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NOTE 1 — BASIS OF PRESENTATION
The unaudited condensed consolidated financial statements presented herein include the accounts of Broadwind Energy, Inc. (the “Company”) and its wholly-owned subsidiaries Broadwind Towers, Inc. (“Broadwind Towers”) and Brad Foote Gear Works, Inc. (“Brad Foote”). All intercompany transactions and balances have been eliminated.
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, 2016 are not necessarily indicative of the results that may be expected for the twelve months ending December 31, 2016. The December 31, 2015 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 consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015.
In September 2015, the Company’s Board of Directors (the “Board”) approved a plan to divest or otherwise exit the Company’s Services segment; consequently, this segment is now reported as a discontinued operation and the Company has revised its segment presentation to include two reportable operating segments: Towers and Weldments, and Gearing. All current and prior period financial results have been revised to reflect these changes. See Note 14, “Segment Reporting” of these condensed consolidated financial statements for further discussion of reportable segments.
There have been no material changes in the Company’s significant accounting policies during the three and nine months ended September 30, 2016 as compared to the significant accounting policies described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015. The Company changed an accounting estimate as of the beginning of 2016 to increase the salvage value of selected large machinery and equipment at Brad Foote to reflect the estimated sale value on the used machinery and equipment market. The impact of this change during the three and nine months ended September 30, 2016 was a reduction of depreciation expense of $576 and $1,838, respectively. A similar impact is expected to occur through October 2017.
Company Description
Through its subsidiaries, the Company provides technologically advanced high-value products to energy, mining and infrastructure sector customers, primarily in the United States (the “U.S.”). The Company’s most significant presence is within the U.S. wind energy industry, which accounted for 93% of the Company’s revenue during the first nine months of 2016.
Outside of the wind energy market, the Company provides precision gearing and specialty weldments to a broad range of customers for oil and gas, mining and other industrial applications.
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. The Company has incurred a total of approximately $14,200 of net costs to implement this restructuring plan.
Liquidity
The Company meets its short term liquidity needs through cash generated from operations, its available cash balances and the Credit Facility (as defined below). The Credit Facility has been undrawn since September 2015; however, the Company uses the Credit Facility from time to time to fund temporary increases in working capital.
See Note 8, “Debt and Credit Agreement” of these consolidated condensed financial statements for a complete description of the Credit Facility and the Company’s other debt.
Total debt and capital lease obligations at September 30, 2016 totaled $3,172, and the Company is obligated to make principal payments under the outstanding debt totaling $156 over the next twelve months.
Since its inception, the Company has continuously incurred annual operating losses. The Company anticipates that current cash resources, amounts available under the Credit Facility, and cash to be generated from operations will be adequate to meet the Company’s liquidity needs for at least the next twelve months. If assumptions regarding the Company’s production, sales and subsequent collections from certain several of the Company’s large customers, as well as customer deposits and revenues generated from new customer orders, are materially inconsistent with management’s expectations, the Company may in the future encounter cash flow and liquidity issues. If the Company’s operational performance deteriorates significantly, it may be unable to comply with existing financial covenants, and could lose access to the Credit Facility. This could limit the Company’s operational flexibility or require a delay in making planned investments. Any additional equity financing, if available, may be dilutive to stockholders, and additional debt financing, if available, would likely require new financial covenants or impose other restrictions on the Company. While the Company believes that it will continue to have sufficient cash available 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, or that credit facilities will be available in an amount sufficient to enable the Company to meet these financial obligations.
|
|||
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, 2016 and 2015, as follows:
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
||||||||
|
|
|
September 30, |
|
|
September 30, |
|
|
||||||||
|
|
|
2016 |
|
2015 |
|
|
2016 |
|
2015 |
|
|
||||
|
Basic earnings per share calculation: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
872 |
|
$ |
(7,613) |
|
|
$ |
21 |
|
$ |
(11,013) |
|
|
|
Weighted average number of common shares outstanding |
|
|
14,876,308 |
|
|
14,707,994 |
|
|
|
14,823,525 |
|
|
14,656,471 |
|
|
|
Basic net income (loss) per share |
|
$ |
0.06 |
|
$ |
(0.52) |
|
|
$ |
0.00 |
|
$ |
(0.75) |
|
|
|
Diluted earnings per share calculation: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
872 |
|
$ |
(7,613) |
|
|
$ |
21 |
|
$ |
(11,013) |
|
|
|
Weighted average number of common shares outstanding |
|
|
14,876,308 |
|
|
14,707,994 |
|
|
|
14,823,525 |
|
|
14,656,471 |
|
|
|
Common stock equivalents: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options and non-vested stock awards |
|
|
244,663 |
|
|
— |
|
|
|
214,136 |
|
|
— |
|
|
|
Weighted average number of common shares outstanding |
|
|
15,120,971 |
|
|
14,707,994 |
|
|
|
15,037,661 |
|
|
14,656,471 |
|
|
|
Diluted net income (loss) per share |
|
$ |
0.06 |
|
$ |
(0.52) |
|
|
$ |
0.00 |
|
$ |
(0.75) |
|
|
|
|||
NOTE 3 — DISCONTINUED OPERATIONS
The Company’s Services segment had substantial continued operating losses for several years, due to operating issues and an increasingly competitive environment due in part to increased in-sourcing of service functions by customers. In July 2015, the Board directed management to evaluate potential strategic alternatives with respect to the Services segment. In September 2015, the Board authorized management to sell substantially all of the assets of the Services segment to one or more third-party purchasers, and thereafter to liquidate or otherwise dispose of any such assets remaining unsold. The Company began negotiations to sell substantially all the assets of the Services segment in the third quarter of 2015. The exit of this business was a strategic shift that has had a major effect on the Company; therefore, the Company reclassified the related assets and liabilities of the Services segment as held for sale. In connection with the divestiture, which was substantially completed in December 2015, the Company sold $5,406 of net assets, resulting in a $2,096 loss. In addition, the Company has also recorded asset impairment charges to reduce the carrying value of the net assets held for sale to their estimated fair value. The impairment charge and loss on sale is included in “Loss before benefit for income taxes” in “Results of Discontinued Operations.”
Results of Discontinued Operations
Results of operations for the Services segment, which are reflected as discontinued operations in the Company’s condensed consolidated statements of operations for the three and nine months ended September 30, 2016 and 2015, were as follows:
|
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||
|
|
|
2016 |
|
2015 |
|
|
2016 |
|
2015 |
|
||||
|
Revenues |
|
$ |
51 |
|
$ |
3,011 |
|
|
$ |
108 |
|
$ |
7,634 |
|
|
Cost of sales |
|
|
(100) |
|
|
(3,385) |
|
|
|
(864) |
|
|
(11,280) |
|
|
Selling, general and administrative |
|
|
(1) |
|
|
(405) |
|
|
|
(83) |
|
|
(1,502) |
|
|
Interest expense, net |
|
|
(6) |
|
|
(1) |
|
|
|
5 |
|
|
(36) |
|
|
Other income and expense items |
|
|
— |
|
|
— |
|
|
|
— |
|
|
140 |
|
|
Impairment of held for sale assets and liabilities and gain on sale of assets |
|
|
(317) |
|
|
(4,450) |
|
|
|
(74) |
|
|
(4,450) |
|
|
Loss from discontinued operations before and after benefit for income taxes |
|
$ |
(373) |
|
$ |
(5,230) |
|
|
$ |
(908) |
|
$ |
(9,494) |
|
The Company was notified of two warranty claims, which resulted in an additional $427 of warranty expense recorded during the second quarter of 2016; the first of the warranty claims was resolved during the three months ended September 30, 2016. The Company also reviewed the status of remaining inventory, which resulted in $216 of impairment expense during the three months ended September 30, 2016.
