| LEASES
|
|
|
|
|
|
|
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business
Broadwind Energy, Inc. (the “Company”) provides technologically advanced high‑value products to energy, mining and infrastructure sector customers, primarily in the United States of America (the “U.S.”). The Company’s most significant presence is within the U.S. wind energy industry, although the Company has diversified into other industrial markets. Within the U.S. wind energy industry, the Company provides products primarily to turbine manufacturers. Outside of the wind energy market, the Company provides precision gearing and specialty weldments to a broad range of industrial customers for oil and gas (“O&G”), mining, steel and other industrial applications. The Company has two reportable operating segments: Towers and Weldments, and Gearing.
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. 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. 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 O&G, wind energy, 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.
Liquidity
The Company meets its short term liquidity needs through cash generated from operations, through its available cash balances and through the Company’s $20,000 three-year secured revolving line of credit (the “New Credit Facility”) with The PrivateBank and Trust Company (“PrivateBank”). The Company uses the revolving line of credit from time to time to fund temporary increases in working capital, and believes the New Credit Facility, together with the operating cash generated by the business, will be sufficient to meet its cash obligations for the next twelve months.
On October 26, 2016, the Company established the New Credit Facility. Under the terms of the New Credit Facility, PrivateBank will advance funds when requested against a borrowing base consisting of up to 85% of the face value of the Company’s eligible accounts receivable (“A/R”), up to 50% of the book value of the Company’s eligible inventory and up to 50% of the appraised value of the Company’s eligible machinery, equipment and certain real property up to $10,000. Under the New Credit Facility, borrowings are continuous and all cash receipts are automatically applied to the outstanding borrowed balance. As of December 31, 2016, cash and cash equivalents and short-term investments totaled $21,870, an increase of $9,255 from December 31, 2015, and $0 was outstanding under the New Credit Facility. The Company had the ability to borrow up to $17,226 under the New Credit Facility as of December 31, 2016.
The increase in cash and cash equivalents as of December 31, 2016, when compared to levels at December 31, 2015, was due to the Company receiving customer deposits for orders. The spike in inventory levels experienced in 2015 has reversed; net inventory of $21,159 as of December 31, 2016 is $3,060 lower than at December 31, 2015.
Debt and capital lease obligations at December 31, 2016 totaled $4,103, and the Company is obligated to make principal payments under the outstanding debt and capital leases totaling $465 over the next twelve months.
The Company anticipates that current cash resources, amounts available under the New 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 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 New 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.
Summary of Significant Accounting Policies
Principles of Consolidation and Basis of Presentation
These consolidated financial statements include the accounts of the Company and entities in which it has a controlling financial interest. All significant intercompany transactions and balances have been eliminated in consolidation. The Company determines whether it has a controlling financial interest in an entity by first evaluating whether the entity is a voting interest entity or a variable interest entity (“VIE”).
When the Company obtains an economic interest in an entity, the Company evaluates the entity to determine if the entity is deemed a VIE, and if the Company is deemed to be the primary beneficiary, in accordance with the accounting standard for the consolidation of VIE’s. The accounting standard for the consolidation of VIE’s requires the Company to qualitatively assess if the Company was the primary beneficiary of the VIE based on whether the Company had (i) the power to direct those matters that most significantly impacted the activities of the VIE and (ii) the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant. Refer to Note 18, “New Markets Tax Credit Transaction” of these consolidated financial statements for a description of two VIE’s included in the Company’s consolidated financial statements.
Management’s Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. (“GAAP”) requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities as of the date of the financial statements and reported amounts of revenues and expenses during the reported period. Significant estimates, among others, include revenue recognition, future tax rates, inventory reserves, warranty reserves, impairment of long-lived assets, allowance for doubtful accounts, workers’ compensation reserves, health insurance reserves, and environmental reserves. Although these estimates are based upon management’s best knowledge of current events and actions that the Company may undertake in the future, actual results could differ from these estimates.
The Company changed an accounting estimate as of the beginning of 2016 to increase the salvage value of selected large machinery and equipment in the Gearing segment to reflect the estimated sale value of the used machinery market. The impact during the year-ended December 31, 2016 was a reduction of depreciation expense of $2,481. A similar impact is expected to occur through October 2017.
Out-of-Period Adjustment
Included in the results of operations for the year ended December 31, 2015, are out-of-period adjustments, which represent corrections of prior-period errors relating to the inventory balance in the Company’s Towers & Weldments segment. During the fourth quarter of 2015, the Company determined that the cost of certain component parts had not been properly assigned to previously sold towers resulting in an overstatement of inventory and an understatement of previously reported cost of goods sold. The out-of-period impact of the error recorded was approximately $231 related to periods prior to 2015. The correction of these errors was not material to the year ended December 31, 2015 or any of the prior interim or annual periods.
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 consolidated statements of operations. As of December 31, 2016 and December 31, 2015, cash and cash equivalents totaled $18,699 and $6,436, respectively, and short‑term investments totaled $3,171 and $6,179, respectively. For the years ended December 31, 2016 and 2015, interest income was $48 and $10, respectively.
Restricted Cash
Restricted cash balances relate primarily to provisions contained in certain vendor agreements. The Company anticipates that all restricted cash balances will be used for current purposes. As of December 31, 2016 and 2015, the Company had restricted cash in the amount of $39 and $83, respectively.
Revenue Recognition
The Company recognizes revenue when the earnings process is complete and when persuasive evidence of an arrangement exists, transfer of title has occurred or services have been rendered, the selling price is fixed or determinable, collectability is reasonably assured and delivery has occurred per the terms of the contract. Customer deposits, deferred revenue and other receipts are deferred and recognized when the revenue is realized and earned. Cash payments to customers are presumed to be classified as reductions of revenue in the Company’s statement of operations.
In most instances within the Company’s Towers and Weldments segment, products are sold under terms included in bill and hold sales arrangements that result in different timing for revenue recognition. The Company recognizes revenue under these arrangements only when the buyer requests the arrangement, a fixed schedule for delivery exists, the ordered goods are segregated from inventory and not available to fill other orders and the goods are complete and ready for shipment. Assuming these required revenue recognition criteria are met, revenue is recognized upon completion of product manufacture and customer acceptance.
Cost of Sales
Cost of sales represents all direct and indirect costs associated with the production of products for sale to customers. These costs include operation, repair and maintenance of equipment, materials, direct and indirect labor and benefit costs, rent and utilities, maintenance, insurance, equipment rentals, freight in and depreciation.
Selling, General and Administrative Expenses
Selling, general and administrative (“SG&A”) expenses include all corporate and administrative functions such as sales and marketing, legal, human resource management, finance, investor and public relations, information technology and senior management. These functions serve to support the Company’s current and future operations and provide an infrastructure to support future growth. Major expense items in this category include management and staff wages and benefits, share‑based compensation and professional services.
Accounts Receivable (A/R)
The Company generally grants uncollateralized credit to customers on an individual basis based upon the customer’s financial condition and credit history. Credit is typically on net 30 day terms and customer deposits are frequently required at various stages of the production process to minimize credit risk.
Historically, the Company’s A/R is highly concentrated with a select number of customers. During the year ended December 31, 2016, the Company’s five largest customers accounted for 91% of its consolidated revenues and 86% of outstanding A/R balances, compared to the year ended December 31, 2015 when the Company’s five largest customers accounted for 92% of its consolidated revenues and 71% of its outstanding A/R balances.
Allowance for Doubtful Accounts
Based upon past experience and judgment, the Company establishes an allowance for doubtful accounts with respect to A/R. 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 realizability of its A/R. These factors include individual customer circumstances, history with the Company and other relevant criteria. A/R balances that remain outstanding after the Company has exhausted reasonable collection efforts are written off through a charge to the valuation allowance and a credit to A/R.
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 realizability of its A/R, as noted above, or modifications to the Company’s credit standards, collection practices and other related policies may impact its allowance for doubtful accounts and its financial results. Bad debt expense for the years ended December 31, 2016 and 2015 was $65 and $87, respectively.
Inventories
Inventories are stated at the lower of cost or market. Cost is determined either based on the first‑in, first‑out (“FIFO”) method, or on a standard cost basis that approximates the FIFO method. Market is determined based on net realizable value. Any excess of cost over market value is included in the Company’s inventory allowance. Market value of inventory, and management’s judgment of the need for reserves, encompasses consideration of other business factors including physical condition, inventory holding period, contract terms and usefulness.
Inventories consist of raw materials, work‑in‑process and finished goods. Raw materials consist of components and parts for general production use. Work‑in‑process consists of labor and overhead, processing costs, purchased subcomponents and materials purchased for specific customer orders. Finished goods consist of components purchased from third parties as well as components manufactured by the Company that will be used to produce final customer products.
Long-Lived Assets
Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation and amortization of property and equipment is recognized using the straight‑line method over the estimated useful lives of the related assets for financial reporting purposes, and generally using an accelerated method for income tax reporting purposes. Depreciation expense related to property and equipment for the years ended December 31, 2016 and 2015 was $6,471 and $8,736, respectively. Expenditures for additions and improvements are capitalized, while replacements, maintenance and repairs that do not improve or extend the useful lives of the respective assets are expensed as incurred. The Company has in the past capitalized interest costs incurred on indebtedness used to construct property and equipment. Capitalized interest is recorded as part of the asset to which it relates and is amortized over the asset’s estimated useful life. There was no interest cost capitalized during the years ended December 31, 2016 or 2015. Property or equipment sold or disposed of is removed from the respective property accounts, with any corresponding gains and losses recorded to other income or expense in the Company’s consolidated statement of operations.
The Company reviews property and equipment and other long‑lived assets (“long-lived assets”) for impairment whenever events or circumstances indicate that carrying amounts may not be recoverable. In evaluating the recoverability of the long-lived assets, the Company must make assumptions regarding the undiscounted future cash flows of the asset group. The Company utilizes fair value techniques accepted by Accounting Standards Codification (“ASC”) 820, Fair Value Measurement, which includes the income, market and cost approach. If the fair value of the asset group is less than the carrying amount, the Company recognizes an impairment loss.
