Form 8-K BROADWIND ENERGY, INC. For: Jul 28
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
`
Date of report (Date of earliest event reported): July 28, 2016
BROADWIND ENERGY, INC.
(Exact Name of Registrant as Specified in Its Charter)
| Delaware | 001-34278 | 88-0409160 | ||
| (State or Other Jurisdiction of | (Commission File Number) | (IRS Employer Identification No.) | ||
| Incorporation) |
3240 South Central Avenue, Cicero, Illinois 60804
(Address of Principal Executive Offices) (Zip Code)
Registrant’s Telephone Number, Including Area Code: (708) 780-4800
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 2.02. Results of Operations and Financial Condition.
On July 28, 2016, Broadwind Energy, Inc. (the “Company”) issued a press release announcing its financial results as of and for the quarter ended June 30, 2016. The press release is incorporated herein by reference and is attached hereto as Exhibit 99.1.
The information contained in, or incorporated into, this Item 2.02 of this Current Report on Form 8-K (this “Report”), including Exhibit 99.1, is furnished under Item 2.02 of Form 8-K and shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) or otherwise subject to the liabilities of that section, and shall not be deemed to be incorporated by reference into the filings of the Company under the Securities Act of 1933, as amended (the “Securities Act”) or the Exchange Act regardless of any general incorporation language in such filings.
Item 7.01. Regulation FD Disclosure.
An Investor Presentation dated July 28, 2016 is incorporated herein by reference and attached hereto as Exhibit 99.2.
The information contained in, or incorporated into, this Item 7.01 of this Report, including Exhibit 99.2 attached hereto, is furnished under Item 7.01 of Form 8-K and shall not be deemed “filed” for the purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of that section, and shall not be deemed to be incorporated by reference into the filings of the Company under the Securities Act or the Exchange Act regardless of any general incorporation language in such filings.
This Report shall not be deemed an admission as to the materiality of any information in this Report that is being disclosed pursuant to Regulation FD.
Please refer to Exhibit 99.2 for a discussion of certain forward-looking statements included therein and the risks and uncertainties related thereto.
Item 9.01. Financial Statements and Exhibits.
| (d) | Exhibits |
| EXHIBIT NUMBER |
DESCRIPTION | |
| 99.1 | Press Release dated July 28, 2016 | |
| 99.2 | Investor Presentation dated July 28, 2016 |
2
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| BROADWIND ENERGY, INC. | ||
| July 28, 2016 | By: | /s/ Stephanie K. Kushner |
| Stephanie K. Kushner | ||
| Chief Executive Officer and Chief Financial Officer | ||
| (Principal Executive Officer and Principal Financial Officer) | ||
3
EXHIBIT INDEX
| EXHIBIT NUMBER |
DESCRIPTION | |
| 99.1 | Press Release dated July 28, 2016 | |
| 99.2 | Investor Presentation dated July 28, 2016 |
4
EXHIBIT 99.1
Broadwind Energy Announces Second-Quarter 2016 Results
Tower Revenue Lower as Expected, Successful Cost Management Evident
Highlights:
- Booked $176 million in new orders; quarter-end backlog rises to $219 million
- Revenue of $43 million in Q2 2016 down from $63 million in Q2 2015 as expected – lower volume and lower steel prices
- Cost reductions on track — $4.0 million of savings during first half of 2016
- Break-even income from continuing operations in Q2 2016, compared to $3.4 million, or $.23 per share, in Q2 2015
- Cash and short-term investments totaled $11 million at quarter-end, following $2.4 million early pay-down of debt; credit line remains undrawn
CICERO, Ill., July 28, 2016 (GLOBE NEWSWIRE) -- Broadwind Energy, Inc. (NASDAQ: BWEN) reported sales of $43.4 million in Q2 2016, down 31% compared to $62.6 million in Q2 2015 as a result of lower Towers and Weldments segment revenue due to lower volume and material costs, and reduced Gearing segment revenue due to lower demand from oil & gas and mining customers.
The Company reported break-even results for continuing operations in Q2 2016, compared to net income from continuing operations of $3.4 million, or $.23 per share, in Q2 2015. The $.23 per share reduction was due to the timing of tower deliveries in 2015 and a less profitable mix of towers produced in the Towers and Weldments segment, partially offset by significant operational improvements in the Company’s Abilene, TX tower facility and successful cost management actions across the Company.
The Company reported a net loss from discontinued operations of $.5 million, or $.03 per share, in Q2 2016, compared to a net loss from discontinued operations of $1.8 million, or $.12 per share, in Q2 2015.
The Company reported non-GAAP adjusted EBITDA (earnings before interest, taxes, depreciation, amortization, share-based payments and restructuring costs) of $2.1 million in Q2 2016, compared to $6.1 million in Q2 2015 (see attached reconciliation of non-GAAP financial measure). The $4.0 million decrease was mainly attributable to the factors described above.
