Exhibit 99.1
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 — 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
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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
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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.
BWEN INVESTOR CONTACT: Joni Konstantelos, 708.780.4819 joni.konstantelos@bwen.com
LHA CONTACT: Jody Burfening/Carolyn Capaccio, 212.838.3777 ccapaccio@lhai.com
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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 December 31, 2013, respectively | | 24,736 | | 18,735 | |
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 portions | | 725 | | 1,193 | |
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 outstanding as of June 30, 2014 and December 31, 2013, respectively | | 15 | | 15 | |
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 | |
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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 administrative | | 5,620 | | 5,117 | | 11,537 | | 10,505 | |
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 and restructuring | | — | | 2,953 | | — | | 2,966 | |
Total other (expense) income, net | | (200 | ) | 2,906 | | (224 | ) | 2,863 | |
| | | | | | | | | |
Net income (loss) from continuing operations before provision for income taxes | | 1,901 | | 418 | | 882 | | (4,109 | ) |
Provision for income taxes | | 41 | | 14 | | 65 | | 36 | |
INCOME (LOSS) FROM CONTINUING OPERATIONS | | 1,860 | | 404 | | 817 | | (4,145 | ) |
LOSS FROM DISCONTINUED OPERATIONS, NET OF TAX | | — | | — | | — | | (210 | ) |
NET INCOME (LOSS) | | $ | 1,860 | | $ | 404 | | $ | 817 | | $ | (4,355 | ) |
| | | | | | | | | |
NET INCOME (LOSS) PER COMMON SHARE - BASIC: | | | | | | | | | |
Income (loss) from continuing operations | | $ | 0.13 | | $ | 0.03 | | $ | 0.06 | | $ | (0.29 | ) |
Loss from discontinued operations | | — | | — | | — | | (0.01 | ) |
Net income (loss) | | $ | 0.13 | | $ | 0.03 | | $ | 0.06 | | $ | (0.30 | ) |
| | | | | | | | | |
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING - Basic | | 14,732 | | 14,422 | | 14,696 | | 14,345 | |
| | | | | | | | | |
NET INCOME (LOSS) PER COMMON SHARE - DILUTED: | | | | | | | | | |
Income (loss) from continuing operations | | $ | 0.12 | | $ | 0.03 | | $ | 0.05 | | $ | (0.29 | ) |
Loss from discontinued operations | | — | | — | | — | | (0.01 | ) |
Net income (loss) | | $ | 0.12 | | $ | 0.03 | | $ | 0.05 | | $ | (0.30 | ) |
| | | | | | | | | |
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING - Diluted | | 15,180 | | 14,597 | | 15,179 | | 14,345 | |
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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 401(k) plan | | 163 | | 337 | |
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 contibution 401(k) plan | | $ | 163 | | $ | 337 | |
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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 | |
| | (unaudited) | | (unaudited) | |
REVENUES: | | | | | |
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 profit/(loss) | | $ | 2,101 | | $ | (2,488 | ) | $ | 1,106 | | $ | (6,972 | ) |
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 stock payments | | 107 | | 702 | | 330 | | 1,325 | |
Total Adjusted EBITDA (Non-GAAP) | | $ | 5,910 | | $ | 3,549 | | $ | 8,717 | | $ | 4,885 | |
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Towers and Weldments Segment
| | Three Months Ended June 30, | | Six Months Ended 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 payments | | 1 | | 117 | | 45 | | 246 | |
Total Adjusted EBITDA (Non-GAAP) | | $ | 9,557 | | $ | 6,282 | | $ | 16,217 | | $ | 9,751 | |
Gearing Segment
| | Three Months Ended June 30, | | Six Months Ended June 30, | |
| | 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 stock payments | | 72 | | 131 | | 131 | | 211 | |
Total Adjusted EBITDA (Non-GAAP) | | $ | 638 | | $ | (147 | ) | $ | (154 | ) | $ | (127 | ) |
Services Segment
| | Three Months Ended June 30, | | Six Months Ended 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 stock payments | | 2 | | 128 | | 17 | | 168 | |
Total Adjusted EBITDA (Non-GAAP) | | $ | (1,009 | ) | $ | (613 | ) | $ | (1,888 | ) | $ | (649 | ) |
Corporate and Other
| | Three Months Ended June 30, | | Six Months Ended 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 stock payments | | 32 | | 326 | | 137 | | 700 | |
Total Adjusted EBITDA (Non-GAAP) | | $ | (3,276 | ) | $ | (1,973 | ) | $ | (5,458 | ) | $ | (4,090 | ) |
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