In evaluating the recoverability of long‑lived assets, the Company must make assumptions regarding estimated future cash flows and other factors to determine the fair value of such assets. If the Company’s fair value estimates or related assumptions change in the future, the Company may be required to record impairment charges related to property and equipment and other long‑lived assets. Asset recoverability is first measured by comparing the assets’ carrying amounts to their expected future undiscounted net cash flows to determine if the assets are impaired. If such assets are considered to be impaired, the impairment recognized is measured based on the amount by which the carrying amount of the assets exceeds the fair value. To the extent the projections used in the Company’s analysis are not achieved, there may be a negative effect on the valuation of these assets.
Warranty Liability
The Company provides warranty terms that generally range from one to five years for various products and services relating to workmanship and materials supplied by the Company. In certain contracts, the Company has recourse provisions for items that would enable the Company to pursue recovery from third parties for amounts paid to customers under warranty provisions. Warranty liability is recorded in accrued liabilities within the consolidated balance sheet. The Company estimates the warranty accrual based on various factors, including historical warranty costs, current trends, product mix and sales. The changes in the carrying amount of the Company’s total product warranty liability for the years ended December 31, 2016 and 2015 were as follows, excluding activity related to the discontinued Services segment:
|
|
|
As of December 31, |
|
|||||
|
|
|
2016 |
|
2015 |
|
|
||
Balance, beginning of period |
|
|
$ |
601 |
|
$ |
1,054 |
|
|
Addition to (reduction of) warranty reserve |
|
|
|
83 |
|
|
(72) |
|
|
Warranty claims |
|
|
|
(13) |
|
|
(381) |
|
|
Balance, end of period |
|
|
$ |
671 |
|
$ |
601 |
|
|
The decrease in the warranty liability as of December 31, 2015 was due primarily to settlement of a $371 obligation to a specific customer completed during 2015.
Income Taxes
The Company accounts for income taxes based upon an asset and liability approach. Deferred tax assets and liabilities represent the future tax consequences of the differences between the financial statement carrying amounts of assets and liabilities versus the tax basis of assets and liabilities. Under this method, deferred tax assets are recognized for deductible temporary differences, and operating loss and tax credit carryforwards. Deferred tax liabilities are recognized for taxable temporary differences. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The impact of tax rate changes on deferred tax assets and liabilities is recognized in the year that the change is enacted.
In connection with the preparation of its consolidated financial statements, the Company is required to estimate its income tax liability for each of the tax jurisdictions in which the Company operates. This process involves estimating the Company’s actual current income tax expense and assessing temporary differences resulting from differing treatment of certain income or expense items for income tax reporting and financial reporting purposes. The Company also recognizes as deferred income tax assets the expected future income tax benefits of net operating loss (“NOL”) carryforwards. In evaluating the realizability of deferred income tax assets associated with NOL carryforwards, the Company considers, among other things, expected future taxable income, the expected timing of the reversals of existing temporary reporting differences and the expected impact of tax planning strategies that may be implemented to prevent the potential loss of future income tax benefits. Changes in, among other things, income tax legislation, statutory income tax rates or future taxable income levels could materially impact the Company’s valuation of income tax assets and liabilities and could cause its income tax provision to vary significantly among financial reporting periods.
The Company also accounts for the uncertainty in income taxes related to the recognition and measurement of a tax position taken or expected to be taken in an income tax return. The Company follows the applicable pronouncement guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition related to the uncertainty in these income tax positions.
Share‑Based Compensation
The Company grants incentive stock options and/or restricted stock units (“RSUs”) to certain officers, directors, and employees. The Company accounts for share‑based compensation related to these awards based on the estimated fair value of the equity award and recognizes expense ratably over the vesting term of the award. See Note 15 “Share‑Based Compensation” of these consolidated financial statements for further discussion of the Company’s share‑based compensation plans, the nature of share‑based awards issued and the Company’s accounting for share‑based compensation.
Net Income (Loss) Per Share
The Company presents both basic and diluted net income (loss) per share. Basic net income (loss) per share is based solely upon the weighted average number of common shares outstanding and excludes any dilutive effects of options, warrants and convertible securities. Diluted net income (loss) per share is based upon the weighted average number of common shares and common‑share equivalents outstanding during the year excluding those common‑share equivalents where the impact to basic net income (loss) per share would be anti‑dilutive.
|
2. EARNINGS PER SHARE
The following table presents a reconciliation of basic and diluted earnings per share for the years ended December 31,2016 and 2015 as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31, |
|
|||||
|
|
|
|
2016 |
|
2015 |
|
|
||
Basic earnings per share calculation: |
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
|
|
$ |
319 |
|
$ |
(21,807) |
|
|
Weighted average number of common shares outstanding |
|
|
|
|
14,843 |
|
|
14,677 |
|
|
Basic net income (loss) per share |
|
|
|
$ |
0.02 |
|
$ |
(1.48) |
|
|
Diluted earnings per share calculation: |
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
|
|
$ |
319 |
|
$ |
(21,807) |
|
|
Weighted average number of common shares outstanding |
|
|
|
|
14,843 |
|
|
14,677 |
|
|
Common stock equivalents: |
|
|
|
|
|
|
|
|
|
|
Stock options and non-vested stock awards |
|
|
|
|
238 |
|
|
— |
|
|
Weighted average number of common shares outstanding |
|
|
|
|
15,081 |
|
|
14,677 |
|
|
Diluted net income (loss) per share |
|
|
|
$ |
0.02 |
|
$ |
(1.48) |
|
|
(1) Stock options and RSUs granted and outstanding of 522,007 as of December 31, 2015 are excluded from the computation of diluted earnings due to the anti‑dilutive effect as a result of the Company’s net loss for the year ended December 31, 2015
|
3. DISCONTINUED OPERATIONS
The Company’s former 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 Company’s Board of Directors (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 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 recorded an 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 associated with the Services segment, which are reflected as discontinued operations in the Company’s condensed consolidated statements of income for the twelve months ended December 31, 2016 and 2015, were as follows:
|
|
|
|
|
Year Ended December 31, |
||||
|
|
|
|
|
2016 |
|
2015 |
||
Revenues |
|
|
|
|
$ |
109 |
|
$ |
10,486 |
Cost of sales |
|
|
|
|
|
(1,006) |
|
|
(14,395) |
Selling, general and administrative |
|
|
|
|
|
(69) |
|
|
(2,153) |
Interest expense, net |
|
|
|
|
|
(5) |
|
|
(36) |
Other income and expense items |
|
|
|
|
|
— |
|
|
133 |
Impairment of held for sale assets and liabilities and gain on sale of assets |
|
|
|
|
|
(45) |
|
|
(3,596) |
Loss from discontinued operations before and after benefit for income taxes |
|
|
|
|
$ |
(1,016) |
|
$ |
(9,561) |
The Company was notified of two warranty claims, which resulted in an additional $427 of warranty expense recorded during the second quarter of 2016; both of the warranty claims were resolved prior to the end of 2016. The Company also reviewed the status of remaining inventory, which resulted in $216 of impairment expense during year-ended December 31, 2016.
Assets and Liabilities Held for Sales
Assets and liabilities classified as held for sale in the Company’s consolidated balance sheets as of December 31, 2016 and 2015 include the following:
|
|
December 31, |
|
December 31, |
||
|
|
2016 |
|
2015 |
||
Assets: |
|
|
|
|
|
|
Accounts receivable, net |
|
$ |
172 |
|
$ |
2,119 |
Inventories, net |
|
|
807 |
|
|
2,118 |
Prepaid expenses and other current assets |
|
|
55 |
|
|
606 |
Assets Held For Sale Related To Discontinued Operations |
|
|
1,034 |
|
|
4,843 |
Impairment of discontinued assets held for sale |
|
|
(579) |
|
|
(1,500) |
Total Assets Held For Sale Related To Discontinued Operations |
|
$ |
455 |
|
$ |
3,343 |
Liabilities: |
|
|
|
|
|
|
Accounts payable |
|
$ |
22 |
|
$ |
367 |
Accrued liabilities |
|
|
121 |
|
|
433 |
Customer deposits and other current obligations |
|
|
3 |
|
|
49 |
Other long-term liabilities |
|
|
3 |
|
|
17 |
Total Liabilities Held For Sale Related To Discontinued Operations |
|
$ |
149 |
|
$ |
866 |
|
4. 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 consolidated financial statements, except as discussed below.
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 Accounting Standards Codification 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 ASU 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 ASU 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 and ASU 2015-14 for the fiscal year beginning January 1, 2018 and has elected the modified retrospective approach. The Company is currently evaluating the impact on its consolidated financial statements.
In July 2015, the FASB issued ASU 2015-11, Inventory (Topic 330), which requires that inventory be measured at the lower of cost or net realizable value. Prior to the issuance of the new guidance, inventory was measured at the lower of cost or market. Replacing the concept of market with the single measurement of net realizable value is intended to create efficiencies for preparers. Inventory measured using the last-in, first-out (LIFO) method and the retail inventory method are not impacted by the new guidance. This ASU will be effective for public entities with annual reporting periods beginning after December 15, 2016. The Company does not expect the adoption to have a material impact on its 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 ASU 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 ASU on its consolidated financial statements.
