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NOTE 1 — BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, the financial statements do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, all adjustments, including normal recurring accruals, considered necessary for a fair presentation have been included. Operating results for the three and nine months ended September 30, 2013 are not necessarily indicative of the results that may be expected for the twelve months ending December 31, 2013. The December 31, 2012 condensed consolidated balance sheet was derived from audited financial statements, but does not include all disclosures required by GAAP. This financial information should be read in conjunction with the condensed consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012.
The unaudited condensed consolidated financial statements presented herein include the accounts of Broadwind Energy, Inc. and its wholly-owned subsidiaries Broadwind Towers, Inc. (“Broadwind Towers”), Brad Foote Gear Works, Inc. (“Brad Foote”) and Broadwind Services, LLC (“Broadwind Services”) (collectively, “Subsidiaries”). All intercompany transactions and balances have been eliminated.
There have been no material changes in the Company’s significant accounting policies during the three and nine months ended September 30, 2013 as compared to the significant accounting policies described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012.
Company Description
As used in this Quarterly Report on Form 10-Q, the terms “we,” “us,” “our,” “Broadwind,” and the “Company” refer to Broadwind Energy, Inc., a Delaware corporation headquartered in Cicero, Illinois, and its Subsidiaries.
Broadwind provides technologically advanced high-value products and services to energy, mining and infrastructure sector customers, primarily in the U.S. The Company’s most significant presence is within the U.S. wind industry, although it has diversified into other industrial markets in order to improve its capacity utilization and reduce its exposure to uncertainty related to favorable governmental policies currently supporting the U.S. wind industry. For the first nine months of 2013, 67% of the Company’s revenue was derived from sales associated with new wind turbine installations, versus 64% for the same period of 2012.
The Company’s product and service portfolio provides its wind energy customers, including wind turbine manufacturers, wind farm developers and wind farm operators, with access to a broad array of component and service offerings. Outside of the wind market, the Company provides precision gearing and specialty weldments to a broad range of industrial customers for oil and gas, mining and other industrial applications.
Liquidity
The Company had cash and cash equivalents and short-term investments that totaled $23,693 as of September 30, 2013, up significantly from $516 as of December 31, 2012. The Company’s improved cash position is primarily the result of (i) the sale of its idle wind tower manufacturing facility in Brandon, South Dakota (the “Brandon Facility”), which occurred in April 2013 and generated approximately $8,000 in net proceeds after closing costs and repayment of the associated mortgage balance, and (ii) the receipt of customer deposits used mainly to fund raw material steel purchases associated with tower orders. During the third quarter of 2012, the Company entered into a three-year $20,000 credit agreement with AloStar Bank of Commerce (“AloStar”). Pursuant to this agreement, AloStar will advance funds, as requested, against the Company’s borrowing base, which consists of approximately 85% of eligible receivables and approximately 50% of eligible inventory. Under this borrowing structure, borrowings are continuous and all cash proceeds received by the Company and its Subsidiaries are automatically applied to the outstanding borrowed balance. At September 30, 2013, the AloStar line of credit was undrawn and the Company had the ability to borrow up to $15,480 thereunder.
The Company has incurred operating losses since inception, partly due to large non-cash charges attributable to significant capital expenditures and acquisition outlays during 2007 and 2008. The Company anticipates that current cash resources, amounts available on the AloStar line of credit, and cash to be generated from operations will be adequate to meet the Company’s liquidity needs for at least the next twelve months. As discussed further in Note 8, “Debt and Credit Agreements” of these condensed consolidated financial statements, as of September 30, 2013, the Company is obligated to make principal payments on outstanding debt totaling $342 during the next twelve months. If assumptions regarding the Company’s production, sales and subsequent collections from several of the Company’s large customers, as well as customer advances and revenues generated from new customer orders, are not materially consistent with management’s expectations, the Company may in the future encounter cash flow and liquidity issues. If the Company cannot make scheduled payments on its debt, or comply with applicable covenants, it may lose operational flexibility or have to delay planned investments. Any additional equity financing, if available, may be dilutive to stockholders, and additional debt financing, if available, will likely require new financial covenants or impose other restrictions on the Company. While the Company believes that it will continue to have sufficient cash flows to operate its businesses and to meet its financial obligations and debt covenants, there can be no assurances that its operations will generate sufficient cash, that it will be able to comply with applicable loan covenants or that credit facilities will be available in an amount sufficient to enable the Company to pay its indebtedness or to fund its other liquidity needs.
Please refer to Note 17, “Restructuring” of these condensed consolidated financial statements for a discussion of the restructuring plan which the Company initiated in the third quarter of 2011. To date, the Company has incurred $8,500 of net costs in conjunction with its restructuring plan. Including costs incurred to date, the Company expects that a total of approximately $13,300 of net costs will be incurred to implement this restructuring plan. Of the total projected expenses, the Company anticipates that approximately $5,400 will be non-cash expenditures.
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NOTE 2 — EARNINGS PER SHARE
The following table presents a reconciliation of basic and diluted earnings per share for the three and nine months ended September 30, 2013 and 2012, as follows:
|
|
Three Months Ended |
|
Nine Months Ended |
| ||||||||
|
|
September 30, |
|
September 30, |
| ||||||||
|
|
2013 |
|
2012 |
|
2013 |
|
2012 |
| ||||
Basic earnings per share calculation: |
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|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Net loss |
|
$ |
(2,491 |
) |
$ |
(3,938 |
) |
$ |
(7,703 |
) |
$ |
(12,029 |
) |
|
|
|
|
|
|
|
|
|
| ||||
Weighted average number of common shares outstanding |
|
14,524,522 |
|
14,093,122 |
|
14,405,498 |
|
14,021,563 |
| ||||
Basic net loss per share |
|
$ |
(0.17 |
) |
$ |
(0.28 |
) |
$ |
(0.53 |
) |
$ |
(0.86 |
) |
|
|
|
|
|
|
|
|
|
| ||||
Diluted earnings per share calculation: |
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|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Net loss |
|
$ |
(2,491 |
) |
$ |
(3,938 |
) |
$ |
(7,703 |
) |
$ |
(12,029 |
) |
|
|
|
|
|
|
|
|
|
| ||||
Weighted average number of common shares outstanding |
|
14,524,522 |
|
14,093,122 |
|
14,405,498 |
|
14,021,563 |
| ||||
Common stock equivalents: |
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|
|
|
|
|
|
|
| ||||
Stock options and unvested restricted stock units (1) |
|
— |
|
— |
|
— |
|
— |
| ||||
Weighted average number of common shares outstanding |
|
14,524,522 |
|
14,093,122 |
|
14,405,498 |
|
14,021,563 |
| ||||
Diluted net loss per share |
|
$ |
(0.17 |
) |
$ |
(0.28 |
) |
$ |
(0.53 |
) |
$ |
(0.86 |
) |
(1) Stock options and unvested restricted stock units granted and outstanding of 974,296 and 1,064,525 as of September 30, 2013 and 2012, respectively, are excluded from the computation of diluted earnings per share due to the anti-dilutive effect as a result of the Company’s net loss for these respective periods.
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NOTE 3 — DISCONTINUED OPERATIONS
In December 2010, the Company’s Board of Directors approved a plan to divest the Company’s wholly-owned subsidiary Badger Transport, Inc. (“Badger”), which formerly comprised the Company’s Logistics segment. In March 2011, the Company completed the sale of Badger to BTI Logistics, LLC. As a component of the proceeds from the sale, the Company received a $1,500 secured promissory note payable from the purchaser. During the first quarter of 2013, the Company recorded a $210 discontinued operations charge to adjust the net balance of the Company’s note receivable down to the $150 estimated value of the Company’s security interest. During the third quarter of 2013, the Company received a payment under the note in excess of the $150 net receivable recorded, and recorded a discontinued operations gain of $100 to reflect the additional amount received. There is a balance of $860 outstanding on the note receivable, all of which is considered past due. As a result of the uncertainty related to any future expected payments from the purchaser, the note is fully reserved for at September 30, 2013.
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NOTE 4 — CASH AND CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS
Cash and cash equivalents typically comprise cash balances and readily marketable investments with original maturities of three months or less, such as money market funds, short-term government bonds, Treasury bills, marketable securities and commercial paper. Marketable investments with original maturities between three and twelve months are recorded as short-term investments. The Company’s treasury policy is to invest excess cash in money market funds or other investments, which are generally of a short-term duration based upon operating requirements. Income earned on these investments is recorded to interest income in the Company’s condensed consolidated statements of operations. As of September 30, 2013 and December 31, 2012, cash and cash equivalents totaled $22,826 and $516, respectively, and short-term investments totaled $867 and $0, respectively. The components of cash and cash equivalents and short-term investments as of September 30, 2013 and December 31, 2012 are summarized as follows:
|
|
September 30, |
|
December 31, |
| ||
|
|
2013 |
|
2012 |
| ||
Cash and cash equivalents: |
|
|
|
|
| ||
Cash |
|
$ |
14,640 |
|
$ |
464 |
|
Municipal bonds |
|
8,186 |
|
52 |
| ||
Total cash and cash equivalents |
|
22,826 |
|
516 |
| ||
|
|
|
|
|
| ||
Short-term investments (available-for-sale): |
|
|
|
|
| ||
Municipal bonds |
|
867 |
|
— |
| ||
|
|
|
|
|
| ||
Total cash and cash equivalents and short-term investments |
|
23,693 |
|
516 |
| ||
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NOTE 5 — INVENTORIES
The components of inventories as of September 30, 2013 and December 31, 2012 are summarized as follows:
|
|
September 30, |
|
December 31, |
| ||
|
|
2013 |
|
2012 |
| ||
|
|
|
|
|
| ||
Raw materials |
|
$ |
18,220 |
|
$ |
8,697 |
|
Work-in-process |
|
11,461 |
|
9,505 |
| ||
Finished goods |
|
4,642 |
|
4,558 |
| ||
|
|
34,323 |
|
22,760 |
| ||
Less: Reserve for excess and obsolete inventory |
|
(1,698 |
) |
(772 |
) | ||
Net inventories |
|
$ |
32,625 |
|
$ |
21,988 |
|
|
NOTE 6 — INTANGIBLE ASSETS
Intangible assets represent the fair value assigned to definite-lived assets such as trade names and customer relationships as part of the Company’s acquisition of Brad Foote completed during 2007. Intangible assets are amortized on a straight-line basis over their estimated useful lives, which range from 10 to 20 years. The Company tests intangible assets for impairment when events or circumstances indicate that the carrying value of these assets may not be recoverable. During the first three quarters of 2013, the Company identified triggering events associated with the Company’s current period operating loss combined with its history of continued operating losses. As a result, the Company evaluated the recoverability of certain of its identifiable intangible assets. Based upon the Company’s assessment, the recoverable amount was in excess of the carrying amount of the intangible assets, and no impairment to these assets was indicated as of September 30, 2013.