Broadwind CEO Stephanie Kushner stated, “Broadwind had a solid second quarter. We booked $176 million in new orders, essentially filling our tower backlog for the remainder of 2016 and locking in a significant portion of tower production through 2019. Gearing is seeing strength in the wind and steel markets that is helping to offset weak orders in the oil & gas and mining markets. Overall tower revenue was down compared to Q2 2015, as expected, attributable to lower steel costs, a spike in tower deliveries in the second quarter of last year and planned lower production in our Wisconsin plant. In Gearing, despite lower revenue, successful cost management efforts led to a narrowed operating loss compared to Q2 2015. Our cash outlook is strong, so we repaid $2.4 million of debt early, leaving only the low-interest subsidized loan in place.”
Ms. Kushner continued, “Our tower plants are running very well, and we are ahead of schedule on contracted deliveries despite a model changeover during the quarter. We are focused on securing remaining tower orders for 2017, expanding our gearing customer base and tightly managing costs across the Company. For the second half of the year, we expect to be modestly profitable on revenue of $86-90 million.”
For the six months ended June 30, 2016, revenue totaled $90.1 million, compared to $111.8 million for the six months ended June 30, 2015. The 19% reduction was due primarily to lower Towers and Weldments revenue attributable to lower steel and other material costs and 4% lower volumes, and lower Gearing revenue related to reduced demand from oil & gas and mining customers. Net loss from continuing operations for the six months ended June 30, 2016 was $.3 million, or $.02 per share, compared with net income from continuing operations of $.9 million, or $.06 per share, for the six months ended June 30, 2015. The decrease was due to a lower margin mix of towers sold and reduced Gearing revenue, largely offset by cost saving initiatives Company-wide. The Company reported non-GAAP adjusted EBITDA of $3.8 million for the six months ended June 30, 2016, down from $6.9 million for the six months ended June 30, 2015, due to the factors described above.
Orders and Backlog
The Company booked $176.2 million of net new orders in Q2 2016, up sharply from $55.2 million of orders booked in Q2 2015. Towers and Weldments orders, which vary considerably from quarter to quarter, totaled $170.6 million in Q2 2016, up substantially from $51.4 million in Q2 2015. Of the $170.6 million, $137 million was attributable to a multi-year framework agreement that locks up a significant portion of production capacity for the next three years. Gearing orders totaled $5.6 million in Q2 2016, nearly double the prior year period, due to strength in the wind and steel markets which offset very low orders from oil & gas customers, and continued weakness in mining.
At June 30, 2016, total backlog was $218.9 million, up significantly from backlog of $165.8 million at June 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 Q2 2016, compared to $55.0 million in Q2 2015 due mainly to $6 million in lower steel and other material costs, which are generally passed through to customers and due to the absence of the $5 million timing benefit in Q2 2015 when towers completed in Q1 2015 and held in inventory pending customer acceptance were delivered. The decrease in sales was also attributable to 8% lower production driven by the timing of orders and steel deliveries, and a less profitable mix of towers produced in Q2 2016.
Towers and Weldments segment operating income in Q2 2016 totaled $2.7 million, compared to $7.2 million in Q2 2015, reflecting the volume and mix factors cited above, partially offset by significantly improved operating efficiencies at the Company’s Abilene, TX tower facility in Q2 2016.Towers and Weldments segment net income in Q2 2016 totaled $1.8 million compared to $4.7 million in Q2 2015. Non-GAAP adjusted EBITDA totaled $3.9 million in Q2 2016, compared to non-GAAP adjusted EBITDA of $8.1 million in Q2 2015, as a result of the factors described above. (See attached reconciliation of non-GAAP financial measure).
Gearing
Broadwind Energy engineers, builds and remanufactures precision gears and gearboxes for oil and gas, mining, steel and wind applications.
Gearing segment sales totaled $5.4 million in Q2 2016, compared to $8.0 million in Q2 2015. The 32% reduction in sales was due to weaker demand from oil & gas and mining customers.
Despite the lower revenue, Gearing segment operating loss narrowed to $1.2 million in Q2 2016, compared to $1.5 million in Q2 2015. Successful cost management led to an overall reduction in fixed overhead and operating expenses which more than offset $.3 million in severance charges. Net Loss for the Gearing segment declined to $1.2 million in Q2 2016 compared to $1.5 million in Q2 2015. Non-GAAP adjusted EBITDA loss for Q2 2016 was $.5 million, compared to non-GAAP adjusted EBITDA loss of $.2 million in Q2 2015. ( See attached reconciliation of non-GAAP financial measure). The increase was primarily due to lower volumes, offset by strong cost control efforts.
Corporate
Corporate and other expenses totaled $1.4 million in Q2 2016, compared to $2.0 million in Q2 2015. Lower employee compensation costs and other cost savings initiatives contributed to this decrease.
Cash and Liquidity
During Q2 2016, operating working capital (accounts receivable and inventory, net of accounts payable and customer deposits) increased by $3.0 million to $10.8 million, or 6% of Q2 2016 annualized sales, mainly due to a $2.0 million increase in inventory.