Assets and Liabilities Held for Sale
Assets and liabilities classified as held for sale in the Company’s condensed consolidated balance sheets as of September 30, 2016 and December 31, 2015 include the following:
|
|
|
September 30, |
|
December 31, |
|
||
|
|
|
2016 |
|
2015 |
|
||
|
Assets: |
|
|
|
|
|
|
|
|
Accounts receivable, net |
|
$ |
205 |
|
$ |
2,119 |
|
|
Inventories, net |
|
|
842 |
|
|
2,118 |
|
|
Prepaid expenses and other current assets |
|
|
73 |
|
|
606 |
|
|
Assets Held For Sale Related To Discontinued Operations |
|
|
1,120 |
|
|
4,843 |
|
|
Impairment of discontinued assets held for sale |
|
|
(607) |
|
|
(1,500) |
|
|
Total Assets Held For Sale Related To Discontinued Operations |
|
$ |
513 |
|
$ |
3,343 |
|
|
Liabilities: |
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
22 |
|
$ |
367 |
|
|
Accrued liabilities |
|
|
138 |
|
|
433 |
|
|
Customer deposits and other current obligations |
|
|
4 |
|
|
49 |
|
|
Other long-term liabilities |
|
|
4 |
|
|
17 |
|
|
Total Liabilities Held For Sale Related To Discontinued Operations |
|
$ |
168 |
|
$ |
866 |
|
|
|||
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 as interest income in the Company’s condensed consolidated statements of operations. As of September 30, 2016 and December 31, 2015, cash and cash equivalents totaled $8,091 and $6,436, respectively, and short-term investments totaled $16,213 and $6,179, respectively. The components of cash and cash equivalents and short-term investments as of September 30, 2016 and December 31, 2015 are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
December 31, |
|
||
|
|
|
2016 |
|
2015 |
|
||
|
Cash and cash equivalents: |
|
|
|
|
|
|
|
|
Cash |
|
$ |
5,278 |
|
$ |
4,614 |
|
|
Money market funds |
|
|
2,210 |
|
|
199 |
|
|
Corporate & municipal bonds |
|
|
603 |
|
|
1,623 |
|
|
Total cash and cash equivalents |
|
|
8,091 |
|
|
6,436 |
|
|
Short-term investments (available-for-sale): |
|
|
|
|
|
|
|
|
Corporate & municipal bonds |
|
|
16,213 |
|
|
6,179 |
|
|
Total cash and cash equivalents and short-term investments |
|
$ |
24,304 |
|
$ |
12,615 |
|
|
|||
NOTE 5 — INVENTORIES
The components of inventories as of September 30, 2016 and December 31, 2015 are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
December 31, |
|
||
|
|
|
2016 |
|
2015 |
|
||
|
Raw materials |
|
$ |
15,118 |
|
$ |
14,868 |
|
|
Work-in-process |
|
|
6,384 |
|
|
8,540 |
|
|
Finished goods |
|
|
6,687 |
|
|
2,661 |
|
|
|
|
|
28,189 |
|
|
26,069 |
|
|
Less: Reserve for excess and obsolete inventory |
|
|
(1,958) |
|
|
(1,850) |
|
|
Net inventories |
|
$ |
26,231 |
|
$ |
24,219 |
|
|
|||
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 15 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 third quarter of 2016, the Company continued to identify triggering events associated with Brad Foote’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 undiscounted cash flows based upon the Company’s most recent projections were less than the carrying amount of the relevant asset groups within the Gearing segment, and a possible impairment to these assets was indicated under step one of Accounting Standards Codifications 360 (“ASC 360”). In step two of ASC 360 testing, the Company compared the asset group’s estimated fair values with the corresponding carrying amount of the asset group. Under step two, the Company assumed that the asset group would be exchanged in an orderly transaction between market participants and that such exchange would represent the highest and best use of this asset group. Based on the step two analysis, the Company determined that no impairment to this asset group was indicated as of September 30, 2016.
As of September 30, 2016 and December 31, 2015, the cost basis, accumulated amortization and net book value of intangible assets were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2016 |
|
December 31, 2015 |
|
||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
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 |
|
$ |
(3,715) |
|
$ |
264 |
|
7.2 |
|
$ |
3,979 |
|
$ |
(3,682) |
|
$ |
297 |
|
7.2 |
|
|
Trade names |
|
|
7,999 |
|
|
(3,580) |
|
|
4,419 |
|
20.0 |
|
|
7,999 |
|
|
(3,280) |
|
|
4,719 |
|
20.0 |
|
|
Intangible assets |
|
$ |
11,978 |
|
$ |
(7,295) |
|
$ |
4,683 |
|
15.8 |
|
$ |
11,978 |
|
$ |
(6,962) |
|
$ |
5,016 |
|
15.8 |
|
As of September 30, 2016, estimated future amortization expense is as follows:
|
|
|
|
|
|
|
2016 |
|
$ |
111 |
|
|
2017 |
|
|
444 |
|
|
2018 |
|
|
444 |
|
|
2019 |
|
|
444 |
|
|
2020 |
|
|
444 |
|
|
2021 and thereafter |
|
|
2,796 |
|
|
Total |
|
$ |
4,683 |
|
|
|||
NOTE 7 — ACCRUED LIABILITIES
Accrued liabilities as of September 30, 2016 and December 31, 2015 consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
December 31, |
|
||
|
|
|
2016 |
|
2015 |
|
||
|
Accrued payroll and benefits |
|
$ |
4,419 |
|
$ |
3,675 |
|
|
Accrued property taxes |
|
|
498 |
|
|
128 |
|
|
Income taxes payable |
|
|
118 |
|
|
155 |
|
|
Accrued professional fees |
|
|
100 |
|
|
74 |
|
|
Accrued warranty liability |
|
|
561 |
|
|
601 |
|
|
Accrued regulatory settlement |
|
|
500 |
|
|
500 |
|
|
Accrued environmental reserve |
|
|
1,252 |
|
|
1,300 |
|
|
Accrued self-insurance reserve |
|
|
1,233 |
|
|
1,464 |
|
|
Accrued other |
|
|
235 |
|
|
237 |
|
|
Total accrued liabilities |
|
$ |
8,916 |
|
$ |
8,134 |
|
|
|||
NOTE 8 — DEBT AND CREDIT AGREEMENTS
The Company’s outstanding debt balances as of September 30, 2016 and December 31, 2015 consisted of the following:
|
|
|
September 30, |
|
December 31, |
|
||
|
|
|
2016 |
|
2015 |
|
||
|
Term loans and notes payable |
|
$ |
2,600 |
|
$ |
5,399 |
|
|
Less: Current portion |
|
|
— |
|
|
(2,799) |
|
|
Long-term debt, net of current maturities |
|
$ |
2,600 |
|
$ |
2,600 |
|
Credit Facilities
AloStar Credit Facility
On August 23, 2012, the Company established a $20,000 secured revolving line of credit (the “Credit Facility”) with AloStar Bank of Commerce (“AloStar”). On June 29, 2015, the Credit Facility was amended to extend the maturity date to August 31, 2016, modify the applicable interest rate and minimum quarterly interest charges and convert $5,000 of the original Credit Facility amount to a term loan (the “Term Loan”).
Under the Credit Facility, AloStar advanced funds when requested against a borrowing base consisting of approximately 85% of the face value of eligible accounts receivable of the Company and approximately 30% of the book value of eligible inventory of the Company. Borrowings under the Credit Facility bore interest at a per annum rate equal to the one-month London Interbank Offered Rate (“LIBOR”) plus a margin of 3.25%, subject to a minimum. The Company also paid 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.
AloStar funded the full amount of the Term Loan on June 30, 2015. Borrowings under the Term Loan bore interest at a per annum rate equal to 3.50% plus the applicable daily weighted average LIBOR. The Term Loan payments were amortized at approximately $60 per month. In June 2016, the Company paid off the remaining $2,441 balance of the Term Loan.
In connection with the Credit Facility, the Company entered into a Loan and Security Agreement with AloStar dated August 23, 2012 (as amended, the “Loan Agreement”), which contained customary representations and warranties. The Loan Agreement also contained a requirement that the Company, on a consolidated basis, maintain a minimum monthly fixed charge coverage ratio (the “Fixed Charge Coverage Ratio Covenant”) and achieve minimum monthly earnings before interest, taxes, depreciation, amortization, restructuring and share-based payments (the “Adjusted EBITDA Covenant”), along with other customary restrictive covenants, certain of which were subject to materiality thresholds, baskets and customary exceptions and qualifications.
