Broadwind Energy Announces Third-Quarter 2013 Results Highlights: oQ3 orders up sharply to $87 million; Excludes $106 million tower order received after quarter-end oSeptember 30 backlog of $167 million, up 17% sequentially oRevenue of $62.4 million beat outlook due to record tower sales oGross profit margin (ex. restructuring) rose to 9.1%, up 370 bp from Q3 2012 oEPS loss of $.18 and Adjusted EBITDA of $2.6 million oBalance sheet continues to strengthen: Cash assets totaled $24 million, operating line of credit undrawn; Debt balance of $3.1 million outstanding CICERO, Ill., Oct. 31, 2013 (GLOBE NEWSWIRE) -- Broadwind Energy, Inc. (Nasdaq:BWEN) today reported sales of $62.4 million for the third quarter of 2013, a 13% increase compared to $55.0 million in the third quarter of 2012. The increase reflected the continued strength in the Towers and Weldments segment, partly offset by weaker results in the Gearing and Services segments. The Company reported a net loss from continuing operations of $2.6 million or $.18 per share in the third quarter of 2013, compared to a loss of $3.9 million or $.28 per share in the third quarter of 2012. The improvement was due to stronger operating results in the Towers and Weldments segment, which offset the impact of a $1.5 million fine incurred by the Gearing segment to settle a long-standing environmental investigation. The Company reported non-GAAP adjusted EBITDA (earnings before interest, taxes, depreciation, amortization, share-based payments and restructuring costs) of $2.6 million during the third quarter of 2013, compared to $2.4 million during the third quarter of 2012, up modestly despite the inclusion of the regulatory settlement charge. Peter C. Duprey, president and chief executive officer, stated, "Our third-quarter results continue to highlight the strength in our Towers and Weldments segment which had its highest quarter on record. We booked $70 million in new tower orders during the quarter and announced another $106 million in tower orders after quarter-end. Our tower production capacity is substantially sold out for 2014 and we are booking orders for 2015. "Our Gearing segment continues to work through challenges, both internally and externally. Internally, we are working to minimize the operational impact of the plant consolidation, which is on track. Gearing results were below expectations as we continue to grapple with productivity issues stemming from a mix of more complicated gearboxes versus loose gearing. Externally, Gearing revenues continue to be impacted by weak demand from customers in the mining sector. In response to these challenges, we have made a number of process and management changes in this segment, from which we are already starting to see positive results. Gearing orders more than doubled during the third quarter compared to last quarter, and we continue to focus on Kaizen events to identify process improvements that will get this business back on track. We believe we will see improvement in the fourth quarter. "Gearing also incurred a $1.5 million regulatory settlement charge associated with an environmental investigation that has been underway for some time. While the fine was higher than we anticipated and remains subject to final court approval, we are happy to have this distraction behind us. Sound environmental management is one of our key operating principles. We have made a careful evaluation of environmental practices at our other acquired businesses and believe there are no other potential problems. "In our Services segment, we saw some recovery from a weak first half. However, sales and earnings continue to lag behind the prior year due mainly to low turbine construction activity and lower gearbox repair activity. We are focused on better leveraging our precision gearing expertise and service experience to meet emerging customer preference for uptower gearbox repair services. We believe we will see positive results from this effort in 2014." Mr. Duprey concluded, "Despite the challenges in the Gearing and Services businesses, we reached some key milestones during the quarter. Gross margin expanded by 390 basis points, we added $6.0 million of cash and generated $4.1 million of EBITDA before the regulatory settlement, which represented a $1.7 million improvement over 2012. This performance shows the financial potential of the business ahead. We are focused on achieving a similar turnaround in Gearing and Services going forward as we have achieved in our Towers business." Revenue for the nine months ending September 30, 2013 was $159.5 million, down 4% from $165.8 million for the same period last