders in the fourth quarter and started 2013 with a backlog of $10.0 million. Our Gearing business faced its own obstacles due to low natural gas prices, but saw increased demand for enclosed drives primarily in the oil markets. In all, we finished 2012 with 13% top-line growth and a $7.6 million improvement in EBITDA, and achieved our goal of positive EBITDA in every quarter. Supported by a strengthening balance sheet, this puts Broadwind solidly on a path to profitability.” Mr. Duprey concluded, “Tower supply and demand have come into balance, partly due to a favorable ruling from the International Trade Commission, and in part from Congress extending the PTC for projects that begin construction in 2013. We see strong near-term demand for towers as some of the market uncertainty has been removed, and recently announced a $27 million tower order. As a result, we now expect higher productivity in Towers in 2013 than last year, which, combined with benefits from our restructuring initiatives, should drive significant expansion in our 2013 gross margins. Our revenue diversification strategy continues to support growth in our Industrial Weldments, Gearing and Services businesses and we are positioned to achieve our goal of deriving nearly half of our 2013 revenue—more than $100 million—independent of new wind turbine demand. Therefore, we view our 2013 outlook for $215-225 million in revenue and $9-12 million in EBITDA as highly achievable.” Orders and Backlog The Company booked $69.1 million in net new orders during the fourth quarter, an increase of 1% from the prior-year quarter. Towers and Weldments orders, which vary considerably from quarter-to-quarter, totaled $49.2 million, including follow-on orders from two new customers added in 2012. Fourth quarter Gearing orders totaled $7.0 million, a 50% decrease from the prior-year fourth quarter, as orders from natural gas fracking and mining equipment customers remained soft; these were partly offset by solid order intake from other industrial and oil customers. Services had a record quarter, as orders more than doubled to $12.9 million from the prior-year fourth quarter, including a large drivetrain project with an industrial customer. At December 31, 2012, backlog totaled $123 million, up from $100 million at September 30, 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 $25.6 million in the fourth quarter of 2012, compared to $34.6 million in the fourth quarter of 2011. As expected, revenue decreased 26% from the prior-year quarter as deliveries were accelerated into earlier quarters of 2012 ahead of the expiration of the Production Tax Credit, which was renewed early in 2013. Consistent with the company's diversification strategy, industrial weldment sales of $3.6 million were up significantly from the prior year. Non-GAAP adjusted EBITDA for the fourth quarter was $1.2 million in 2012, compared to $1.6 million in 2011. The decrease was due primarily to lower Towers revenue, offset somewhat by increased sales of industrial weldments and lower operating expenses. Towers and Weldments segment operating loss for the fourth quarter of 2012 was $.5 million, compared to a slight profit in 2011. Towers and Weldments segment sales for 2012 totaled $135.2 million, a 16% increase over 2011 reported sales. In the current year, approximately $19.8 million of additional steel costs were included in tower sales, compared with 2011 tower sales which included a higher mix of fabrication-only tower sales. In addition, industrial weldment sales nearly tripled in 2012, making a solid contribution to the increase in segment revenue compared to the prior year. Non-GAAP adjusted EBITDA for 2012 was $8.3 million, down 20% from 2011 due mainly to operating inefficiencies related to producing multiple tower designs earlier in the year. Towers and Weldments segment operating income totaled $2.8 million compared to $5.2 million in 2011 due to the factors noted above. Gearing Broadwind Energy engineers, builds and remanufactures precision gears and gearing systems for wind, oil and gas and mining applications. Gearing segment sales totaled $14.3 million in the fourth quarter of 2012, compared to $15.6 million in the fourth quarter of 2011. The 8% decrease was due primarily to lower sales into natural gas fracking markets, partially offset by higher sales to other industrial and mining equipment customers. Non-GAAP adjusted EBITDA for the fourth quarter of 2012 was $1.0 million, increasing