As of September 30, 2013 and December 31, 2012, the cost basis, accumulated amortization and net book value of intangible assets were as follows:
|
|
September 30, 2013 |
|
December 31, 2012 |
| ||||||||||||||||||
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
Weighted |
| ||||||
|
|
|
|
|
|
Net |
|
Average |
|
|
|
|
|
Net |
|
Average |
| ||||||
|
|
Cost |
|
Accumulated |
|
Book |
|
Amortization |
|
Cost |
|
Accumulated |
|
Book |
|
Amortization |
| ||||||
|
|
Basis |
|
Amortization |
|
Value |
|
Period |
|
Basis |
|
Amortization |
|
Value |
|
Period |
| ||||||
Intangible assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Customer relationships |
|
$ |
3,979 |
|
$ |
(3,584 |
) |
$ |
395 |
|
7.2 |
|
$ |
3,979 |
|
$ |
(2,444 |
) |
$ |
1,535 |
|
7.2 |
|
Trade names |
|
7,999 |
|
(2,380 |
) |
5,619 |
|
20.0 |
|
7,999 |
|
(2,080 |
) |
5,919 |
|
20.0 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Intangible assets |
|
$ |
11,978 |
|
$ |
(5,964 |
) |
$ |
6,014 |
|
15.8 |
|
$ |
11,978 |
|
$ |
(4,524 |
) |
$ |
7,454 |
|
15.8 |
|
As of September 30, 2013, estimated future amortization expense is as follows:
2013 |
|
$ |
111 |
|
2014 |
|
444 |
| |
2015 |
|
444 |
| |
2016 |
|
444 |
| |
2017 |
|
444 |
| |
2018 and thereafter |
|
4,127 |
| |
Total |
|
$ |
6,014 |
|
|
NOTE 7 — ACCRUED LIABILITIES
Accrued liabilities as of September 30, 2013 and December 31, 2012 consisted of the following:
|
|
September 30, |
|
December 31, |
| ||
|
|
2013 |
|
2012 |
| ||
|
|
|
|
|
| ||
Accrued payroll and benefits |
|
$ |
3,821 |
|
$ |
2,913 |
|
Accrued property taxes |
|
458 |
|
367 |
| ||
Income taxes payable |
|
488 |
|
443 |
| ||
Accrued professional fees |
|
199 |
|
526 |
| ||
Accrued warranty liability |
|
675 |
|
707 |
| ||
Accrued regulatory settlement |
|
500 |
|
— |
| ||
Accrued environmental reserve |
|
242 |
|
352 |
| ||
Accrued other |
|
578 |
|
704 |
| ||
Total accrued liabilities |
|
$ |
6,961 |
|
$ |
6,012 |
|
|
NOTE 8 — DEBT AND CREDIT AGREEMENTS
The Company’s outstanding debt balances as of September 30, 2013 and December 31, 2012 consisted of the following:
|
|
September 30, |
|
December 31, |
| ||
|
|
2013 |
|
2012 |
| ||
|
|
|
|
|
| ||
Lines of credit |
|
$ |
— |
|
$ |
955 |
|
Term loans and notes payable |
|
3,099 |
|
3,308 |
| ||
Less: Current portion |
|
(342 |
) |
(1,307 |
) | ||
Long-term debt, net of current maturities |
|
$ |
2,757 |
|
$ |
2,956 |
|
Credit Facilities
AloStar Credit Facility
On August 23, 2012, the Company and its Subsidiaries entered into a Loan and Security Agreement (the “Loan Agreement”) with AloStar, providing the Company and its Subsidiaries with a new $20,000 secured credit facility (the “Credit Facility”). The Credit Facility is a secured three-year asset-based revolving credit facility, pursuant to which AloStar will advance funds when requested against a borrowing base consisting of approximately 85% of the face value of eligible receivables of the Company and its Subsidiaries and approximately 50% of the book value of eligible inventory of the Company and its Subsidiaries. Borrowings under the Credit Facility bear interest at a per annum rate equal to the one-month London Interbank Offered Rate plus a margin of 4.25%, with a minimum interest rate of 5.25% per annum. The Company must also pay an unused facility fee to AloStar equal to 0.50% per annum on the unused portion of the Credit Facility along with other standard fees. The initial term of the Loan Agreement ends on August 23, 2015.
The Loan Agreement contains customary representations and warranties applicable to the Company and its Subsidiaries. It also contains a requirement that the Company, on a consolidated basis, maintain a minimum monthly fixed charge coverage ratio and minimum monthly earnings before interest, taxes, depreciation, amortization, restructuring and share-based payments (“Adjusted EBITDA”), along with other customary restrictive covenants, certain of which are subject to materiality thresholds, baskets and customary exceptions and qualifications. As of September 30, 2013, the Loan Agreement was amended to: (i) redefine certain exclusions to the fixed charge coverage ratio, (ii) exclude the periodic non-cash portion of the environmental regulatory settlement charges from the adjusted EBITDA calculation and (iii) increase the capital expenditure limit for 2013.
The obligations under the Loan Agreement are secured by, subject to certain exclusions, (i) a first priority security interest in all of the accounts, inventory, chattel paper, payment intangibles, cash and cash equivalents and other working capital assets and stock or other equity interests in the Company’s Subsidiaries and (ii) a first priority security interest in all of the equipment of Brad Foote.
As of September 30, 2013, there was no outstanding indebtedness under the Credit Facility. The Company had the ability to borrow up to $15,480 as of September 30, 2013, and the per annum interest rate would have been 5.25%. The Company was in compliance with all applicable covenants under the Loan Agreement as of September 30, 2013.
Great Western Bank Loan
On April 28, 2009, Broadwind Towers entered into a Construction Loan Agreement with Great Western Bank (“GWB”), pursuant to which GWB agreed to provide up to $10,000 in financing (the “GWB Construction Loan”) to fund construction of the Brandon Facility. Pursuant to a Change in Terms Agreement dated April 5, 2010 between GWB and Broadwind Towers, the GWB Construction Loan was converted to a term loan (the “GWB Term Loan”) providing for monthly payments of principal plus interest, extending the maturity date to November 5, 2016, reducing the principal amount to $6,500, and changing the per annum interest rate to 8.5%.
The GWB Term Loan was secured by a first mortgage on the Brandon Facility and all fixtures and proceeds relating thereto, pursuant to a Mortgage and a Commercial Security Agreement, each between Broadwind Towers and GWB, and by a Commercial Guaranty from the Company. In addition, the Company agreed to subordinate all intercompany debt with Broadwind Towers to the GWB Term Loan. The documents evidencing and securing the GWB Term Loan contained representations, warranties and covenants customary for a term financing arrangement and contained no financial covenants.
The Brandon Facility was sold in April 2013 and the GWB Term Loan was repaid in its entirety with a portion of the proceeds.
Other
Included in Long Term Debt, Net of Current Maturities is $2,600 associated with the New Markets Tax Credit transaction described further in Note 16, “New Markets Tax Credit Transaction” of these condensed consolidated financial statements.
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NOTE 9 — FAIR VALUE MEASUREMENTS
The Company measures its financial assets and liabilities at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., exit price) in an orderly transaction between market participants at the measurement date. Additionally, the Company is required to provide disclosure and categorize assets and liabilities measured at fair value into one of three different levels depending on the assumptions (i.e., inputs) used in the valuation. Level 1 provides the most reliable measure of fair value while Level 3 generally requires significant management judgment. Financial assets and liabilities are classified in their entirety based on the lowest level of input significant to the fair value measurement. Financial instruments are assessed quarterly to determine the appropriate classification within the fair value hierarchy. Transfers between fair value classifications are made based upon the nature and type of the observable inputs. The fair value hierarchy is defined as follows:
Level 1 — Valuations are based on unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2 — Valuations are based on quoted prices for similar assets or liabilities in active markets, or quoted prices in markets that are not active for which significant inputs are observable, either directly or indirectly. For the Company’s municipal bonds, we noted that although quoted prices are available and used to value said assets, they are traded less frequently.
Level 3 — Valuations are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. Inputs reflect management’s best estimate of what market participants would use in valuing the asset or liability at the measurement date. The Company used market negotiations to value its Gearing assets. The Company used real estate appraisals to value the Clintonville, WI facility.
