Broadwind Energy, Inc. (NASDAQ: BWEN) reported sales of $54.4 million for the first quarter of 2012, a 25% increase compared to $43.5 million in the first quarter of 2011.
The Company reported a net loss from continuing operations of $3.9 million or $.03 per share in the first quarter of 2012, compared to a loss of $4.1 million or $.04 per share during the first quarter of 2011. The modest improvement was primarily due to stronger operating results from the Gearing segment and lower operating expenses, largely offset by $.5 million of restructuring costs and lower tower production compared to the prior year first quarter. The Company reported non-GAAP adjusted EBITDA (earnings before interest, taxes, depreciation, amortization, stock-based compensation and restructuring) of $1.4 million during the first quarter of 2012, compared to adjusted EBITDA of $.2 million during the first quarter of 2011.
Peter C. Duprey, president and chief executive officer, stated, "Broadwind is off to a good start in 2012, recording solid revenue growth and meeting our objective for positive EBITDA in the first quarter. Our Gearing segment showed significant improvement, both sequentially and year-over-year, as a result of continued diversification into the higher-margin industrial segment, and improved productivity. As we anticipated, tower production was down from the prior year, though volumes are now rising as we build for new customers. We expect utilization in this segment to improve further as we shift a portion of our tower capacity to support our growing non-wind weldments business. Services revenue increased substantially in the quarter, and we continue to reposition this business toward the achievement of positive EBITDA."
Mr. Duprey concluded, "In summary, Gearing has turned the corner and Services is moving in the right direction. Therefore, our focus for 2012 and 2013 remains to drive operating efficiency while further diversifying our revenue base toward industrial customers and new end-market relationships. Our restructuring program is progressing without disrupting the productivity improvements that we are making in our plants. At quarter-end, $125 million of additional 2012 sales are in backlog. Given this and our first quarter performance, we remain confident that we are well positioned to deliver on our current year objectives of $215-225 million revenue and $8-10 million of adjusted EBITDA, and to further expand our progress toward profitability."
Orders and Backlog
The company booked $18 million in new orders during the first quarter. Towers orders were light compared to the prior year due mainly to customers accelerating orders into the fourth quarter of 2011 ahead of the scheduled Production Tax Credit expiration. First quarter Gearing orders totaled $11 million, a 12% increase over the prior year first quarter. Services orders in the first quarter totaled $5 million, more than double the prior year first quarter. At March 31, 2012, backlog totaled $164 million, down from $200 million at year end, partly attributable to the wind-down of a customer's multi-year framework agreement. In the Gearing segment, 97% of orders received in the current year first quarter were from oil and gas, mining and other industrial customers.
Towers and Weldments
Broadwind Energy fabricates specialty weldments for wind, oil and gas, mining and other industrial applications, specializing in the production of wind turbine towers.
Towers and Weldments segment sales totaled $35.2 million in the first quarter of 2012, compared to $28.2 million in the first quarter of 2011. Revenue increased 25% despite a 19% decrease in the volume of tower sections manufactured in the first quarter of 2012 compared to 2011. The prior year quarter included a heavy mix of fabrication-only tower sections, which have a relatively higher margin on lower reported sales. Growth in weldments revenue also contributed to higher revenue relative to last year's quarter. Non-GAAP adjusted EBITDA for the first quarter was $2.3 million in 2012, compared to $3.6 million in 2011. Non-GAAP adjusted EBITDA decreased from last year as a result of the decrease in tower volume, and a lower margin sales mix. Towers and Weldments segment operating income for the first quarter of 2012 was $1.0 million, compared to $2.4 million in 2011.
Gearing
Broadwind Energy engineers, builds and remanufactures precision gears and gearing systems for wind, oil and gas and mining applications.
Gearing segment sales totaled $16.0 million in the first quarter of 2012, compared to $13.6 million in the first quarter of 2011. The increase was due primarily to a 73% increase in industrial gearing sales, partially offset by a decrease in wind gearing sales of 39%, compared to the first quarter of 2011. Non-GAAP adjusted EBITDA for the first quarter of 2012 was $1.8 million, compared to $.2 million in the prior year first quarter, with the increase resulting from growth in higher-margin industrial sales volumes and greater operating productivity and efficiencies, including lower scrap expense. The Gearing segment operating loss for the first quarter of 2012 improved to $1.1 million, versus a loss of $2.4 million in 2011, and included $.4 million in restructuring expenses associated with the manufacturing plant consolidation.
Services
Broadwind Energy specializes in non-routine drivetrain and blade maintenance services. The Company also offers comprehensive installation support and field services to the wind industry.
Revenue from the Services segment was $3.4 million in the first quarter of 2012, compared with $1.8 million in the first quarter of 2011. The increase in revenue was primarily the result of increased field service and blade activity, as well as new revenue derived from the company's drivetrain service center, which was not operational until late in first-quarter 2011. Non-GAAP adjusted EBITDA for the first quarter was a loss of $.9 million, compared to a loss of $1.1 million in the prior year first quarter, improving as a result of higher volumes, partially offset by increased operating expenses associated with the drivetrain services expansion. Services segment operating loss in the first quarter 2012 was $1.6 million, compared to a loss of $1.4 million in the first quarter of 2011.
Corporate and Other
Corporate and other expenses totaled $2.2 million in the first quarter of 2012, compared to $2.6 million in the first quarter of 2011. The decrease was primarily attributable to lower employee compensation and professional services expenses.
For the company in total, operating expenses declined to $6.2 million, or 11% of revenue, down from $6.6 million, or 15% of revenue in the prior year period.
The future income tax benefits associated with the current period loss are offset by an increase in the valuation allowance; therefore the effective federal tax rate is zero. As of the prior year-end, cumulative federal net operating loss carry-forwards totaled $136 million.
Cash and Liquidity
At March 31, 2012, cash, marketable securities and short-term investments on hand totaled $11.3 million and $2.9 million of the Company's $10 million credit line was drawn.
During the quarter, operating working capital increased to $16.0 million, or 7.4% of annualized first quarter 2012 sales. The $2.0 million increase from December 31, 2011 was due to a $9.0 million increase in inventory levels primarily related to steel for tower sections, largely offset by a $7.5 million increase in payables to suppliers. The increased steel inventory supports higher tower deliveries scheduled for the second quarter.
During the quarter, debt and capitalized lease obligations decreased by $.7 million to $13.1 million, and the company was in compliance with all covenants.