from $.4 million in the prior-year fourth quarter, due to improved margins and lower operating expenses, which more than offset the impact of lower sales volumes. Gearing segment operating loss for the fourth quarter of 2012 was $2.2 million, unchanged from 2011, and included $.4 million of additional restructuring expense associated with the plant consolidation project underway and the $.5 million impact of accelerating the amortization of customer intangibles, in addition to the factors described above. Gearing segment revenues for 2012 totaled $55.7 million, up modestly from $54.3 million in 2011. Sales to industrial and other customers increased 55% compared to the prior year, more than offsetting the 78% decline in sales to new-wind customers. Gearing sales to industrial and other customers represented 91% of 2012 sales, compared to 60% in 2011. Non-GAAP adjusted EBITDA for 2012 totaled $5.0 million compared to a loss of $.5 million in 2011. The significant improvement was due to the increased sales from higher-margin industrial customers, improved productivity and lower operating expenses in 2012. Gearing segment operating loss for 2012 improved to $7.6 million, compared to a reported operating loss of $10.7 million for 2011. 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 $6.1 million in the fourth quarter of 2012, compared with $5.5 million in the fourth quarter of 2011. This 11% increase in revenue was primarily the result of higher drivetrain and blade services revenue, partially offset by lower field services activity in the Midwest region. Non-GAAP adjusted EBITDA improved in the fourth quarter to near break-even, compared to a loss of $1.1 million in the prior year as result of improved margins, reduced manufacturing overhead and lower operating expenses. Services segment operating loss decreased in the fourth quarter of 2012 to $.9 million, compared to a loss of $1.4 million in the fourth quarter of 2011, reflecting the factors described above, partly offset by higher depreciation and restructuring expenses. Services segment sales for 2012 totaled $22.1 million, an increase of 36% compared to reported sales for 2011. The significant improvement was due to higher overall revenue across all product lines. Non-GAAP adjusted EBITDA narrowed to a loss of $1.5 million in 2012 from a loss of $4.0 million in 2011. The 63% improvement, year-over-year, was due primarily to improved margins and lower operating expenses compared to 2011. Operating loss for 2012 improved to a loss of $4.2 million, compared to a loss of $5.2 million in 2011. Corporate and Other Corporate and other expenses totaled $2.0 million in the fourth quarter of 2012, compared with $2.3 million in the fourth quarter of 2011. The improvement was primarily attributable to lower legal expense, reduced headcount, and other general cost containment efforts. Corporate and other expenses totaled $8.3 million for 2012 compared to $9.6 million for 2011. The 14% decrease was primarily due to the factors noted above. On a consolidated basis for the fourth quarter, total operating expenses, excluding restructuring, declined to $5.6 million from $6.7 million, compared to the prior-year fourth quarter. The future income tax benefits associated with the current period loss were offset by an increase in the valuation allowance; therefore the effective federal tax rate is zero. As of year-end, cumulative federal net operating loss carry-forwards totaled $154 million. In February 2013, The Board of Directors passed a Net Operating Loss Shareholder Rights Plan in an attempt to preserve this significant tax asset. Cash and Liquidity During the quarter, operating working capital decreased $17.7 million to $21.6 million or 12% of annualized fourth-quarter 2012 sales. The sharp decrease from September 30, 2012 was due primarily to reductions in inventory and in trade receivables as the Company received payments for towers that were shipped during the third quarter. As a result of the working capital reduction, the Company significantly reduced the outstanding balance on the $20 million line of credit put in place in the third quarter of 2012. The line was paid down by $16.6 million to just under $1.0 million at December 31, 2012. Net debt dropped to $10.1 million at year-end from $25.1 million at September 30, 2012. 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 $.8 million at year-end 2012. 