Broadwind Energy Announces Third-Quarter 2016 Results

October 28, 2016

Improved Operating Efficiencies and Successful Cost Management Evident

Highlights:

  • Revenue of $43 million in Q3 2016, down from $50 million in Q3 2015 as expected – lower steel prices and continued weak demand from Gearing customers
  • Gross profit margin rises to 12.5% in Q3 2016, more than double Q3 2015
  • Income from continuing operations of $1.2 million (or $.08 per share) in Q3 2016, compared to loss from continuing operations of $2.4 million (or $.16 per share) in Q3 2015
  • Cost reductions tracking ahead of plan — $6.5 million reduction in manufacturing overhead and operating expenses through Q3 2016

CICERO, Ill., Oct. 28, 2016 (GLOBE NEWSWIRE) -- Broadwind Energy, Inc. (NASDAQ:BWEN) reported sales of $42.6 million in Q3 2016, down 14% compared to $49.8 million in Q3 2015 as a result of lower Towers and Weldments segment revenue, due to lower steel and other material costs which are generally passed through to the customer, and reduced Gearing segment revenue due to lower demand from oil & gas and mining customers.

The Company reported income from continuing operations of $1.2 million, or $.08 per share, in Q3 2016, compared to net loss from continuing operations of $2.4 million, or $.16 per share, in Q3 2015. The $.24 per share improvement was due to significant operational improvements in the Towers and Weldments segment and successful cost management actions across the Company.

The Company reported a net loss from discontinued operations of $.4 million, or $.03 per share, in Q3 2016, compared to a net loss from discontinued operations of $5.2 million, or $.36 per share, in Q3 2015.

The Company reported non-GAAP adjusted EBITDA (earnings before interest, taxes, depreciation, amortization, share-based payments and restructuring costs) of $3.3 million in Q3 2016, compared to $1.4 million in Q3 2015 (please refer to the reconciliation of GAAP measures to non-GAAP measures at the end of this release). The $1.9 million increase was mainly attributable to the factors described above.

Broadwind CEO Stephanie Kushner stated, “Broadwind had a strong third quarter. The investments we’ve made to systematize our production processes have significantly improved the operations and raised productivity and margins in our tower plants. Our Gearing business was cash neutral in a weak revenue environment. Our Company-wide cost management efforts are ahead of plan. Employees at all levels are contributing their ideas to our cost reduction program. It’s exciting to see the creativity of our workforce.”

Ms. Kushner continued, “The expansion of our Abilene tower facility is progressing on target. When this project is completed in mid-2017, our capacity at this plant will increase by 30%. We are focused on securing remaining orders for 2017, continued cost management efforts and making additional gains in operational efficiencies. For the fourth - quarter, our production mix is less favorable, and we expect to earn approximately $500,000 on revenue of $44-46 million.”

For the nine months ended September 30, 2016, revenue totaled $132.7 million, compared to $161.6 million for the nine months ended September 30, 2015. The 18% reduction was due primarily to lower Towers and Weldments revenue attributable to lower steel and other material costs and 2% lower volumes and lower Gearing revenue related to reduced demand from oil & gas and mining customers.

Net income from continuing operations for the nine months ended September 30, 2016 was $.9 million, or $.06 per share, compared with net loss from continuing operations of $1.5 million, or $.10 per share, for the nine months ended September 30, 2015. The increase was due to significantly improved operating efficiencies in the Towers and Weldments segment and successful cost containment efforts Company-wide which more than offset the reduction in revenue. Net loss from discontinued operations for the nine months ended September 30, 2016 totaled $.9 million, or $.06 per share, compared to net loss from discontinued operations of $9.5 million, or $.65 per share, for the nine months ended September 30, 2015. The Company reported non-GAAP adjusted EBITDA of $7.1 million for the nine months ended September 30, 2016 (please refer to the reconciliation of GAAP measures to non-GAAP measures at the end of this release).

Orders and Backlog

The Company booked $27.5 million of net new orders in Q3 2016, more than double Q3 2015 orders which totaled $12.2 million. Towers and Weldments orders, which vary considerably from quarter to quarter, totaled $25.3 million in Q3 2016, up substantially from $3.2 million in Q3 2015. Gearing orders totaled $2.2 million in Q3 2016, compared to $9.0 million in Q3 2015, (which included a multi-year buy from a wind gearing customer). At September 30, 2016, total backlog was $204.2 million, up significantly from backlog of $130.7 million at September 30, 2015.