In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230), which requires the statement of cash flows to explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. This ASU will be effective for annual reporting periods beginning after December 15, 2017 and interim periods within those fiscal years, with early adoption permitted. The Company has early adopted this standard, resulting in a $44 and $0 change for the years ended December 31, 2016 and December 31, 2015, respectively, within the change in cash, cash equivalents and restricted cash. The total cash, cash equivalents, and restricted cash shown in the Consolidated Statements of Cash Flows represent the sum of the cash and cash equivalents and restricted cash amounts shown in the Consolidated Balance Sheets.
|
5. CASH AND CASH EQUIVALENTS AND SHORT‑TERM INVESTMENTS
The components of cash and cash equivalents and short‑term investments as of December 31, 2016 and 2015 are summarized as follows:
|
|
As of |
|
||||
|
|
December 31, |
|
||||
|
|
2016 |
|
2015 |
|
||
Cash and cash equivalents: |
|
|
|
|
|
|
|
Cash |
|
$ |
16,821 |
|
$ |
4,614 |
|
Money market funds |
|
|
1,878 |
|
|
199 |
|
Corporate & municipal bonds |
|
|
— |
|
|
1,623 |
|
Total cash and cash equivalents |
|
|
18,699 |
|
|
6,436 |
|
Short-term investments (available-for-sale): |
|
|
|
|
|
|
|
Corporate & municipal bonds |
|
|
3,171 |
|
|
6,179 |
|
Total cash and cash equivalents and short-term investments |
|
$ |
21,870 |
|
$ |
12,615 |
|
|
6. ALLOWANCE FOR DOUBTFUL ACCOUNTS
The activity in the A/R allowance from operations for the years ended December 31, 2016 and 2015 consists of the following:
|
|
|
For the Years Ended |
|||||
|
|
|
December 31, |
|||||
|
|
|
2016 |
|
2015 |
|
||
Balance at beginning of period |
|
|
$ |
84 |
|
$ |
81 |
|
Bad debt expense |
|
|
|
65 |
|
|
87 |
|
Write-offs |
|
|
|
— |
|
|
(11) |
|
Other adjustments |
|
|
|
(4) |
|
|
(73) |
|
Balance at end of period |
|
|
$ |
145 |
|
$ |
84 |
|
|
7. INVENTORIES
The components of inventories from operations as of December 31, 2016 and 2015 are summarized as follows:
|
|
As of December 31, |
|
||||
|
|
2016 |
|
2015 |
|
||
Raw materials |
|
$ |
14,174 |
|
$ |
14,868 |
|
Work-in-process |
|
|
5,321 |
|
|
8,540 |
|
Finished goods |
|
|
3,342 |
|
|
2,661 |
|
|
|
|
22,837 |
|
|
26,069 |
|
Less: Reserve for excess and obsolete inventory |
|
|
(1,678) |
|
|
(1,850) |
|
Net inventories |
|
$ |
21,159 |
|
$ |
24,219 |
|
|
8. LONG-LIVED ASSETS
The cost basis and estimated lives of property and equipment from continuing operations as of December 31, 2016 and 2015 are as follows:
|
|
As of December 31, |
|
|
|
|
|
|
||||
|
|
2016 |
|
2015 |
|
Life |
|
|||||
Land |
|
$ |
1,982 |
|
$ |
1,982 |
|
|
|
|
|
|
Buildings |
|
|
20,874 |
|
|
20,874 |
|
39 |
years |
|
|
|
Machinery and equipment |
|
|
98,656 |
|
|
95,546 |
|
2 |
- |
10 |
years |
|
Office furniture and equipment |
|
|
3,648 |
|
|
3,446 |
|
3 |
- |
7 |
years |
|
Leasehold improvements |
|
|
8,720 |
|
|
8,169 |
|
Asset life or life of lease |
|
|
|
|
Construction in progress |
|
|
6,089 |
|
|
993 |
|
|
|
|
|
|
|
|
|
139,969 |
|
|
131,010 |
|
|
|
|
|
|
Less accumulated depreciation and amortization |
|
|
(85,363) |
|
|
(79,104) |
|
|
|
|
|
|
Total property and equipment |
|
$ |
54,606 |
|
$ |
51,906 |
|
|
|
|
|
|
As of December 31, 2016, the Company had commitments of $1,220 related to the completion of projects within construction in progress.
As of December 31, 2016 and 2015, the cost basis, accumulated amortization and net book value of intangible assets were as follows:
|
|
|
|
|
December 31, 2016 |
|
December 31, 2015 |
||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
|
|
|
|
Net |
|
Average |
|
|
|
|
|
|
|
Net |
|
Average |
||
|
|
|
|
|
|
|
|
Accumulated |
|
Book |
|
Amortization |
|
|
|
|
Accumulated |
|
Book |
|
Amortization |
||||
|
|
|
|
|
Cost |
|
Amortization |
|
Value |
|
Period |
|
Cost |
|
Amortization |
|
Value |
|
Period |
||||||
Intangible assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer relationships |
|
|
|
|
$ |
3,979 |
|
$ |
(3,726) |
|
$ |
253 |
|
7.2 |
|
$ |
3,979 |
|
$ |
(3,682) |
|
$ |
297 |
|
7.2 |
Trade names |
|
|
|
|
|
7,999 |
|
|
(3,680) |
|
|
4,319 |
|
20.0 |
|
|
7,999 |
|
|
(3,280) |
|
|
4,719 |
|
20.0 |
Intangible assets |
|
|
|
|
$ |
11,978 |
|
$ |
(7,406) |
|
$ |
4,572 |
|
15.8 |
|
$ |
11,978 |
|
$ |
(6,962) |
|
$ |
5,016 |
|
15.8 |
Intangible assets are amortized on a straight‑line basis over their estimated useful lives, which range from 15 to 20 years. Amortization expense was $444 for the years ended December 31, 2016 and 2015. As of December 31, 2016, estimated future amortization expense is as follows:
2017 |
|
$ |
444 |
2018 |
|
|
444 |
2019 |
|
|
444 |
2020 |
|
|
444 |
2021 |
|
|
444 |
2022 and thereafter |
|
|
2,352 |
Total |
|
$ |
4,572 |
During the fourth quarter of 2016, the Company continued to experience triggering events associated with the Gearing segment’s current period operating losses combined with its history of continued operating losses. As a result, the Company evaluated the recoverability of certain of its long‑lived assets associated with the Gearing segment. Based upon the Company’s December 31, 2016 impairment assessment, the undiscounted cash flows based upon the Company’s most recent projections were less than the carrying amount of relevant asset groups within the Gearing segment, and a possible impairment to these assets was indicated under ASC 360. However, based on third-party appraisals and other estimates of the fair value of the assets, the Company determined that the fair value of these assets is in excess of their carrying amount under ASC 360. The Company assumed that the assets would be exchanged in an orderly transaction between market participants and would represent the highest and best use of these assets. Based on the analysis, the Company determined that no impairment to the asset group was indicated as of December 31, 2016.
|
9. ACCRUED LIABILITIES
Accrued liabilities as of December 31, 2016 and 2015 consisted of the following:
|
|
December 31, |
|
||||
|
|
2016 |
|
2015 |
|
||
Accrued payroll and benefits |
|
$ |
4,422 |
|
$ |
3,675 |
|
Accrued property taxes |
|
|
99 |
|
|
128 |
|
Income taxes payable |
|
|
127 |
|
|
155 |
|
Accrued professional fees |
|
|
236 |
|
|
74 |
|
Accrued warranty liability |
|
|
671 |
|
|
601 |
|
Accrued regulatory settlement |
|
|
500 |
|
|
500 |
|
Accrued environmental reserve |
|
|
1,241 |
|
|
1,300 |
|
Accrued self-insurance reserve |
|
|
909 |
|
|
1,464 |
|
Accrued other |
|
|
225 |
|
|
237 |
|
Total accrued liabilities |
|
$ |
8,430 |
|
$ |
8,134 |
|
|
10. DEBT AND CREDIT AGREEMENTS
The Company’s outstanding debt balances as of December 31, 2016 and 2015 consisted of the following:
|
|
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 |
|
As of December 31, 2016, future annual principal payments on the Company’s outstanding debt obligations were as follows:
2017 |
|
$ |
— |
|
2018 |
|
|
2,600 |
|
2019 |
|
|
— |
|
2020 |
|
|
— |
|
2021 |
|
|
— |
|
2022 and thereafter |
|
|
— |
|
Total |
|
$ |
2,600 |
|
Credit Facilities
AloStar Credit Facility
On August 23, 2012, the Company established a $20,000 secured revolving line of credit (the “AloStar Credit Facility”) with AloStar Bank of Commerce (“AloStar”). On June 29, 2015, the AloStar 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 AloStar Credit Facility amount to a term loan (the “Term Loan”). Under the AloStar Credit Facility, AloStar advanced funds when requested against a borrowing base consisting of approximately 85% of the face value of eligible A/R of the Company and approximately 50% of the book value of eligible inventory of the Company. Borrowings under the AloStar 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%. The Company also paid an unused facility fee to AloStar equal to 0.50% per annum on the unused portion of the AloStar 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 outstanding under the Term Loan.
In connection with the AloStar Credit Facility, the Company entered into a Loan and Security Agreement, dated August 23, 2012 (as amended, the “AloStar Loan Agreement”), which contained customary representations and warranties. The AloStar Loan Agreement 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 Company’s obligations under the AloStar Loan Agreement were secured by, subject to certain exclusions, (i) a first priority security interest in all of the A/R, 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 the Company’s wholly-owned subsidiary Brad Foote Gear Works, Inc. an Illinois corporation (“Brad Foote”). On February 23, 2016, the parties executed the 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 AloStar Credit Facility to $10,000 and extended the maturity date of the AloStar 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 parties executed a Tenth Amendment to Loan and Security Agreement which removed the liquidity requirement set forth in the Ninth Amendment and removed the exclusion of certain customer A/R.
The PrivateBank Credit Facility
On October 26, 2016, the Company established the New Credit Facility with PrivateBank to replace the AloStar Credit Facility. The Company incurred extinguishment losses of $77 related to the write-off of unamortized debt issuance costs. 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 the Company’s eligible A/R, up to 50% of the book value of eligible inventory and up to 50% of the appraised value of eligible machinery, equipment and certain real property up to $10,000. Upon achieving at least $7,000 in EBITDA during fiscal year 2016, the Company has the ability to request a $5,000 increase in the amount of the New Credit Facility. 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%, or the applicable base rate plus a margin ranging from 0.00% to 1.00%, both of which are based on the our 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 New Credit Facility contains customary representations and warranties. It also contains a requirement that the Company, on a consolidated basis, maintain a Fixed Charge Coverage Ratio Covenant, along with other customary restrictive covenants. 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. On February 10, 2017, a First Amendment to Loan and Security Agreement and Joinder to Loan and Security Agreement were executed to add Red Wolf as a borrower under the New Credit Facility.
As of December 31, 2016, there was no outstanding indebtedness under the New Credit Facility. The Company had the ability to borrow up to $17,226 under the New Credit Facility as of December 31, 2016.
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 18, “New Markets Tax Credit Transaction” of these condensed consolidated financial statements.
|
11. LEASES
The Company leases various property and equipment under operating lease arrangements. Lease terms generally range from 3 to 15 years with renewal options for extended terms. Certain leases contain rent escalation clauses that require additional rental payments in the later years of the term. Rent expense for these types of leases is recognized on a straight‑line basis over the minimum lease term. Any lease concessions received by the Company are deferred and recognized as an adjustment to rent expense ratably over the minimum lease term. The Company is required to make additional payments under certain property leases for taxes, insurance and other operating expenses incurred during the operating lease period. Rental expense for the years ended December 31, 2016 and 2015 was $2,996 and $2,875, respectively.