The following table represents the fair values of the Company’s financial assets as of September 30 2013 and December 31, 2012:
|
|
September 30, 2013 |
| ||||||||||
|
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
Total |
| ||||
Assets measured on a recurring basis: |
|
|
|
|
|
|
|
|
| ||||
Municipal bonds |
|
$ |
— |
|
$ |
9,053 |
|
$ |
— |
|
$ |
9,053 |
|
Assets measured on a nonrecurring basis: |
|
|
|
|
|
|
|
|
| ||||
Gearing equipment |
|
— |
|
— |
|
1,331 |
|
1,331 |
| ||||
Clintonville, WI facility |
|
— |
|
— |
|
821 |
|
821 |
| ||||
Total assets at fair value |
|
$ |
— |
|
$ |
9,053 |
|
$ |
2,152 |
|
$ |
11,205 |
|
|
|
December 31, 2012 |
| ||||||||||
|
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
Total |
| ||||
Assets measured on a recurring basis: |
|
|
|
|
|
|
|
|
| ||||
Municipal bonds |
|
$ |
— |
|
$ |
52 |
|
$ |
— |
|
$ |
52 |
|
Total assets at fair value |
|
$ |
— |
|
$ |
52 |
|
$ |
— |
|
$ |
52 |
|
Fair value of financial instruments
The carrying amounts of the Company’s financial instruments, which include cash and cash equivalents, restricted cash, accounts receivable, accounts payable and customer deposits, approximate their respective fair values due to the relatively short-term nature of these instruments. Based upon interest rates currently available to the Company for debt with similar terms, the carrying value of the Company’s long-term debt is approximately equal to its fair value.
Assets measured at fair value on a nonrecurring basis
The fair value measurement approach for long-lived assets utilizes a number of significant unobservable inputs or Level 3 assumptions. These assumptions include, among others, projections of the Company’s future operating results, the implied fair value of these assets using an income approach by preparing a discounted cash flow analysis and a market-based approach based on the Company’s market capitalization, and other subjective assumptions. To the extent projections used in the Company’s evaluations are not achieved, there may be a negative effect on the valuation of these assets.
Due to the Company’s operating losses in each of the first three quarters of 2013 combined with its history of continued operating losses, the Company continues to evaluate the recoverability of certain of its identifiable intangible assets and certain property and equipment assets. Based upon the Company’s September 30, 2013 assessment, the recoverable amount of undiscounted cash flows based upon the Company’s most recent projections exceeded the carrying amount of invested capital by 120% and 56% for the Gearing and Services segments, respectively, and no impairment to these assets was indicated.
During the first half of 2013, the Company took a $288 charge to adjust the carrying value of its Clintonville, Wisconsin facility assets to fair value, and reclassified the resulting $790 carrying value from property and equipment to Assets Held for Sale. This treatment was due to management’s decision to list the property for sale as a result of its determination that the property was no longer required in its operations. Additionally, the Company took a $345 charge to adjust the carrying value of certain Gearing equipment to fair value, and reclassified the resulting $1,400 carrying value to Assets Held for Sale as a result of the decision to sell this equipment.
|
NOTE 10 — INCOME TAXES
Effective tax rates differ from federal statutory income tax rates primarily due to changes in the Company’s valuation allowance, permanent differences and provisions for state and local income taxes. As of September 30, 2013, the Company had no net deferred income taxes due to the full recorded valuation allowance. During the three months ended September 30, 2013, the Company recorded a provision for income taxes of $28 compared to a benefit for income taxes of $9 during the three months ended September 30, 2012. During the nine months ended September 30, 2013, the Company recorded a provision for income taxes of $64, compared to a provision for income taxes of $21 during the nine months ended September 30, 2012.
The Company files income tax returns in U.S. federal and state jurisdictions. As of September 30, 2013, open tax years in federal and some state jurisdictions date back to 1996 due to the taxing authorities’ ability to adjust operating loss carryforwards. As of December 31, 2012, the Company had net operating loss carryforwards of $153,629 expiring in various years through 2032.
It is reasonably possible that unrecognized tax benefits will decrease by up to approximately $285 as a result of the expiration of the applicable statute of limitations within the next 12 months. In addition, Section 382 of the Internal Revenue Code of 1986, as amended (the “IRC”), generally imposes an annual limitation on the amount of net operating loss (“NOL”) carryforwards and associated built-in losses that may be used to offset taxable income when a corporation has undergone certain changes in stock ownership. The Company’s ability to utilize NOL carryforwards and built-in losses may be limited, under this section or otherwise, by the Company’s issuance of common stock or by other changes in stock ownership. Upon completion of the Company’s analysis of IRC Section 382, the Company has determined that aggregate changes in stock ownership have triggered an annual limitation on NOL carryforwards and built-in losses available for utilization. To the extent the Company’s use of NOL carryforwards and associated built-in losses is significantly limited in the future due to additional changes in stock ownership, the Company’s income could be subject to U.S. corporate income tax earlier than it would be if the Company were able to use NOL carryforwards and built-in losses without such limitation, which could result in lower profits and the loss of benefits from these attributes.
The Company announced on February 13, 2013, that its Board of Directors had adopted a Stockholder Rights Plan (the “Rights Plan”) designed to preserve the Company’s substantial tax assets associated with NOL carryforwards under IRC Section 382. The Rights Plan is intended to act as a deterrent to any person or group, together with its affiliates and associates, being or becoming the beneficial owner of 4.9% or more of the Company’s common stock and thereby triggering a further limitation of the Company’s available NOL carryforwards. In connection with the adoption of the Rights Plan, the Board of Directors declared a non-taxable dividend of one preferred share purchase right (a “Right”) for each outstanding share of the Company’s common stock to the Company’s stockholders of record as of the close of business on February 22, 2013. Each Right entitles its holder to purchase from the Company one-thousandth of a share of the Company’s Series A Junior Participating Preferred Stock at an exercise price of $14.00 per Right, subject to adjustment. As a result of the Rights Plan, any person or group that acquires beneficial ownership of 4.9% or more of the Company’s common stock without the approval of the Company’s Board of Directors would be subject to significant dilution in the ownership interest of that person or group. Stockholders who owned 4.9% or more of the outstanding shares of the Company’s common stock as of February 12, 2013 will not trigger the preferred share purchase rights unless they acquire additional shares. The Rights Plan was subsequently approved by the Company’s stockholders at the Company’s 2013 Annual Meeting of Stockholders.
As of September 30, 2013, the Company has $484 of unrecognized tax benefits, all of which would have a favorable impact on income tax expense. The Company recognizes interest and penalties related to uncertain tax positions as income tax expense. The Company has accrued interest and penalties of $198 as of September 30, 2013. As of December 31, 2012, the Company had unrecognized tax benefits of $454, of which $168 represented accrued interest and penalties.
|
NOTE 11 — SHARE-BASED COMPENSATION
Overview of Share-Based Compensation Plans
2007 Equity Incentive Plan
The Company has granted incentive stock options and other equity awards pursuant to the Amended and Restated Broadwind Energy, Inc. 2007 Equity Incentive Plan (the “2007 EIP”), which was approved by the Company’s Board of Directors in October 2007 and by the Company’s stockholders in June 2008. The 2007 EIP has been amended periodically since its original approval.
The 2007 EIP reserved 691,051 shares of the Company’s common stock for grants to officers, directors, employees, consultants and advisors upon whose efforts the success of the Company and its affiliates depends to a large degree. As of September 30, 2013, the Company had reserved 96,247 shares for issuance upon the exercise of stock options outstanding and 92,209 shares for issuance upon the vesting of restricted stock unit (“RSU”) awards outstanding. As of September 30, 2013, 203,408 shares of common stock reserved for stock options and RSU awards under the 2007 EIP have been issued in the form of common stock.
2012 Equity Incentive Plan
On March 8, 2012, the Company’s Board of Directors approved the Broadwind Energy, Inc. 2012 Equity Incentive Plan (the “2012 EIP;” together with the 2007 EIP, the “Equity Incentive Plans”), and at the Company’s Annual Meeting of Stockholders on May 4, 2012, the Company’s stockholders approved the adoption of the 2012 EIP. The purposes of the 2012 EIP are (i) to align the interests of the Company’s stockholders and recipients of awards under the 2012 EIP by increasing the proprietary interest of such recipients in the Company’s growth and success; (ii) to advance the interests of the Company by attracting and retaining officers, other employees, non-employee directors and independent contractors; and (iii) to motivate such persons to act in the long-term best interests of the Company and its stockholders. Under the 2012 EIP, the Company may grant (i) non-qualified stock options; (ii) “incentive stock options” (within the meaning of IRC Section 422); (iii) stock appreciation rights; (iv) restricted stock and RSU’s; and (v) performance awards.
The 2012 EIP reserves 1,200,000 shares of the Company’s common stock for grants to officers, directors, employees, consultants and advisors upon whose efforts the success of the Company and its affiliates will depend to a large degree. As of September 30, 2013, the Company had reserved 138,590 shares for issuance upon the exercise of stock options outstanding and 647,250 shares for issuance upon the vesting of RSU awards outstanding. As of September 30, 2013, 111,053 shares of common stock reserved for stock options and RSU awards under the 2012 EIP have been issued in the form of common stock.
Stock Options. The exercise price of stock options granted under the Equity Incentive Plans is equal to the closing price of the Company’s common stock on the date of grant. Stock options generally become exercisable on the anniversary of the grant date, with vesting terms that may range from one to five years from the date of grant. Additionally, stock options expire ten years after the date of grant. The fair value of stock options granted is expensed ratably over their vesting term.
Restricted Stock Units. The granting of RSU’s is provided for under the Equity Incentive Plans. RSU’s generally vest on the anniversary of the grant date, with vesting terms that may range from one to five years from the date of grant. The fair value of each RSU granted is equal to the closing price of the Company’s common stock on the date of grant and is generally expensed ratably over the vesting term of the RSU award.