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 $38.0 million in Q3 2016, compared to $42.9 million in Q3 2015, due mainly to $5.5 million in lower steel and other material costs, which are generally passed through to customers.

Towers and Weldments segment operating income in Q3 2016 totaled $4.1 million, compared to $2.2 million in Q3 2015. The $1.9 million increase was due to significantly improved operating efficiencies, including higher labor productivity and better cost management which more than offset the reduction in revenue described above. Towers and Weldments segment net income in Q3 2016 totaled $2.8 million, compared to $1.4 million in Q3 2015. Non-GAAP adjusted EBITDA totaled $5.1 million in Q3 2016, compared to non-GAAP adjusted EBITDA of $3.5 million in Q3 2015, as a result of the factors described above (please refer to the reconciliation of GAAP measures to non-GAAP measures at the end of this release).

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

Gearing segment sales totaled $4.6 million in Q3 2016, compared to $7.2 million in Q3 2015. The 36% reduction in sales was due to weaker demand from oil & gas and mining customers.

Despite the lower revenue, Gearing segment operating loss narrowed to $.7 million in Q3 2016, compared to an operating loss of $2.6 million in Q3 2015. The improvement was due to the absence of a $.9 million environmental remediation expense incurred in Q3 2015, successful cost management which led to an overall reduction in manufacturing overhead and operating expenses, and a $.6 million reduction in depreciation expense. Net loss for the Gearing segment declined to $.7 million in Q3 2016 compared to $2.6 million in Q3 2015. The Gearing segment reported breakeven non-GAAP adjusted EBITDA for Q3 2016, compared to a non-GAAP adjusted EBITDA loss of $.5 million in Q3 2015 (please refer to the reconciliation of GAAP measures to non-GAAP measures at the end of this release). The change was primarily due to strong cost management efforts as described above.

Corporate

Corporate and other expenses totaled $2.0 million in Q3 2016, compared to $1.7 million in Q3 2015. The increase was due mainly to higher incentive compensation in the current year period, partially offset by lower professional fees and other successful cost reductions.

Cash and Liquidity

During Q3 2016, operating working capital (accounts receivable and inventory, net of accounts payable and customer deposits) decreased $12.2 million due to the timing of customer receipts. Operating working capital is expected to normalize before 2016 year-end, and increase by $9-10 million in the fourth quarter.

Capital expenditures, net of disposals, in Q3 2016 totaled $2.2 million, bringing year-to-date expenditures to $3.5 million. Expenditures included investments to upgrade the coatings systems in the tower plants, and initial outlays associated with the expansion of the Abilene tower plant.

Cash assets (cash and short-term investments) increased sharply to $24.3 million at September 30, 2016, compared to $11.1 million at June 30, 2016, due to the temporary reduction in operating working capital described above. Debt and capital leases totaled $3.2 million, including the $2.6 million New Markets Tax Credit loan which is expected to be substantially forgiven when it matures in 2018.

The Company’s credit line with AloStar Bank of Commerce was undrawn at September 30, 2016.

Subsequent to quarter-end, the Company retired the credit line with AloStar and entered into a new three-year $20 million asset-based credit line with The PrivateBank. Under the terms of the new credit line, the Company may elect, with the lender’s consent, to increase the size of the commitment by up to $5 million if it achieves minimum EBITDA of $7 million for fiscal year 2016. The new credit line provides enhanced borrowing availability and more favorable terms overall, including a lower borrowing cost.