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. BROADWIND ENERGY, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (IN THOUSANDS) As of December 31, 2012 2011 ASSETS CURRENT ASSETS: Cash and cash equivalents $ 516 $ 13,340 Restricted cash 330 876 Accounts receivable, net 20,039 25,311 Inventories, net 21,988 23,355 Prepaid expenses and other current assets 3,836 4,033 Assets held for sale 8,042 8,052 Total current assets 54,751 74,967 LONG-TERM ASSETS: Property and equipment, net 79,889 87,766 Intangible assets, net 7,454 9,214 Other assets 816 944 TOTAL ASSETS $ 142,910 $ 172,891 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Lines of credit and notes payable $ 955 $ 1,566 Current maturities of long-term debt 352 636 Current portions of capital lease 2,217 965 obligations Accounts payable 16,377 17,358 Accrued liabilities 6,012 5,749 Customer deposits 4,063 17,328 Liabilities held for sale 3,860 4,833 Total current liabilities 33,836 48,435 LONG-TERM LIABILITIES: Long-term debt, net of current maturities 2,956 4,797 Long-term capital lease obligations, net of 641 975 current portions Other 2,169 825 Total long-term liabilities 5,766 6,597 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; 14,197,792 and 13,977,920 shares issued and outstanding as 14 140 of December 31, 2012 and 2011, respectively Additional paid-in capital 373,605 370,123 Accumulated deficit (270,311 ) (252,404 ) Total stockholders' equity 103,308 117,859 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 142,910 $ 172,891 BROADWIND ENERGY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE DATA) Three Months Ended December Twelve Months Ended 31, December 31, 2012 2011 2012 2011 Revenues $ 44,908 $ 55,093 $ 210,707 $ 185,854 Cost of sales 44,102 54,087 202,257 178,536 Restructuring 576 42 1,614 131 Gross profit 230 964 6,836 7,187 OPERATING EXPENSES: Selling, general and 4,976 6,509 21,634 26,316 administrative Intangible 665 215 1,759 859 amortization Restructuring 259 141 740 441 Total operating 5,900 6,865 24,133 27,616 expenses Operating loss (5,670 ) (5,901 ) (17,297 ) (20,429 ) OTHER (EXPENSE) INCOME, net: Interest (658 ) (272 ) (1,711 ) (1,117 ) expense, net Other, net 513 610 1,271 1,169 Restructuring (58 ) (95 ) (144 ) (297 ) Total other (expense) (203 ) 243 (584 ) (245 ) income, net Net loss from continuing operations (5,873 ) (5,658 ) (17,881 ) (20,674 ) before provision for income taxes (Benefit) provision for 5 44 26 68 income taxes LOSS FROM CONTINUING (5,878 ) (5,702 ) (17,907 ) (20,742 ) OPERATIONS LOSS FROM DISCONTINUED - (22 ) - (1,206 ) OPERATIONS, NET OF TAX NET LOSS $ (5,878 ) $ (5,724 ) $ (17,907 ) $ (21,948 ) NET LOSS PER COMMON SHARE - BASIC AND DILUTED: Loss from continuing $ (0.41 ) $ (0.41 ) $ (1.27 ) $ (1.79 ) operations Loss from discontinued - (0.00 ) - (0.10 ) operations Net loss $ (0.41 ) $ (0.41 ) $ (1.27 ) $ (1.89 ) WEIGHTED AVERAGE COMMON SHARES 14,166 13,975 14,058 11,617 OUTSTANDING - Basic and diluted BROADWIND ENERGY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) For the Years Ended December 31, 2012 2011 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (17,907 ) $ (21,948 ) Loss from discontinued operations - 1,206 Loss from continuing operations (17,907 ) (20,742 ) Adjustments to reconcile net cash used in operating activities: Depreciation and amortization expense 16,537 14,534 Impairment charges - - Change in fair value of interest rate - - swap agreements Deferred income taxes - - Stock-based compensation 2,833 1,906 Allowance for doubtful accounts 163 1,004 Common stock issued under defined 523 150 contribution 401(k) plan Loss on disposal of assets 548 474 Changes in operating assets and liabilities: Accounts receivable 5,109 (4,888 ) Inventories 1,367 (5,616 ) Prepaid expenses and other current assets 519 (10 ) Accounts payable (1,165 ) (5,008 ) Accrued liabilities 170 (648 ) Customer deposits (13,256 ) 8,447 Other non-current assets and liabilities 1,677 93 Net cash used in operating activities of (2,882 ) (10,304 ) continued operations CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from the sale of logistics 375 952 business and related note receivable Purchases of property and equipment (5,738 ) (4,708 ) Proceeds from disposals of property and 113 1,874 equipment Decrease (increase) in restricted cash 546 (706 ) Net cash used in investing activities of (4,704 ) (2,588 ) continued operations CASH FLOWS FROM FINANCING ACTIVITIES: Net proceeds from issuance of stock - 11,697 Payments on lines of