Broadwind Energy Announces Q2 2014 Results

Broadwind Energy Announces Q2 2014 Results  Achieves Solid Year-to-Date Profitability  Q2 Highlights:    *Sales of $68.4 million, up 29% from Q2 2013 driven by strength in Towers     and Gearing   *Gross profit margin (ex. restructuring) of 13.4%, up 470 bp from Q2 2013   *Adjusted EBITDA of $5.9 million, up 67% from Q2 2013   *EPS of $.12, significantly ahead of Q2 2013   *$34 million tower order announced after quarter end  CICERO, Ill., July 31, 2014 (GLOBE NEWSWIRE) -- Broadwind Energy, Inc. (Nasdaq:BWEN) reported sales of $68.4 million for the second quarter of 2014, a 29% increase compared to $52.9 million in the second quarter of 2013. The increase reflects the continued strength in the Company's Towers and Weldments segment and improved throughput for its Gearing segment.  The Company reported net income from continuing operations of $1.9 million or $.12 per diluted share in the second quarter of 2014, compared to $.4 million or $.03 per diluted share in the second quarter of 2013. The $.09 per share improvement was due to stronger results in the Towers and Weldments segment and significant improvements in the Gearing segment, partly offset by the absence of a $3.6 million one-time restructuring gain on the sale of an idle tower plant during the second quarter of 2013. The Company reported non-GAAP adjusted EBITDA (earnings before interest, taxes, depreciation, amortization, share-based payments and restructuring costs) of $5.9 million in the second quarter of 2014, compared to $3.5 million in the second quarter of 2013. The significant progress reflects the 39% increase in tower volume in the second quarter of 2014 and improvements in the Gearing segment, partly offset by higher Corporate expense related to an $.8 million reserve for a potential settlement with the SEC for an investigation initiated in 2010.  Peter C. Duprey, president and chief executive officer, stated, "We had an outstanding quarter from both a financial and operational perspective, allowing us to achieve year-to-date profitability for the first time in Broadwind's history. Our Towers and Weldments segment results continue to significantly outpace the prior year, with tower volume up 39% and a 69% improvement in operating income. Our Gearing segment had a strong quarter, with a 19% improvement in revenue and a reduction in operating loss by over 50%. With the Gearing plant consolidation nearly behind us, we are making good progress improving our plant throughput. We booked over $18 million of Gearing orders during the quarter, the highest quarterly order rate in over four years, which demonstrates good progress with our expanded commercial efforts. In the Services segment, demand for blade repair work increased significantly over the prior year and we are seeing increased orders and quoting activity."  Mr. Duprey concluded, "Broadwind hit a major milestone by achieving year-to-date profitability for the first time in the company's history. As we near completion of our four-year restructuring project, and with our focus on continuous improvement, towers production nearly sold out for 2015 and Gearing orders and production improving, we have reached an inflection point. As we continue to generate strong organic growth, particularly in our towers business, we are seeing the increased operating leverage the business is capable of generating. With all that we have accomplished, we remain highly confident about the road ahead."  Orders and Backlog  The Company booked $23.6 million in net new orders in the second quarter of 2014, down slightly from $24.9 million the second quarter of 2013. Towers and Weldments orders, which vary considerably from quarter to quarter, totaled $.9 million and consisted of industrial weldment orders. Gearing orders totaled $18.3 million, up from $4.8 million in the second quarter of 2013, and represented the highest quarterly order rate in over four years. Services orders totaled $4.4 million, up from $2.6 million in the second quarter of 2013, and represented the highest quarterly order rate since the fourth quarter of 2012.  At June 30, 2014, total backlog was $222.4 million, up 56% from June 30, 2013.  Subsequent to quarter end, $34 million in new tower orders for 2015 production were announced, not included in the June 30, 2014 backlog figure.  Segment Results  Towers and Weldments  Broadwind Energy produces fabrications for wind, oil and gas, mining and other industrial applications, specializing in the production of wind turbine towers.  Towers and Weldments segment sales totaled $52.9 million in the second quarter of 2014, compared to $39.1 million in the second quarter of 2013. The significant increase was due to a 39% increase in tower volume compared to the second quarter of 2013, resulting from a ramp-up in production to support the strong bookings in 2013. Towers and Weldments operating income for the second quarter of 2014 was $8.6 million (16% of sales), up 69% from the second quarter of 2013. The significant improvement was the result of the higher volume, improved production flow and material sourcing improvements, and a higher margin mix of towers compared to the prior-year quarter. Non-GAAP adjusted EBITDA in the second quarter of 2014 totaled $9.6 million, up from $6.3 million in the second quarter of 2013 due to these same factors.  Gearing  Broadwind Energy engineers, builds and remanufactures precision gears and gearboxes for oil and gas, mining, steel and wind applications.  Gearing segment sales totaled $12.4 million in the second quarter of 2014, compared to $10.4 million in the second quarter of 2013. The 19% increase was due primarily to improved plant throughput and a reduction in the past-due backlog. Gearing segment operating loss was $1.8 million for the second quarter of 2014, a 55% improvement compared to the second quarter of 2013, due to the increase in production volume, improved productivity and lower restructuring costs due to the wind-down of consolidation activities. Non-GAAP adjusted EBITDA for the second quarter of 2014 was $.6 million, compared to a non-GAAP adjusted EBITDA loss of $.1 million in the second quarter of 2013, due to the throughput and productivity factors described above.  