Capital expenditures in Q2 2016 totaled $1.0 million, up from $.6 million in Q2 2015.
At June 30, 2016, debt and capital lease obligations totaled $3.3 million, down from $5.5 million at March 31, 2016, due to an early pay-down of term debt during Q2 2016.
Cash assets (cash and short-term investments) totaled $11.1 million at June 30, 2016, compared to $15.4 million at March 31, 2016 due to the debt repayment described above. The Company’s credit line was undrawn at June 30, 2016.
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”, as defined in Section 21E of the Securities Exchange Act of 1934, as amended. Forward‑looking statements include any statement that does not directly relate to a current or historical fact. 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 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 results to be materially different from the forward-looking statements including, but not limited to, those set forth under the caption “Risk Factors” in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2015. We are under no duty to update any of these statements. You should not consider any list of such factors to be an exhaustive statement of all of the risks, uncertainties or other factors that could cause our current beliefs, expectations, plans and/or assumptions to change and could.
| BROADWIND ENERGY, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (IN THOUSANDS) | |||||||||||||
| June 30, | December 31, | ||||||||||||
| 2016 | 2015 | ||||||||||||
| ASSETS | |||||||||||||
| CURRENT ASSETS: | |||||||||||||
| Cash and cash equivalents | $ | 7,501 | $ | 6,436 | |||||||||
| Short-term investments | 3,605 | 6,179 | |||||||||||
| Restricted cash | 39 | 83 | |||||||||||
| Accounts receivable, net of allowance for doubtful accounts of $159 | |||||||||||||
| and $84 as of June 30, 2016 and December 31, 2015, respectively | 16,866 | 9,784 | |||||||||||
| Inventories, net | 21,047 | 24,219 | |||||||||||
| Prepaid expenses and other current assets | 1,333 | 1,530 | |||||||||||
| Current assets held for sale | 1,637 | 4,403 | |||||||||||
| Total current assets | 52,028 | 52,634 | |||||||||||
| LONG-TERM ASSETS: | |||||||||||||
| Property and equipment, net | 51,310 | 51,906 | |||||||||||
| Intangible assets, net | 4,794 | 5,016 | |||||||||||
| Other assets | 336 | 351 | |||||||||||
| TOTAL ASSETS | $ | 108,468 | $ | 109,907 | |||||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||||||
| CURRENT LIABILITIES: | |||||||||||||
| Current maturities of long-term debt | $ | - | $ | 2,799 | |||||||||
| Current portions of capital lease obligations | 297 | 447 | |||||||||||
| Accounts payable | 15,736 | 13,822 | |||||||||||
| Accrued liabilities | 7,658 | 8,134 | |||||||||||
| Customer deposits | 11,383 | 9,940 | |||||||||||
| Current liabilities held for sale | 960 | 1,613 | |||||||||||
| Total current liabilities | 36,034 | 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 | 451 | - | |||||||||||
| Other | 2,310 | 3,060 | |||||||||||
| Total long-term liabilities | 5,361 | 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; 15,124,046 | |||||||||||||
| and 15,012,789 shares issued as of June 30, 2016 and | |||||||||||||
| December 31, 2015, respectively | 15 | 15 | |||||||||||
| Treasury stock, at cost, 273,937 shares as of June 30, 2016 and December 31, 2015, | |||||||||||||
| respectively | (1,842 | ) | (1,842 | ) | |||||||||
| Additional paid-in capital | 378,536 | 378,104 | |||||||||||
| Accumulated deficit | (309,636 | ) | (308,785 | ) | |||||||||
| Total stockholders' equity | 67,073 | 67,492 | |||||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 108,468 | $ | 109,907 | |||||||||
| 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, | ||||||||||||||||||||
| 2016 | 2015 | 2016 | 2015 | ||||||||||||||||||
| Revenues | $ | 43,380 | $ | 62,563 | $ | 90,137 | $ | 111,792 | |||||||||||||
| Cost of sales | 39,238 | 54,064 | 82,033 | 100,548 | |||||||||||||||||
| Gross profit | 4,142 | 8,499 | 8,104 | 11,244 | |||||||||||||||||
| OPERATING EXPENSES: | |||||||||||||||||||||
| Selling, general and administrative | 3,850 | 4,755 | 7,925 | 9,770 | |||||||||||||||||
| Intangible amortization | 111 | 111 | 222 | 222 | |||||||||||||||||
| Restructuring | - | 17 | - | - | |||||||||||||||||
| Total operating expenses | 3,961 | 4,883 | 8,147 | 9,992 | |||||||||||||||||