The following table summarizes stock option activity during the nine months ended September 30, 2013 under the Equity Incentive Plans, as follows:
|
|
Options |
|
Weighted Average |
| |
Outstanding as of December 31, 2012 |
|
286,455 |
|
$ |
26.80 |
|
Granted |
|
— |
|
$ |
— |
|
Exercised |
|
— |
|
$ |
— |
|
Forfeited |
|
(37,579 |
) |
$ |
15.94 |
|
Expired |
|
(14,039 |
) |
$ |
103.43 |
|
Outstanding as of September 30, 2013 |
|
234,837 |
|
$ |
23.96 |
|
|
|
|
|
|
| |
Exercisable as of September 30, 2013 |
|
100,031 |
|
$ |
45.96 |
|
The following table summarizes RSU activity during the nine months ended September 30, 2013 under the Equity Incentive Plans, as follows:
|
|
Number of RSU’s |
|
Weighted Average |
| |
Outstanding as of December 31, 2012 |
|
761,662 |
|
$ |
6.01 |
|
Granted |
|
463,218 |
|
$ |
3.68 |
|
Vested |
|
(280,624 |
) |
$ |
6.76 |
|
Forfeited |
|
(204,797 |
) |
$ |
4.50 |
|
Outstanding as of September 30, 2013 |
|
739,459 |
|
$ |
4.66 |
|
The fair value of each stock option award is estimated on the date of grant using the Black-Scholes option pricing model. The determination of the fair value of each stock option is affected by the Company’s stock price on the date of grant, as well as assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to, the Company’s expected stock price volatility over the expected life of the awards and actual and projected stock option exercise behavior. There were no stock options granted during the nine months ended September 30, 2013.
The Company utilized a forfeiture rate of 25% during the nine months ended September 30, 2013 and 2012 for estimating the forfeitures of stock compensation granted.
The following table summarizes share-based compensation expense included in the Company’s condensed consolidated statements of operations for the nine months ended September 30, 2013 and 2012, as follows:
|
|
Nine Months Ended September 30, |
| ||||
|
|
2013 |
|
2012 |
| ||
Share-based compensation expense: |
|
|
|
|
| ||
Selling, general and administrative |
|
$ |
1,438 |
|
$ |
2,079 |
|
Income tax benefit (1) |
|
— |
|
— |
| ||
Net effect of share-based compensation expense on net loss |
|
$ |
1,438 |
|
$ |
2,079 |
|
|
|
|
|
|
| ||
Reduction in earnings per share: |
|
|
|
|
| ||
Basic and diluted earnings per share (2) |
|
$ |
0.10 |
|
$ |
0.15 |
|
(1) Income tax benefit is not illustrated because the Company is currently operating at a loss and an actual income tax benefit was not realized for the nine months ended September 30, 2013 and 2012. The result of the loss situation creates a timing difference, resulting in a deferred tax asset, which is fully reserved for in the Company’s valuation allowance.
(2) Diluted earnings per share for the nine months ended September 30, 2013 and 2012 does not include common stock equivalents due to their anti-dilutive nature as a result of the Company’s net losses for these respective periods. Accordingly, basic earnings per share and diluted earnings per share are identical for all periods presented.
As of September 30, 2013, the Company estimates that pre-tax compensation expense for all unvested share-based awards, including both stock options and RSU’s, in the amount of approximately $2,879 will be recognized through 2016. The Company expects to satisfy the exercise of stock options and future distribution of shares of restricted stock by issuing new shares of common stock.
|
NOTE 12 — LEGAL PROCEEDINGS
Shareholder Lawsuits
On February 11, 2011, a putative class action was filed in the United States District Court for the Northern District of Illinois (the “USDC”) against the Company and certain of its current or former officers and directors. The lawsuit was purportedly brought on behalf of purchasers of the Company’s common stock between March 17, 2009 and August 9, 2010. A lead plaintiff was appointed and an amended complaint was filed on September 13, 2011. The amended complaint named as additional defendants certain of the Company’s current and former directors, certain Tontine entities, and Jeffrey Gendell, a principal of Tontine. The complaint sought to allege that the defendants violated Section 10(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Rule 10b-5 promulgated thereunder, and/or Section 20(a) of the Exchange Act by issuing or causing to be issued a series of allegedly false and/or misleading statements concerning the Company’s financial results, operations, and prospects, including with respect to the January 2010 secondary public offering of the Company’s common stock (the “Offering”). The plaintiffs alleged that the Company’s statements were false and misleading because, among other things, the Company’s reported financial results during the class period allegedly violated GAAP because they failed to reflect the impairment of goodwill and other intangible assets, and the Company allegedly failed to disclose known trends and other information regarding certain customer relationships at Brad Foote. In support of their claims, the plaintiffs relied in part upon six alleged confidential informants, all of whom are alleged to be former employees of the Company. On November 18, 2011, the Company filed a motion to dismiss. On April 19, 2012, the USDC granted in part and denied in part the Company’s motion. The USDC dismissed all claims with prejudice against each of the named current and former officers except for J. Cameron Drecoll and held that the plaintiffs had failed to state a claim for any alleged misstatements made after March 19, 2010. In addition, the USDC dismissed all claims with prejudice against the named Tontine entities and Mr. Gendell. The USDC denied the motion with respect to certain of the claims asserted against the Company and Mr. Drecoll. The Company filed its answer and affirmative defenses on May 21, 2012. The plaintiffs’ class certification was filed on June 22, 2012, and the parties agreed to a briefing schedule. The parties participated in a mediation session on August 20, 2012, and reached agreement on a settlement of the matter in the amount of $3,915, which is payable by the Company’s insurance carrier. The USDC granted final approval of the settlement on June 27, 2013.
Between February 15, 2011 and March 30, 2011, three putative shareholder derivative lawsuits were filed in the USDC against certain of the Company’s current and former officers and directors, and certain Tontine entities, seeking to challenge alleged breaches of fiduciary duty, waste of corporate assets, and unjust enrichment, including in connection with the Offering. One of the lawsuits also alleged that certain directors violated Section 14(a) of the Exchange Act in connection with the Company’s Proxy Statement for its 2010 Annual Meeting of Stockholders. Two of the matters pending in the USDC were subsequently consolidated, and on May 15, 2012, the USDC granted the defendants’ motion to dismiss the consolidated cases and also entered an order dismissing the third case. The Company received a request from the Tontine defendants for indemnification in the derivative suits and the class action lawsuit from Tontine and/or Mr. Gendell pursuant to various agreements related to shares owned by Tontine. The Company maintains directors and officers liability insurance; however, the costs of indemnification for Mr. Gendell and/or Tontine would not be covered by any Company insurance policy. The Company subsequently entered into an agreement with Tontine providing, among other things, for a settlement of these indemnification claims and related matters for a payment of $495. Because of the preliminary nature of these matters, the Company is not able to estimate a loss or range of loss, if any, that may be incurred in connection with these matters at this time.
SEC Inquiry
In August 2011, the Company received a subpoena from the United States Securities and Exchange Commission (“SEC”) seeking documents and other records related to certain accounting practices at Brad Foote. The subpoena was issued in connection with an informal inquiry that the Company received from the SEC in November 2010, which most likely arose out of a whistleblower complaint that the SEC received related to revenue recognition, cost accounting and intangible and fixed asset valuations at Brad Foote. The Company has been in regular contact with the SEC, and in its communications the SEC has clarified or supplemented its requests. The Company has produced documents responsive to such requests and completed the process of responding to the subpoena for documents. Following the issuance of subpoenas for testimony, the SEC has deposed certain current and former Brad Foote and Company employees. The Company cannot currently predict the outcome of this investigation. The Company does not believe that the resolution of this matter will have a material adverse effect on the Company’s consolidated financial position or results of operations. No estimate regarding the loss or range of loss, if any, that may be incurred in connection with this matter is possible at this time. All pending reimbursement requests from Tontine related to the SEC inquiry were resolved in the above-referenced settlement.
Environmental
The Company is aware of an investigation commenced by the United States Attorney’s Office, Northern District of Illinois (“USAO”), for potential violation of federal environmental laws. On February 15, 2011, pursuant to a search warrant, officials from the United States Environmental Protection Agency (“USEPA”) entered and conducted a search of a Brad Foote facility in Cicero, Illinois (the “Cicero Avenue Facility”) in connection with the alleged improper disposal of industrial wastewater to the sewer. Also on or about February 15, 2011, in connection with the same matter, the Company received a grand jury subpoena requesting testimony and the production of certain documents relating to the Cicero Avenue Facility’s past compliance with certain environmental laws and regulations relating to the generation, discharge and disposal of wastewater from certain of its processes between 2004 and the present. On or about February 23, 2011, the Company received another grand jury subpoena relating to the same investigation, requesting testimony and the production of certain other documents relating to certain of the Cicero Avenue Facility’s employees, environmental and manufacturing processes, and disposal practices. On April 5, 2012, the Company received a letter from the USAO requesting the production of certain financial records from 2008 to the present. The Company has completed its response to the subpoenas and to the USAO’s request. The Company has also voluntarily instituted corrective measures at the Cicero Avenue Facility, including changes to its wastewater disposal practices. On September 24, 2013, the USAO commenced a criminal action in the USDC based on this investigation. Brad Foote has agreed to enter into a plea agreement with the USAO (the “Plea Agreement”) with regard to this criminal action, pursuant to which Brad Foote would plead guilty to one count of knowingly violating the Clean Water Act, Title 33, United States Code, Section 1319(c)(2)(A) and pay a $1,500 fine (payable in three installments of $500 within three years of the date of sentencing). The Plea Agreement is subject to the approval of the USDC.
Other
The Company is also a party to additional claims and legal proceedings arising in the ordinary course of business, none of which is deemed to be individually significant at this time. Due to the inherent uncertainty of litigation, there can be no assurance that the resolution of any particular claim or proceeding would not have a material adverse effect on the Company’s results of operations, financial position or liquidity. It is possible that if one or more of the matters described above were decided against the Company, the effects could be material to the Company’s results of operations in the period in which the Company would be required to record or adjust the related liability and could also be material to the Company’s cash flows in the periods the Company would be required to pay such liability.
|
NOTE 13 — RECENT ACCOUNTING PRONOUNCEMENTS
The Company reviews new accounting standards as issued. Although some of these accounting standards issued or effective after the end of the Company’s previous fiscal year may be applicable to the Company, the Company has not identified any new standards that it believes merit further discussion. The Company believes that none of the new standards will have a significant impact on its condensed consolidated financial statements.
|
NOTE 14 — SEGMENT REPORTING
The Company is organized into reporting segments based on the nature of the products and services offered and business activities from which it earns revenues and incurs expenses for which discrete financial information is available and regularly reviewed by the Company’s chief operating decision maker. The Company’s segments and their product and service offerings are summarized below:
Towers and Weldments
The Company manufactures towers for wind turbines, specifically the large and heavier wind towers that are designed for 2 megawatt (“MW”) and larger wind turbines. Production facilities, located in Manitowoc, Wisconsin and Abilene, Texas, are situated in close proximity to the primary U.S. domestic wind energy and equipment manufacturing hubs. The two facilities have a combined annual tower production capacity of approximately 500 towers, sufficient to support turbines generating more than 1,200 MW of power. This product segment also encompasses the manufacture of specialty fabrications and specialty weldments for mining and other industrial customers.