In addition, the Company has entered into capital lease arrangements to finance property and equipment and assumed capital lease obligations in connection with certain acquisitions. The cost basis and accumulated depreciation of assets recorded under capital leases, which are included in property and equipment, are as follows as of December 31, 2016 and 2015:
|
|
December 31, |
|
||||
|
|
2016 |
|
2015 |
|
||
Cost |
|
$ |
1,616 |
|
$ |
1,784 |
|
Accumulated depreciation |
|
|
(129) |
|
|
(503) |
|
Net book value |
|
$ |
1,487 |
|
$ |
1,281 |
|
Depreciation expense recorded in connection with assets recorded under capital leases was $273 and $263 for the years ended December 31, 2016 and 2015, respectively.
As of December 31, 2016, future minimum lease payments under capital leases and operating leases were as follows:
|
|
Capital |
|
Operating |
|
|
|
|
||
|
|
Leases |
|
Leases |
|
Total |
|
|||
2017 |
|
$ |
523 |
|
$ |
2,954 |
|
$ |
3,477 |
|
2018 |
|
|
523 |
|
|
2,845 |
|
|
3,368 |
|
2019 |
|
|
523 |
|
|
2,877 |
|
|
3,400 |
|
2020 |
|
|
43 |
|
|
2,202 |
|
|
2,245 |
|
2021 |
|
|
— |
|
|
2,236 |
|
|
2,236 |
|
2022 and thereafter |
|
|
— |
|
|
10,730 |
|
|
10,730 |
|
Total |
|
$ |
1,612 |
|
$ |
23,844 |
|
$ |
25,456 |
|
Less—portion representing interest at a weighted average annual rate of 5.0% |
|
|
(109) |
|
|
|
|
|
|
|
Principal |
|
|
1,503 |
|
|
|
|
|
|
|
Less—current portion |
|
|
(465) |
|
|
|
|
|
|
|
Capital lease obligations, noncurrent portion |
|
$ |
1,038 |
|
|
|
|
|
|
|
|
12. COMMITMENTS AND CONTINGENCIES
Legal Proceedings
From time to time, the Company is subject to legal proceedings or claims that arise in the ordinary course of its business. The Company accrues for costs related to loss contingencies when such costs are probable and reasonably estimable. Except as otherwise noted, as of December 31, 2016, the Company is not aware of any material pending legal proceedings or threatened litigation that would have a material adverse effect on the Company’s results of operations, financial condition or cash flows, although no assurance can be given with respect to the ultimate outcome of pending actions. Refer to Note 21, “Legal Proceedings” of these consolidated financial statements for further discussion of legal proceedings.
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. Also, 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 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 one of the Company’s facilities located in Cicero, Illinois (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. On July 23, 2014, the Company received comments from the IEPA regarding the proposed site remediation plan. The Company provided additional information to the IEPA in response to those comments, and determined that no change to the remediation plan or the financial reserve was needed at that time. 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 will continue to reevaluate its remediation activities and the reserve balance associated with this matter as additional information is obtained. As of December 31, 2016, the accrual balance associated with this matter totaled $1,241.
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.
Warranty Liability
The Company provides warranty terms that generally range from one to five years for various products and services relating to workmanship and materials supplied by the Company. In certain contracts, the Company has recourse provisions for items that would enable the Company to pursue recovery from third parties for amounts paid to customers under warranty provisions.
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. When the damages are determined to be probable and estimable, the damages are recorded as a reduction to revenue. During 2016, the Company incurred no liquidated damages and there was no reserve for liquidated damages as of December 31, 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. As of December 31, 2016, the Company had $909 accrued for self‑insured workers’ compensation liabilities.
Other
As of December 31, 2016, approximately 11% of the Company’s employees were covered by two collective bargaining agreements with local unions at the Company’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 18, “New Markets Tax Credit Transaction” of these 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 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 in the same building 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 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 credit recaptures will be required in connection with the NMTC Transaction.
|
13. 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, 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 segments assets. The Company used real estate appraisals to value its Clintonville, Wisconsin facility formerly owned by the Company’s wholly-owned subsidiary Broadwind Towers, Inc., a Wisconsin corporation (the “Clintonville Facility”).
The following tables represent the fair values of the Company’s financial assets measured as of December 31, 2016 and 2015:
|
|
|
December 31, 2016 |
|
||||||||||
|
|
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
Total |
|
||||
Assets measured on a recurring basis: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate & municipal bonds and money market funds |
|
|
$ |
— |
|
$ |
5,049 |
|
$ |
— |
|
$ |
5,049 |
|
Assets measured on a nonrecurring basis: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gearing equipment |
|
|
|
— |
|
|
— |
|
|
353 |
|
|
353 |
|
Gearing Cicero Ave. facility |
|
|
|
— |
|
|
— |
|
|
560 |
|
|
560 |
|
Services assets |
|
|
|
— |
|
|
— |
|
|
455 |
|
|
455 |
|
Total assets at fair value |
|
|
$ |
— |
|
$ |
5,049 |
|
$ |
1,368 |
|
$ |
6,417 |
|
|
|
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, A/R, 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.
The Clintonville Facility was classified 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 segment 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 December 31, 2016, reflects the sale of a portion of the surplus assets.
The carrying value of the land and building comprising 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.
|
14. INCOME TAXES
The provision for income taxes for the years ended December 31, 2016 and 2015 consists of the following:
|
|
For the Years Ended December 31, |
|
|||||
|
|
2016 |
|
2015 |
|
|
||
Current provision |
|
|
|
|
|
|
|
|
Federal |
|
$ |
— |
|
$ |
— |
|
|
Foreign |
|
|
— |
|
|
— |
|
|
State |
|
|
(2) |
|
|
(36) |
|
|
Total current benefit |
|
|
(2) |
|
|
(36) |
|
|
Deferred credit |
|
|
|
|
|
|
|
|
Federal |
|
|
487 |
|
|
(7,165) |
|
|
State |
|
|
5,226 |
|
|
(2,403) |
|
|
Total deferred credit |
|
|
5,713 |
|
|
(9,568) |
|
|
(Decrease) increase in deferred tax valuation allowance |
|
|
(5,713) |
|
|
9,568 |
|
|
Total benefit for income taxes |
|
$ |
(2) |
|
$ |
(36) |
|
|
The (decrease) increase in the deferred tax valuation allowance was $(5,713) and $9,568 for the years ended December 31, 2016 and 2015, respectively. The changes in the deferred tax valuation allowances in 2016 and 2015 were primarily the result of (decreases) increases to the deferred tax assets pertaining to federal and state NOLs.
The tax effects of the temporary differences and NOLs that give rise to significant portions of deferred tax assets and liabilities are as follows:
|
|
As of December 31, |
|
||||
|
|
2016 |
|
2015 |
|
||
Noncurrent deferred income tax assets: |
|
|
|
|
|
|
|
Net operating loss carryforwards |
|
$ |
79,966 |
|
$ |
81,221 |
|
Intangible assets |
|
|
19,021 |
|
|
22,886 |
|
Accrual and reserves |
|
|
5,201 |
|
|
5,919 |
|
Other |
|
|
52 |
|
|
75 |
|
Total noncurrent deferred tax assets |
|
|
104,240 |
|
|
110,101 |
|
Valuation allowance |
|
|
(103,623) |
|
|
(109,336) |
|
Noncurrent deferred tax assets, net of valuation allowance |
|
|
617 |
|
|
765 |
|
Noncurrent deferred income tax liabilities: |
|
|
|
|
|
|
|
Fixed assets |
|
|
(617) |
|
|
(765) |
|
Intangible assets |
|
|
— |
|
|
— |
|
Total noncurrent deferred tax liabilities |
|
|
(617) |
|
|
(765) |
|
Net deferred income tax liability |
|
$ |
— |
|
$ |
— |
|
Valuation allowances of $103,623 and $109,336 have been provided for deferred income tax assets for which realization is uncertain as of December 31, 2016 and 2015, respectively. A reconciliation of the beginning and ending amounts of the valuation is as follows:
Valuation allowance as of December 31, 2015 |
|
$ |
(109,336) |
|
Gross decrease for current year activity |
|
|
5,713 |
|
Valuation allowance as of December 31, 2016 |
|
$ |
(103,623) |
|
As of December 31, 2016, the Company had federal NOL carryforwards of approximately $210,775 expiring in various years through 2036. The majority of the NOL carryforwards will expire in various years from 2028 through 2036.
As of December 31, 2016, the Company had unapportioned state NOLs in the aggregate of approximately $210,775, expiring in various years from 2021 through 2036, based upon various NOL carryforward periods as designated by the different taxing jurisdictions.
The reconciliation between the statutory U.S. federal income tax rate and the Company’s effective income tax rate is as follows:
|
|
For the Year Ended |
|||
|
|
December 31, |
|||
|
|
2016 |
|
2015 |
|
Statutory U.S. federal income tax rate |
|
34.0 |
% |
34.0 |
% |
State and local income taxes, net of federal income tax benefit |
|
34.4 |
|
4.6 |
|
Permanent differences |
|
12.7 |
|
(0.4) |
|
Change in valuation allowance |
|
(68.8) |
|
(38.2) |
|
Change in uncertain tax positions |
|
(14.8) |
|
0.2 |
|
Other |
|
1.8 |
|
— |
|
Effective income tax rate |
|
(0.7) |
% |
0.2 |
% |
The Company accounts for the uncertainty in income taxes by prescribing a minimum recognition threshold for a tax position taken, or expected to be taken, in a tax return that is required to be met before being recognized in the financial statements. The changes in the Company’s uncertain income tax positions for the years ended December 31, 2016 and 2015 consisted of the following:
|
|
For the Year |
|
||||
|
|
Ended |
|
||||
|
|
December 31, |
|
||||
|
|
2016 |
|
2015 |
|
||
Beginning balance |
|
$ |
56 |
|
$ |
81 |
|
Tax positions related to current year: |
|
|
|
|
|
|
|
Additions |
|
|
— |
|
|
— |
|
Reductions |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
— |
|
Tax positions related to prior years: |
|
|
|
|
|
|
|
Additions |
|
|
— |
|
|
— |
|
Reductions |
|
|
— |
|
|
— |
|
Settlements |
|
|
— |
|
|
— |
|
Lapses in statutes of limitations |
|
|
(29) |
|
|
(25) |
|
Additions from current year acquisitions |
|
|
— |
|
|
— |
|
|
|
|
(29) |
|
|
(25) |
|
Ending balance |
|
$ |
27 |
|
$ |
56 |
|
The amount of unrecognized tax benefits at December 31, 2016 that would affect the effective tax rate if the tax benefits were recognized was $45.