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 and industrial weldments, we have solutions for the energy needs of the future. With facilities throughout the central U.S., Broadwind Energy's talented team 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”—that is, statements related to future, not past, events—as defined in Section 21E of the Securities Exchange Act of 1934, as amended, that reflect our current expectations regarding our future growth, results of operations, financial condition, cash flows, performance, business prospects and opportunities, as well as assumptions made by, and information currently available to, our management. Forward‑looking statements include any statement that does not directly relate to a current or historical fact. We have tried to identify forward‑looking statements by using words such as “anticipate,” “believe,” “expect,” “intend,” “will,” “should,” “may,” “plan” and similar expressions, but these words are not the exclusive means of identifying forward‑looking statements. Our forward‑looking statements may include or relate to our beliefs, expectations, plans and/or assumptions with respect to the following: (i) state, local and federal regulatory frameworks affecting the industries in which we compete, including the wind energy industry, and the related extension, continuation or renewal of federal tax incentives and grants and state renewable portfolio standards; (ii) our customer relationships and efforts to diversify our customer base and sector focus and leverage customer relationships across business units; (iii) our ability to continue to grow our business organically; (iv) the sufficiency of our liquidity and our plans to evaluate alternate sources of funding if necessary; (v) our restructuring efforts, including estimated costs and saving opportunities; (vi) our ability to realize revenue from customer orders and backlog; (vii) our ability to operate our business efficiently, manage capital expenditures and costs effectively, and generate cash flow; (viii) the economy and the potential impact it may have on our business, including our customers; (ix) the state of the wind energy market and other energy and industrial markets generally and the impact of competition and economic volatility in those markets; (x) the effects of market disruptions and regular market volatility, including fluctuations in the price of oil, gas and other commodities; and (xi) the potential loss of tax benefits if we experience an “ownership change” under Section 382 of the Internal Revenue Code of 1986, as amended. These statements are based on information currently available to us and are subject to various risks, uncertainties and other factors that could cause our actual growth, results of operations, financial condition, cash flows, performance, business prospects and opportunities to differ materially from those expressed in, or implied by, these statements. We are under no duty to update any of these forward-looking statements after the date of this release to conform such statements to actual results. You should not consider any list of such factors to be an exhaustive statement of all of the risks, uncertainties or potentially inaccurate assumptions that could cause our current beliefs, expectations, plans and/or assumptions to change.

          
BROADWIND ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
          
      September 30,  December 31,  
       2016   2015  
 ASSETS     
 CURRENT ASSETS:     
  Cash and cash equivalents $8,091  $6,436  
  Short-term investments  16,213   6,179  
  Restricted cash  39   83  
  Accounts receivable, net of allowance for doubtful accounts of $161     
  and $84 as of September 30, 2016 and December 31, 2015, respectively  14,926   9,784  
  Inventories, net  26,231   24,219  
  Prepaid expenses and other current assets  2,503   1,530  
  Current assets held for sale  866   4,403  
   Total current assets  68,869   52,634  
 LONG-TERM ASSETS:     
  Property and equipment, net  51,761   51,906  
  Intangible assets, net  4,683   5,016  
  Other assets  323   351  
 TOTAL ASSETS $125,636  $109,907  
          
 LIABILITIES AND STOCKHOLDERS' EQUITY     
 CURRENT LIABILITIES:     
  Current maturities of long-term debt $-  $2,799  
  Current portions of capital lease obligations  156   447  
  Accounts payable  21,062   13,822  
  Accrued liabilities  8,916   8,134  
  Customer deposits  21,493   9,940  
  Current liabilities held for sale  538   1,613  
   Total current liabilities  52,165   36,755  
 LONG-TERM LIABILITIES:     
  Long-term debt, net of current maturities  2,600   2,600  
  Long-term capital lease obligations, net of current portions  416   -  
  Other  2,331   3,060  
   Total long-term liabilities  5,347   5,660  
 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; 15,172,245     
  and 15,012,789 shares issued as of September 30, 2016 and     
  December 31, 2015, respectively  15   15  
  Treasury stock, at cost, 273,937 shares as of September 30, 2016 and December 31, 2015,     
  respectively (1,842)  (1,842) 
  Additional paid-in capital  378,715   378,104  
  Accumulated deficit  (308,764)  (308,785) 
   Total stockholders' equity  68,124   67,492  
 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $125,636  $109,907  
          


 
BROADWIND ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
              
     Three Months Ended September 30, Nine Months Ended September 30,  
      2016   2015   2016   2015   
              
              
 Revenues $42,552  $49,791  $132,689  $161,583   
 Cost of sales  37,221   46,960   119,254   147,507   
 Gross profit  5,331   2,831   13,435   14,076   
              
 OPERATING EXPENSES:          
 Selling, general and administrative  3,860   3,981   11,785   13,752   
 Intangible amortization  111   111   333   333   
 Restructuring  -   874   -   874   
  Total operating expenses  3,971   4,966   12,118   14,959   
 Operating income (loss)  1,360   (2,135)  1,317   (883)  
              
 OTHER (EXPENSE) INCOME, net:          
 Interest expense, net  (125)  (210)  (431)  (611)  
 Other, net  10   (64)  27   (36)  
  Total other (expense), net  (115)  (274)  (404)  (647)  
              