The obligations under the Loan Agreement were secured by, subject to certain exclusions, (i) a first priority security interest in all of the accounts receivable, 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 Brad Foote’s equipment.
On February 23, 2016, the Company and AloStar executed a Ninth Amendment to Loan and Security Agreement (the “Ninth Amendment”), which waived the Company’s non-compliance with the Adjusted EBITDA Covenant as of December 31, 2015, amended the Adjusted EBITDA Covenant going forward, provided that the Fixed Charge Coverage Ratio Covenant would be recalculated for future periods commencing with the quarter ending June 30, 2016, reduced the amount of the Credit Facility to $10,000 and extended the maturity date of the Credit Facility to February 28, 2017. The Ninth Amendment also contained a liquidity requirement of $3,500 and established a reserve against the borrowing base in an amount equal to the outstanding balance of the Term Loan at any given time.
On August 29, 2016, the Company and AloStar executed a Tenth Amendment to Loan and Security Agreement (the “Tenth Amendment”), which removed the liquidity requirement set forth in the Ninth Amendment and removed the exclusion of certain customer accounts receivables.
As of September 30, 2016, there was no outstanding indebtedness under the Credit Facility, the Company had the ability to borrow up to $3,281 thereunder, the per annum interest rate thereunder was 4.25%, and there was no outstanding indebtedness under the Term Loan which was repaid in full in June 2016.
On October 26, 2016, the Company established a $20,000 three-year secured revolving line of credit (the “New Credit Facility”) with The PrivateBank and Trust Company (“PrivateBank”) to replace the Credit Facility with AloStar. Under the New Credit Facility, PrivateBank will advance funds when requested against a borrowing base consisting of up to 85% of the face value of eligible accounts of the Company, up to 50% of the book value of eligible inventory of the Company and up to 50% of the appraised value of eligible machinery, equipment and certain real property up to $10,000. Upon the Company achieving at least $7,000 in EBITDA during the 2016 fiscal year, the Company can elect to increase the New Credit Facility by an additional $5,000. Borrowings under the New Credit Facility bear interest at a per annum rate equal to the applicable LIBOR plus a margin ranging from 2.25% to 3.00%, which is based on the Company’s trailing twelve-month EBITDA. The Company will also pay an unused facility fee to PrivateBank equal to 0.50% per annum on the unused portion of the New Credit Facility, along with other standard fees. The obligations under the New Credit Facility are be secured by, subject to certain exclusions, (i) a first priority security interest in all accounts receivable, inventory, equipment, cash and investment property, and (ii) a mortgage on the Abilene, Texas tower facility.
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. The Company has no other term loans outstanding.
|
|||
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 corporate and municipal bonds, the Company notes 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 the Gearing segment’s assets. The Company used real estate appraisals to value the Clintonville, Wisconsin facility formerly owned by Broadwind Towers (the “Clintonville Facility”).
The following tables represent the fair values of the Company’s financial assets as of September 30, 2016 and December 31, 2015:
|
|
|
September 30, 2016 |
|
||||||||||
|
|
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
Total |
|
||||
|
Assets measured on a recurring basis: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate & municipal bonds and money market funds |
|
$ |
— |
|
$ |
19,026 |
|
$ |
— |
|
$ |
19,026 |
|
|
Assets measured on a nonrecurring basis: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gearing equipment |
|
|
— |
|
|
— |
|
|
353 |
|
|
353 |
|
|
Gearing Cicero Ave. facility |
|
|
— |
|
|
— |
|
|
560 |
|
|
560 |
|
|
Services assets |
|
|
— |
|
|
— |
|
|
513 |
|
|
513 |
|
|
Total assets at fair value |
|
$ |
— |
|
$ |
19,026 |
|
$ |
1,426 |
|
$ |
20,452 |
|
|
|
|
December 31, 2015 |
|
||||||||||
|
|
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
Total |
|
||||
|
Assets measured on a recurring basis: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate & municipal bonds and money market funds |
|
$ |
— |
|
$ |
8,001 |
|
$ |
— |
|
$ |
8,001 |
|
|
Assets measured on a nonrecurring basis: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gearing equipment |
|
|
— |
|
|
— |
|
|
506 |
|
|
506 |
|
|
Clintonville, WI facility |
|
|
— |
|
|
— |
|
|
554 |
|
|
554 |
|
|
Gearing Cicero Ave. facility |
|
|
— |
|
|
— |
|
|
560 |
|
|
560 |
|
|
Services assets |
|
|
— |
|
|
— |
|
|
3,343 |
|
|
3,343 |
|
|
Total assets at fair value |
|
$ |
— |
|
$ |
8,001 |
|
$ |
4,963 |
|
$ |
12,964 |
|
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 an undiscounted cash flow analysis, a market based approach based on the Company’s market capitalization and market value third-party appraisals, and other subjective assumptions. To the extent assumptions 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 continued operating losses within the Gearing segment in the nine month period ending September 30, 2016 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, 2016 assessment, the recoverable amount of undiscounted cash flows based upon the Company’s most recent projections were less than the carrying amount of the relevant asset groups within the Gearing segment and failed this step one of the impairment test. In step two, the Company compared the asset group’s estimated fair values with the corresponding carrying amount of the asset group. Under step two, the Company assumed that the asset group would be exchanged in an orderly transaction between market participants and that such exchange would represent the highest and best use of this asset group. Based on the step two analysis, the Company determined that no impairment to this asset group was indicated.
The Clintonville Facility was reclassified as an Asset Held for Sale in 2013 due to the decision to vacate the property and offer it for sale. At that time, the property was written down by $288 to adjust the carrying value of the Clintonville Facility property to fair value. The Company recorded an additional impairment of $186 in 2015 to value the Clintonville Facility property at its fair value. The Clintonville Facility was subsequently sold during the second quarter of 2016 at its fair value.
The investment in select Gearing equipment, shown as $506 at December 31, 2015, is associated with the Company’s activities to update and consolidate the Gearing segment asset base. The reduction in the carrying value to $353 at September 30, 2016, reflects the sale of a portion of the surplus assets.
The carrying value of the land and building comprising one of Brad Foote’s facilities located in Cicero, Illinois (the “Cicero Avenue Facility”) of $560 reflects the expected proceeds associated with selling this facility after environment remediation is complete. As the Cicero Avenue Facility is not immediately available for sale, it has not been classified as Assets Held for Sale.
Following the Board’s approval of a plan to divest the Company’s Services segment, the Company has been able to evaluate the value of the segment’s assets on the open market; therefore, the Company has utilized this measurement to determine the fair value of the Services segment assets.
|
|||
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, 2016, the Company had no net deferred income taxes due to the full recorded valuation allowance. During the nine months ended September 30, 2016, the Company recorded a benefit for income taxes of ($16), compared to a benefit for income taxes of ($11) during the nine months ended September 30, 2015.
The Company files income tax returns in U.S. federal and state jurisdictions. As of September 30, 2016, 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, 2015, the Company had net operating loss (“NOL”) carryforwards of $202,107 expiring in various years through 2035.
It is reasonably possible that unrecognized tax benefits will decrease by up to approximately $77 as a result of the expiration of the applicable statutes of limitations within the next twelve 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 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.
On February 13, 2013, the Board adopted a Stockholder Rights Plan (as amended, the “Rights Plan”) designed to preserve the Company’s substantial tax assets associated with NOL carryforwards under IRC Section 382. The Rights Plan was subsequently ratified by the Company’s stockholders at the Company’s 2013 Annual Meeting of Stockholders. The Rights Plan was amended and extended for an additional three years on February 5, 2016, and such extension was subsequently ratified by the Company’s stockholders at the Company’s 2016 Annual Meeting of Stockholders.
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 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 one‑thousandth of a share of the Company’s Series A Junior Participating Preferred Stock at an exercise price of $9.81 (as amended) 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 Board 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 after that date.