It is the Company’s policy to include interest and penalties in tax expense. During the years ended December 31, 2016 and 2015, the Company recognized and accrued approximately $6 and $18, respectively, of interest and penalties.
The Company files income tax returns in the U.S. federal and state jurisdictions. As of December 31, 2016, open tax years in the federal and some state jurisdictions date back to 1996 due to the taxing authorities’ ability to adjust NOL carryforwards. The Company’s 2008 and 2009 federal tax returns were examined in 2011 and no material adjustments were identified related to any of the Company’s tax positions. Although these periods have been audited, they continue to remain open until all NOLs generated in those tax years have either been utilized or expire.
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 an annual limitation of $14,284 on NOLs and built‑in losses available for utilization based on the triggering event in 2010. 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 if the Company were able to use NOL carryforwards and built‑in losses without such annual limitation, which could result in lower profits and the loss of benefits from these attributes.
In February 2013, the Company adopted a Stockholder Rights Plan, which was amended in February 2016 and approved by our stockholders (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 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 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 December 31, 2016, the Company had $69 of unrecognized tax benefits, all of which would have a favorable impact on income tax expense. It is reasonably possible that unrecognized tax benefits will decrease by up to approximately $69 as a result of the expiration of the applicable statutes of limitations within the next twelve months. The Company recognizes interest and penalties related to uncertain tax positions as income tax expense. The Company had accrued interest and penalties of $42 as of December 31, 2016. As of December 31, 2015, the Company had unrecognized tax benefits of $140, of which $84 represented accrued interest and penalties.
|
15. SHARE‑BASED COMPENSATION
Overview of Share‑Based Compensation Plan
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 December 31, 2016, the Company had reserved 30,233 shares for issuance upon the exercise of stock options outstanding and no shares for issuance upon the vesting of RSU awards outstanding. As of December 31, 2016, 253,659 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
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 December 31, 2016, the Company had reserved 37,205 shares for issuance upon the exercise of stock options outstanding and 64,759 shares for issuance upon the vesting of RSU awards outstanding. As of December 31, 2016, 583,894 shares of common stock reserved for stock options and RSU awards under the 2012 EIP have 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 2015 EIP are (i) to align the interests of the Company’s stockholders and recipients of awards under the 2015 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 2015 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 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 December 31, 2016, the Company had reserved 427,417 shares for issuance upon the vesting of RSU awards outstanding. As of December 31, 2016, 47,669 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.
Stock option activity during the years ended December 31, 2016 and 2015 under the Equity Incentive Plans was as follows:
|
|
|
|
|
|
|
|
Weighted Average |
|
Aggregate Intrinsic |
|
|
|
|
|
|
|
Weighted Average |
|
Remaining |
|
Value |
|
||
|
|
|
Options |
|
Exercise Price |
|
Contractual Term |
|
(in thousands) |
|
||
Outstanding as of December 31, 2015 |
|
|
144,197 |
|
$ |
17.98 |
|
|
|
|
|
|
Granted |
|
|
— |
|
|
— |
|
|
|
|
|
|
Exercised |
|
|
(5,647) |
|
|
3.39 |
|
|
|
|
|
|
Forfeited |
|
|
— |
|
|
— |
|
|
|
|
|
|
Expired |
|
|
(71,112) |
|
|
12.52 |
|
|
|
|
|
|
Outstanding as of December 31, 2016 |
|
|
67,438 |
|
$ |
24.96 |
|
4.38 |
|
$ |
24,220 |
|
Exercisable as of December 31, 2016 |
|
|
67,438 |
|
$ |
24.96 |
|
4.38 |
|
$ |
24,220 |
|
The following table summarizes information with respect to all outstanding and exercisable stock options under the Equity Incentive Plans as of December 31, 2016:
|
|
|
|
Options Outstanding |
|
|
Options Exercisable |
|
||||||||
|
|
|
|
|
|
|
|
|
Weighted Average |
|
|
|
|
|
|
|
|
|
|
|
Number of options |
|
Weighted Average |
|
Remaining |
|
|
Number |
|
Weighted Average |
|
||
Exercise Price or Range |
|
outstanding |
|
Exercise Price |
|
Contractual Term |
|
|
Exercisable |
|
Exercise Price |
|
||||
$3.39 |
- |
$13.50 |
|
52,115 |
|
$ |
6.29 |
|
5.01 |
years |
|
52,115 |
|
$ |
6.29 |
|
$54.40 |
- |
$92.50 |
|
5,823 |
|
|
57.67 |
|
3.07 |
years |
|
5,823 |
|
|
57.67 |
|
$99.90 |
- |
$128.50 |
|
9,500 |
|
|
107.34 |
|
1.75 |
years |
|
9,500 |
|
|
107.34 |
|
|
|
|
|
67,438 |
|
$ |
24.96 |
|
4.38 |
years |
|
67,438 |
|
$ |
24.96 |
|
The following table summarizes information with respect to outstanding RSU’s as of December 31, 2016 and 2015:
|
|
|
|
|
Weighted Average |
|
|
|
|
|
|
|
Grant-Date Fair Value |
|
|
|
|
|
Number of Shares |
|
Per Share |
|
|
Unvested as of December 31, 2015 |
|
|
377,810 |
|
$ |
4.87 |
|
Granted |
|
|
411,910 |
|
$ |
2.84 |
|
Vested |
|
|
(198,762) |
|
$ |
4.73 |
|
Forfeited |
|
|
(98,782) |
|
$ |
3.22 |
|
Unvested as of December 31, 2016 |
|
|
492,176 |
|
$ |
3.56 |
|
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 twelve months ended December 31, 2016.
During the years ended December 31, 2016 and 2015, the Company utilized a forfeiture rate of 25% for estimating the forfeitures of stock compensation granted.
The following table summarizes share‑based compensation expense, net of taxes withheld, included in the Company’s consolidated statements of operations for the years ended December 31, 2016 and 2015 as follows:
|
|
|
For the Years Ended |
|
||||
|
|
|
December 31, |
|
||||
|
|
|
2016 |
|
2015 |
|
||
Share-based compensation expense: |
|
|
|
|
|
|
|
|
Cost of sales |
|
|
$ |
90 |
|
$ |
131 |
|
Selling, general and administrative |
|
|
|
663 |
|
|
788 |
|
Income tax benefit (1) |
|
|
|
— |
|
|
— |
|
Net effect of share-based compensation expense on net income (loss) |
|
|
$ |
753 |
|
$ |
919 |
|
Reduction in earnings per share: |
|
|
|
|
|
|
|
|
Basic earnings per share |
|
|
$ |
0.05 |
|
$ |
0.06 |
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share |
|
|
$ |
0.05 |
|
$ |
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 years ended December 31, 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. |
(2) |
Diluted earnings per share for the year ended December 31, 2015 does not include common stock equivalents due to their anti‑dilutive nature as a result of the Company’s net losses for the period. Accordingly, basic earnings per share and diluted earnings per share are identical for the period. |
As of December 31, 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 $1,113 will be recognized through the year 2020. 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.
|
16. 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. Effective upon the acquisition of Red Wolf on February 1, 2017, as more fully described in Note 22, “Subsequent Events” in the notes to our consolidated financial statements, the Company will be reporting operations in a new segment, Process Systems. The Company’s segments and their product 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 MW 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 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. This product segment also encompasses the manufacture of 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.
Corporate and Other
“Corporate” includes the assets and SG&A expenses of the Company’s corporate office. “Eliminations” comprises adjustments to reconcile segment results to consolidated results.
The accounting policies of the reportable segments are the same as those referenced in Note 1, “Description of Business and Summary of Significant Accounting Policies” of these consolidated financial statements. Summary financial information by reportable segment is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Towers and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weldments |
|
Gearing |
|
Corporate |
|
Eliminations |
|
Consolidated |
|
|||||
For the Year Ended December 31, 2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from external customers |
|
|
$ |
160,210 |
|
$ |
20,630 |
|
$ |
— |
|
$ |
— |
|
$ |
180,840 |
|
Intersegment revenues |
|
|
|
— |
|
|
18 |
|
|
— |
|
|
(18) |
|
|
— |
|
Net revenues |
|
|
|
160,210 |
|
|
20,648 |
|
|
— |
|
|
(18) |
|
|
180,840 |
|
Operating profit (loss) |
|
|
|
12,788 |
|
|
(3,244) |
|
|
(7,636) |
|
|
1 |
|
|
1,909 |
|
Depreciation and amortization |
|
|
|
4,166 |
|
|
2,545 |
|
|
203 |
|
|
— |
|
|
6,914 |
|
Capital expenditures |
|
|
|
6,161 |
|
|
386 |
|
|
77 |
|
|
— |
|
|
6,624 |
|
Assets held for sale |
|
|
|
— |
|
|
353 |
|
|
455 |
|
|
— |
|
|
808 |
|
Total assets |
|
|
|
45,367 |
|
|
30,415 |
|
|
244,639 |
|
|
(202,759) |
|
|
117,662 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Towers and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weldments |
|
Gearing |
|
Corporate |
|
Eliminations |
|
Consolidated |
|
|||||
For the Year Ended December 31, 2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from external customers |
|
$ |
170,540 |
|
$ |
28,616 |
|
$ |
— |
|
$ |
— |
|
$ |
199,156 |
|
Intersegment revenues |
|
|
379 |
|
|
972 |
|
|
— |
|
|
(1,351) |
|
|
— |
|
Net revenues |
|
|
170,919 |
|
|
29,588 |
|
|
— |
|
|
(1,351) |
|
|
199,156 |
|
Operating profit (loss) |
|
|
4,702 |
|
|
(8,235) |
|
|
(8,378) |
|
|
3 |
|
|
(11,908) |
|
Depreciation and amortization |
|
|
3,954 |
|
|
5,031 |
|
|
194 |
|
|
— |
|
|
9,179 |
|
Capital expenditures |
|
|
2,096 |
|
|
583 |
|
|
110 |
|
|
— |
|
|
2,789 |
|
Assets held for sale |
|
|
554 |
|
|
506 |
|
|
3,343 |
|
|
— |
|
|
4,403 |
|
Total assets |
|
|
38,622 |
|
|
39,735 |
|
|
256,238 |
|
|
(224,688) |
|
|
109,907 |
|
The Company generates revenues entirely from transactions completed in the U.S. and its long‑lived assets are all located in the U.S. All intercompany revenue is eliminated in consolidation. During 2016, three customers each accounted for more than 10% of total net revenues. These three customers accounted for revenues of $111,480, $23,018, and $21,237 for fiscal year 2016 and were reported within the Towers and Weldments segment. During 2015, two customers accounted for more than 10% of total net revenues. These two customers accounted for revenues of $124,759 and $45,214 for fiscal year 2015 and were reported within the Towers and Weldments segment. During the years ended December 31, 2016 and 2015, five customers accounted for 91% and 92%, respectively, of total net revenues.