year. Gearing revenue declined due to weaker demand from mining and oil and natural gas customers as well as difficulties related to the production of more complex gearboxes. This was partly offset by an 18% increase in completed towers compared to the prior year. Non-GAAP adjusted EBITDA for the nine months ending September 30, 2013 was $6.6 million, up 37% from $4.9 million in the same period in 2012. The sharp increase was due to higher volumes and a less variable mix of towers in the current year, partly offset by lower volumes and margins in the Gearing segment as well as the regulatory settlement in the current year period. Operating loss for the nine months ending September 30, 2013 was $10.2 million, an improvement of 12% over the same period in 2012 due in part to $.6 million lower restructuring expense in the current year and the factors described above. Orders and Backlog The Company booked net orders of $87 million during the third quarter of 2013, more than four times the level booked during the third quarter of 2012. Towers and Weldments orders, which vary considerably from quarter-to-quarter, totaled $70 million. Third quarter net Gearing orders totaled $13 million, a 47% increase from the prior-year third quarter due mainly to a large order for replacement wind gearing. Net orders for Services totaled $4 million and were up from the first half run-rate but down $2 million compared to the prior-year third quarter, due mainly to weaker demand for in-field services compared to the prior year. At September 30, 2013, backlog totaled $167 million, up from $100 million at September 30, 2012. Subsequent to quarter-end, the Company announced new tower orders of $106 million. 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 $48.7 million in the third quarter of 2013, compared to $37.4 million in the third quarter of 2012. The 30% increase reflects strong demand from the Company's expanded customer base and $4.4 million of sales of a new tower design produced during the second quarter of 2013 but not inspected and accepted by the customer until the third quarter. Partly offsetting this strength was a $.9 million reduction in industrial weldment sales to a mining equipment customer that is trimming production in view of a weaker mining sector outlook. Non-GAAP adjusted EBITDA for the third quarter was $7.8 million, more than double the prior-year third quarter adjusted EBITDA of $3.1 million. The significant improvement was the result of higher volumes, improved operating efficiencies and a less variable and more profitable mix of towers compared to the third quarter of 2012, during which productivity suffered due to the production of multiple tower types. Towers and Weldments segment operating income for the third quarter of 2013 was $6.7 million (14% of sales), up $5.0 million from the third 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 third quarter of 2013, compared to $11.3 million in the third quarter of 2012. The 8% decrease was caused by lower sales to a mining customer due to weak demand in this industry as well as lower shipments to an oil industry customer due in part to manufacturing delays with a new line of gearboxes. Gearing segment non-GAAP adjusted EBITDA for the third quarter of 2013 was a loss of $2.6 million, declining from $.9 million in the prior-year third quarter due in part to lower volumes and margins. The loss also included a $1.5 million regulatory settlement associated with resolution of a long-standing environmental investigation as discussed above. These factors were partly offset by reductions in fixed costs and lower compensation, bad debt and other professional expenses. Gearing segment operating loss for the third quarter of 2013 increased to $5.7 million, from a loss of $2.6 million in the prior-year third quarter. The increased operating loss was partly attributable to $.6 million of higher restructuring charges as well as the factors described above. The restructuring and consolidation project remains on track and on budget. 