| Operating Income/(loss) | 181 | 3,616 | (43 | ) | 1,252 | ||||||||||||||||
| OTHER (EXPENSE) INCOME, net: | |||||||||||||||||||||
| Interest expense, net | (152 | ) | (247 | ) | (306 | ) | (401 | ) | |||||||||||||
| Other, net | 5 | (83 | ) | 17 | 27 | ||||||||||||||||
| Gain on sale of assets and restructuring | - | 38 | - | - | |||||||||||||||||
| Total other (expense), net | (147 | ) | (292 | ) | (289 | ) | (374 | ) | |||||||||||||
| Net income/(loss) before (benefit) provision for income taxes | 34 | 3,324 | (332 | ) | 878 | ||||||||||||||||
| (Benefit) provision for income taxes | (8 | ) | (62 | ) | (16 | ) | 15 | ||||||||||||||
| INCOME/(LOSS) FROM CONTINUING OPERATIONS | 42 | 3,386 | (316 | ) | 863 | ||||||||||||||||
| LOSS FROM DISCONTINUED OPERATIONS, NET OF TAX | (516 | ) | (1,771 | ) | (535 | ) | (4,263 | ) | |||||||||||||
| NET INCOME/(LOSS) | $ | (474 | ) | $ | 1,615 | $ | (851 | ) | $ | (3,400 | ) | ||||||||||
| NETINCOME/( LOSS) PER COMMON SHARE - BASIC: | |||||||||||||||||||||
| Income/(loss) from continuing operations | $ | 0.00 | $ | 0.23 | $ | (0.02 | ) | $ | 0.06 | ||||||||||||
| Loss from discontinued operations | (0.03 | ) | (0.12 | ) | (0.04 | ) | (0.29 | ) | |||||||||||||
| Net Income/(loss) | $ | (0.03 | ) | $ | 0.11 | $ | (0.06 | ) | $ | (0.23 | ) | ||||||||||
| WEIGHTED AVERAGE COMMON SHARES OUTSTANDING - BASIC | 14,835 | 14,663 | 14,797 | 14,630 | |||||||||||||||||
| NET INCOME (LOSS) PER COMMON SHARE - DILUTED: | |||||||||||||||||||||
| Income (loss) from continuing operations | $ | 0.00 | $ | 0.23 | $ | (0.02 | ) | $ | 0.06 | ||||||||||||
| Loss from discontinued operations | (0.03 | ) | (0.12 | ) | (0.04 | ) | (0.29 | ) | |||||||||||||
| Net income (loss) | $ | (0.03 | ) | $ | 0.11 | $ | (0.06 | ) | $ | (0.23 | ) | ||||||||||
| WEIGHTED AVERAGE COMMON SHARES OUTSTANDING - DILUTED | 14,835 | 14,780 | 14,797 | 14,630 | |||||||||||||||||
| BROADWIND ENERGY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) (UNAUDITED) | |||||||||||||
| Six Months Ended June 30, | |||||||||||||
| 2016 | 2015 | ||||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||||||||
| Net loss | $ | (851 | ) | $ | (3,400 | ) | |||||||
| Loss from discontinued operations | (535 | ) | (4,263 | ) | |||||||||
| Income/(Loss) from continuing operations | (316 | ) | 863 | ||||||||||
| Adjustments to reconcile net cash used in operating activities: | |||||||||||||
| Depreciation and amortization expense | 3,443 | 4,460 | |||||||||||
| Impairment charges | - | 38 | |||||||||||
| Stock-based compensation | 432 | 607 | |||||||||||
| Allowance for doubtful accounts | 75 | 14 | |||||||||||
| Gain on disposal of assets | (138 | ) | - | ||||||||||
| Changes in operating assets and liabilities: | |||||||||||||
| Accounts receivable | (7,165 | ) | (2,376 | ) | |||||||||
| Inventories | 3,171 | (8,291 | ) | ||||||||||
| Prepaid expenses and other current assets | 189 | 461 | |||||||||||
| Accounts payable | 1,891 | (691 | ) | ||||||||||
| Accrued liabilities | (476 | ) | (1,494 | ) | |||||||||
| Customer deposits | 1,433 | (13,845 | ) | ||||||||||
| Other non-current assets and liabilities | (751 | ) | (463 | ) | |||||||||
| Net cash provided by (used in) operating activities of continuing operations | 1,788 | (20,717 | ) | ||||||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||||||||
| Purchases of available for sale securities | (3,581 | ) | (1,884 | ) | |||||||||
| Sales of available for sale securities | 95 | 5,083 | |||||||||||
| Maturities of available for sale securities | 6,060 | 4,825 | |||||||||||
| Purchases of property and equipment | (1,966 | ) | (1,328 | ) | |||||||||
| Proceeds from disposals of property and equipment | 554 | - | |||||||||||
| Decrease in restricted cash | 44 | - | |||||||||||
| Net cash provided by investing activities of continuing operations | 1,206 | 6,696 | |||||||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||||||||
| Payments on lines of credit and notes payable | - | (80,685 | ) | ||||||||||
| Proceeds from lines of credit and notes payable | - | 81,212 | |||||||||||
| Proceeds from long-term debt | - | 5,000 | |||||||||||
| Payments on long-term debt | (2,799 | ) | - | ||||||||||
| Principal payments on capital leases | (328 | ) | (451 | ) | |||||||||