|
17. EMPLOYEE BENEFIT PLANS
Retirement Savings and Profit Sharing Plans
Retirement Savings and Profit Sharing Plans
The Company offers a 401(k) retirement savings plan to all eligible employees who may elect to contribute a portion of their salary on a pre‑tax basis, subject to applicable statutory limitations. Participating non‑union employees are eligible to receive safe harbor matching contributions equal to 100% of the first 3% of the participant’s elective deferral contributions and 50% of the next 2% of the participant’s elective deferral contributions. In accordance with the collective bargaining agreements in place at its two union locations, the Company’s Illinois‑based union employees are eligible to receive a discretionary match in an amount up to 50% of each participant’s first 4% of elective deferral contributions, and the Company’s Pennsylvania‑based union employees are eligible to receive a discretionary match in an amount up to 100% of each participant’s first 3% and 50% of the next 2% of elective deferral contributions. The Company has the discretion, subject to applicable statutory requirements, to fund any matching contribution with a contribution to the plan of the Company’s common stock. Beginning with the first quarter of 2012, the Company funded the matching contributions in the form of the Company’s common stock. Starting in the first quarter of 2014, the Company resumed funding the matching contributions in cash. Under the plan, elective deferrals and basic Company matching will be 100% vested at all times.
For the years ended December 31, 2016 and 2015, the Company recorded expense under these plans of approximately $823 and $876, respectively.
Deferred Compensation Plan
The Company maintains a deferred compensation plan for certain key employees and nonemployee directors, whereby certain wages earned, compensation for services rendered, and discretionary company‑matching contributions may be deferred and deemed to be invested in the Company’s common stock. Changes in the fair value of the plan liability are recorded as charges or credits to compensation expense. Compensation expense associated with the deferred compensation plan recorded during the years ended December 31, 2016 and 2015 was $24 and ($19), respectively. The fair value of the plan liability to the Company is included in accrued liabilities in the Company’s consolidated balance sheets. As of December 31, 2016 and 2015, the fair value of plan liability to the Company was $36 and $12, respectively.
In addition to the employee benefit plans described above, the Company participates in certain customary employee benefits plans, including those which provide health and life insurance benefits to employees.
|
18. 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, a Delaware limited liability company, 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 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 December 31, 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 NMTC Transaction structure are 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. Incremental costs to maintain the transaction structure during the compliance period will be recognized as they are incurred.
|
19. RESTRUCTURING
The Company’s total net restructuring charges 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. Accordingly, 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 leased presence at six facilities and achieved a reduction of approximately 400,000 square feet. One remaining property, the Cicero Avenue Facility, has been vacated and is being prepared for sale. The Company believes its remaining locations 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 12, “Commitments and Contingencies” of these consolidated financial statements. The Company adjusted the liability by recording an additional $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 charge in the third quarter of 2015. The expenses associated with this liability have been recorded as restructuring charges; as of December 31, 2016, the accrual balance remaining was $1,241.
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 the execution of a sale contract subsequent to the year-end. 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.
|
20. QUARTERLY FINANCIAL SUMMARY (UNAUDITED)
The following table provides a summary of selected financial results of operations by quarter for the years ended December 31, 2016 and 2015 as follows:
2016 |
|
First |
|
Second |
|
Third |
|
Fourth |
|
||||
Revenues |
|
$ |
46,757 |
|
$ |
43,380 |
|
$ |
42,552 |
|
$ |
48,151 |
|
Gross profit |
|
|
3,962 |
|
|
4,142 |
|
|
5,331 |
|
|
4,704 |
|
Operating (loss) profit |
|
|
(224) |
|
|
181 |
|
|
1,360 |
|
|
592 |
|
(Loss) income from continuing operations, net of tax |
|
|
(358) |
|
|
42 |
|
|
1,245 |
|
|
406 |
|
Net (loss) income |
|
|
(377) |
|
|
(474) |
|
|
872 |
|
|
298 |
|
(Loss) income from continuing operations per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
(0.02) |
|
$ |
0.00 |
|
$ |
0.08 |
|
$ |
0.03 |
|
Diluted |
|
$ |
(0.02) |
|
$ |
0.00 |
|
$ |
0.08 |
|
$ |
0.03 |
|
Net (loss) income per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
(0.03) |
|
$ |
(0.03) |
|
$ |
0.06 |
|
$ |
0.02 |
|
Diluted |
|
$ |
(0.03) |
|
$ |
(0.03) |
|
$ |
0.06 |
|
$ |
0.02 |
|
2015 |
|
First |
|
Second |
|
Third |
|
Fourth |
|
||||
Revenues |
|
$ |
49,229 |
|
$ |
62,563 |
|
$ |
49,791 |
|
$ |
37,573 |
|
Gross profit (loss) |
|
|
2,745 |
|
|
8,499 |
|
|
2,831 |
|
|
(6,208) |
|
Operating (loss) profit |
|
|
(2,364) |
|
|
3,616 |
|
|
(2,135) |
|
|
(11,025) |
|
(Loss) income from continuing operations, net of tax |
|
|
(2,523) |
|
|
3,387 |
|
|
(2,383) |
|
|
(10,727) |
|
Net (loss) income |
|
|
(5,015) |
|
|
1,615 |
|
|
(7,613) |
|
|
(10,794) |
|
(Loss) income from continuing operations per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
(0.17) |
|
$ |
0.23 |
|
$ |
(0.16) |
|
$ |
(0.73) |
|
Diluted |
|
$ |
(0.17) |
|
$ |
0.23 |
|
$ |
(0.16) |
|
$ |
(0.73) |
|
Net (loss) income per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
(0.34) |
|
$ |
0.11 |
|
$ |
(0.52) |
|
$ |
(0.73) |
|
Diluted |
|
$ |
(0.34) |
|
$ |
0.11 |
|
$ |
(0.52) |
|
$ |
(0.73) |
|
|
21. LEGAL PROCEEDINGS
The Company is party to a variety of legal proceedings that arise in the ordinary 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 in which the Company would be required to pay such liability.
|
22. SUBSEQUENT EVENTS
On February 1, 2017, the Company acquired all of the outstanding equity interests in Red Wolf Company, LLC, a North Carolina limited liability company (“Red Wolf”), a fabricator, kitter and assembler of industrial systems primarily supporting the global gas turbine market, for approximately $16,500 paid at closing, and up to $9,900 in contingent consideration payable in cash and, at the election of the Company, up to 50% in the form of shares of the Company’s common stock. The operations of Red Wolf will be reported in a new Process Systems segment of the Company.
As of February 22, 2017, the initial accounting for the business combination has not been completed, including the measurement of certain intangible assets and goodwill. Acquisition costs for the Red Wolf acquisition were $135.
The amounts of pro forma, unaudited net revenues and net income (loss) of the combined entity, before the impact of purchase accounting, had the acquisition date been January 1, 2015 are as follows:
Period |
|
Net revenues |
|
Net income (loss) |
|
For the Year Ended 2016 |
|
$ 213,218 |
|
$ 6,274 |
|
For the Year Ended 2015 |
|
$ 222,501 |
|
$ (18,963) |
|
|
|
|
|
|
|
|
Principles of Consolidation and Basis of Presentation
These consolidated financial statements include the accounts of the Company and entities in which it has a controlling financial interest. All significant intercompany transactions and balances have been eliminated in consolidation. The Company determines whether it has a controlling financial interest in an entity by first evaluating whether the entity is a voting interest entity or a variable interest entity (“VIE”).
When the Company obtains an economic interest in an entity, the Company evaluates the entity to determine if the entity is deemed a VIE, and if the Company is deemed to be the primary beneficiary, in accordance with the accounting standard for the consolidation of VIE’s. The accounting standard for the consolidation of VIE’s requires the Company to qualitatively assess if the Company was the primary beneficiary of the VIE based on whether the Company had (i) the power to direct those matters that most significantly impacted the activities of the VIE and (ii) the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant. Refer to Note 18, “New Markets Tax Credit Transaction” of these consolidated financial statements for a description of two VIE’s included in the Company’s consolidated financial statements.
Management’s Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. (“GAAP”) requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities as of the date of the financial statements and reported amounts of revenues and expenses during the reported period. Significant estimates, among others, include revenue recognition, future tax rates, inventory reserves, warranty reserves, impairment of long-lived assets, allowance for doubtful accounts, workers’ compensation reserves, health insurance reserves, and environmental reserves. Although these estimates are based upon management’s best knowledge of current events and actions that the Company may undertake in the future, actual results could differ from these estimates.
The Company changed an accounting estimate as of the beginning of 2016 to increase the salvage value of selected large machinery and equipment in the Gearing segment to reflect the estimated sale value of the used machinery market. The impact during the year-ended December 31, 2016 was a reduction of depreciation expense of $2,481. A similar impact is expected to occur through October 2017.
Out-of-Period Adjustment
Included in the results of operations for the year ended December 31, 2015, are out-of-period adjustments, which represent corrections of prior-period errors relating to the inventory balance in the Company’s Towers & Weldments segment. During the fourth quarter of 2015, the Company determined that the cost of certain component parts had not been properly assigned to previously sold towers resulting in an overstatement of inventory and an understatement of previously reported cost of goods sold. The out-of-period impact of the error recorded was approximately $231 related to periods prior to 2015. The correction of these errors was not material to the year ended December 31, 2015 or any of the prior interim or annual periods.
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 consolidated statements of operations. As of December 31, 2016 and December 31, 2015, cash and cash equivalents totaled $18,699 and $6,436, respectively, and short‑term investments totaled $3,171 and $6,179, respectively. For the years ended December 31, 2016 and 2015, interest income was $48 and $10, respectively.
