BWEN Broadwind Inc

Highlights:

Broadwind Energy, Inc. (NASDAQ:BWEN) reported sales of $56.1 million in Q1 2017, up 20% compared to $46.8 million in Q1 2016. The increase was primarily due to a 16% increase in Towers and Weldments segment revenue due to high shipments in advance of the 100% safe harbor Production Tax Credit deadline, and significantly improved production flow in the Abilene tower plant. Additionally, the current quarter included $3.3 million of sales from the newly formed Process Systems segment, which includes the Abilene compressed natural gas (CNG) and fabrication business and Red Wolf Company, LLC (Red Wolf) as of the February 1, 2017 acquisition date. These increases were partially offset by lower Gearing segment revenue resulting from broadly lower second half 2016 order intake.

The Company reported net income from continuing operations of $6.5 million, or $.43 per share, in Q1 2017, compared to a net loss from continuing operations of $.4 million, or $.02 per share, in Q1 2016. The current quarter includes a $5.1 million, or $.34 per share income tax benefit due primarily to the partial release of a tax valuation allowance related to the Red Wolf acquisition. The remaining $.11 per share improvement was due mainly to the improved production flow in the Towers and Weldments segment.

The Company reported a net loss from discontinued operations of $.2 million, or $.01 per share, in Q1 2017, compared to near break-even in Q1 2016. The Company reported non-GAAP adjusted EBITDA (earnings before interest, taxes, depreciation, amortization, share-based payments and restructuring costs) of $3.9 million in Q1 2017, compared to $1.7 million in Q1 2016 (please refer to the reconciliation of GAAP measures to non-GAAP measures at the end of this release). The $2.2 million improvement was mainly attributable to the increased volume and productivity in the Towers and Weldments segment as well as a $.4 million reduction in Corporate expenses.

Broadwind CEO Stephanie Kushner stated, “Broadwind started the year strong. Revenue was up 20% and we doubled our EBITDA margin to 7% from last year. Our team members’ focus on continuous operational improvement and stringent cost reduction is reflected in our financial performance. Towers results exceeded our plan, as we operated at full capacity to meet aggressive customer delivery schedules, while successfully converting to a new tower model in the Abilene plant.

“Gearing revenue was soft due to weak order intake late last year, but orders have risen sharply since the beginning of 2017 due to recovering oil and gas markets and the expansion of our sales organization. The work we did in 2016 to improve delivery times, raise productivity and reduce costs will translate into significant financial improvements as the year progresses.

Ms. Kushner continued, “Our tower order intake was weak in the first quarter and the near-term demand outlook for our Manitowoc plant is down significantly, as the impact of our customers pre-ordering components in advance of the safe harbor Production Tax Credit deadline was greater than we anticipated. While the medium-term outlook for our tower business remains strong, we have taken immediate action to reduce headcount and lower our tower production rate through at least the next two quarters. Despite the addition of Red Wolf and the recovery of Gearing volumes, we have revised down our full-year outlook to reflect flat year-over-year revenue with EBITDA growth exceeding 15 percent. We believe this tower weakness is short-term and reflects the structure of the PTC qualification rules. This does not alter our strategic objective of doubling revenue and EBITDA margins over the next three years.”

Orders and Backlog

The Company booked $40.0 million of net new orders in Q1 2017, compared to $39.0 million of net new orders booked in Q1 2016. Towers and Weldments orders, which vary considerably from quarter to quarter, totaled $29.1 million in Q1 2017, down from $35.4 million in Q1 2016, reflecting weaker demand for towers in the upper Midwest, due to pre-buys of equipment by turbine manufacturers and the locational mix of windfarms under construction. Gearing orders totaled $7.3 million in Q1 2017, more than double Q1 2016 orders of $3.5 million, due to increased orders from oil & gas and industrial customers. Process Systems orders totaled $3.6 million in Q1 2017.

At March 31, 2017, total backlog was $181.7 million, more than double the backlog of $86.0 million at March 31, 2016.