| Net cash (used in) provided by financing activities of continuing operations | (3,127 | ) | 5,076 | ||||||||||
| DISCONTINUED OPERATIONS: | |||||||||||||
| Operating cash flows | 907 | (2,393 | ) | ||||||||||
| Investing cash flows | 303 | (276 | ) | ||||||||||
| Financing cash flows | (12 | ) | (5 | ) | |||||||||
| Net cash provided by (used in) discontinued operations | 1,198 | (2,674 | ) | ||||||||||
| Add: Cash balance of discontinued operations, beginning of period | - | 93 | |||||||||||
| Less: Cash balance of discontinued operations, end of period | - | 21 | |||||||||||
| NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | 1,065 | (11,547 | ) | ||||||||||
| CASH AND CASH EQUIVALENTS, beginning of the period | 6,436 | 12,056 | |||||||||||
| CASH AND CASH EQUIVALENTS, end of the period | $ | 7,501 | $ | 509 | |||||||||
| Supplemental cash flow information: | |||||||||||||
| Interest paid | $ | 267 | $ | 293 | |||||||||
| Income taxes paid | $ | 12 | $ | 35 | |||||||||
| Non-cash investing and financing activities: | |||||||||||||
| Issuance of restricted stock grants | $ | 432 | $ | 607 | |||||||||
| BROADWIND ENERGY, INC. AND SUBSIDIARIES SELECTED SEGMENT FINANCIAL INFORMATION (IN THOUSANDS) (UNAUDITED) | ||||||||||||||||||
| Three Months Ended | Six Months Ended | |||||||||||||||||
| June 30, | June 30, | |||||||||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||||||||
| ORDERS: | ||||||||||||||||||
| Towers and Weldments | $ | 170,637 | $ | 51,392 | $ | 206,072 | $ | 63,163 | ||||||||||
| Gearing | 5,588 | 3,878 | 9,129 | 13,796 | ||||||||||||||
| Total orders | $ | 176,225 | $ | 55,270 | $ | 215,201 | $ | 76,959 | ||||||||||
| REVENUES: | ||||||||||||||||||
| Towers and Weldments | $ | 37,963 | $ | 55,032 | $ | 79,978 | $ | 96,060 | ||||||||||
| Gearing | 5,417 | 7,966 | 10,177 | 16,574 | ||||||||||||||
| Corporate and Other | - | (435 | ) | (18 | ) | (842 | ) | |||||||||||
| Total revenues | $ | 43,380 | $ | 62,563 | $ | 90,137 | $ | 111,792 | ||||||||||
| OPERATING PROFIT/(LOSS): | ||||||||||||||||||
| Towers and Weldments | $ | 2,725 | $ | 7,156 | $ | 5,966 | $ | 8,290 | ||||||||||
| Gearing | (1,189 | ) | (1,524 | ) | (2,392 | ) | (2,736 | ) | ||||||||||
| Corporate and Other | (1,355 | ) | (2,016 | ) | (3,617 | ) | (4,302 | ) | ||||||||||
| Total operating profit/(loss) | $ | 181 | $ | 3,616 | $ | (43 | ) | $ | 1,252 | |||||||||
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 June 30, | Six Months Ended June 30, | ||||||||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||||||||
| Net Income/(Loss) | $ | 42 | $ | 3,386 | $ | (316 | ) | $ | 863 | |||||||||
| Interest Expense | 152 | 247 | 306 | 401 | ||||||||||||||
| Income Tax Provision/(Benefit) | (8 | ) | (62 | ) | (16 | ) | 15 | |||||||||||
| Depreciation and Amortization | 1,787 | 2,203 | 3,443 | 5,097 | ||||||||||||||
| Share-based Compensation and Other Stock Payments | 174 | 343 | 433 | 606 | ||||||||||||||
| Restructuring Expense | - | (21 | ) | - | - | |||||||||||||
| Adjusted EBITDA (Non-GAAP) | $ | 2,147 | $ | 6,096 | $ | 3,850 | $ | 6,982 | ||||||||||
| Towers and Weldments Segment | Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2016 | 2015 | 2016 | 2015 | ||||||||||||||
| Net Income | $ | 1,801 | $ | 4,721 | $ | 3,941 | $ | 5,511 | |||||||||
| Interest Expense | 6 | 1 | 16 | 4 | |||||||||||||
| Income Tax Provision/(Benefit) | 923 | 2,464 | 2,027 | 2,879 | |||||||||||||
| Depreciation and Amortization | 1,094 | 915 | 2,060 | 1,829 | |||||||||||||
| Share-based Compensation and Other Stock Payments | 37 | 19 | 75 | 34 | |||||||||||||
| Restructuring Expense | - | (21 | ) | - | - | ||||||||||||
| Adjusted EBITDA (Non-GAAP) | $ | 3,861 | $ | 8,099 | $ | 8,119 | $ | 10,257 | |||||||||
| Gearing Segment | Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2016 | 2015 | 2016 | 2015 | ||||||||||||||
| Net Loss | $ | (1,194 | ) | $ | (1,534 | ) | $ | (2,401 | ) | $ | (2,759 | ) | |||||
| Interest Expense | 3 | 9 | 7 | 21 | |||||||||||||
| Income Tax Provision/(Benefit) | 1 | 1 | 2 | 4 | |||||||||||||
| Depreciation and Amortization | 641 | 1,244 | 1,280 | 2,541 | |||||||||||||
| Share-based Compensation and Other Stock Payments | 25 | 76 | 72 | 139 | |||||||||||||
| Adjusted EBITDA (Non-GAAP) | $ | (524 | ) | $ | (204 | ) | $ | (1,040 | ) | $ | (54 | ) | |||||
| Corporate and Other | Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||||||