 Net income (loss) before benefit for income taxes  1,245   (2,409)  913   (1,530)  
 Benefit for income taxes  -   (26)  (16)  (11)  
 INCOME (LOSS) FROM CONTINUING OPERATIONS  1,245   (2,383)  929   (1,519)  
 LOSS FROM DISCONTINUED OPERATIONS, NET OF TAX  (373)  (5,230)  (908)  (9,494)  
 NET INCOME (LOSS) $872  $(7,613) $21  $(11,013)  
              
              
 NET INCOME (LOSS) PER COMMON SHARE - BASIC:          
 Income (loss) from continuing operations $0.08  $(0.16) $0.06  $(0.10)  
 Loss from discontinued operations  (0.03)  (0.36)  (0.06)  (0.65)  
 Net income (loss) $0.06  $(0.52) $0.00  $(0.75)  
              
 WEIGHTED AVERAGE COMMON SHARES OUTSTANDING - BASIC  14,876   14,708   14,824   14,656   
              
 NET INCOME (LOSS) PER COMMON SHARE - DILUTED:          
 Income (loss) from continuing operations $0.08  $(0.16) $0.06  $(0.10)  
 Loss from discontinued operations  (0.02)  (0.36)  (0.06)  (0.65)  
 Net income (loss) $0.06  $(0.52) $0.00  $(0.75)  
              
 WEIGHTED AVERAGE COMMON SHARES OUTSTANDING - DILUTED  15,121   14,708   15,038   14,656   
              

 

        
BROADWIND ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
        
     Nine Months Ended September 30, 
      2016  2015  
CASH FLOWS FROM OPERATING ACTIVITIES:    
 Net income $  21 $  (11,013) 
 Loss from discontinued operations    (908)   (9,494) 
 Income (loss) income from continuing operations    929    (1,519) 
        
Adjustments to reconcile net cash used in operating activities:   
 Depreciation and amortization expense    5,138    6,860  
 Impairment charges    -     38  
 Stock-based compensation    592    900  
 Allowance for doubtful accounts    45    55  
 Gain on disposal of assets    (147)   (110) 
 Changes in operating assets and liabilities:    
  Accounts receivable    (5,187)   (129) 
  Inventories     (2,013)   (2,943) 
  Prepaid expenses and other current assets    (982)   10  
  Accounts payable    7,118    (655) 
  Accrued liabilities    777    (995) 
  Customer deposits    11,541    (15,772) 
  Other non-current assets and liabilities    (744)   (468) 
Net cash provided by (used in) operating activities of continuing operations    17,067    (14,728) 
        
CASH FLOWS FROM INVESTING ACTIVITIES:    
 Purchases of available for sale securities    (19,207)   (1,884) 
 Sales of available for sale securities    167    5,083  
 Maturities of available for sale securities    9,005    4,825  
 Purchases of property and equipment    (4,007)   (2,282) 
 Proceeds from disposals of property and equipment    479    1,156  
 Decrease in restricted cash    44    -   
Net cash (used in) provided by investing activities of continuing operations    (13,519)   6,898  
        
CASH FLOWS FROM FINANCING ACTIVITIES:    
 Net proceeds from issuance of stock    19    -   
 Payments on lines of credit and notes payable    -     (118,212) 
 Proceeds from lines of credit and notes payable    -     118,212  
 Proceeds from long-term debt   -     5,000  
 Payments on long-term debt    (2,799)   (119) 
 Principal payments on capital leases    (500)   (598) 
Net cash (used in) provided by financing activities of continuing operations    (3,280)   4,283  
        
        
DISCONTINUED OPERATIONS:    
 Operating cash flows    786    (3,484) 
 Investing cash flows    615    (368) 
 Financing cash flows    (12)   (7) 
Net cash provided by (used in) discontinued operations    1,389    (3,859) 
        
Add: Cash balance of discontinued operations, beginning of period    -     93  
Less: Cash balance of discontinued operations, end of period    2    1  
        
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS    1,655    (7,314) 
CASH AND CASH EQUIVALENTS, beginning of the period    6,436    12,057  
CASH AND CASH EQUIVALENTS, end of the period $  8,091 $  4,743  
        
Supplemental cash flow information:    
 Interest paid $  371 $  647  
 Income taxes paid $  22 $  35  
Non-cash investing and financing activities:    
 Issuance of restricted stock grants $  592 $  900  
       

 

           
BROADWIND ENERGY, INC. AND SUBSIDIARIES
SELECTED SEGMENT FINANCIAL INFORMATION
(IN THOUSANDS)
(UNAUDITED)
           