As of September 30, 2016, the Company had $87 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 had accrued interest and penalties of $53 as of September 30, 2016. As of December 31, 2015, the Company had unrecognized tax benefits of $140, of which $84 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 Board 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, 2016, the Company had reserved 35,483 shares for issuance upon the exercise of stock options outstanding and no shares for issuance upon the vesting of restricted stock unit (“RSU”) awards outstanding. As of September 30, 2016, 253,659 shares of common stock reserved for stock options and RSU awards under the 2007 EIP had been issued in the form of common stock.
2012 Equity Incentive Plan
The Company has granted incentive stock options and other equity awards pursuant to the Broadwind Energy, Inc. 2012 Equity Incentive Plan (the “2012 EIP”), which was approved by the Board in March 2012 and by the Company’s stockholders in May 2012.
The 2012 EIP reserved 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, 2016, the Company had reserved 37,205 shares for issuance upon the exercise of stock options outstanding and 65,459 shares for issuance upon the vesting of RSU awards outstanding. As of September 30, 2016, 583,435 shares of common stock reserved for stock options and RSU awards under the 2012 EIP had been issued in the form of common stock.
2015 Equity Incentive Plan
The Company has granted equity awards pursuant to the Broadwind Energy, Inc. 2015 Equity Incentive Plan (the “2015 EIP” together with the 2007 EIP and the 2012 EIP, the “Equity Incentive Plans”), which was approved by the Board in February 2015 and by the Company’s stockholders in April 2015. The purposes of the Equity Incentive Plans are to (i) align the interests of the Company’s stockholders and recipients of awards under the Equity Incentive Plans by increasing the proprietary interest of such recipients in the Company’s growth and success; (ii) advance the interests of the Company by attracting and retaining officers, other employees, non-employee directors and independent contractors; and (iii) motivate such persons to act in the long-term best interests of the Company and its stockholders. Under the Equity Incentive Plans, 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 RSUs; and (v) performance awards.
The 2015 EIP reserves 1,100,000 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, 2016, the Company had reserved 442,706 shares for issuance upon the vesting of RSU awards outstanding. As of September 30, 2016, 44,606 shares of common stock reserved for RSU awards under the 2015 EIP had 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 (RSUs). The granting of RSUs is provided for under the Equity Incentive Plans. RSUs 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, 2016 under the Equity Incentive Plans, as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average |
|
|
|
|
|
Options |
|
Exercise Price |
|
|
|
Outstanding as of December 31, 2015 |
|
144,197 |
|
$ |
17.98 |
|
|
Granted |
|
— |
|
$ |
— |
|
|
Exercised |
|
(5,647) |
|
$ |
3.39 |
|
|
Forfeited |
|
— |
|
$ |
— |
|
|
Expired |
|
(65,862) |
|
$ |
8.65 |
|
|
Outstanding as of September 30, 2016 |
|
72,688 |
|
$ |
27.56 |
|
|
Exercisable as of September 30, 2016 |
|
72,688 |
|
$ |
27.56 |
|
The following table summarizes RSU activity during the nine months ended September 30, 2016 under the Equity Incentive Plans, as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average |
|
|
|
|
|
Number of |
|
Grant-Date Fair Value |
|
|
|
|
|
Shares |
|
Per Share |
|
|
|
Unvested as of December 31, 2015 |
|
377,810 |
|
$ |
4.87 |
|
|
Granted |
|
411,910 |
|
$ |
2.84 |
|
|
Vested |
|
(193,509) |
|
$ |
4.79 |
|
|
Forfeited |
|
(88,046) |
|
$ |
3.21 |
|
|
Unvested as of September 30, 2016 |
|
508,165 |
|
$ |
3.55 |
|
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 expected volatility of the price of the Company’s stock 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, 2016.
The Company utilized a forfeiture rate of 25% during the nine months ended September 30, 2016 and 2015 for estimating the forfeitures of equity 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, 2016 and 2015, as follows:
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, |
|
||||
|
|
|
2016 |
|
2015 |
|
||
|
Share-based compensation expense: |
|
|
|
|
|
|
|
|
Cost of sales |
|
$ |
63 |
|
$ |
105 |
|
|
Selling, general and administrative |
|
|
529 |
|
|
795 |
|
|
Income tax benefit (1) |
|
|
— |
|
|
— |
|
|
Net effect of share-based compensation expense on net loss |
|
$ |
592 |
|
$ |
900 |
|
|
Reduction in earnings per share: |
|
|
|
|
|
|
|
|
Basic earnings per share |
|
$ |
0.04 |
|
$ |
0.06 |
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share |
|
$ |
0.04 |
|
$ |
0.06 |
|
|
(1) |
Income tax benefit is not illustrated because the Company is currently in a full tax valuation allowance position and an actual income tax benefit was not realized for the nine months ended September 30, 2016 and 2015. The result of the income (loss) situation creates a timing difference, resulting in a deferred tax asset, which is fully reserved for in the Company’s valuation allowance. |
As of September 30, 2016, the Company estimates that pre-tax compensation expense for all unvested share-based awards, including both stock options and RSUs, in the amount of approximately $1,246 will be recognized through 2019. 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
The Company is party to a variety of legal proceedings that arise in the normal course of its business. While the results of these legal proceedings cannot be predicted with certainty, management believes that the final outcome of these proceedings will not have a material adverse effect, individually or in the aggregate, on the Company’s results of operations, financial condition or cash flows. 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 condition or cash flows. It is possible that if one or more of such matters 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 financial condition and 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 the accounting standards issued or effective in the current fiscal year may be applicable to it, the Company believes that none of the new standards have a significant impact on its condensed consolidated financial statements, except as discussed below. The Company is currently evaluating the impact of the new standards on its condensed consolidated financial statements.
In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers, which amends the guidance in former ASC Topic 605, Revenue Recognition, and provides a single, comprehensive revenue recognition model for all contracts with customers. This standard contains principles that an entity will apply to determine the measurement of revenue and timing of when it is recognized. The entity will recognize revenue to reflect the transfer of goods or services to customers at an amount that the entity expects to be entitled to in exchange for those goods or services. This update permits companies to either apply the requirements retrospectively to all prior periods presented, or apply the requirement in the year of adoption, through a cumulative adjustment. In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606) Deferral of the Effective Date, which amends the previously issued ASU to provide for a one year deferral from the original effective date. This update is effective for public business entities for annual reporting periods beginning after December 15, 2017, including interim periods within those reporting periods. Early adoption is permitted for annual reporting periods beginning on or after December 15, 2016, including interim periods within that annual period. The Company will adopt the provisions of ASU 2014-09 for the fiscal year beginning January 1, 2018, and is currently evaluating the impact on its condensed consolidated financial statements.
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which is intended to improve financial reporting about leasing transactions. This ASU will require organizations (“lessees”) that lease assets with lease terms of more than twelve months to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases. Organizations that own the assets leased by lessees (“lessors”) will remain largely unchanged from current guidance. In addition, this ASU will require disclosures to help investors and other financial statement users better understand the amount, timing and uncertainty of cash flows arising from leases. This update will be effective for annual reporting periods beginning after December 15, 2018 and interim periods within those fiscal years, with early adoption permitted. The Company is currently evaluating the impact of this update on its condensed consolidated financial statements.
|
|||
NOTE 14 — SEGMENT REPORTING
The Company is organized into reporting segments based on the nature of the products 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. In September 2015, the Board approved a plan to divest or otherwise exit the Company’s Services segment; consequently, this segment is now reported as a discontinued operation and the Company has revised its segment presentation to include two reportable operating segments: Towers and Weldments, and Gearing. All current and prior period financial results have been revised to reflect these changes. 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 multiple megawatt (“MW”) wind turbines, as well as other specialty welded structures for mining and other industrial customers. 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 up to approximately 500 towers, sufficient to support turbines generating more than 1,000 MW of power.
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 processes in Neville Island, Pennsylvania.