| Net Income/(Loss) | $ | (565 | ) | $ | 199 | $ | (1,856 | ) | $ | (1,889 | ) | |||||
| Interest Expense | 143 | 237 | 283 | 376 | ||||||||||||
| Income Tax Provision/(Benefit) | (932 | ) | (2,527 | ) | (2,045 | ) | (2,868 | ) | ||||||||
| Depreciation and Amortization | 52 | 44 | 103 | 727 | ||||||||||||
| Share-based Compensation and Other Stock Payments | 112 | 248 | 286 | 433 | ||||||||||||
| Adjusted EBITDA (Non-GAAP) | $ | (1,190 | ) | $ | (1,799 | ) | $ | (3,229 | ) | $ | (3,221 | ) | ||||
BWEN INVESTOR CONTACT:
Joni Konstantelos, 708.780.4819 [email protected]
Q2 2016 Earnings Conference Call July 28, 2016
Industry Data and Forward-Looking Statements Disclaimer ▪Broadwindobtained the industry and market data used throughout this presentation from our own research, internal surveys and studies conducted by third parties, independent industry associations or general publications and other publicly available information. Independent industry publications and surveys generally state that they have obtained information from sources believed to be reliable, but do not guarantee the accuracy or completeness of such information. Forecasts are particularly likely to be inaccurate, especially over long periods of time. We are not aware of any misstatements in the industry data we have presented herein, but estimates involve risks anduncertainties and are subject to change based on various factors beyond our control. ▪This presentation contains “forward-looking statements”, as defined in Section21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements include any statement that does not directly relate to a current or historical fact. 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 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 otherenergy 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 lossoftax 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 results to be materially different from the forward-looking statements including, but not limited to, those set forth under the caption “Risk Factors” in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2015. We are under no duty to update any of these statements. You should not consider any list of such factors to be an exhaustive statement of all of the risks, uncertainties or other factors that could cause our current beliefs, expectations, plans and/or assumptions to change and could. ▪This presentation contains non-GAAP financial information. Webelieve 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. We believe 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. Non-GAAP financial measures should be viewed in addition to, and not as an alternative to, our reported results prepared in accordance with GAAP. Please see our earnings release dated July 28, 2016 for a reconciliation of certain non-GAAP measures presented in this presentation. 7/28/16 © 2016 Broadwind Energy, Inc. All rights reserved. 2
Q2 2016 Highlights ▪Booked $176M net new orders in Q2 2016 -backlog extended into 2019 ▪Revenue of $43M -on plan ▪Cost reductions on track -$4M of savings in first half of 2016 ▪Break-even income from continuing operations ▪Cash and short-term investments totaled $11M at quarter-end following early pay-down of term debt; credit line remains undrawn 7/28/16 © 2016 Broadwind Energy, Inc. All rights reserved. 3
Progress on Priorities 7/28/16 © 2016 Broadwind Energy, Inc. All rights reserved. 4 ▪Double Order Intake xYTD 2016 orders totaled $215M –more than last 2 years combined ▪Maintain Consistent Tower Production xBoth plants operating at plant design rate ▪Aggressively Manage Costs xYTD 2016 FOH reduced $2M compared to YTD 2015 xYTD 2016 operating expenses reduced $2M compared to YTD 2015
Market Update -Wind 7/28/16 © 2016 Broadwind Energy, Inc. All rights reserved. 5 0 2 4 6 8 10 12 14 2010A 2011A 2012A 2013A 2014A 2015A 2016e 2017e 2018e 2019e 2020e G W US Demand vs. Critical Component Supply (GW) GW Installations Blade Supply Tower Supply Source: MAKE Windpower2016 Report 5.2016 Component capacity is operational capacity, not maximum design capacity •Industry estimates adding 7.5-10.4 GW per year through 2020 •Strong long-term demand for wind energy driven by PTC and fossil fuel-fired power plant retirements •Supply/demand for U.S. towers supportive of Abilene capacity addition