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 $48.9 million in Q1 2017, compared to $42.0 million in Q1 2016. Tower sales increased 16% compared to Q1 2016 due to improved production flow at the Abilene plant and higher material costs, which are generally passed through to the customer. Operating income totaled $5.8 million in Q1 2017, compared to $3.2 million in Q1 2016, due to the improved throughput at the Abilene plant, and better overhead absorption at both tower plants. Net income for the segment totaled $4.0 million in Q1 2017, compared to $2.1 million in Q1 2016. Non-GAAP adjusted EBITDA totaled $7.0 million in Q1 2017, compared to $4.3 million in Q1 2016, due mainly to the factors described above. (please refer to the reconciliation of GAAP measures to non-GAAP measures at the end of this release)

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

Gearing segment sales totaled $3.9 million in Q1 2017, compared to $4.8 million in Q1 2016. The $.9 million decrease was due to reduced sales to oil & gas and mining industry customers related to the weak order intake in the second half of 2016. Operating loss was $1.5 million in Q1 2017, compared to $1.2 million in Q1 2016. The $.3 million increase was due to lower sales, the absence of a $.1 gain from an asset sale recorded in Q1 2016 and higher compensation expense. Net loss for the Gearing segment totaled $1.5 million in Q1 2017, compared to a net loss of $1.2 million in Q1 2016. The Non-GAAP adjusted EBITDA loss for Q1 2017 totaled $.9 million, compared to $.5 million in Q1 2016, due to the factors described above. (please refer to the reconciliation of GAAP measures to non-GAAP measures at the end of this release)

Process SystemsBroadwind Energy designs and manufactures custom, modular systems for compression, filtration and other specialized process applications for the global market.

On February 1, 2017 the Company acquired Red Wolf which has been combined with the Abilene CNG and fabrication business, previously reported as a part of Towers and Weldments, to form the Process Systems segment. The Process Systems segment results include a partial period of Red Wolf results as of the acquisition date. Process Systems sales for Q1 2017 totaled $3.3 million. For Q1 2017, Process Systems operating loss totaled $.8 million and net loss for the Process Systems segment totaled $.7 million. The first quarter loss reflects the absence of any CNG unit shipments and included a $.2 million adverse impact of inventory revaluation associated with purchase accounting and $.2 million of intangible amortization associated with the Red Wolf transaction. Non-GAAP adjusted EBITDA loss totaled $.5 million in Q1 2017. (please refer to the reconciliation of GAAP measures to non-GAAP measures at the end of this release)

Corporate

Corporate and other expenses totaled $1.9 million in Q1 2017, compared to $2.3 million in Q1 2016. The decrease was due mainly to lower health care costs in Q1 2017.

Cash and Liquidity

During Q1 2017, operating working capital (accounts receivable and inventory, net of accounts payable and customer deposits) increased to $16.4 million due to the addition of Red Wolf and higher accounts receivable.

Capital expenditures, net of disposals, in Q1 2017 totaled $3.3 million. Expenditures included investments to upgrade the coatings systems in the tower plants, and outlays associated with the expansion of the Abilene tower plant which will be operational in mid-2017.

Cash assets (cash and short-term investments) dropped as expected to $.2 million at March 31, 2017, compared to $21.9 million at December 31, 2016, following the acquisition of Red Wolf on February 1, 2017 for a closing cash payment of $16.5 million, subject to adjustment and additional earn-out payments.

Debt and capital leases totaled $10.5 million at March 31, 2017, 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 The Private Bank and Trust Company had a balance of $6.5 million at March 31, 2017. Late in the quarter, the credit line was increased to $25 million to accommodate the additional working capital associated with Red Wolf.

About Broadwind Energy, Inc.Broadwind Energy (NASDAQ:BWEN) is a precision manufacturer of structures, equipment and components for clean tech and other specialized applications. From gears and gearing systems for wind, oil and gas and mining applications, to wind towers and industrial weldments, we have solutions for the clean tech, energy and infrastructure needs of the future. With facilities throughout the 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 StatementsThis 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. 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 and through acquisitions; (iv) the sufficiency of our liquidity and alternate sources of funding, if necessary; (v) our ability to realize revenue from customer orders and backlog; (vi) our ability to operate our business efficiently, manage capital expenditures and costs effectively, and generate cash flow; (vii) the economy and the potential impact it may have on our business, including our customers; (viii) 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; (ix) the effects of market disruptions and regular market volatility, including fluctuations in the price of oil, gas and other commodities; (x) the effects of the recent change of administrations in the U.S. federal government; (xi) our ability to successfully integrate and operate the business of Red Wolf Company, LLC and to identify, negotiate and execute future acquisitions; and (xii) 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 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.