Corporate and Other
“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, 2016 and 2015 is as follows:
|
|
|
Towers and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weldments |
|
Gearing |
|
Corporate |
|
|
Eliminations |
|
Consolidated |
|
||||
|
For the Three Months Ended September 30, 2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from external customers |
|
$ |
37,970 |
|
$ |
4,582 |
|
$ |
— |
|
$ |
— |
|
$ |
42,552 |
|
|
Operating profit (loss) |
|
|
4,050 |
|
|
(692) |
|
|
(1,998) |
|
|
— |
|
|
1,360 |
|
|
Depreciation and amortization |
|
|
1,007 |
|
|
638 |
|
|
50 |
|
|
— |
|
|
1,695 |
|
|
Capital expenditures |
|
|
1,984 |
|
|
39 |
|
|
17 |
|
|
— |
|
|
2,040 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Towers and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weldments |
|
Gearing |
|
Corporate |
|
Eliminations |
|
Consolidated |
|
|||||
|
For the Nine Months Ended September 30, 2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from external customers |
|
$ |
117,948 |
|
$ |
14,741 |
|
$ |
— |
|
$ |
— |
|
$ |
132,689 |
|
|
Intersegment revenues |
|
|
— |
|
|
18 |
|
|
— |
|
|
(18) |
|
|
— |
|
|
Operating profit (loss) |
|
|
10,016 |
|
|
(3,083) |
|
|
(5,616) |
|
|
— |
|
|
1,317 |
|
|
Depreciation and amortization |
|
|
3,066 |
|
|
1,918 |
|
|
154 |
|
|
— |
|
|
5,138 |
|
|
Capital expenditures |
|
|
3,593 |
|
|
368 |
|
|
45 |
|
|
— |
|
|
4,006 |
|
|
|
|
Towers and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weldments |
|
Gearing |
|
Corporate |
|
Eliminations |
|
Consolidated |
|
|||||
|
For the Three Months Ended September 30, 2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from external customers |
|
$ |
42,865 |
|
$ |
6,926 |
|
$ |
— |
|
$ |
— |
|
$ |
49,791 |
|
|
Intersegment revenues |
|
|
78 |
|
|
258 |
|
|
— |
|
|
(336) |
|
|
— |
|
|
Operating profit (loss) |
|
|
2,235 |
|
|
(2,646) |
|
|
(1,724) |
|
|
— |
|
|
(2,135) |
|
|
Depreciation and amortization |
|
|
1,132 |
|
|
1,216 |
|
|
52 |
|
|
— |
|
|
2,400 |
|
|
Capital expenditures |
|
|
812 |
|
|
134 |
|
|
9 |
|
|
— |
|
|
955 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Towers and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weldments |
|
Gearing |
|
Corporate |
|
Eliminations |
|
Consolidated |
|
|||||
|
For the Nine Months Ended September 30, 2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from external customers |
|
$ |
138,657 |
|
$ |
22,926 |
|
$ |
— |
|
$ |
— |
|
$ |
161,583 |
|
|
Intersegment revenues |
|
|
346 |
|
|
832 |
|
|
— |
|
|
(1,178) |
|
|
— |
|
|
Operating profit (loss) |
|
|
10,525 |
|
|
(5,380) |
|
|
(6,033) |
|
|
5 |
|
|
(883) |
|
|
Depreciation and amortization |
|
|
2,961 |
|
|
3,757 |
|
|
142 |
|
|
— |
|
|
6,860 |
|
|
Capital expenditures |
|
|
1,599 |
|
|
588 |
|
|
95 |
|
|
— |
|
|
2,282 |
|
|
|
|
Total Assets as of |
|
||||
|
|
|
September 30, |
|
December 31, |
|
||
|
Segments: |
|
2016 |
|
2015 |
|
||
|
Towers and Weldments |
|
$ |
46,500 |
|
$ |
38,068 |
|
|
Gearing |
|
|
36,325 |
|
|
39,229 |
|
|
Assets held for sale |
|
|
866 |
|
|
4,403 |
|
|
Corporate |
|
|
244,736 |
|
|
252,895 |
|
|
Eliminations |
|
|
(202,791) |
|
|
(224,688) |
|
|
|
|
$ |
125,636 |
|
$ |
109,907 |
|
|
|||
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 may 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 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 or operators of sites and 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 restructuring initiatives, during the third quarter of 2012, the Company identified a 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 2013, the Company applied for and was accepted into the Illinois Environmental Protection Agency (“IEPA”) voluntary site remediation program. In the first quarter of 2014, the Company completed a comprehensive review of remedial options for the Cicero Avenue Facility and selected a preferred remediation technology. As part of the voluntary site remediation program, the Company submitted a plan to the IEPA for approval to conduct a pilot study to test the effectiveness of the selected remediation technology. In the third quarter of 2015, the Company obtained additional information regarding potential remediation options and modified the remediation plan, which caused an increase in the estimated cost of remediation and resulted in the Company increasing its reserve associated with this matter by $874. The Company is currently reviewing these options and will continue to reevaluate its remediation activities and the reserve balance associated with this matter as additional information is obtained. As of September 30, 2016, the accrual balance associated with this matter totaled $1,252.
Warranty Liability
The Company provides warranty terms that range from one to five years for various products 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, 2016 and 2015, estimated product warranty liability was $561 and $623, 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, 2016 and 2015 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
For the Nine Months Ended September 30, |
|
||||
|
2016 |
2015 |
||||||
|
Balance, beginning of period |
|
$ |
601 |
|
$ |
1,054 |
|
|
Addition to (reduction of) warranty reserve |
|
|
(21) |
|
|
(60) |
|
|
Warranty claims |
|
|
(19) |
|
|
(371) |
|
|
Balance, end of period |
|
$ |
561 |
|
$ |
623 |
|
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, 2016 and 2015 consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
For the Nine Months Ended September 30, |
|
||||
|
|
|
2016 |
|
2015 |
|
||
|
Balance at beginning of period |
|
$ |
84 |
|
$ |
81 |
|
|
Bad debt expense |
|
|
82 |
|
|
76 |
|
|
Write-offs |
|
|
(5) |
|
|
(54) |
|
|
Balance at end of period |
|
$ |
161 |
|
$ |
103 |
|
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/or are dependent on actual losses sustained by the customer. The Company does not believe that this 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, 2016.
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 for such liabilities will have a material adverse effect on the Company’s consolidated financial position or results of operations. Although the Company entered into a guaranteed cost program at the beginning of the third quarter of 2016, the Company maintained a liability for the trailing claims from the self-insured policy. As of September 30, 2016, the Company had $1,233 accrued for self-insured workers’ compensation liabilities.
Other
As of December 31, 2015, approximately 14% of the Company’s employees were covered by two collective bargaining agreements with local unions at Brad Foote’s Cicero, Illinois and Neville Island, Pennsylvania locations. The current collective bargaining agreement with the Cicero union is expected to remain in effect through February 2018. The current collective bargaining agreement with the Neville Island union is expected to remain in effect through October 2017.
See Note 16, “New Markets Tax Credit Transaction” of these condensed consolidated financial statements for a discussion of a strategic financing transaction (the “NMTC Transaction”) which originally related to the Company’s drivetrain service center in Abilene, Texas (the “Abilene Gearbox Facility”), and was amended in August 2015 to also include the activities of the Company’s heavy industries business conducted at the same location in Abilene, Texas (the “Abilene Heavy Industries Facility”). The Abilene Gearbox Facility 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. The Abilene Heavy Industries Facility focuses on heavy weldment fabrication for industries including those related to compressed natural gas distribution. Pursuant to the NMTC Transaction, the gross loan and investment in the Abilene Heavy Industries Facility and the Abilene Gearbox Facility of $10,000 is expected to generate $3,900 in tax credits over a period of seven years, which the NMTC Transaction makes available to Capital One, National Association (“Capital One”). The Abilene Heavy Industries Facility and/or the Abilene Gearbox Facility must operate and remain 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 credit recaptures will be required in connection with the NMTC Transaction.
|
|||
NOTE 16 — NEW MARKETS TAX CREDIT TRANSACTION
On July 20, 2011, the Company executed the NMTC Transaction, which was amended on August 24, 2015, involving the following third parties: AMCREF Fund VII, LLC (“AMCREF”), a registered community development entity; COCRF Investor VIII, LLC (“COCRF”); and Capital One. The NMTC Transaction allows the Company to receive below market interest rate funds through the federal New Markets Tax Credit (“NMTC”) program. The Company received $2,280 in proceeds via the NMTC Transaction. The NMTC Transaction qualifies under the NMTC program and includes a gross loan from AMCREF to the Company’s wholly-owned subsidiary Broadwind Services, LLC 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 August 2015 amendment did not change the financial terms of the NMTC Transaction, but did add the activities and assets of the Abilene Heavy Industries Facility to the NMTC Transaction and allow for the possible sale of the Abilene Gearbox Facility assets, provided that the proceeds of such sale are re-invested in the Abilene Heavy Industries Facility.