Gearing
The Company engineers, builds and remanufactures precision gears and gearing systems for oil and gas, wind, mining, steel and other industrial applications. The Company uses an integrated manufacturing process, which includes machining and finishing processes in Cicero, Illinois, and heat treatment in Neville Island, Pennsylvania.
Services
The Company offers a comprehensive range of services, primarily to wind farm developers and operators. The Company specializes in non-routine maintenance services for both kilowatt and MW turbines. The Company also offers comprehensive field services to the wind industry. The Company is increasingly focusing its efforts on the identification and/or development of product and service offerings which will improve the reliability and efficiency of wind turbines, and therefore enhance the economic benefits to its customers. The Company provides wind services across the U.S., with primary service locations in South Dakota and Texas. In February 2011, the Company put into operation its Abilene, Texas gearbox service facility (the “Gearbox Facility”), which is focused on servicing the growing installed base of MW wind turbines as they come off warranty and, to a limited extent, industrial gearboxes requiring precision repair and testing.
Corporate and Eliminations
“Corporate” includes the assets and selling, general and administrative expenses of the Company’s corporate office. “Eliminations” comprises adjustments to reconcile segment results to consolidated results.
Summary financial information by reportable segment for the three and nine months ended September 30, 2013 and 2012 is as follows:
For the Three Months Ended September 30, 2013: |
|
Towers and |
|
Gearing |
|
Services |
|
Corporate |
|
Eliminations |
|
Consolidated |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Revenues from external customers |
|
$ |
48,594 |
|
$ |
10,138 |
|
$ |
3,704 |
|
$ |
— |
|
$ |
— |
|
$ |
62,436 |
|
Intersegment revenues (1) |
|
64 |
|
251 |
|
— |
|
— |
|
(315 |
) |
— |
| ||||||
Operating profit (loss) |
|
6,723 |
|
(5,653 |
) |
(1,276 |
) |
(2,197 |
) |
22 |
|
(2,381 |
) | ||||||
Depreciation and amortization |
|
941 |
|
2,014 |
|
409 |
|
15 |
|
— |
|
3,379 |
| ||||||
Capital expenditures |
|
750 |
|
2,459 |
|
7 |
|
22 |
|
— |
|
3,238 |
| ||||||
For the Three Months Ended September 30, 2012: |
|
Towers and |
|
Gearing |
|
Services |
|
Corporate |
|
Eliminations |
|
Consolidated |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Revenues from external customers |
|
$ |
37,423 |
|
$ |
10,778 |
|
$ |
6,844 |
|
$ |
— |
|
$ |
— |
|
$ |
55,045 |
|
Intersegment revenues (1) |
|
— |
|
478 |
|
55 |
|
— |
|
(533 |
) |
— |
| ||||||
Operating profit (loss) |
|
1,740 |
|
(2,637 |
) |
(570 |
) |
(2,048 |
) |
(12 |
) |
(3,527 |
) | ||||||
Depreciation and amortization |
|
942 |
|
2,995 |
|
413 |
|
17 |
|
— |
|
4,367 |
| ||||||
Capital expenditures |
|
127 |
|
893 |
|
44 |
|
71 |
|
— |
|
1,135 |
| ||||||
For the Nine Months Ended September 30, 2013: |
|
Towers and |
|
Gearing |
|
Services |
|
Corporate |
|
Eliminations |
|
Consolidated |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Revenues from external customers |
|
$ |
116,127 |
|
$ |
28,098 |
|
$ |
15,238 |
|
$ |
— |
|
$ |
— |
|
$ |
159,463 |
|
Intersegment revenues (1) |
|
67 |
|
3,456 |
|
15 |
|
— |
|
(3,538 |
) |
— |
| ||||||
Operating profit (loss) |
|
12,828 |
|
(12,394 |
) |
(3,239 |
) |
(7,386 |
) |
(19 |
) |
(10,210 |
) | ||||||
Depreciation and amortization |
|
2,841 |
|
7,469 |
|
1,064 |
|
38 |
|
— |
|
11,412 |
| ||||||
Capital expenditures |
|
1,235 |
|
4,114 |
|
240 |
|
378 |
|
— |
|
5,967 |
| ||||||
For the Nine Months Ended September 30, 2012: |
|
Towers and |
|
Gearing |
|
Services |
|
Corporate |
|
Eliminations |
|
Consolidated |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Revenues from external customers |
|
$ |
109,587 |
|
$ |
40,256 |
|
$ |
15,956 |
|
$ |
— |
|
$ |
— |
|
$ |
165,799 |
|
Intersegment revenues (1) |
|
— |
|
1,096 |
|
81 |
|
— |
|
(1,177 |
) |
— |
| ||||||
Operating profit (loss) |
|
3,306 |
|
(5,390 |
) |
(3,331 |
) |
(6,224 |
) |
12 |
|
(11,627 |
) | ||||||
Depreciation and amortization |
|
2,722 |
|
8,217 |
|
1,237 |
|
51 |
|
— |
|
12,227 |
| ||||||
Capital expenditures |
|
540 |
|
1,657 |
|
944 |
|
159 |
|
— |
|
3,300 |
| ||||||
|
|
Total Assets as of |
| ||||
|
|
September 30, |
|
December 31, |
| ||
Segments: |
|
2013 |
|
2012 |
| ||
|
|
|
|
|
| ||
Towers and Weldments |
|
$ |
51,054 |
|
$ |
50,801 |
|
Gearing |
|
70,561 |
|
71,371 |
| ||
Services |
|
15,906 |
|
13,976 |
| ||
Assets held for sale |
|
2,152 |
|
8,042 |
| ||
Corporate |
|
303,401 |
|
308,336 |
| ||
Eliminations |
|
(278,845 |
) |
(309,616 |
) | ||
|
|
$ |
164,229 |
|
$ |
142,910 |
|
(1) Intersegment revenues generally include a 10% markup over costs and primarily consist of sales from Gearing to Services. Sales from Gearing to Services totaled $3,456 and $1,096 for the nine months ended September 30, 2013 and 2012, respectively.
|
NOTE 15 — COMMITMENTS AND CONTINGENCIES
Environmental Compliance and Remediation Liabilities
The Company’s operations and products are subject to a variety of environmental laws and regulations in the jurisdictions in which the Company operates and sells products governing, among other things, air emissions, wastewater discharges, the use, handling and disposal of hazardous materials, soil and groundwater contamination, employee health and safety, and product content, performance and packaging. Certain environmental laws can impose the entire cost or a portion of the cost of investigating and cleaning up a contaminated site, regardless of fault, upon any one or more of a number of parties, including the current or previous owners or operators of the site. These environmental laws can also impose liability on any person who arranges for the disposal or treatment of hazardous substances at a contaminated site. Third parties may also make claims against owners, operators and/or users of disposal sites for personal injuries and property damage associated with releases of hazardous substances from those sites.
In connection with the Company’s ongoing restructuring initiatives, during the third quarter of 2012, the Company identified a $352 liability associated with the planned sale of the Cicero Avenue Facility. The liability is associated with environmental remediation costs that were identified while preparing the site for sale. During the third quarter, the Company applied for entry into the Illinois Environmental Protection Agency voluntary site remediation program. The Company intends to submit its environmental sampling data, as well as its remedial objectives plan, during the fourth quarter. The Company will continue to reevaluate its reserve balance associated with this matter as it gathers additional information. As of September 30, 2013, the accrual balance remaining is $242.
Warranty Liability
The Company provides warranty terms that range from one to seven years for various products and services supplied by the Company. In certain contracts, the Company has recourse provisions for items that would enable recovery from third parties for amounts paid to customers under warranty provisions. As of September 30, 2013 and 2012, estimated product warranty liability was $675 and $751, respectively, and is recorded within accrued liabilities in the Company’s condensed consolidated balance sheets.
The changes in the carrying amount of the Company’s total product warranty liability for the nine months ended September 30, 2013 and 2012 were as follows:
|
|
For the Nine Months Ended September 30, |
| ||||
|
|
2013 |
|
2012 |
| ||
|
|
|
|
|
| ||
Balance, beginning of period |
|
$ |
707 |
|
$ |
983 |
|
Reduction of warranty reserve |
|
(25 |
) |
(133 |
) | ||
Warranty claims |
|
(7 |
) |
(99 |
) | ||
Balance, end of period |
|
$ |
675 |
|
$ |
751 |
|
Allowance for Doubtful Accounts
Based upon past experience and judgment, the Company establishes an allowance for doubtful accounts with respect to accounts receivable. The Company’s standard allowance estimation methodology considers a number of factors that, based on its collections experience, the Company believes will have an impact on its credit risk and the collectability of its accounts receivable. These factors include individual customer circumstances, history with the Company, the length of the time period during which the account receivable has been past due and other relevant criteria.