		BROADWIND ENERGY, INC. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS(IN THOUSANDS)
						March 31,				December 31,
							2017				2016
	ASSETS					(Unaudited)
	CURRENT ASSETS:
		Cash and cash equivalents				$	216			$	18,699
		Short-term investments					-				3,171
		Restricted cash					39				39
		Accounts receivable, net of allowance for doubtful accounts of $153
		and $145 as of March 31, 2017 and December 31, 2016, respectively					23,690				11,865
		Inventories, net					25,775				21,159
		Prepaid expenses and other current assets					2,027				2,449
		Current assets held for sale					626				808
			Total current assets				52,373				58,190
	LONG-TERM ASSETS:
		Property and equipment, net					55,982				54,606
		Goodwill					5,568				-
		Other intangible assets, net					17,491				4,572
		Other assets					274				294
	TOTAL ASSETS					$	131,688			$	117,662
	LIABILITIES AND STOCKHOLDERS' EQUITY
	CURRENT LIABILITIES:
		Line of credit and notes payable				$	6,494			$	-
		Current portions of capital lease obligations					470				465
		Accounts payable					19,495				15,852
		Accrued liabilities					8,536				8,430
		Customer deposits					13,574				18,011
		Current liabilities held for sale					371				493
			Total current liabilities				48,940				43,251
	LONG-TERM LIABILITIES:
		Long-term debt, net of current maturities					2,600				2,600
		Long-term capital lease obligations, net of current portions					918				1,038
		Other					4,098				2,190
			Total long-term liabilities				7,616				5,828
	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; 15,255,688
		and 15,175,767 shares issued as of March 31, 2017 and
		December 31, 2016, respectively					15				15
		Treasury stock, at cost, 273,937 shares as of March 31, 2017 and December 31, 2016					(1,842	)			(1,842	)
		Additional paid-in capital					379,098				378,876
		Accumulated deficit					(302,139	)			(308,466	)
			Total stockholders' equity				75,132				68,583
	TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY					$	131,688			$	117,662

	BROADWIND ENERGY, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF OPERATIONS(IN THOUSANDS, EXCEPT PER SHARE DATA)(UNAUDITED)
					Three Months Ended March 31,
						2017				2016
	Revenues				$	56,060			$	46,757
	Cost of sales					49,686				42,795
	Gross profit					6,374				3,962
	OPERATING EXPENSES:
	Selling, general and administrative					4,420				4,075
	Intangible amortization					351				111
		Total operating expenses				4,771				4,186
	Operating income (loss)					1,603				(224	)
	OTHER (EXPENSE) INCOME, net:
	Interest expense, net					(139	)			(154	)
	Other, net					-				12
		Total other expense, net				(139	)			(142	)
	Net income (loss) before benefit for income taxes					1,464				(366	)
	Benefit for income taxes					(5,018	)			(8	)
	INCOME (LOSS) FROM CONTINUING OPERATIONS					6,482				(358	)
	LOSS FROM DISCONTINUED OPERATIONS					(155	)			(19	)
	NET INCOME (LOSS)				$	6,327			$	(377	)
	NET INCOME (LOSS) PER COMMON SHARE - BASIC:
	Income (loss) from continuing operations				$	0.43			$	(0.02	)
	Loss from discontinued operations				$	(0.01	)			(0.00	)
	Net income (loss)				$	0.42			$	(0.03	)
	WEIGHTED AVERAGE COMMON SHARES OUTSTANDING - BASIC					14,929				14,758
	NET INCOME (LOSS) PER COMMON SHARE - DILUTED:
	Income (loss) from continuing operations				$	0.43			$	(0.02	)
	Loss from discontinued operations					(0.01	)			(0.00	)
	Net income (loss)				$	0.42			$	(0.03	)
	WEIGHTED AVERAGE COMMON SHARES OUTSTANDING - DILUTED					15,195				14,758

BROADWIND ENERGY, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS(IN THOUSANDS)(UNAUDITED)
					Three Months Ended March 31,
						2017			2016
CASH FLOWS FROM OPERATING ACTIVITIES:
	Net income (loss)				$	6,327		$	(377	)
	Loss from discontinued operations					(155	)		(19	)
	Income (loss) from continuing operations					6,482			(358	)
Adjustments to reconcile net cash used in operating activities:
	Depreciation and amortization expense					2,101			1,657
	Deferred income taxes					(5,050	)		-
	Stock-based compensation					222			259
	Allowance for doubtful accounts					8			80
	Gain on disposal of assets					(2	)		(138	)
	Changes in operating assets and liabilities:
		Accounts receivable				(9,037	)		(2,753	)
		Inventories				382			5,348
		Prepaid expenses and other current assets				423			(55	)
		Accounts payable				2,883			1,848
		Accrued liabilities				(2,356	)		(129	)
		Customer deposits				(4,440	)		(2,163	)
		Other non-current assets and liabilities				239			(535	)
Net cash (used in) provided by operating activities of continuing operations						(8,145	)		3,061
CASH FLOWS FROM INVESTING ACTIVITIES:
	Cash paid in acquisition					(16,659	)		-
	Purchases of available for sale securities					-			(1,978	)
	Sales of available for sale securities					2,221			36
	Maturities of available for sale securities					950			2,425
	Purchases of property and equipment					(3,261	)		(950	)
	Proceeds from disposals of property and equipment					2			-
Net cash  (used in) provided by investing activities of continuing operations						(16,747	)		(467	)
CASH FLOWS FROM FINANCING ACTIVITIES:
	Net proceeds from lines of credit and notes payable					6,494			-
	Payments on long-term debt					-			(179	)
	Principal payments on capital leases					(114	)		(147	)
Net cash provided by (used in) financing activities of continuing operations						6,380			(326	)
DISCONTINUED OPERATIONS:
	Operating cash flows					74			826
	Investing cash flows					-			151
	Financing cash flows					(109	)		(12	)
Net cash provided by (used in) discontinued operations						(35	)		965
Add: Cash balance of discontinued operations, beginning of period						2			-
Less: Cash balance of discontinued operations, end of period						-			2
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH						(18,545	)		3,231
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH beginning of the period						18,800			6,519
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH end of the period					$	255		$	9,750
Supplemental cash flow information:
	Interest paid				$	77		$	143
	Income taxes paid				$	3		$	12
	Contingent consideration related to business acquisition				$	2,944		$	-
Non-cash investing and financing activities:
	Issuance of restricted stock grants				$	222		$	259
Red Wolf acquisition:
Assets acquired					$	27,157		$	-
Liabilities assumed					$	7,554		$	-