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 Abilene Gearbox Facility assets and associated operating costs and in the assets of the Abilene Heavy Industries Facility, as permitted under the amended NMTC Transaction.
The Abilene Heavy Industries Facility and/or the Abilene Gearbox Facility must operate and remain in compliance with various regulations and restrictions through September 2018, the end of the seven year compliance period, 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, 2016. 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 to the Company and receive $130 from the Company at that time. 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 the NMTC Transaction structure are variable interest entities (“VIEs”). The ongoing activities of the VIEs—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 VIEs. 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 NMTC 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 VIEs. The Company has concluded that it is required to consolidate the VIEs 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, 2016. Incremental costs to maintain the transaction structure during the compliance period will be recognized as they are incurred.
|
|||
NOTE 17 — RESTRUCTURING
The Company’s total net restructuring charges incurred to date are detailed below:
|
|
|
2011 |
|
2012 |
|
2013 |
|
2014 |
|
2015 |
|
Total |
|
||||||
|
|
|
Actual |
|
Actual |
|
Actual |
|
Actual |
|
Actual |
|
Incurred |
|
||||||
|
Restructuring charges: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures |
|
$ |
5 |
|
$ |
2,596 |
|
$ |
2,352 |
|
$ |
674 |
|
$ |
— |
|
$ |
5,627 |
|
|
Gain on sale of Brandon, SD Facility |
|
|
— |
|
|
— |
|
|
(3,585) |
|
|
— |
|
|
— |
|
|
(3,585) |
|
|
Accelerated depreciation |
|
|
— |
|
|
819 |
|
|
898 |
|
|
— |
|
|
— |
|
|
1,717 |
|
|
Severance |
|
|
430 |
|
|
— |
|
|
435 |
|
|
— |
|
|
— |
|
|
865 |
|
|
Impairment charges |
|
|
— |
|
|
— |
|
|
2,365 |
|
|
— |
|
|
186 |
|
|
2,551 |
|
|
Moving and other exit-related costs |
|
|
439 |
|
|
1,354 |
|
|
2,866 |
|
|
1,479 |
|
|
874 |
|
|
7,012 |
|
|
Total |
|
$ |
874 |
|
$ |
4,769 |
|
$ |
5,331 |
|
$ |
2,153 |
|
$ |
1,060 |
|
$ |
14,187 |
|
During the third quarter of 2011, the Company conducted a review of its business strategies and product plans based on the business and industry outlook, and concluded that its manufacturing footprint and fixed cost base were excessive for its medium-term needs. A plan was developed to reduce the Company’s facility footprint by approximately 40% through the sale and/or closure of facilities comprising a total of approximately 600,000 square feet. To date, the Company has reduced its presence at eight facilities and achieved a reduction of approximately 500,000 square feet. In addition, the Cicero Avenue Facility has been vacated and will be marketed for sale. The Company believes its remaining facilities will be sufficient to support its current business activities, while allowing for growth for the next several years.
The Company recorded a liability associated with environmental remediation costs that were originally identified while preparing the Cicero Avenue Facility for sale. See the “Environmental Compliance and Remediation Liabilities” section of Note 15, “Commitments and Contingencies” of these consolidated financial statements. The Company further adjusted the liability by recording a $352 liability associated with the planned sale of the Cicero Avenue Facility. The Company further adjusted the liability by recording an additional $258 charge in the fourth quarter of 2013 and an additional $874 in the quarter ending September 30, 2015. The liability is associated with environmental remediation costs that were originally identified while preparing the site for sale. See the “Environmental Compliance and Remediation Liabilities” section of Note 15, “Commitments and Contingencies” of these consolidated financial statements. The expenses associated with this liability have been recorded as restructuring charges, and as of September 30, 2016, the accrual balance remaining is $1,252.
As of December 31, 2014, the Company had completed the expenditures relating to its restructuring plan, with the exception of the new information on the environmental remediation of the Cicero Avenue Facility that resulted in additional expense of $874 recorded during the third quarter of 2015 and new information on the fair value on the Clintonville Facility that resulted in additional impairment expense of $186 recorded during the fourth quarter of 2015 based on negotiations that resulted in an executed contract for the sale of the property that was completed during the second quarter of 2016. The Company incurred total costs of approximately $14,200, net of a $3,585 gain on the sale of an idle tower plant in Brandon, South Dakota. The Company’s restructuring charges generally include costs to close or exit facilities, costs to move equipment, the related costs of building infrastructure for moved equipment and employee related costs. Of the total restructuring costs incurred, a total of approximately $4,800 consists of non‑cash charges.
|
|||
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
||||||||
|
|
|
September 30, |
|
|
September 30, |
|
|
||||||||
|
|
|
2016 |
|
2015 |
|
|
2016 |
|
2015 |
|
|
||||
|
Basic earnings per share calculation: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
872 |
|
$ |
(7,613) |
|
|
$ |
21 |
|
$ |
(11,013) |
|
|
|
Weighted average number of common shares outstanding |
|
|
14,876,308 |
|
|
14,707,994 |
|
|
|
14,823,525 |
|
|
14,656,471 |
|
|
|
Basic net income (loss) per share |
|
$ |
0.06 |
|
$ |
(0.52) |
|
|
$ |
0.00 |
|
$ |
(0.75) |
|
|
|
Diluted earnings per share calculation: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
872 |
|
$ |
(7,613) |
|
|
$ |
21 |
|
$ |
(11,013) |
|
|
|
Weighted average number of common shares outstanding |
|
|
14,876,308 |
|
|
14,707,994 |
|
|
|
14,823,525 |
|
|
14,656,471 |
|
|
|
Common stock equivalents: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options and non-vested stock awards |
|
|
244,663 |
|
|
— |
|
|
|
214,136 |
|
|
— |
|
|
|
Weighted average number of common shares outstanding |
|
|
15,120,971 |
|
|
14,707,994 |
|
|
|
15,037,661 |
|
|
14,656,471 |
|
|
|
Diluted net income (loss) per share |
|
$ |
0.06 |
|
$ |
(0.52) |
|
|
$ |
0.00 |
|
$ |
(0.75) |
|
|
|
|||
|
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||
|
|
|
2016 |
|
2015 |
|
|
2016 |
|
2015 |
|
||||
|
Revenues |
|
$ |
51 |
|
$ |
3,011 |
|
|
$ |
108 |
|
$ |
7,634 |
|
|
Cost of sales |
|
|
(100) |
|
|
(3,385) |
|
|
|
(864) |
|
|
(11,280) |
|
|
Selling, general and administrative |
|
|
(1) |
|
|
(405) |
|
|
|
(83) |
|
|
(1,502) |
|
|
Interest expense, net |
|
|
(6) |
|
|
(1) |
|
|
|
5 |
|
|
(36) |
|
|
Other income and expense items |
|
|
— |
|
|
— |
|
|
|
— |
|
|
140 |
|
|
Impairment of held for sale assets and liabilities and gain on sale of assets |
|
|
(317) |
|
|
(4,450) |
|
|
|
(74) |
|
|
(4,450) |
|
|
Loss from discontinued operations before and after benefit for income taxes |
|
$ |
(373) |
|
$ |
(5,230) |
|
|
$ |
(908) |
|
$ |
(9,494) |
|
The Company was notified of two warranty claims, which resulted in an additional $427 of warranty expense recorded during the second quarter of 2016; the first of the warranty claims was resolved during the three months ended September 30, 2016. The Company also reviewed the status of remaining inventory, which resulted in $216 of impairment expense during the three months ended September 30, 2016.