Services  Broadwind Energy specializes in non-routine drivetrain and blade maintenance services and offers comprehensive field services to the wind industry.  Revenue from the Services segment was $3.5 million in the second quarter of 2014, compared to $4.1 million in the second quarter of 2013. The decrease was related to the completion of a large drivetrain assembly project in the second quarter of 2013, somewhat offset by higher demand for blade repair work in the second quarter of 2014. Despite the $.6 million reduction in revenue, Services operating loss for the second quarter of 2014 was $1.3 million, essentially flat compared to the second quarter of 2013, due to lower restructuring and administrative expenses. The non-GAAP adjusted EBITDA loss, which does not include restructuring, increased to $1.0 million in the second quarter of 2014, compared to $.6 million in the second quarter of 2013, due to the factors described above.  Corporate and Other  Corporate and other expenses totaled $3.3 million in the second quarter of 2014, compared to $2.3 million in the second quarter of 2013. The increase was due primarily to an $.8 million reserve related to a potential settlement with the SEC for an investigation initiated in 2010.  Cash and Liquidity  During the quarter, operating working capital (accounts receivable and inventory, net of accounts payable and customer deposits) increased $6.4 million to $26.0 million or 10% of annualized second-quarter 2014 sales, due to the reduction in customer deposits as deliveries have been completed, and lower trade payables balances.  Cash assets totaled $11.6 million at June 30, 2014, a slight increase of $0.1 million from March 31, 2014. At June 30, 2014, the Company's $20 million line of credit was undrawn.  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, steel, 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 over 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 contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 that involve risks, uncertainties and assumptions, such as statements regarding our future financial condition or results of operations and our prospects and strategies for future growth. 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, including those contained in Part I, Item 1A "Risk Factors" of our Annual Reports on Form 10-K.  BROADWIND ENERGY, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (IN THOUSANDS)                                                                                                                                                                                     June 30,   December 31,                                                     2014        2013                                                     (Unaudited)  ASSETS                                                           CURRENT ASSETS:                                                  Cash and cash equivalents                            $10,799   $24,936 Short-term investments                               700        1,143 Restricted cash                                      83         83 Accounts receivable, net of allowance for doubtful accounts of $111 and $17 as of June 30, 2014 and     24,736     18,735 December 31, 2013, respectively Inventories, net                                     36,294     37,143 Prepaid expenses and other current assets            1,991      2,325 Assets held for sale                                 2,063      1,970 Total current assets                                 76,666     86,335 Property and equipment, net                          66,336     69,077 Intangible assets, net                               5,681      5,903 Other assets                                         2,176      2,379 TOTAL ASSETS                                         $150,859  $163,694                                                                 LIABILITIES AND STOCKHOLDERS' EQUITY                             CURRENT LIABILITIES:                                             Current maturities of long-term debt                 $157      $201 Current portions of capital lease obligations        941        933 Accounts payable                                     20,487     27,537 Accrued liabilities                                  9,838      8,115 Customer deposits                                    14,496     22,993 Liabilities held for sale                            1,361      749 Total current liabilities                            47,280     60,528                                                                 LONG-TERM LIABILITIES:                                           Long-term debt, net of current maturities            2,610      2,755 Long-term capital lease obligations, net of current  725        1,193 portions Other                                                3,604      3,888 Total long-term liabilities                          6,939      7,836                                                                 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; 14,760,654 and 14,627,990 shares issued and          15         15 outstanding as of June 30, 2014 andDecember 31, 2013, respectively Additional paid-in capital                           376,618    376,125 Accumulated deficit                                  (279,993)  (280,810) Total stockholders' equity                           96,640     95,330 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY           $150,859  $163,694    BROADWIND ENERGY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)                                                                                        Three Months Ended June 30, Six Months Ended June 30,                         2014          2013          2014         2013 Revenues                 $68,381     $52,945     $127,181   $98,451 Cost of sales            59,231       48,338       112,669     91,219 Restructuring            519          1,206        788         1,661 Gross profit             8,631        3,401        13,724      5,571                                                                OPERATING EXPENSES:                                             Selling, general and     5,620        5,117        11,537      10,505 administrative Intangible amortization  111          665          222         1,330 Regulatory settlement    750          --          750         -- Restructuring            49           107          109         708 Total operating expenses 6,530        5,889        12,618      12,543 Operating income (loss)  2,101        (2,488)      1,106       (6,972)                                                                OTHER (EXPENSE) INCOME,                                         net: Interest expense, net    (184)        (227)        (344)       (618) Other, net               (16)         180          120         515 Gain on sale of assets   --          2,953        --         2,966 and restructuring Total other (expense)    (200)        2,906        (224)       2,863 income, net                                                                Net income (loss) from continuing operations    1,901        418          882         (4,109) before provision for income taxes Provision for income     41           14           65          36 taxes INCOME (LOSS) FROM       1,860        404          817         (4,145) CONTINUING OPERATIONS LOSS FROM DISCONTINUED   --          --          --         (210) OPERATIONS, NET OF TAX NET INCOME (LOSS)        $1,860      $404        $817       $(4,355)                                                                NET INCOME (LOSS) PER                                           COMMON SHARE - BASIC: Income (loss) from       $0.13       $0.03       $0.06      $(0.29) continuing operations Loss from discontinued   --          --          --         (0.01) operations Net income (loss)        $0.13       $0.03       $0.06      $(0.30)                                                                WEIGHTED AVERAGE COMMON SHARES OUTSTANDING -     14,732       14,422       14,696      14,345 Basic                                                                NET INCOME (LOSS) PER                                           COMMON SHARE - DILUTED: Income (loss) from       $0.12       $0.03       $0.05      $(0.29) continuing operations Loss from discontinued   --          --          --         (0.01) operations Net income (loss)        $0.12       $0.03       $0.05      $(0.30)                                                                WEIGHTED AVERAGE COMMON SHARES OUTSTANDING -     15,180       14,597       15,179      14,345 Diluted    BROADWIND ENERGY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) (UNAUDITED)                                                                                                                      Six Months Ended June 30,                                                     2014         2013 CASH FLOWS FROM OPERATING ACTIVITIES:                             Net income (loss)                                    $817       $(4,355) Loss from discontinued operations                    --         210 Income (loss) from continuing operations             817         (4,145)                                                                  Adjustments to reconcile net cash used in operating               activities: Depreciation and amortization expense                6,264       8,033 Impairment charges                                   --         288 Stock-based compensation                             330         972 Allowance for doubtful accounts                      94          (174) Common stock issued under defined contribution       163         337 401(k) plan Loss (gain) on disposal of assets                    5           (3,657) Changes in operating assets and liabilities:                      Accounts receivable                                  (6,094)     (638) Inventories                                         849         (13,606) Prepaid expenses and other current assets            443         535 Accounts payable                                     (6,317)     11,174 Accrued liabilities                                  1,723       431 Customer deposits                                    (8,496)     14,073 Other non-current assets and liabilities             (327)       153 Net cash (used) provided by operating activities     (10,546)    13,776                                                                  CASH FLOWS FROM INVESTING ACTIVITIES:                             Purchases of available for sale securities           (2,563)     (606) Sales of available for sale securities               1,051       -- Maturities of available for sale securities          1,955       -- Purchases of property and equipment                  (4,542)     (2,729) Proceeds from disposals of property and equipment    1,045       12,453 Net cash (used) provided by investing activities     (3,054)     9,118                                                                  CASH FLOWS FROM FINANCING ACTIVITIES:                             Payments on lines of credit and notes payable        (43)        (80,209) Proceeds from lines of credit and notes payable      --         75,208 Principal payments on capital leases                 (494)       (1,148) Net cash used in financing activities                (537)       (6,149)                                                                  NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (14,137)    16,745 CASH AND CASH EQUIVALENTS, beginning of the period   24,936      516 CASH AND CASH EQUIVALENTS, end of the period         $10,799    $17,261                                                                  Supplemental cash flow information:                               Interest