The Company monitors its collections and write-off experience to assess whether or not adjustments to its allowance estimates are necessary. Changes in trends in any of the factors that the Company believes may impact the collectability of its accounts receivable, as noted above, or modifications to its credit standards, collection practices and other related policies may impact the Company’s allowance for doubtful accounts and its financial results. The activity in the accounts receivable allowance liability for the nine months ended September 30, 2013 and 2012 consists of the following:
|
|
For the Nine Months Ended September 30, |
| ||||
|
|
2013 |
|
2012 |
| ||
|
|
|
|
|
| ||
Balance at beginning of period |
|
$ |
453 |
|
$ |
438 |
|
Bad debt expense |
|
(38 |
) |
200 |
| ||
Write-offs |
|
(236 |
) |
(123 |
) | ||
Balance at end of period |
|
$ |
179 |
|
$ |
515 |
|
Collateral
In select instances, the Company has pledged specific inventory and machinery and equipment assets to serve as collateral on related payable or financing obligations.
Liquidated Damages
In certain customer contracts, the Company has agreed to pay liquidated damages in the event of qualifying delivery or production delays. These damages are typically limited to a specific percentage of the value of the product in question and dependent on actual losses sustained by the customer. The Company does not believe that potential exposure will have a material adverse effect on the Company’s consolidated financial position or results of operations. There was no reserve for liquidated damages as of September 30, 2013.
Workers’ Compensation Reserves
At the beginning of the third quarter of 2013, the Company began to self-insure for its workers’ compensation liabilities, including reserves for self-retained losses. Historical loss experience combined with actuarial evaluation methods and the application of risk transfer programs are used to determine required workers’ compensation reserves. The Company takes into account claims incurred but not reported when determining its workers’ compensation reserves. Although the ultimate outcome of these matters may exceed the amounts recorded and additional losses may be incurred, the Company does not believe that any additional potential exposure will have a material adverse effect on the Company’s consolidated financial position or results of operations.
Other
As of September 30, 2013, approximately 19% of the Company’s employees were covered by two collective bargaining agreements with United Steelworkers local unions in Cicero, Illinois and Neville Island, Pennsylvania, which are scheduled to remain in effect through February 2014 and October 2017, respectively.
On July 20, 2011, the Company executed a strategic financing transaction (the “NMTC Transaction”) involving the following third parties: AMCREF Fund VII, LLC (“AMCREF”), a registered community development entity; COCRF Investor VIII, LLC (“COCRF”); and Capital One, National Association (“Capital One”). The NMTC Transaction allows the Company to receive below market interest rate funds through the federal New Markets Tax Credit (“NMTC”) program; see Note 16, “New Markets Tax Credit Transaction” of these condensed consolidated financial statements. Pursuant to the NMTC Transaction, the gross loan and investment in the Gearbox Facility of $10,000 will generate $3,900 in tax credits over a period of seven years, which the NMTC Transaction makes available to Capital One. The Gearbox Facility must operate and be in compliance with the terms and conditions of the NMTC Transaction during the seven year compliance period, or the Company may be liable for the recapture of $3,900 in tax credits to which Capital One is otherwise entitled. The Company does not anticipate any tax credit recaptures will be required in connection with the NMTC Transaction.
|
NOTE 16 — NEW MARKETS TAX CREDIT TRANSACTION
On July 20, 2011, the Company received $2,280 in proceeds via the NMTC Transaction. The NMTC Transaction qualifies under the NMTC program and included a gross loan from AMCREF to Broadwind Services in the principal amount of $10,000, with a term of fifteen years and interest payable at the rate of 1.4% per annum, largely offset by a gross loan in the principal amount of $7,720 from the Company to COCRF, with a term of fifteen years and interest payable at the rate of 2.5% per annum.
The NMTC regulations permit taxpayers to claim credits against their federal income taxes for up to 39% of qualified investments in the equity of community development entities. The NMTC Transaction could generate $3,900 in tax credits, which the Company has made available under the structure by passing them through to Capital One. The proceeds have been applied to the Company’s investment in the Gearbox Facility assets and operating costs, as permitted under the NMTC program.
The Gearbox Facility must operate and be in compliance with various regulations and restrictions for seven years to comply with the terms of the NMTC Transaction, or the Company may be liable under its indemnification agreement with Capital One for the recapture of tax credits. In the event the Company does not comply with these regulations and restrictions, the NMTC program tax credits may be subject to 100% recapture for a period of seven years as provided in the IRC. The Company does not anticipate that any tax credit recapture events will occur or that it will be required to make any payments to Capital One under the indemnification agreement.
The Capital One contribution, including a loan origination payment of $320, has been included as other assets in the Company’s condensed consolidated balance sheet as of September 30, 2013. The NMTC Transaction includes a put/call provision whereby the Company may be obligated or entitled to repurchase Capital One’s interest in the third quarter of 2018. Capital One may exercise an option to put its investment and receive $130 from the Company. If Capital One does not exercise its put option, the Company can exercise a call option at the then fair market value of the call. The Company expects that Capital One will exercise the put option at the end of the tax credit recapture period. The Capital One contribution other than the amount allocated to the put obligation will be recognized as income only after the put/call is exercised and when Capital One has no ongoing interest. However, there is no legal obligation for Capital One to exercise the put, and the Company has attributed only an insignificant value to the put option included in this transaction structure.
The Company has determined that two pass-through financing entities created under this transaction structure are variable interest entities (“VIE’s”). The ongoing activities of the VIE’s—collecting and remitting interest and fees and complying with NMTC program requirements—were considered in the initial design of the NMTC Transaction and are not expected to significantly affect economic performance throughout the life of the VIE’s. In making this determination, management also considered the contractual arrangements that obligate the Company to deliver tax benefits and provide various other guarantees under the transaction structure, Capital One’s lack of a material interest in the underlying economics of the project, and the fact that the Company is obligated to absorb losses of the VIE’s. The Company has concluded that it is required to consolidate the VIE’s because the Company has both (i) the power to direct those matters that most significantly impact the activities of each VIE and (ii) the obligation to absorb losses or the right to receive benefits of each VIE.
The $262 of issue costs paid to third parties in connection with the NMTC Transaction are recorded as prepaid expenses, and are being amortized over the expected seven year term of the NMTC arrangement. Capital One’s net contribution of $2,600 is included in Long Term Debt, Net of Current Maturities in the condensed consolidated balance sheet as of September 30, 2013. Incremental costs to maintain the transaction structure during the compliance period will be recognized as they are incurred.
|
NOTE 17 — RESTRUCTURING
During the third quarter of 2011, the Company conducted a review of its business strategies and product plans based on the outlook for the economy at large, the forecast for the industries it serves, and its business environment. The Company concluded that its manufacturing footprint and fixed cost base were too large and expensive for its medium-term needs and began restructuring its facility capacity and its management structure to consolidate and increase the efficiencies of its operations.
The Company is executing a plan to reduce its facility footprint by approximately 40% through the sale and/or closure through the end of 2014 of facilities comprising a total of approximately 600,000 square feet. As part of this plan, in the third quarter of 2011, the Company determined that the Brandon Facility should be sold, and as a result the Company reclassified the Brandon Facility property and equipment to Assets Held for Sale and the related indebtedness to Liabilities Held for Sale. In April 2013 the Company completed the sale of the Brandon Facility, generating approximately $8,000 in net proceeds after closing costs and the repayment of the mortgage on the Brandon Facility. Including the sale of the Brandon Facility, the Company has so far closed or reduced its leased presence at six facilities and achieved a reduction of approximately 400,000 square feet. During 2013, the Company determined that its Clintonville, Wisconsin was no longer required in its operations and reclassified the property and equipment associated with this facility, as well as certain Gearing equipment, to Assets Held for Sale. The most significant remaining reduction relates to the anticipated closure and disposition of the Cicero Avenue Facility. The Company believes its remaining locations will be sufficient to support its Towers and Weldments, Gearing, Services and general corporate and administrative activities, while allowing for growth for the next several years.
In the third quarter of 2012, the Company identified a $352 liability associated with the planned sale of the Cicero Avenue Facility. The liability is associated with environmental remediation costs that were identified while preparing the site for sale. The expenses associated with this liability have been recorded as a restructuring charge, and as of September 30, 2013 the accrual balance remaining is $242.