Assets and Liabilities Held for Sale
Assets and liabilities classified as held for sale in the Company’s condensed consolidated balance sheets as of September 30, 2016 and December 31, 2015 include the following:
|
|
|
September 30, |
|
December 31, |
|
||
|
|
|
2016 |
|
2015 |
|
||
|
Assets: |
|
|
|
|
|
|
|
|
Accounts receivable, net |
|
$ |
205 |
|
$ |
2,119 |
|
|
Inventories, net |
|
|
842 |
|
|
2,118 |
|
|
Prepaid expenses and other current assets |
|
|
73 |
|
|
606 |
|
|
Assets Held For Sale Related To Discontinued Operations |
|
|
1,120 |
|
|
4,843 |
|
|
Impairment of discontinued assets held for sale |
|
|
(607) |
|
|
(1,500) |
|
|
Total Assets Held For Sale Related To Discontinued Operations |
|
$ |
513 |
|
$ |
3,343 |
|
|
Liabilities: |
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
22 |
|
$ |
367 |
|
|
Accrued liabilities |
|
|
138 |
|
|
433 |
|
|
Customer deposits and other current obligations |
|
|
4 |
|
|
49 |
|
|
Other long-term liabilities |
|
|
4 |
|
|
17 |
|
|
Total Liabilities Held For Sale Related To Discontinued Operations |
|
$ |
168 |
|
$ |
866 |
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
December 31, |
|
||
|
|
|
2016 |
|
2015 |
|
||
|
Cash and cash equivalents: |
|
|
|
|
|
|
|
|
Cash |
|
$ |
5,278 |
|
$ |
4,614 |
|
|
Money market funds |
|
|
2,210 |
|
|
199 |
|
|
Corporate & municipal bonds |
|
|
603 |
|
|
1,623 |
|
|
Total cash and cash equivalents |
|
|
8,091 |
|
|
6,436 |
|
|
Short-term investments (available-for-sale): |
|
|
|
|
|
|
|
|
Corporate & municipal bonds |
|
|
16,213 |
|
|
6,179 |
|
|
Total cash and cash equivalents and short-term investments |
|
$ |
24,304 |
|
$ |
12,615 |
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
December 31, |
|
||
|
|
|
2016 |
|
2015 |
|
||
|
Raw materials |
|
$ |
15,118 |
|
$ |
14,868 |
|
|
Work-in-process |
|
|
6,384 |
|
|
8,540 |
|
|
Finished goods |
|
|
6,687 |
|
|
2,661 |
|
|
|
|
|
28,189 |
|
|
26,069 |
|
|
Less: Reserve for excess and obsolete inventory |
|
|
(1,958) |
|
|
(1,850) |
|
|
Net inventories |
|
$ |
26,231 |
|
$ |
24,219 |
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2016 |
|
December 31, 2015 |
|
||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
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 |
|
$ |
(3,715) |
|
$ |
264 |
|
7.2 |
|
$ |
3,979 |
|
$ |
(3,682) |
|
$ |
297 |
|
7.2 |
|
|
Trade names |
|
|
7,999 |
|
|
(3,580) |
|
|
4,419 |
|
20.0 |
|
|
7,999 |
|
|
(3,280) |
|
|
4,719 |
|
20.0 |
|
|
Intangible assets |
|
$ |
11,978 |
|
$ |
(7,295) |
|
$ |
4,683 |
|
15.8 |
|
$ |
11,978 |
|
$ |
(6,962) |
|
$ |
5,016 |
|
15.8 |
|
|
|
|
|
|
|
|
2016 |
|
$ |
111 |
|
|
2017 |
|
|
444 |
|
|
2018 |
|
|
444 |
|
|
2019 |
|
|
444 |
|
|
2020 |
|
|
444 |
|
|
2021 and thereafter |
|
|
2,796 |
|
|
Total |
|
$ |
4,683 |
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
December 31, |
|
||
|
|
|
2016 |
|
2015 |
|
||
|
Accrued payroll and benefits |
|
$ |
4,419 |
|
$ |
3,675 |
|
|
Accrued property taxes |
|
|
498 |
|
|
128 |
|
|
Income taxes payable |
|
|
118 |
|
|
155 |
|
|
Accrued professional fees |
|
|
100 |
|
|
74 |
|
|
Accrued warranty liability |
|
|
561 |
|
|
601 |
|
|
Accrued regulatory settlement |
|
|
500 |
|
|
500 |
|
|
Accrued environmental reserve |
|
|
1,252 |
|
|
1,300 |
|
|
Accrued self-insurance reserve |
|
|
1,233 |
|
|
1,464 |
|
|
Accrued other |
|
|
235 |
|
|
237 |
|
|
Total accrued liabilities |
|
$ |
8,916 |
|
$ |
8,134 |
|
|
|||
|
|
|
September 30, |
|
December 31, |
|
||
|
|
|
2016 |
|
2015 |
|
||
|
Term loans and notes payable |
|
$ |
2,600 |
|
$ |
5,399 |
|
|
Less: Current portion |
|
|
— |
|
|
(2,799) |
|
|
Long-term debt, net of current maturities |
|
$ |
2,600 |
|
$ |
2,600 |
|
|
|||
|
|
|
September 30, 2016 |
|
||||||||||
|
|
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
Total |
|
||||
|
Assets measured on a recurring basis: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate & municipal bonds and money market funds |
|
$ |
— |
|
$ |
19,026 |
|
$ |
— |
|
$ |
19,026 |
|
|
Assets measured on a nonrecurring basis: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gearing equipment |
|
|
— |
|
|
— |
|
|
353 |
|
|
353 |
|
|
Gearing Cicero Ave. facility |
|
|
— |
|
|
— |
|
|
560 |
|
|
560 |
|
|
Services assets |
|
|
— |
|
|
— |
|
|
513 |
|
|
513 |
|
|
Total assets at fair value |
|
$ |
— |
|
$ |
19,026 |
|
$ |
1,426 |
|
$ |
20,452 |
|
|
|
|
December 31, 2015 |
|
||||||||||
|
|
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
Total |
|
||||
|
Assets measured on a recurring basis: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate & municipal bonds and money market funds |
|
$ |
— |
|
$ |
8,001 |
|
$ |
— |
|
$ |
8,001 |
|
|
Assets measured on a nonrecurring basis: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gearing equipment |
|
|
— |
|
|
— |
|
|
506 |
|
|
506 |
|
|
Clintonville, WI facility |
|
|
— |
|
|
— |
|
|
554 |
|
|
554 |
|
|
Gearing Cicero Ave. facility |
|
|
— |
|
|
— |
|
|
560 |
|
|
560 |
|
|
Services assets |
|
|
— |
|
|
— |
|
|
3,343 |
|
|
3,343 |
|
|
Total assets at fair value |
|
$ |
— |
|
$ |
8,001 |
|
$ |
4,963 |
|
$ |
12,964 |
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average |
|
|
|
|
|
Options |
|
Exercise Price |
|
|
|
Outstanding as of December 31, 2015 |
|
144,197 |
|
$ |
17.98 |
|
|
Granted |
|
— |
|
$ |
— |
|
|
Exercised |
|
(5,647) |
|
$ |
3.39 |
|
|
Forfeited |
|
— |
|
$ |
— |
|
|
Expired |
|
(65,862) |
|
$ |
8.65 |
|
|
Outstanding as of September 30, 2016 |
|
72,688 |
|
$ |
27.56 |
|
|
Exercisable as of September 30, 2016 |
|
72,688 |
|
$ |
27.56 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average |
|
|
|
|
|
Number of |
|
Grant-Date Fair Value |
|
|
|
|
|
Shares |
|
Per Share |
|
|
|
Unvested as of December 31, 2015 |
|
377,810 |
|
$ |
4.87 |
|
|
Granted |
|
411,910 |
|
$ |
2.84 |
|