    Three Months Ended  Nine Months Ended 
    September 30, September 30,
     2016   2015   2016   2015 
ORDERS:     
 Towers and Weldments$  25,329  $  3,167  $  231,401  $  66,330 
 Gearing   2,162     8,997     11,307     22,493 
   Total orders$  27,491  $  12,164  $  242,708  $  88,823 
           
REVENUES:     
 Towers and Weldments  $  37,390  $  42,943  $  117,948  $  139,003 
 Gearing     4,582     7,184     14,759     23,758 
 Corporate and Other     580     (336)    (18)    (1,178)
   Total revenues  $  42,552  $  49,791  $  132,689  $  161,583 
           
OPERATING PROFIT/(LOSS):     
 Towers and Weldments  $  4,050  $  2,235  $  10,016  $  10,525 
 Gearing     (692)    (2,646)    (3,083)    (5,380)
 Corporate and Other     (1,998)    (1,724)    (5,616)    (6,028)
   Total operating profit/(loss)  $  1,360  $  (2,135) $  1,317  $  (883)
           

 Non-GAAP Financial Measure
The Company provides non-GAAP adjusted EBITDA (earnings before interest, income taxes, depreciation, amortization, and stock compensation) as supplemental information regarding the Company’s business performance. The Company’s management uses adjusted EBITDA when it internally evaluates the performance of the Company’s business, reviews financial trends and makes operating and strategic decisions. The Company believes that this non-GAAP financial measure is useful to investors because it provides investors with a better understanding of the Company’s past financial performance and future results allows investors to evaluate the Company’s performance using the same methodology and information as used by the Company’s management. The Company's definition of adjusted EBITDA may be different from similar non-GAAP financial measures used by other companies and/or analysts.

 
BROADWIND ENERGY, INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(IN THOUSANDS)
(UNAUDITED)
         
 Consolidated Three Months Ended September 30, Nine Months Ended September 30,
     2016   2015   2016   2015 
 Net Income/(Loss) from continuing operations $1,245  $(2,383) $929  $(1,519)
 Interest Expense  125   210   431   611 
 Income Tax Provision/(Benefit)  -   (26)  (16)  (11)
 Depreciation and Amortization 1,695   2,400   5,138   6,860 
 Share-based Compensation and Other Stock Payments 195   310   628   897 
 Restructuring Expense -   874   -   874 
  Adjusted EBITDA (Non-GAAP) $3,260  $1,385  $7,110  $7,712 


 Towers and Weldments SegmentThree Months Ended September 30, Nine Months Ended September 30,
   2016   2015   2016   2015 
 Net Income$2,797  $1,366  $6,738  $6,877 
 Interest Expense 5   -   21   4 
 Income Tax Provision/(Benefit) 1,259   880   3,285   3,759 
 Depreciation and Amortization 1,007   1,132   3,066   2,961 
 Share-based Compensation and Other Stock Payments 79   72   154   106 
 Adjusted EBITDA (Non-GAAP)$5,147  $3,450  $13,264  $13,707 

 

 Gearing Segment Three Months Ended September 30, Nine Months Ended September 30,
    2016   2015   2016   2015 
 Net Loss $(697) $(2,643) $(3,099) $(5,380)
 Interest Expense  1   8   8   29 
 Income Tax Provision/(Benefit)  5   (9)  7   (5)
 Depreciation and Amortization  638   1,216   1,918   3,757 
 Share-based Compensation and Other Stock Payments  17   44   89   183 
 Restructuring Expense  -   874   -   874 
 Adjusted EBITDA (Non-GAAP) $(36) $(510) $(1,077) $(542)


 Corporate and OtherThree Months Ended September 30, Nine Months Ended September 30,
   2016   2015   2016   2015 
 Net Income/(Loss)$(855) $(1,106) $(2,710) $(3,016)
 Interest Expense 119   201   402   578 
 Income Tax Provision/(Benefit) (1,264)  (897)  (3,308)  (3,765)
 Depreciation and Amortization 50   52   154   142 
 Share-based Compensation and Other Stock Payments 99   194   385   608 
 Adjusted EBITDA (Non-GAAP)$(1,851) $(1,555) $(5,077) $(5,453)
                 
                 
BWEN INVESTOR CONTACT: Joni Konstantelos, 708.780.4819 joni.konstantelos@bwen.com

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Source: Broadwind Energy, Inc.

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