Market Update -Gearing 7/28/16 © 2016 Broadwind Energy, Inc. All rights reserved. 6 •US gear demand expected to begin rising in 2017 •Seeing strength in orders from wind gearing customers and an uptick from steel customers •Oil and gas capex may begin rising in 2017, mining in 2018-19 Source: AGMA
- 50 100 150 200 250 300 350 Q2 11 Q2 12 Q2 13 Q2 14 Q2 15 Q2 16 M i l l i o n s Orders and Backlog Orders –$M ▪$171M of new Towers and Weldments orders in Q2 2016, up significantly from Q2 2015 ▪Gearing orders up vs. PY –wind replacement gearing orders partially offset by lower oil & gas orders Order Backlog –$M ▪Ending backlog $219M ▪$137M order booked in Q2 2016 extends backlog into 2019 ▪Strong industry dynamics and customer relationships leading to increased orders Q2 2015 Q2 2016 Book : Bill YTD 2015 YTD 2016 Towers & Weldments 51.4 170.6 4.5 63.2 206.1 Gearing 3.9 5.6 1.02 13.8 9.1 Total 55.2 176.2 4.06 77.0 215.2 7/28/16 © 2016 Broadwind Energy, Inc. All rights reserved. 7 Record-high backlog; Tower orders placed ahead of PTC expiration
Consolidated Financial Results 7/28/16 © 2016 Broadwind Energy, Inc. All rights reserved. 8 ▪Q2 2016 sales down 31%: Towers and Weldments -31%, Gearing -32%; lower steel prices, absence of $5M benefit from completed towers held in inventory at end of Q1 2015 awaiting customer acceptance and timing of new orders ▪Q2 2016 gross margin, profit and EPS decreases all due primarily to lower revenues, somewhat offset by operational efficiencies in Abilene, TX tower facility and successful cost management Company-wide * Reconciliation to non-GAAP measure included in Appendix 2015 2016 # 2015 2016 Orders 55.20$ 176.20$ 76.90$ 215.20$ Total Sales 62.56$ 43.38$ 111.79$ 90.14$ Gross Profit 8.50$ 4.14$ 11.24$ 8.10$ Gross Profit % 13.6% 9.5% 10.1% 9.0% Total SG&A 4.88$ 3.96$ 9.99$ 8.15$ Income from Operations 3.62$ 0.18$ 1.25$ (0.04)$ % of Sales 5.8% 0.4% 1.1% 0.0% Adj. EBITDA* 6.10$ 2.15$ 6.98$ 3.85$ EPS, Continuing 0.23$ -$ 0.06$ (0.02)$ Memo: Net I/(L) including Disc. Ops. 1.62$ (0.47)$ (3.40)$ (0.85)$ $M except per share data Q2 YTD
Towers and Weldments Q2 2015 Q2 2016 YTD 2015 YTD 2016 Orders ($M) $51.4 $170.6 $63.1 $206.1 Towers Sold (#) 142 108 245 226 Revenue ($M) 55.0 38.0 96.1 80.0 Operating Income($M) 7.2 2.7 8.3 6.0 -% of Sales 13.0% 7.2% 8.6% 7.5% EBITDA* ($M) 8.1 3.9 10.3 8.1 -% of Sales 14.7% 10.2% 10.7% 10.2% Q2 Results ▪Orders totaled $171M in Q2 2016 ▪Q2 2016 revenue down 31% vs. Q2 2015 –$6M reduction in steel prices, spike in tower deliveries in Q2 2015 ▪Operating Income down due to revenue factors, partially offset by efficiencies in Abilene tower facility 2016 Objectives ▪Sell remaining 2016-17 tower capacity; build and diversify weldments backlog ▪Reduce tower production cost through improved welding and paint productivity ▪Improve management of tower model changeovers ▪Phase I of Paint & Assembly Investment 7/28/16 © 2016 Broadwind Energy, Inc. All rights reserved. 9 0 50 100 150 200 250 300 350 400 450 500 2012 2013 2014 2015 2016 E # o f T o w e r s Annual Tower Sales * Reconciliation to non-GAAP measure included in Appendix
Gearing Q2 2015 Q2 2016 YTD 2015 YTD 2016 Orders ($M) $3.9 $5.6 $13.8 $9.1 Revenue ($M) 8.0 5.4 16.6 10.2 Operating Loss ($M) -1.5 -1.2 -2.7 -2.4 EBITDA* ($M) -0.2 -0.5 -0.1 -1.0 Q2 Results ▪Orders up $2M vs. Q2 2015 –wind and steel up, partially offset by oil & gas orders down $1M ▪Revenue down –oil & gas and mining down ▪Operating Loss narrowed on lower revenue –cost management and lower depreciation both contributed 7/28/16 © 2016 Broadwind Energy, Inc. All rights reserved. 10 2016 Objectives ▪Continue cross-training to improve labor productivity ▪Continue aggressive cost management ▪Expand sales efforts to improve capacity utilization * Reconciliation to non-GAAP measure included in Appendix Source: AGMA - 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000 20,000 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Gearing Order Trend Wind Oil & Gas Other
Liquidity 7/28/16 © 2016 BroadwindEnergy, Inc. All rights reserved. 11 ▪Inventory increased $3M in Q2 2016 ▪Operating working capital increased $3M, to 6% of annualized sales, in Q2 2016 driven primarily by increase in raw material purchases ▪Early repayment of term loan $2.4M; remaining debt $2.6M -New Markets Tax Credit financing ▪Cash and short-term investments totaled $11M at 6/30/16 and LOC undrawn Gross Inventory *Operating Working Capital = Trade A/R + Inventories –Trade Payables –Customer Deposits - 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 50,000 Raw Materials WIP Finished Goods - 2 4 6 8 10 12 14 16 Operating Working Capital* ¢/$ Sales