Additional restructuring plans were approved in the fourth quarter of 2011. Including costs incurred to date, the Company expects that a total of approximately $13,300 of net costs will be incurred to implement this restructuring initiative. To date, the Company has incurred approximately $8,500, or 64% of the total expected restructuring costs. Of the total projected costs, the Company anticipates that a total of approximately $5,400 will consist of non-cash charges. Restructuring costs incurred to date include $900 of involuntary terminations and $1,500 of accelerated depreciation of the Cicero Avenue Facility. The table below details the Company’s total net restructuring charges incurred to date and the total net expected restructuring charges as of September 30, 2013:
|
|
2011 |
|
2012 |
|
Q1 ‘13 |
|
Q2 ‘13 |
|
Q3 ‘13 |
|
Total |
|
Total |
| |||||||
|
|
Actual |
|
Actual |
|
Actual |
|
Actual |
|
Actual |
|
Incurred |
|
Projected |
| |||||||
Capital expenditures: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Gearing |
|
$ |
5 |
|
$ |
2,072 |
|
$ |
359 |
|
$ |
817 |
|
$ |
514 |
|
$ |
3,767 |
|
$ |
5,007 |
|
Corporate |
|
— |
|
524 |
|
277 |
|
— |
|
— |
|
801 |
|
801 |
| |||||||
Total capital expenditures |
|
5 |
|
2,596 |
|
636 |
|
817 |
|
514 |
|
4,568 |
|
5,808 |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Cash expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Cost of sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Gearing |
|
131 |
|
308 |
|
157 |
|
886 |
|
840 |
|
2,322 |
|
3,295 |
| |||||||
Services |
|
— |
|
225 |
|
119 |
|
115 |
|
— |
|
459 |
|
459 |
| |||||||
Total cost of sales |
|
131 |
|
533 |
|
276 |
|
1,001 |
|
840 |
|
2,781 |
|
3,754 |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Selling, general, and administrative expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Towers |
|
— |
|
130 |
|
78 |
|
37 |
|
50 |
|
295 |
|
295 |
| |||||||
Gearing |
|
35 |
|
520 |
|
65 |
|
67 |
|
28 |
|
715 |
|
715 |
| |||||||
Services |
|
— |
|
40 |
|
— |
|
— |
|
— |
|
40 |
|
40 |
| |||||||
Corporate |
|
406 |
|
49 |
|
458 |
|
3 |
|
1 |
|
917 |
|
917 |
| |||||||
Total selling, general and administrative expenses |
|
441 |
|
739 |
|
601 |
|
107 |
|
79 |
|
1,967 |
|
1,967 |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Other - Towers and Weldments gain on Brandon Facility: |
|
— |
|
— |
|
— |
|
(3,586 |
) |
1 |
|
(3,585 |
) |
(3,585 |
) | |||||||
Non-cash expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Towers |
|
— |
|
— |
|
290 |
|
— |
|
— |
|
290 |
|
290 |
| |||||||
Gearing |
|
247 |
|
1,166 |
|
179 |
|
550 |
|
257 |
|
2,399 |
|
4,989 |
| |||||||
Services |
|
— |
|
58 |
|
(15 |
) |
— |
|
— |
|
43 |
|
43 |
| |||||||
Corporate |
|
50 |
|
— |
|
— |
|
— |
|
— |
|
50 |
|
50 |
| |||||||
Total non-cash expenses |
|
297 |
|
1,224 |
|
454 |
|
550 |
|
257 |
|
2,782 |
|
5,372 |
| |||||||
Grand total |
|
$ |
874 |
|
$ |
5,092 |
|
$ |
1,967 |
|
$ |
(1,111 |
) |
$ |
1,691 |
|
$ |
8,513 |
|
$ |
13,316 |
|
|
|
Three Months Ended |
|
Nine Months Ended |
| |||||||||
|
|
September 30, |
|
September 30, |
| ||||||||
|
|
2013 |
|
2012 |
|
2013 |
|
2012 |
| ||||
Basic earnings per share calculation: |
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Net loss |
|
$ |
(2,491 |
) |
$ |
(3,938 |
) |
$ |
(7,703 |
) |
$ |
(12,029 |
) |
|
|
|
|
|
|
|
|
|
| ||||
Weighted average number of common shares outstanding |
|
14,524,522 |
|
14,093,122 |
|
14,405,498 |
|
14,021,563 |
| ||||
Basic net loss per share |
|
$ |
(0.17 |
) |
$ |
(0.28 |
) |
$ |
(0.53 |
) |
$ |
(0.86 |
) |
|
|
|
|
|
|
|
|
|
| ||||
Diluted earnings per share calculation: |
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Net loss |
|
$ |
(2,491 |
) |
$ |
(3,938 |
) |
$ |
(7,703 |
) |
$ |
(12,029 |
) |
|
|
|
|
|
|
|
|
|
| ||||
Weighted average number of common shares outstanding |
|
14,524,522 |
|
14,093,122 |
|
14,405,498 |
|
14,021,563 |
| ||||
Common stock equivalents: |
|
|
|
|
|
|
|
|
| ||||
Stock options and unvested restricted stock units (1) |
|
— |
|
— |
|
— |
|
— |
| ||||
Weighted average number of common shares outstanding |
|
14,524,522 |
|
14,093,122 |
|
14,405,498 |
|
14,021,563 |
| ||||
Diluted net loss per share |
|
$ |
(0.17 |
) |
$ |
(0.28 |
) |
$ |
(0.53 |
) |
$ |
(0.86 |
) |
(1) Stock options and unvested restricted stock units granted and outstanding of 974,296 and 1,064,525 as of September 30, 2013 and 2012, respectively, are excluded from the computation of diluted earnings per share due to the anti-dilutive effect as a result of the Company’s net loss for these respective periods.
|
|
September 30, |
|
December 31, |
| |||
|
|
2013 |
|
2012 |
| ||
Cash and cash equivalents: |
|
|
|
|
| ||
Cash |
|
$ |
14,640 |
|
$ |
464 |
|
Municipal bonds |
|
8,186 |
|
52 |
| ||
Total cash and cash equivalents |
|
22,826 |
|
516 |
| ||
|
|
|
|
|
| ||
Short-term investments (available-for-sale): |
|
|
|
|
| ||
Municipal bonds |
|
867 |
|
— |
| ||
|
|
|
|
|
| ||
Total cash and cash equivalents and short-term investments |
|
23,693 |
|
516 |
| ||
|
|
September 30, |
|
December 31, |
| |||
|
|
2013 |
|
2012 |
| ||
|
|
|
|
|
| ||
Raw materials |
|
$ |
18,220 |
|
$ |
8,697 |
|
Work-in-process |
|
11,461 |
|
9,505 |
| ||
Finished goods |
|
4,642 |
|
4,558 |
| ||
|
|
34,323 |
|
22,760 |
| ||
Less: Reserve for excess and obsolete inventory |
|
(1,698 |
) |
(772 |
) | ||
Net inventories |
|
$ |
32,625 |
|
$ |
21,988 |
|
|
|
September 30, 2013 |
|
December 31, 2012 |
| |||||||||||||||||||
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
Weighted |
| ||||||
|
|
|
|
|
|
Net |
|
Average |
|
|
|
|
|
Net |
|
Average |
| ||||||
|
|
Cost |
|
Accumulated |
|
Book |
|
Amortization |
|
Cost |
|
Accumulated |
|
Book |
|
Amortization |
| ||||||
|
|
Basis |
|
Amortization |
|
Value |
|
Period |
|
Basis |
|
Amortization |
|
Value |
|
Period |
| ||||||
Intangible assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Customer relationships |
|
$ |
3,979 |
|
$ |
(3,584 |
) |
$ |
395 |
|
7.2 |
|
$ |
3,979 |
|
$ |
(2,444 |
) |
$ |
1,535 |
|
7.2 |
|
Trade names |
|
7,999 |
|
(2,380 |
) |
5,619 |
|
20.0 |
|
7,999 |
|
(2,080 |
) |
5,919 |
|
20.0 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Intangible assets |
|
$ |
11,978 |
|
$ |
(5,964 |
) |
$ |
6,014 |
|
15.8 |
|
$ |
11,978 |
|
$ |
(4,524 |
) |
$ |
7,454 |
|
15.8 |
|
As of September 30, 2013, estimated future amortization expense is as follows:
2013 |
|
$ |
111 |
|
2014 |
|
444 |
| |
2015 |
|
444 |
| |
2016 |
|
444 |
| |
2017 |
|
444 |
| |
2018 and thereafter |
|
4,127 |
| |
Total |
|
$ |
6,014 |
|
|
|
September 30, |
|
December 31, |
| |||
|
|
2013 |
|
2012 |
| ||
|
|
|
|
|
| ||
Accrued payroll and benefits |
|
$ |
3,821 |
|
$ |
2,913 |
|
Accrued property taxes |
|
458 |
|
367 |
| ||
Income taxes payable |
|
488 |
|
443 |
| ||
Accrued professional fees |
|
199 |
|
526 |
| ||
Accrued warranty liability |
|
675 |
|
707 |
| ||
Accrued regulatory settlement |
|
500 |
|
— |
| ||
Accrued environmental reserve |
|
242 |
|
352 |
| ||
Accrued other |
|
578 |
|
704 |
| ||
Total accrued liabilities |
|
$ |
6,961 |
|
$ |
6,012 |
|
|
|
September 30, |
|
December 31, |
| |||
|
|
2013 |
|
2012 |
| ||
|
|
|
|
|
| ||
Lines of credit |
|
$ |
— |
|
$ |
955 |
|
Term loans and notes payable |
|
3,099 |
|
3,308 |
| ||
Less: Current portion |
|
(342 |
) |
(1,307 |
) | ||
Long-term debt, net of current maturities |
|
$ |
2,757 |
|
$ |
2,956 |
|
|
|
|
September 30, 2013 |
| ||||||||||
|
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
Total |
| ||||
Assets measured on a recurring basis: |
|
|
|
|
|
|
|
|
| ||||
Municipal bonds |
|
$ |
— |
|
$ |
9,053 |
|
$ |
— |
|
$ |
9,053 |
|
Assets measured on a nonrecurring basis: |
|
|
|
|
|
|
|
|
| ||||
Gearing equipment |
|
— |
|
— |
|
1,331 |
|
1,331 |
| ||||
Clintonville, WI facility |
|
— |
|
— |
|
821 |
|
821 |
| ||||
Total assets at fair value |
|
$ |
— |
|
$ |
9,053 |
|
$ |
2,152 |
|
$ |
11,205 |
|
|
|
December 31, 2012 |
| ||||||||||
|
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
Total |
| ||||
Assets measured on a recurring basis: |
|
|
|
|
|
|
|
|
| ||||
Municipal bonds |
|
$ |
— |
|
$ |
52 |
|
$ |
— |
|
$ |
52 |
|
Total assets at fair value |
|
$ |
— |
|
$ |
52 |
|
$ |
— |
|
$ |
52 |
|
|
|
|
Options |
|
Weighted Average |
| |
Outstanding as of December 31, 2012 |
|
286,455 |
|
$ |
26.80 |
|
Granted |
|
— |
|
$ |
— |
|
Exercised |
|
— |
|
$ |
— |
|
Forfeited |
|
(37,579 |
) |
$ |
15.94 |
|
Expired |
|
(14,039 |
) |
$ |
103.43 |
|
Outstanding as of September 30, 2013 |
|
234,837 |
|
$ |
23.96 |
|
|
|
|
|
|
| |
Exercisable as of September 30, 2013 |
|
100,031 |
|
$ |
45.96 |
|
|
Number of RSU’s |
|
Weighted Average |
| ||
Outstanding as of December 31, 2012 |
|
761,662 |
|
$ |
6.01 |
|
Granted |
|
463,218 |
|
$ |
3.68 |
|
Vested |
|
(280,624 |
) |
$ |
6.76 |
|
Forfeited |
|
(204,797 |
) |
$ |
4.50 |
|
Outstanding as of September 30, 2013 |
|
739,459 |
|
$ |
4.66 |
|
|
Nine Months Ended September 30, |
| |||||
|
|
2013 |
|
2012 |
| ||
Share-based compensation expense: |
|
|
|
|
| ||
Selling, general and administrative |
|
$ |
1,438 |
|
$ |
2,079 |
|
Income tax benefit (1) |
|
— |
|
— |
| ||
Net effect of share-based compensation expense on net loss |
|
$ |
1,438 |
|
$ |
2,079 |
|
|
|
|
|
|
| ||
Reduction in earnings per share: |
|
|
|
|
| ||
Basic and diluted earnings per share (2) |
|
$ |
0.10 |
|
$ |
0.15 |
|
(1) Income tax benefit is not illustrated because the Company is currently operating at a loss and an actual income tax benefit was not realized for the nine months ended September 30, 2013 and 2012. The result of the loss situation creates a timing difference, resulting in a deferred tax asset, which is fully reserved for in the Company’s valuation allowance.