credit and notes (78,785 ) (1,517 ) payable Payments on related party notes payable (2,791 ) (209 ) Proceeds from lines of credit and notes 77,620 2,311 payable Payments for debt issuance costs (638 ) - Principal payments on capital leases (644 ) (977 ) Net cash (used in) provided by financing (5,238 ) 11,305 activities of continued operations DISCONTINUED OPERATIONS: Operating cash flows - (851 ) Investing cash flows - - Financing cash flows - (83 ) Net cash used in discontinued operations - (934 ) Add: Cash balance of discontinued - 530 operations, beginning of period Less: Cash balance of discontinued - - operations, end of period NET (DECREASE) INCREASE IN CASH AND CASH (12,824 ) (1,991 ) EQUIVALENTS CASH AND CASH EQUIVALENTS, beginning of 13,340 15,331 the year CASH AND CASH EQUIVALENTS, end of the $ 516 $ 13,340 year Supplemental cash flow information: Interest paid, net of capitalized $ 1,450 $ 1,029 interest Income taxes paid $ 26 $ 34 Non-cash investing and financing activities: Issuance of restricted stock grants $ 1,701 $ 900 Common stock issued under defined $ 523 $ 150 contribution 401(k) plan BROADWIND ENERGY, INC. AND SUBSIDIARIES SELECTED SEGMENT FINANCIAL INFORMATION (IN THOUSANDS) Three Months Ended December Twelve Months Ended December 31, 31, 2012 2011 2012 2011 REVENUES: (unaudited) (unaudited) Towers and $ 25,634 $ 34,576 $ 135,221 $ 116,926 Weldments Gearing 14,308 15,600 55,660 54,296 Services 6,069 5,481 22,106 16,291 Corporate (1,103 ) (564 ) (2,280 ) (1,659 ) and Other Total $ 44,908 $ 55,093 $ 210,707 $ 185,854 revenues OPERATING (LOSS) PROFIT: Towers and $ (540 ) $ 28 $ 2,766 $ 5,187 Weldments Gearing (2,236 ) (2,210 ) (7,626 ) (10,733 ) Services (854 ) (1,385 ) (4,185 ) (5,247 ) Corporate (2,040 ) (2,334 ) (8,252 ) (9,636 ) and Other Total operating $ (5,670 ) $ (5,901 ) $ (17,297 ) $ (20,429 ) loss 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 twelve months ended December 31, 2012 and 2011. 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. Consolidated Three Months Ended Twelve Months Ended December 31, December 31, 2012 2011 2012 2011 (unaudited) (unaudited) Operating Loss $ (5,670 ) $ (5,901 ) $ (17,297 ) $ (20,429 ) Depreciation 3,423 3,408 13,919 13,674 Amortization 665 215 1,759 859 Share-based compensation 886 512 3,505 2,025 and other stock payments Other Income 513 515 1,271 873 Restructuring Expense 835 279 2,354 869 Total Adjusted EBITDA $ 652 $ (972 ) $ 5,511 $ (2,129 ) (Non-GAAP) Towers and Three Months Ended December 31, Twelve Months Ended Weldments Segment December 31, 2012 2011 2012 2011 (unaudited) (unaudited) Operating Profit $ (540 ) $ 28 $ 2,766 $ 5,187 Depreciation 954 870 3,676 3,508 Share-based compensation and 145 107 720 477 other stock payments Other Income 463 563 992 1,229 Restructuring 130 - 130 - Expense Total Adjusted $ 1,152 $ 1,568 $ 8,284 $ 10,401 EBITDA (Non-GAAP) Three Months Ended December Twelve Months Ended 31, December 31, Gearing Segment 2012 2011 2012 2011 (unaudited) (unaudited) Operating Loss $ (2,236 ) $ (2,210 ) $ (7,626 ) $ (10,733 ) Depreciation 1,893 2,210 8,378 9,063 Amortization 665 215 1,759 859 Share-based compensation 147 94 602 371 and other stock payments Other Income (1 ) 6 16 (437 ) (Expense) Restructuring 548 121 1,910 412 Expense Total Adjusted EBITDA 1,016 436 5,039 (465 ) (Non-GAAP) Services Three Months Ended December Twelve Months Ended December Segment 31, 31, 2012 2011 2012 2011 (unaudited) (unaudited) Operating Loss $ (854 ) $ (1,385 ) $ (4,185 ) $ (5,247 ) Depreciation 563 292 1,800 937 Share-based compensation 65 39 405 149 and other stock payments Other Income 58 (4 ) 267 135 (Expense) Restructuring 119 - 265 - Expense Total Adjusted EBITDA $ (49 ) $ (1,058 ) $ (1,448 ) $ (4,026 ) (Non-GAAP) Corporate and Three Months Ended December Twelve Months Ended Other 31, December 31, 2012 2011 2012 2011 (unaudited) (unaudited) Operating Loss $ (2,040 ) $ (2,334 ) $ (8,252 ) $ (9,636 ) Depreciation 13 36 65 166 Share-based compensation 529 272 1,778 1,028 and other stock payments Other Income (7 ) (50 ) (4 ) (54 ) (Expense) Restructuring 38 158 49 457 Expense Total Adjusted EBITDA $ (1,467 ) $ (1,918 ) $ (6,364 ) $ (8,039 ) (Non-GAAP) Contact: Broadwind Energy, Inc. Joni Konstantelos, 708.780.4819 email@example.com or LHA Jody Burfening/Carolyn Capaccio, 212.838.3777 firstname.lastname@example.org
Broadwind Energy Announces Q4 and Full-Year 2012 Results
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