	BROADWIND ENERGY, INC. AND SUBSIDIARIESSELECTED SEGMENT FINANCIAL INFORMATION(IN THOUSANDS)(UNAUDITED)
				Three Months Ended
				March 31,
					2017				2016
ORDERS:
	Towers and Weldments			$	29,088			$	35,436
	Gearing				7,319				3,540
	Process Systems				3,615				-
	Total orders			$	40,022			$	38,976
REVENUES:
	Towers and Weldments			$	48,895			$	42,015
	Gearing				3,871			$	4,760
	Process Systems				3,294				-
	Corporate and Other				-				(18	)
	Total revenues			$	56,060			$	46,757
OPERATING PROFIT/(LOSS):
	Towers and Weldments			$	5,849				3,241
	Gearing				(1,531	)			(1,202	)
	Process Systems				(822	)			-
	Corporate and Other				(1,893	)			(2,263	)
	Total operating profit/(loss)			$	1,603			$	(224	)

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 SUBSIDIARIESRECONCILIATION OF NON-GAAP FINANCIAL MEASURES(IN THOUSANDS)(UNAUDITED)
	Consolidated			Three Months Ended March 31,
					2017				2016
	Net Income/(Loss) from continuing operations			$	6,482			$	(358	)
	Interest Expense				139				154
	Income Tax Provision/(Benefit)				(5,018	)			(8	)
	Depreciation and Amortization				2,101				1,657
	Share-based Compensation and Other Stock Payments				222				259
	Restructuring Expense				-				-
		Adjusted EBITDA (Non-GAAP)		$	3,926			$	1,704

Towers and Weldments Segment	Three Months Ended March 31,
		2017			2016
Net Income	$	4,003		$	2,140
Interest Expense/(Benefit)		15			10
Income Tax Provision/(Benefit)		1,831			1,103
Depreciation and Amortization		1,092			966
Share-based Compensation and Other Stock Payments		58			38
Adjusted EBITDA (Non-GAAP)	$	6,999		$	4,257

Gearing Segment		Three Months Ended March 31,
			2017				2016
Net Loss		$	(1,537	)		$	(1,208	)
Interest Expense			4				5
Income Tax Provision/(Benefit)			2				1
Depreciation and Amortization			625				639
Share-based Compensation and Other Stock Payments			19				48
Adjusted EBITDA (Non-GAAP)		$	(887	)		$	(515	)

Process Systems	Three Months Ended March 31,
		2017				2016
Net Income/(Loss)	$	(699	)		$	-
Interest Expense		1				-
Income Tax Provision/(Benefit)		(125	)			-
Depreciation and Amortization		334				-
Share-based Compensation and Other Stock Payments		6				-
Adjusted EBITDA (Non-GAAP)	$	(483	)		$	-

Corporate and Other	Three Months Ended March 31,
		2017				2016
Net Income/(Loss)	$	4,715			$	(1,290	)
Interest Expense		119				140
Income Tax Provision/(Benefit)		(6,726	)			(1,113	)
Depreciation and Amortization		51				52
Share-based Compensation and Other Stock Payments		139				173
Adjusted EBITDA (Non-GAAP)	$	(1,703	)		$	(2,038	)

 

BWEN INVESTOR CONTACT: 
Joni Konstantelos, 708.780.4819 
joni.konstantelos@bwen.com