(2) Diluted earnings per share for the nine months ended September 30, 2013 and 2012 does not include common stock equivalents due to their anti-dilutive nature as a result of the Company’s net losses for these respective periods. Accordingly, basic earnings per share and diluted earnings per share are identical for all periods presented.
|
For the Three Months Ended September 30, 2013: |
|
Towers and |
|
Gearing |
|
Services |
|
Corporate |
|
Eliminations |
|
Consolidated |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Revenues from external customers |
|
$ |
48,594 |
|
$ |
10,138 |
|
$ |
3,704 |
|
$ |
— |
|
$ |
— |
|
$ |
62,436 |
|
Intersegment revenues (1) |
|
64 |
|
251 |
|
— |
|
— |
|
(315 |
) |
— |
| ||||||
Operating profit (loss) |
|
6,723 |
|
(5,653 |
) |
(1,276 |
) |
(2,197 |
) |
22 |
|
(2,381 |
) | ||||||
Depreciation and amortization |
|
941 |
|
2,014 |
|
409 |
|
15 |
|
— |
|
3,379 |
| ||||||
Capital expenditures |
|
750 |
|
2,459 |
|
7 |
|
22 |
|
— |
|
3,238 |
| ||||||
For the Three Months Ended September 30, 2012: |
|
Towers and |
|
Gearing |
|
Services |
|
Corporate |
|
Eliminations |
|
Consolidated |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Revenues from external customers |
|
$ |
37,423 |
|
$ |
10,778 |
|
$ |
6,844 |
|
$ |
— |
|
$ |
— |
|
$ |
55,045 |
|
Intersegment revenues (1) |
|
— |
|
478 |
|
55 |
|
— |
|
(533 |
) |
— |
| ||||||
Operating profit (loss) |
|
1,740 |
|
(2,637 |
) |
(570 |
) |
(2,048 |
) |
(12 |
) |
(3,527 |
) | ||||||
Depreciation and amortization |
|
942 |
|
2,995 |
|
413 |
|
17 |
|
— |
|
4,367 |
| ||||||
Capital expenditures |
|
127 |
|
893 |
|
44 |
|
71 |
|
— |
|
1,135 |
| ||||||
For the Nine Months Ended September 30, 2013: |
|
Towers and |
|
Gearing |
|
Services |
|
Corporate |
|
Eliminations |
|
Consolidated |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Revenues from external customers |
|
$ |
116,127 |
|
$ |
28,098 |
|
$ |
15,238 |
|
$ |
— |
|
$ |
— |
|
$ |
159,463 |
|
Intersegment revenues (1) |
|
67 |
|
3,456 |
|
15 |
|
— |
|
(3,538 |
) |
— |
| ||||||
Operating profit (loss) |
|
12,828 |
|
(12,394 |
) |
(3,239 |
) |
(7,386 |
) |
(19 |
) |
(10,210 |
) | ||||||
Depreciation and amortization |
|
2,841 |
|
7,469 |
|
1,064 |
|
38 |
|
— |
|
11,412 |
| ||||||
Capital expenditures |
|
1,235 |
|
4,114 |
|
240 |
|
378 |
|
— |
|
5,967 |
| ||||||
For the Nine Months Ended September 30, 2012: |
|
Towers and |
|
Gearing |
|
Services |
|
Corporate |
|
Eliminations |
|
Consolidated |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Revenues from external customers |
|
$ |
109,587 |
|
$ |
40,256 |
|
$ |
15,956 |
|
$ |
— |
|
$ |
— |
|
$ |
165,799 |
|
Intersegment revenues (1) |
|
— |
|
1,096 |
|
81 |
|
— |
|
(1,177 |
) |
— |
| ||||||
Operating profit (loss) |
|
3,306 |
|
(5,390 |
) |
(3,331 |
) |
(6,224 |
) |
12 |
|
(11,627 |
) | ||||||
Depreciation and amortization |
|
2,722 |
|
8,217 |
|
1,237 |
|
51 |
|
— |
|
12,227 |
| ||||||
Capital expenditures |
|
540 |
|
1,657 |
|
944 |
|
159 |
|
— |
|
3,300 |
| ||||||
|
|
Total Assets as of |
| ||||
|
|
September 30, |
|
December 31, |
| ||
Segments: |
|
2013 |
|
2012 |
| ||
|
|
|
|
|
| ||
Towers and Weldments |
|
$ |
51,054 |
|
$ |
50,801 |
|
Gearing |
|
70,561 |
|
71,371 |
| ||
Services |
|
15,906 |
|
13,976 |
| ||
Assets held for sale |
|
2,152 |
|
8,042 |
| ||
Corporate |
|
303,401 |
|
308,336 |
| ||
Eliminations |
|
(278,845 |
) |
(309,616 |
) | ||
|
|
$ |
164,229 |
|
$ |
142,910 |
|
(1) Intersegment revenues generally include a 10% markup over costs and primarily consist of sales from Gearing to Services. Sales from Gearing to Services totaled $3,456 and $1,096 for the nine months ended September 30, 2013 and 2012, respectively.
|
|
For the Nine Months Ended September 30, |
| |||||
|
|
2013 |
|
2012 |
| ||
|
|
|
|
|
| ||
Balance, beginning of period |
|
$ |
707 |
|
$ |
983 |
|
Reduction of warranty reserve |
|
(25 |
) |
(133 |
) | ||
Warranty claims |
|
(7 |
) |
(99 |
) | ||
Balance, end of period |
|
$ |
675 |
|
$ |
751 |
|
|
|
For the Nine Months Ended September 30, |
| ||||
|
|
2013 |
|
2012 |
| ||
|
|
|
|
|
| ||
Balance at beginning of period |
|
$ |
453 |
|
$ |
438 |
|
Bad debt expense |
|
(38 |
) |
200 |
| ||
Write-offs |
|
(236 |
) |
(123 |
) | ||
Balance at end of period |
|
$ |
179 |
|
$ |
515 |
|
|
|
|
2011 |
|
2012 |
|
Q1 ‘13 |
|
Q2 ‘13 |
|
Q3 ‘13 |
|
Total |
|
Total |
| |||||||
|
|
Actual |
|
Actual |
|
Actual |
|
Actual |
|
Actual |
|
Incurred |
|
Projected |
| |||||||
Capital expenditures: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Gearing |
|
$ |
5 |
|
$ |
2,072 |
|
$ |
359 |
|
$ |
817 |
|
$ |
514 |
|
$ |
3,767 |
|
$ |
5,007 |
|
Corporate |
|
— |
|
524 |
|
277 |
|
— |
|
— |
|
801 |
|
801 |
| |||||||
Total capital expenditures |
|
5 |
|
2,596 |
|
636 |
|
817 |
|
514 |
|
4,568 |
|
5,808 |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Cash expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Cost of sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Gearing |
|
131 |
|
308 |
|
157 |
|
886 |
|
840 |
|
2,322 |
|
3,295 |
| |||||||
Services |
|
— |
|
225 |
|
119 |
|
115 |
|
— |
|
459 |
|
459 |
| |||||||
Total cost of sales |
|
131 |
|
533 |
|
276 |
|
1,001 |
|
840 |
|
2,781 |
|
3,754 |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Selling, general, and administrative expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Towers |
|
— |
|
130 |
|
78 |
|
37 |
|
50 |
|
295 |
|
295 |
| |||||||
Gearing |
|
35 |
|
520 |
|
65 |
|
67 |
|
28 |
|
715 |
|
715 |
| |||||||
Services |
|
— |
|
40 |
|
— |
|
— |
|
— |
|
40 |
|
40 |
| |||||||
Corporate |
|
406 |
|
49 |
|
458 |
|
3 |
|
1 |
|
917 |
|
917 |
| |||||||
Total selling, general and administrative expenses |
|
441 |
|
739 |
|
601 |
|
107 |
|
79 |
|
1,967 |
|
1,967 |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Other - Towers and Weldments gain on Brandon Facility: |
|
— |
|
— |
|
— |
|
(3,586 |
) |
1 |
|
(3,585 |
) |
(3,585 |
) | |||||||
Non-cash expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Towers |
|
— |
|
— |
|
290 |
|
— |
|
— |
|
290 |
|
290 |
| |||||||
Gearing |
|
247 |
|
1,166 |
|
179 |
|
550 |
|
257 |
|
2,399 |
|
4,989 |
| |||||||
Services |
|
— |
|
58 |
|
(15 |
) |
— |
|
— |
|
43 |
|
43 |
| |||||||
Corporate |
|
50 |
|
— |
|
— |
|
— |
|
— |
|
50 |
|
50 |
| |||||||
Total non-cash expenses |
|
297 |
|
1,224 |
|
454 |
|
550 |
|
257 |
|
2,782 |
|
5,372 |
| |||||||
Grand total |
|
$ |
874 |
|
$ |
5,092 |
|
$ |
1,967 |
|
$ |
(1,111 |
) |
$ |
1,691 |
|
$ |
8,513 |
|
$ |
13,316 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|