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 $3.7 million in the third quarter of 2013, compared with $6.9 million in the third quarter of 2012. The 46% decrease was due primarily to lower gearbox sales and depressed in-field service activity as a result of very low wind turbine installations across the United States, resulting in wind farm operators continuing to insource non-routine maintenance projects. Non-GAAP adjusted EBITDA loss for the third quarter of 2013 was $.6 million, compared with non-GAAP adjusted EBITDA of $.1 million in the prior-year third quarter. The decrease was due mainly to lower volumes and increased inventory reserves, partly offset by lower salary expenses and the absence of a one-time legal charge in the prior-year third quarter. Services segment operating loss of $1.3 million in the third quarter of 2013 increased $.7 million from a loss of $.6 million in the third quarter of 2012, due to the factors described above. Corporate and Other Corporate and other expenses totaled $2.2 million in the third quarter of 2013, compared with $2.1 million in the third quarter of 2012. The increase in expense was primarily attributable to increased legal expense. Cash and Liquidity During the quarter, operating working capital decreased $5.5 million to $4.0 million or 2% of annualized third-quarter 2013 sales. The decrease from June 30, 2013 was due primarily to a decrease in inventory related to the completed tower sections that were manufactured and placed into inventory during the prior quarter. Cash and equivalents rose to $24.0 million at September 30, 2013, an increase of $6.0 million from June 30, 2013, due to operational cash flow and the reduction in working capital noted above. At September 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 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) September 30, December 31, 2013 2012 (Unaudited) ASSETS CURRENT ASSETS: Cash and cash equivalents $22,826 $516 Short-term investments 867 -- Restricted cash 331 330 Accounts receivable, net of allowance for doubtful accounts of $279 and $179 as of 21,927 20,039 September 30, 2013 and December 31, 2012, respectively Inventories, net 32,625 21,988 Prepaid expenses and other current assets 2,532 3,836 Assets held for sale 2,152 8,042 Total current assets 83,260 54,751 Property and equipment, net 72,761 79,889 Intangible assets, net 6,014 7,454 Other assets 2,194 816 TOTAL ASSETS $164,229 $142,910 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Lines of credit and notes payable $-- $955 Current maturities of long-term debt 342 352 Current portions of capital lease obligations 1,308 2,217 Accounts payable 29,063 16,377 Accrued liabilities 6,961 6,012 Customer deposits 21,482 4,063 Liabilities held for sale -- 3,860 Total current liabilities 59,156 33,836 LONG-TERM LIABILITIES: Long-term debt, net of current maturities 2,757 2,956 Long-term capital lease obligations, net of 1,431 641 current portions Other 3,342 2,169 Total long-term liabilities 7,530 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; 14,563,228 and 14,197,792 shares 15 14 issued and outstanding as of September 30, 2013 and December 31, 2012, respectively Additional paid-in capital 375,542 373,605 Accumulated deficit (278,014) (270,311) Total stockholders' equity 97,543 103,308 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $164,229 $142,910 BROADWIND ENERGY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE DATA) Three Months Ended Nine Months Ended September September 30, 30, 2013 2012 2013 2012 Revenues $62,436 $55,045 $159,463 $165,799 Cost of sales 56,783 52,097 147,399 158,155 Restructuring 1,097 233 2,758 1,038 Gross profit 4,556 2,715 9,306 6,606 OPERATING EXPENSES: Selling, general and 5,247 5,197 15,788 16,658 administrative Intangible amortization 111 664 1,441 1,094 Regulatory settlement 1,500 1,500 Restructuring 79 381 787 481 Total operating expenses 6,937 6,242 19,516 18,233 Operating loss (2,381) (3,527) (10,210) (11,627) OTHER INCOME (EXPENSE) , net: Interest expense, net (177) (553) (795) (1,053) Other, net (4) 148 511 758 Restructuring (1) (15) 2,965 (86) Total other income (182) (420) 2,681 (381) (expense), net Net loss from continuing operations before provision (2,563) (3,947) (7,529) (12,008) for income taxes Provision for income taxes 28 (9) 64 21 LOSS FROM CONTINUING (2,591) (3,938) (7,593) (12,029) OPERATIONS LOSS FROM DISCONTINUED 100 -- (110) -- OPERATIONS, NET OF TAX NET LOSS $(2,491) $(3,938) $(7,703) $(12,029) NET LOSS PER COMMON SHARE - BASIC AND DILUTED: Loss from continuing $(0.18) $(0.28) $(0.53) $(0.86) operations Loss from discontinued 0.01 -- (0.01) -- operations Net loss $(0.17) $(0.28) $(0.53) $(0.86) WEIGHTED AVERAGE COMMON SHARES OUTSTANDING - Basic 14,525 14,093 14,405 14,022 and diluted BROADWIND ENERGY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) Nine Months Ended September 30, 2013 2012 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $(7,703) $(12,029) Adjustments to reconcile net cash used in operating activities: Depreciation and amortization expense 11,412 12,227 Impairment charges 288 -- Stock-based compensation 1,438 2,079 Allowance for doubtful accounts (274) 158 Common stock issued under defined contribution 499 345 401(k) plan (Gain) loss on disposal of assets (3,576) 220 Changes in operating assets and liabilities: Accounts receivable (1,613) (3,318) Inventories (10,637) (5,672) Prepaid expenses and other current assets 1,228 1,078 Accounts payable 12,337 (3,175) Accrued liabilities 1,054 (110) Customer deposits 17,419 (13,411) Other non-current assets and liabilities (365) 1,319 Net cash provided by (used in) operating 21,507 (20,289) activities CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sale of logistics business and 250 375 related note receivable Purchases of available for sale securities (867) -- Purchases of property and equipment (5,967) (3,300) Proceeds from disposals of property and 12,533 106 equipment (Increase) decrease in restricted cash (1) 546 Net cash provided by (used in) investing 5,948 (2,273) activities CASH FLOWS FROM FINANCING ACTIVITIES: Payments on lines of credit and notes payable (80,233) (24,190) Proceeds from lines of credit and notes 75,208 36,908 payable Proceeds from sale-leaseback transactions -- 1,000 Payments for debt issuance costs -- (630) Principal payments on capital leases (120) (1,145) Net cash (used in) provided by financing (5,145) 11,943 activities NET INCREASE (DECREASE) IN CASH AND CASH 22,310 (10,619) EQUIVALENTS CASH AND CASH EQUIVALENTS, beginning of the 516 13,340 period CASH AND CASH EQUIVALENTS, end of the period $22,826 $2,721 BROADWIND ENERGY, INC. AND SUBSIDIARIES SELECTED SEGMENT FINANCIAL INFORMATION (IN THOUSANDS) Three Months Ended September Nine Months Ended September 30, 30 2013 2012 2013 2012 REVENUES: (unaudited) (unaudited) Towers and $48,658 $37,423 $116,194 $109,587 Weldments Gearing 10,389 11,256 31,554 41,352 Services 3,704 6,899 15,253 16,037 Corporate and (315) (533) (3,538) (1,177) Other Total revenues $62,436 $55,045 $159,463 $165,799 OPERATING (LOSS) PROFIT: Towers and $6,723 $1,740 $12,828 $3,306 Weldments Gearing (5,653) (2,637) (12,394) (5,390) Services (1,276) (570) (3,239) (3,331) Corporate and (2,175) (2,060) (7,405) (6,212) Other Total operating $(2,381) $(3,527) $(10,210) $(11,627) 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 nine months ended September 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. Consolidated Three Months Ended Nine Months Ended September 30, September 30, 2013 2012 2013 2012 (unaudited) (unaudited) Operating loss $(2,381) $(3,527) $(10,210) $(11,627) Depreciation and amortization 3,178 4,195 10,826 11,590 Restructuring 1,176 614 3,545 1,519 Other income (4) 148 511 758 Share-based compensation and 645 982 1,970 2,619 other stock payments Adjusted EBITDA $2,614 $2,412 $6,642 $4,859 Towers and Weldments Three Months Ended September Nine Months Ended September Segment 30, 30, 2013 2012 2013 2012 (unaudited) (unaudited) Operating Profit $6,723 $1,740 $12,828 $3,306 Depreciation 941 942 2,841 2,722 Share-based compensation and 108 210 353 575 other stock payments Other Income (9) 171 265 529 Restructuring Expense 50 -- 165 -- Total Adjusted $7,813 $3,063 $16,452 $7,132 EBITDA (Non-GAAP) Gearing Segment Three Months Ended September Nine Months Ended September 30, 30, 2013 2012 2013 2012 (unaudited) (unaudited) Operating Loss $ (5,653) $ (2,637) $ (12,394) $ (5,390) Depreciation 1,702 2,157 5,442 6,485 Amortization 111 665 1,441 1,094 Share-based compensation and 121 157 334 455 other stock payments Other Income 10 4 (5) 17 (Expense) Restructuring Expense 1,125 514 2,684 1,362 Total Adjusted $(2,584) $860 $(2,498) $4,023 EBITDA (Non-GAAP) Services Segment Three Months Ended September Nine Months Ended September 30, 30, 2013 2012 2013 2012 (unaudited) (unaudited) Operating Loss $(1,276) $(570) $(3,239) $(3,331) Depreciation 409 414 1,064 1,237 Share-based compensation and 59 153 227 340 other stock payments Other Income (5) (29) 251 209 (Expense) Restructuring Expense -- 100 234 146 Total Adjusted $(813) $68 $(1,463) $(1,399) EBITDA (Non-GAAP) Corporate and Other Three Months Ended September Nine Months Ended September 30, 30, 2013 2012 2013 2012 (unaudited) (unaudited) Operating Loss $(2,175) $(2,060) $(7,405) $(6,212) Depreciation 15 17 38 51 Share-based compensation and 357 462 1,056 1,249 other stock payments Other Income -- 2 -- 4 (Expense) Restructuring Expense 1 -- 462 11 Total Adjusted $(1,802) $(1,579) $(5,849) $(4,897) EBITDA (Non-GAAP) CONTACT: BWEN INVESTOR CONTACT: Joni Konstantelos, 708.780.4819 email@example.com LHA - Jody Burfening/Carolyn Capaccio 212.838.3777, firstname.lastname@example.org Broadwind Energy, Inc. 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Broadwind Energy Announces Third-Quarter 2013 Results
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