Restricted Cash
Restricted cash balances relate primarily to provisions contained in certain vendor agreements. The Company anticipates that all restricted cash balances will be used for current purposes. As of December 31, 2016 and 2015, the Company had restricted cash in the amount of $39 and $83, respectively.
Revenue Recognition
The Company recognizes revenue when the earnings process is complete and when persuasive evidence of an arrangement exists, transfer of title has occurred or services have been rendered, the selling price is fixed or determinable, collectability is reasonably assured and delivery has occurred per the terms of the contract. Customer deposits, deferred revenue and other receipts are deferred and recognized when the revenue is realized and earned. Cash payments to customers are presumed to be classified as reductions of revenue in the Company’s statement of operations.
In most instances within the Company’s Towers and Weldments segment, products are sold under terms included in bill and hold sales arrangements that result in different timing for revenue recognition. The Company recognizes revenue under these arrangements only when the buyer requests the arrangement, a fixed schedule for delivery exists, the ordered goods are segregated from inventory and not available to fill other orders and the goods are complete and ready for shipment. Assuming these required revenue recognition criteria are met, revenue is recognized upon completion of product manufacture and customer acceptance.
Cost of Sales
Cost of sales represents all direct and indirect costs associated with the production of products for sale to customers. These costs include operation, repair and maintenance of equipment, materials, direct and indirect labor and benefit costs, rent and utilities, maintenance, insurance, equipment rentals, freight in and depreciation.
Selling, General and Administrative Expenses
Selling, general and administrative (“SG&A”) expenses include all corporate and administrative functions such as sales and marketing, legal, human resource management, finance, investor and public relations, information technology and senior management. These functions serve to support the Company’s current and future operations and provide an infrastructure to support future growth. Major expense items in this category include management and staff wages and benefits, share‑based compensation and professional services.
Accounts Receivable (A/R)
The Company generally grants uncollateralized credit to customers on an individual basis based upon the customer’s financial condition and credit history. Credit is typically on net 30 day terms and customer deposits are frequently required at various stages of the production process to minimize credit risk.
Historically, the Company’s A/R is highly concentrated with a select number of customers. During the year ended December 31, 2016, the Company’s five largest customers accounted for 91% of its consolidated revenues and 86% of outstanding A/R balances, compared to the year ended December 31, 2015 when the Company’s five largest customers accounted for 92% of its consolidated revenues and 71% of its outstanding A/R balances.
Allowance for Doubtful Accounts
Based upon past experience and judgment, the Company establishes an allowance for doubtful accounts with respect to A/R. 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 realizability of its A/R. These factors include individual customer circumstances, history with the Company and other relevant criteria. A/R balances that remain outstanding after the Company has exhausted reasonable collection efforts are written off through a charge to the valuation allowance and a credit to A/R.
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 realizability of its A/R, as noted above, or modifications to the Company’s credit standards, collection practices and other related policies may impact its allowance for doubtful accounts and its financial results. Bad debt expense for the years ended December 31, 2016 and 2015 was $65 and $87, respectively.
Inventories
Inventories are stated at the lower of cost or market. Cost is determined either based on the first‑in, first‑out (“FIFO”) method, or on a standard cost basis that approximates the FIFO method. Market is determined based on net realizable value. Any excess of cost over market value is included in the Company’s inventory allowance. Market value of inventory, and management’s judgment of the need for reserves, encompasses consideration of other business factors including physical condition, inventory holding period, contract terms and usefulness.
Inventories consist of raw materials, work‑in‑process and finished goods. Raw materials consist of components and parts for general production use. Work‑in‑process consists of labor and overhead, processing costs, purchased subcomponents and materials purchased for specific customer orders. Finished goods consist of components purchased from third parties as well as components manufactured by the Company that will be used to produce final customer products.
Long-Lived Assets
Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation and amortization of property and equipment is recognized using the straight‑line method over the estimated useful lives of the related assets for financial reporting purposes, and generally using an accelerated method for income tax reporting purposes. Depreciation expense related to property and equipment for the years ended December 31, 2016 and 2015 was $6,471 and $8,736, respectively. Expenditures for additions and improvements are capitalized, while replacements, maintenance and repairs that do not improve or extend the useful lives of the respective assets are expensed as incurred. The Company has in the past capitalized interest costs incurred on indebtedness used to construct property and equipment. Capitalized interest is recorded as part of the asset to which it relates and is amortized over the asset’s estimated useful life. There was no interest cost capitalized during the years ended December 31, 2016 or 2015. Property or equipment sold or disposed of is removed from the respective property accounts, with any corresponding gains and losses recorded to other income or expense in the Company’s consolidated statement of operations.
The Company reviews property and equipment and other long‑lived assets (“long-lived assets”) for impairment whenever events or circumstances indicate that carrying amounts may not be recoverable. In evaluating the recoverability of the long-lived assets, the Company must make assumptions regarding the undiscounted future cash flows of the asset group. The Company utilizes fair value techniques accepted by Accounting Standards Codification (“ASC”) 820, Fair Value Measurement, which includes the income, market and cost approach. If the fair value of the asset group is less than the carrying amount, the Company recognizes an impairment loss.
In evaluating the recoverability of long‑lived assets, the Company must make assumptions regarding estimated future cash flows and other factors to determine the fair value of such assets. If the Company’s fair value estimates or related assumptions change in the future, the Company may be required to record impairment charges related to property and equipment and other long‑lived assets. Asset recoverability is first measured by comparing the assets’ carrying amounts to their expected future undiscounted net cash flows to determine if the assets are impaired. If such assets are considered to be impaired, the impairment recognized is measured based on the amount by which the carrying amount of the assets exceeds the fair value. To the extent the projections used in the Company’s analysis are not achieved, there may be a negative effect on the valuation of these assets.
Warranty Liability
The Company provides warranty terms that generally range from one to five years for various products and services relating to workmanship and materials supplied by the Company. In certain contracts, the Company has recourse provisions for items that would enable the Company to pursue recovery from third parties for amounts paid to customers under warranty provisions. Warranty liability is recorded in accrued liabilities within the consolidated balance sheet. The Company estimates the warranty accrual based on various factors, including historical warranty costs, current trends, product mix and sales. The changes in the carrying amount of the Company’s total product warranty liability for the years ended December 31, 2016 and 2015 were as follows, excluding activity related to the discontinued Services segment:
|
|
|
As of December 31, |
|
|||||
|
|
|
2016 |
|
2015 |
|
|
||
Balance, beginning of period |
|
|
$ |
601 |
|
$ |
1,054 |
|
|
Addition to (reduction of) warranty reserve |
|
|
|
83 |
|
|
(72) |
|
|
Warranty claims |
|
|
|
(13) |
|
|
(381) |
|
|
Balance, end of period |
|
|
$ |
671 |
|
$ |
601 |
|
|
The decrease in the warranty liability as of December 31, 2015 was due primarily to settlement of a $371 obligation to a specific customer completed during 2015.
Income Taxes
The Company accounts for income taxes based upon an asset and liability approach. Deferred tax assets and liabilities represent the future tax consequences of the differences between the financial statement carrying amounts of assets and liabilities versus the tax basis of assets and liabilities. Under this method, deferred tax assets are recognized for deductible temporary differences, and operating loss and tax credit carryforwards. Deferred tax liabilities are recognized for taxable temporary differences. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The impact of tax rate changes on deferred tax assets and liabilities is recognized in the year that the change is enacted.
In connection with the preparation of its consolidated financial statements, the Company is required to estimate its income tax liability for each of the tax jurisdictions in which the Company operates. This process involves estimating the Company’s actual current income tax expense and assessing temporary differences resulting from differing treatment of certain income or expense items for income tax reporting and financial reporting purposes. The Company also recognizes as deferred income tax assets the expected future income tax benefits of net operating loss (“NOL”) carryforwards. In evaluating the realizability of deferred income tax assets associated with NOL carryforwards, the Company considers, among other things, expected future taxable income, the expected timing of the reversals of existing temporary reporting differences and the expected impact of tax planning strategies that may be implemented to prevent the potential loss of future income tax benefits. Changes in, among other things, income tax legislation, statutory income tax rates or future taxable income levels could materially impact the Company’s valuation of income tax assets and liabilities and could cause its income tax provision to vary significantly among financial reporting periods.
The Company also accounts for the uncertainty in income taxes related to the recognition and measurement of a tax position taken or expected to be taken in an income tax return. The Company follows the applicable pronouncement guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition related to the uncertainty in these income tax positions.
Share‑Based Compensation
The Company grants incentive stock options and/or restricted stock units (“RSUs”) to certain officers, directors, and employees. The Company accounts for share‑based compensation related to these awards based on the estimated fair value of the equity award and recognizes expense ratably over the vesting term of the award. See Note 15 “Share‑Based Compensation” of these consolidated financial statements for further discussion of the Company’s share‑based compensation plans, the nature of share‑based awards issued and the Company’s accounting for share‑based compensation.