Summary 7/28/16 © 2016 Broadwind Energy, Inc. All rights reserved. 12 ▪Tower production consistent, delivering ahead of schedule ▪Wind market dynamics strong –good visibility ▪Gearing continues to manage well through oil & gas and mining downturn; savings from consolidation in effect, aggressive cost management continues ▪Cost reduction and continuous improvement remain primary focus areas ▪2H 2016 outlook: Modestly profitable with $86-90M revenue
Appendix –Non-GAAP Financial Measure Non-GAAP Financial Measure The Company provides non-GAAP adjusted EBITDA (earnings before interest, income taxes, depreciation, amortization, and stock compensation) as supplemental information regarding the Company’s business performance. The Company believes that this non-GAAP financial measureis useful to investors because it provides investors with a better understanding of the Company’s past financial performance and future results. The Company’s management uses adjusted EBITDA when it internally evaluates the performance of the Company’s business, reviews financial trendsand makes operating and strategic decisions. The Company believes that providing this non-GAAP financial measure to its investors is useful because it allows investors to evaluate the Company’s performance using the same methodology and information as the Company’s management. The Company's definition of adjusted EBITDA may be different from similar non-GAAP financial measures used by other companies and/or analysts. 7/28/16 © 2016 Broadwind Energy, Inc. All rights reserved. 13 Towers and Weldments Segment 2016 2015 2016 2015 Net Income……………………………. 1,801$ 4,721$ 3,941$ 5,511$ Interest Expense…………………………………. 6 1 16 4 Income Tax Provision/(Benefit)……………………………… 923 2,464 2,027 2,879 Depreciation and Amortization………………………………………………………………1,094 915 2,060 1,829 Share-based Compensation and Other Stock Payments………………………………………………………………37 19 75 34 Restructuring Expense…………………………………………………... - (21) - - Adjusted EBITDA (Non-GAAP)…………………… 3,861$ 8,099$ 8,119$ 10,257$ Three Months Ended June 30, Six Months Ended June 30, Consolidated 2016 2015 2016 2015 Net Income/(Loss)……………………………. 42$ 3,386$ (316)$ 863$ Interest Expense…………………………………. 152 247 306 401 Income Tax Provision/(Benefit)……………………………… (8) (62) (16) 15 Depreciation and Amortization………………………………………………………………1,787 2,203 3,443 5,097 Share-based Compensation and Other Stock Payments………………………………………………………………174 343 433 606 Restructuring Expense…………………………………………………... - (21) - - Adjusted EBITDA (Non-GAAP)………………… 2,147$ 6,096$ 3,850$ 6,982$ Three Months Ended June 30, Six Months Ended June 30,
Appendix –Non-GAAP Financial Measure 7/28/16 © 2016 Broadwind Energy, Inc. All rights reserved. 14 Gearing Segment 2016 2015 2016 2015 Net Loss……………………………. (1,194)$ (1,534)$ (2,401)$ (2,759)$ Interest Expense…………………………………. 3 9 7 21 Income Tax Provision/(Benefit)……………………………… 1 1 2 4 Depreciation and Amortization………………………………………………………………641 1,244 1,280 2,541 Share-based Compensation and Other Stock Payments………………………………………………………………25 76 72 139 Adjusted EBITDA (Non-GAAP)…………………. (524)$ (204)$ (1,040)$ (54)$ Three Months Ended June 30, Six Months Ended June 30, Corporate and Other 2016 2015 2016 2015 Net Income/(Loss)……………………………. (565)$ 199$ (1,856)$ (1,889)$ Interest Expense…………………………………. 143 237 283 376 Income Tax Provision/(Benefit)……………………………… (932) (2,527) (2,045) (2,868) Depreciation and Amortization………………………………………………………………52 44 103 727 Share-based Compensation and Other Stock Payments………………………………………………………………112 248 286 433 Adjusted EBITDA (Non-GAAP)………………… (1,190)$ (1,799)$ (3,229)$ (3,221)$ Three Months Ended June 30, Six Months Ended June 30,
Click to edit Master title style ▪ Click to edit Master text styles –Second level • Third level – Fourth level » Fifth level Broadwind Energy is committed to helping customers maximize performance of their energy and infrastructure investments— quicker, easier and smarter. 7/28/16 © 2016 Broadwind Energy, Inc. All rights reserved. 15