|
Vested |
|
(193,509) |
|
$ |
4.79 |
|
|
Forfeited |
|
(88,046) |
|
$ |
3.21 |
|
|
Unvested as of September 30, 2016 |
|
508,165 |
|
$ |
3.55 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, |
|
||||
|
|
|
2016 |
|
2015 |
|
||
|
Share-based compensation expense: |
|
|
|
|
|
|
|
|
Cost of sales |
|
$ |
63 |
|
$ |
105 |
|
|
Selling, general and administrative |
|
|
529 |
|
|
795 |
|
|
Income tax benefit (1) |
|
|
— |
|
|
— |
|
|
Net effect of share-based compensation expense on net loss |
|
$ |
592 |
|
$ |
900 |
|
|
Reduction in earnings per share: |
|
|
|
|
|
|
|
|
Basic earnings per share |
|
$ |
0.04 |
|
$ |
0.06 |
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share |
|
$ |
0.04 |
|
$ |
0.06 |
|
|
(1) |
Income tax benefit is not illustrated because the Company is currently in a full tax valuation allowance position and an actual income tax benefit was not realized for the nine months ended September 30, 2016 and 2015. The result of the income (loss) situation creates a timing difference, resulting in a deferred tax asset, which is fully reserved for in the Company’s valuation allowance. |
|
|||
|
|
|
Towers and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weldments |
|
Gearing |
|
Corporate |
|
|
Eliminations |
|
Consolidated |
|
||||
|
For the Three Months Ended September 30, 2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from external customers |
|
$ |
37,970 |
|
$ |
4,582 |
|
$ |
— |
|
$ |
— |
|
$ |
42,552 |
|
|
Operating profit (loss) |
|
|
4,050 |
|
|
(692) |
|
|
(1,998) |
|
|
— |
|
|
1,360 |
|
|
Depreciation and amortization |
|
|
1,007 |
|
|
638 |
|
|
50 |
|
|
— |
|
|
1,695 |
|
|
Capital expenditures |
|
|
1,984 |
|
|
39 |
|
|
17 |
|
|
— |
|
|
2,040 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Towers and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weldments |
|
Gearing |
|
Corporate |
|
Eliminations |
|
Consolidated |
|
|||||
|
For the Nine Months Ended September 30, 2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from external customers |
|
$ |
117,948 |
|
$ |
14,741 |
|
$ |
— |
|
$ |
— |
|
$ |
132,689 |
|
|
Intersegment revenues |
|
|
— |
|
|
18 |
|
|
— |
|
|
(18) |
|
|
— |
|
|
Operating profit (loss) |
|
|
10,016 |
|
|
(3,083) |
|
|
(5,616) |
|
|
— |
|
|
1,317 |
|
|
Depreciation and amortization |
|
|
3,066 |
|
|
1,918 |
|
|
154 |
|
|
— |
|
|
5,138 |
|
|
Capital expenditures |
|
|
3,593 |
|
|
368 |
|
|
45 |
|
|
— |
|
|
4,006 |
|
|
|
|
Towers and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weldments |
|
Gearing |
|
Corporate |
|
Eliminations |
|
Consolidated |
|
|||||
|
For the Three Months Ended September 30, 2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from external customers |
|
$ |
42,865 |
|
$ |
6,926 |
|
$ |
— |
|
$ |
— |
|
$ |
49,791 |
|
|
Intersegment revenues |
|
|
78 |
|
|
258 |
|
|
— |
|
|
(336) |
|
|
— |
|
|
Operating profit (loss) |
|
|
2,235 |
|
|
(2,646) |
|
|
(1,724) |
|
|
— |
|
|
(2,135) |
|
|
Depreciation and amortization |
|
|
1,132 |
|
|
1,216 |
|
|
52 |
|
|
— |
|
|
2,400 |
|
|
Capital expenditures |
|
|
812 |
|
|
134 |
|
|
9 |
|
|
— |
|
|
955 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Towers and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weldments |
|
Gearing |
|
Corporate |
|
Eliminations |
|
Consolidated |
|
|||||
|
For the Nine Months Ended September 30, 2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from external customers |
|
$ |
138,657 |
|
$ |
22,926 |
|
$ |
— |
|
$ |
— |
|
$ |
161,583 |
|
|
Intersegment revenues |
|
|
346 |
|
|
832 |
|
|
— |
|
|
(1,178) |
|
|
— |
|
|
Operating profit (loss) |
|
|
10,525 |
|
|
(5,380) |
|
|
(6,033) |
|
|
5 |
|
|
(883) |
|
|
Depreciation and amortization |
|
|
2,961 |
|
|
3,757 |
|
|
142 |
|
|
— |
|
|
6,860 |
|
|
Capital expenditures |
|
|
1,599 |
|
|
588 |
|
|
95 |
|
|
— |
|
|
2,282 |
|
|
|
|
Total Assets as of |
|
||||
|
|
|
September 30, |
|
December 31, |
|
||
|
Segments: |
|
2016 |
|
2015 |
|
||
|
Towers and Weldments |
|
$ |
46,500 |
|
$ |
38,068 |
|
|
Gearing |
|
|
36,325 |
|
|
39,229 |
|
|
Assets held for sale |
|
|
866 |
|
|
4,403 |
|
|
Corporate |
|
|
244,736 |
|
|
252,895 |
|
|
Eliminations |
|
|
(202,791) |
|
|
(224,688) |
|
|
|
|
$ |
125,636 |
|
$ |
109,907 |
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
For the Nine Months Ended September 30, |
|
||||
|
2016 |
2015 |
||||||
|
Balance, beginning of period |
|
$ |
601 |
|
$ |
1,054 |
|
|
Addition to (reduction of) warranty reserve |
|
|
(21) |
|
|
(60) |
|
|
Warranty claims |
|
|
(19) |
|
|
(371) |
|
|
Balance, end of period |
|
$ |
561 |
|
$ |
623 |
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Nine Months Ended September 30, |
|
||||
|
|
|
2016 |
|
2015 |
|
||
|
Balance at beginning of period |
|
$ |
84 |
|
$ |
81 |
|
|
Bad debt expense |
|
|
82 |
|
|
76 |
|
|
Write-offs |
|
|
(5) |
|
|
(54) |
|
|
Balance at end of period |
|
$ |
161 |
|
$ |
103 |
|
|
|||
|
|
|
2011 |
|
2012 |
|
2013 |
|
2014 |
|
2015 |
|
Total |
|
||||||
|
|
|
Actual |
|
Actual |
|
Actual |
|
Actual |
|
Actual |
|
Incurred |
|
||||||
|
Restructuring charges: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures |
|
$ |
5 |
|
$ |
2,596 |
|
$ |
2,352 |
|
$ |
674 |
|
$ |
— |
|
$ |
5,627 |
|
|
Gain on sale of Brandon, SD Facility |
|
|
— |
|
|
— |
|
|
(3,585) |
|
|
— |
|
|
— |
|
|
(3,585) |
|
|
Accelerated depreciation |
|
|
— |
|
|
819 |
|
|
898 |
|
|
— |
|
|
— |
|
|
1,717 |
|
|
Severance |
|
|
430 |
|
|
— |
|
|
435 |
|
|
— |
|
|
— |
|
|
865 |
|
|
Impairment charges |
|
|
— |
|
|
— |
|
|
2,365 |
|
|
— |
|
|
186 |
|
|
2,551 |
|
|
Moving and other exit-related costs |
|
|
439 |
|
|
1,354 |
|
|
2,866 |
|
|
1,479 |
|
|
874 |
|
|
7,012 |
|
|
Total |
|
$ |
874 |
|
$ |
4,769 |
|
$ |
5,331 |
|
$ |
2,153 |
|
$ |
1,060 |
|
$ |
14,187 |
|
|
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