paid                                        $212       $559 Income taxes paid                                    $2         $13 Non-cash investing and financing activities:                      Issuance of restricted stock grants                  $186       $727 Common stock issued under defined contribution       $163       $337 401(k) plan    BROADWIND ENERGY, INC. AND SUBSIDIARIES SELECTED SEGMENT FINANCIAL INFORMATION (IN THOUSANDS)                                                                                        Three Months Ended June 30, Six Months Ended June 30,                         2014          2013          2014         2013 REVENUES:                (unaudited)                 (unaudited) Towers and Weldments     $52,891     $39,089     $101,185   $68,960 Gearing                  12,424       10,445       21,198      21,164 Services                 3,482        4,065        5,920       11,549 Corporate and Other      (416)        (654)        (1,122)     (3,223) Total revenues           $68,381     $52,945     $127,181   $98,450                                                                OPERATING (LOSS) PROFIT:                                        Towers and Weldments     $8,561      $5,063      $14,172    $7,217 Gearing                  (1,800)      (3,975)      (4,765)     (6,953) Services                 (1,319)      (1,262)      (2,658)     (1,962) Corporate and Other      (3,341)      (2,314)      (5,643)     (5,274) Total operating          $2,101      $(2,488)    $1,106     $(6,972) profit/(loss)                                                             BROADWIND ENERGY, INC. AND SUBSIDIARIES                 RECONCILIATION OF NON-GAAP FINANCIAL MEASURES                                 (IN THOUSANDS)  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 months ended June 30, 2014 and 2013. 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  Six Months Ended                                        June 30,           June 30,                                       2014     2013       2014     2013                                       (unaudited)         (unaudited)                                                                  Operating income( loss)                $2,101 $(2,488) $1,106 $(6,972) Depreciation and amortization          3,150   3,842     6,264   7,648 Restructuring                          568     1,313     897     2,369 Other (loss) income                    (16)    180       120     515 Share-based compensation and other     107     702       330     1,325 stock payments Total Adjusted EBITDA (Non-GAAP)       $5,910 $3,549   $8,717 $4,885                                                                   Towers and Weldments Segment             Three Months Ended Six Months Ended                                          June 30,           June 30,                                         2014      2013     2014      2013                                         (unaudited)        (unaudited)                                                            Operating income                         $ 8,561  $ 5,063 $ 14,172 $ 7,217 Depreciation                             1,006    949     1,991    1,900 Restructuring expense                    8        38      26       115 Other income (loss)                      (19)     115     (17)     273 Share-based compensation and other stock 1        117     45       246 payments Total Adjusted EBITDA (Non-GAAP)         $ 9,557  $ 6,282 $ 16,217 $ 9,751                                                                                                       Three Months Ended    Six Months Ended                                    June 30,              June 30, Gearing Segment                    2014       2013       2014       2013                                   (unaudited)           (unaudited) Operating loss                     $(1,800) $(3,975) $(4,765) $(6,953) Depreciation and amortization      1,805     2,745     3,606     5,455 Restructuring expense              560       952       871       1,174 Other income (loss)                1                   3         (14) Share-based compensation and other 72        131       131       211 stock payments Total Adjusted EBITDA (Non-GAAP)   $638     $(147)   $(154)   $(127)                                                          Services Segment                   Three Months Ended    Six Months Ended                                    June 30,              June 30,                                   2014       2013       2014       2013                                   (unaudited)           (unaudited) Operating loss                     $(1,319) $(1,262) $(2,658) $(1,962) Depreciation                       306       342       619       655 Restructuring expense                        114                 234 Other income (loss)                2         65        134       256 Share-based compensation and other 2         128       17        168 stock payments Total Adjusted EBITDA (Non-GAAP)   $(1,009) $(613)   $(1,888) $(649)                                                          Corporate and Other                Three Months Ended    Six Months Ended                                    June 30,              June 30,                                   2014       2013       2014       2013                                   (unaudited)           (unaudited) Operating loss                     $(3,341) $(2,314) $(5,643) $(5,274) Depreciation                       33        12        48        23 Restructuring expense                        3                   461 Share-based compensation and other 32        326       137       700 stock payments Total Adjusted EBITDA (Non-GAAP)   $(3,276) $(1,973) $(5,458) $(4,090)  CONTACT: BWEN INVESTOR CONTACT:          Joni Konstantelos          708.780.4819          joni.konstantelos@bwen.com                   LHA CONTACT:          Jody Burfening/Carolyn Capaccio          212.838.3777          ccapaccio@lhai.com  Broadwind Energy, Inc. 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