Net Income (Loss) Per Share
The Company presents both basic and diluted net income (loss) per share. Basic net income (loss) per share is based solely upon the weighted average number of common shares outstanding and excludes any dilutive effects of options, warrants and convertible securities. Diluted net income (loss) per share is based upon the weighted average number of common shares and common‑share equivalents outstanding during the year excluding those common‑share equivalents where the impact to basic net income (loss) per share would be anti‑dilutive.
|
|
|
|
As of December 31, |
|
|||||
|
|
|
2016 |
|
2015 |
|
|
||
Balance, beginning of period |
|
|
$ |
601 |
|
$ |
1,054 |
|
|
Addition to (reduction of) warranty reserve |
|
|
|
83 |
|
|
(72) |
|
|
Warranty claims |
|
|
|
(13) |
|
|
(381) |
|
|
Balance, end of period |
|
|
$ |
671 |
|
$ |
601 |
|
|
|
|
|
|
|
For the Years Ended December 31, |
|
|||||
|
|
|
|
2016 |
|
2015 |
|
|
||
Basic earnings per share calculation: |
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
|
|
$ |
319 |
|
$ |
(21,807) |
|
|
Weighted average number of common shares outstanding |
|
|
|
|
14,843 |
|
|
14,677 |
|
|
Basic net income (loss) per share |
|
|
|
$ |
0.02 |
|
$ |
(1.48) |
|
|
Diluted earnings per share calculation: |
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
|
|
$ |
319 |
|
$ |
(21,807) |
|
|
Weighted average number of common shares outstanding |
|
|
|
|
14,843 |
|
|
14,677 |
|
|
Common stock equivalents: |
|
|
|
|
|
|
|
|
|
|
Stock options and non-vested stock awards |
|
|
|
|
238 |
|
|
— |
|
|
Weighted average number of common shares outstanding |
|
|
|
|
15,081 |
|
|
14,677 |
|
|
Diluted net income (loss) per share |
|
|
|
$ |
0.02 |
|
$ |
(1.48) |
|
|
(1) Stock options and RSUs granted and outstanding of 522,007 as of December 31, 2015 are excluded from the computation of diluted earnings due to the anti‑dilutive effect as a result of the Company’s net loss for the year ended December 31, 2015
|
Results of operations associated with the Services segment, which are reflected as discontinued operations in the Company’s condensed consolidated statements of income for the twelve months ended December 31, 2016 and 2015, were as follows:
|
|
|
|
|
Year Ended December 31, |
||||
|
|
|
|
|
2016 |
|
2015 |
||
Revenues |
|
|
|
|
$ |
109 |
|
$ |
10,486 |
Cost of sales |
|
|
|
|
|
(1,006) |
|
|
(14,395) |
Selling, general and administrative |
|
|
|
|
|
(69) |
|
|
(2,153) |
Interest expense, net |
|
|
|
|
|
(5) |
|
|
(36) |
Other income and expense items |
|
|
|
|
|
— |
|
|
133 |
Impairment of held for sale assets and liabilities and gain on sale of assets |
|
|
|
|
|
(45) |
|
|
(3,596) |
Loss from discontinued operations before and after benefit for income taxes |
|
|
|
|
$ |
(1,016) |
|
$ |
(9,561) |
The Company was notified of two warranty claims, which resulted in an additional $427 of warranty expense recorded during the second quarter of 2016; both of the warranty claims were resolved prior to the end of 2016. The Company also reviewed the status of remaining inventory, which resulted in $216 of impairment expense during year-ended December 31, 2016.
Assets and Liabilities Held for Sales
Assets and liabilities classified as held for sale in the Company’s consolidated balance sheets as of December 31, 2016 and 2015 include the following:
|
|
December 31, |
|
December 31, |
||
|
|
2016 |
|
2015 |
||
Assets: |
|
|
|
|
|
|
Accounts receivable, net |
|
$ |
172 |
|
$ |
2,119 |
Inventories, net |
|
|
807 |
|
|
2,118 |
Prepaid expenses and other current assets |
|
|
55 |
|
|
606 |
Assets Held For Sale Related To Discontinued Operations |
|
|
1,034 |
|
|
4,843 |
Impairment of discontinued assets held for sale |
|
|
(579) |
|
|
(1,500) |
Total Assets Held For Sale Related To Discontinued Operations |
|
$ |
455 |
|
$ |
3,343 |
Liabilities: |
|
|
|
|
|
|
Accounts payable |
|
$ |
22 |
|
$ |
367 |
Accrued liabilities |
|
|
121 |
|
|
433 |
Customer deposits and other current obligations |
|
|
3 |
|
|
49 |
Other long-term liabilities |
|
|
3 |
|
|
17 |
Total Liabilities Held For Sale Related To Discontinued Operations |
|
$ |
149 |
|
$ |
866 |
|
|
|
As of |
|
||||
|
|
December 31, |
|
||||
|
|
2016 |
|
2015 |
|
||
Cash and cash equivalents: |
|
|
|
|
|
|
|
Cash |
|
$ |
16,821 |
|
$ |
4,614 |
|
Money market funds |
|
|
1,878 |
|
|
199 |
|
Corporate & municipal bonds |
|
|
— |
|
|
1,623 |
|
Total cash and cash equivalents |
|
|
18,699 |
|
|
6,436 |
|
Short-term investments (available-for-sale): |
|
|
|
|
|
|
|
Corporate & municipal bonds |
|
|
3,171 |
|
|
6,179 |
|
Total cash and cash equivalents and short-term investments |
|
$ |
21,870 |
|
$ |
12,615 |
|
|
|
|
|
For the Years Ended |
|||||
|
|
|
December 31, |
|||||
|
|
|
2016 |
|
2015 |
|
||
Balance at beginning of period |
|
|
$ |
84 |
|
$ |
81 |
|
Bad debt expense |
|
|
|
65 |
|
|
87 |
|
Write-offs |
|
|
|
— |
|
|
(11) |
|
Other adjustments |
|
|
|
(4) |
|
|
(73) |
|
Balance at end of period |
|
|
$ |
145 |
|
$ |
84 |
|
|
|
|
As of December 31, |
|
||||
|
|
2016 |
|
2015 |
|
||
Raw materials |
|
$ |
14,174 |
|
$ |
14,868 |
|
Work-in-process |
|
|
5,321 |
|
|
8,540 |
|
Finished goods |
|
|
3,342 |
|
|
2,661 |
|
|
|
|
22,837 |
|
|
26,069 |
|
Less: Reserve for excess and obsolete inventory |
|
|
(1,678) |
|
|
(1,850) |
|
Net inventories |
|
$ |
21,159 |
|
$ |
24,219 |
|
|
|
|
As of December 31, |
|
|
|
|
|
|
||||
|
|
2016 |
|
2015 |
|
Life |
|
|||||
Land |
|
$ |
1,982 |
|
$ |
1,982 |
|
|
|
|
|
|
Buildings |
|
|
20,874 |
|
|
20,874 |
|
39 |
years |
|
|
|
Machinery and equipment |
|
|
98,656 |
|
|
95,546 |
|
2 |
- |
10 |
years |
|
Office furniture and equipment |
|
|
3,648 |
|
|
3,446 |
|
3 |
- |
7 |
years |
|
Leasehold improvements |
|
|
8,720 |
|
|
8,169 |
|
Asset life or life of lease |
|
|
|
|
Construction in progress |
|
|
6,089 |
|
|
993 |
|
|
|
|
|
|
|
|
|
139,969 |
|
|
131,010 |
|
|
|
|
|
|
Less accumulated depreciation and amortization |
|
|
(85,363) |
|
|
(79,104) |
|
|
|
|
|
|
Total property and equipment |
|
$ |
54,606 |
|
$ |
51,906 |
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016 |
|
December 31, 2015 |
||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
|
|
|
|
Net |
|
Average |
|
|
|
|
|
|
|
Net |
|
Average |
||
|
|
|
|
|
|
|
|
Accumulated |
|
Book |
|
Amortization |
|
|
|
|
Accumulated |
|
Book |
|
Amortization |
||||
|
|
|
|
|
Cost |
|
Amortization |
|
Value |
|
Period |
|
Cost |
|
Amortization |
|
Value |
|
Period |
||||||
Intangible assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer relationships |
|
|
|
|
$ |
3,979 |
|
$ |
(3,726) |
|
$ |
253 |
|
7.2 |
|
$ |
3,979 |
|
$ |
(3,682) |
|
$ |
297 |
|
7.2 |
Trade names |
|
|
|
|
|
7,999 |
|
|
(3,680) |
|
|
4,319 |
|
20.0 |
|
|
7,999 |
|
|
(3,280) |
|
|
4,719 |
|
20.0 |
Intangible assets |
|
|
|
|
$ |
11,978 |
|
$ |
(7,406) |
|
$ |
4,572 |
|
15.8 |
|
$ |
11,978 |
|
$ |
(6,962) |
|
$ |
5,016 |
|
15.8 |
2017 |
|
$ |
444 |
2018 |
|
|
444 |
2019 |
|
|
444 |
2020 |
|
|
444 |
2021 |
|
|
444 |
2022 and thereafter |
|
|
2,352 |
Total |
|
$ |
4,572 |
|
|
|
December 31, |
|
||||
|
|
2016 |
|
2015 |
|
||
Accrued payroll and benefits |
|
$ |
4,422 |
|
$ |
3,675 |
|
Accrued property taxes |
|
|
99 |
|
|
128 |
|
Income taxes payable |
|
|
127 |
|
|
155 |
|
Accrued professional fees |
|
|
236 |
|
|
74 |
|
Accrued warranty liability |
|
|
671 |
|
|
601 |
|
Accrued regulatory settlement |
|
|
500 |
|
|
500 |
|
Accrued environmental reserve |
|
|
1,241 |
|
|
1,300 |
|
Accrued self-insurance reserve |
|
|
909 |
|
|
1,464 |
|
Accrued other |
|
|
225 |
|
|
237 |
|
Total accrued liabilities |
|
$ |
8,430 |
|
$ |
8,134 |
|
|
|
|
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 |
|
2017 |
|
$ |
— |
|
2018 |
|
|
2,600 |
|
2019 |
|
|
— |
|
2020 |
|
|
— |
|
2021 |
|
|
— |
|
2022 and thereafter |
|
|
— |
|
Total |
|
$ |
2,600 |
|
|
|
|
December 31, |
|
||||
|
|
2016 |
|
2015 |
|
||
Cost |
|
$ |
1,616 |
|
$ |
1,784 |
|
Accumulated depreciation |
|
|
(129) |
|
|
(503) |
|
Net book value |
|
$ |
1,487 |
|
$ |
1,281 |
|
|
|
Capital |
|
Operating |
|
|
|
|
||
|
|
Leases |
|
Leases |
|
Total |
|
|||
2017 |
|
$ |
523 |
|
$ |
2,954 |
|
$ |
3,477 |
|
2018 |
|
|
523 |
|
|
2,845 |
|
|
3,368 |
|
2019 |
|
|
523 |
|
|
2,877 |
|
|
3,400 |
|
2020 |
|
|
43 |
|
|
2,202 |
|
|
2,245 |
|
2021 |
|
|
— |
|
|
2,236 |
|
|
2,236 |
|
2022 and thereafter |
|
|
— |
|
|
10,730 |
|
|
10,730 |
|
Total |
|
$ |
1,612 |
|
$ |
23,844 |
|
$ |
25,456 |
|
Less—portion representing interest at a weighted average annual rate of 5.0% |
|
|
(109) |
|
|
|
|
|
|
|
Principal |
|
|
1,503 |
|
|
|
|
|
|
|
Less—current portion |
|
|
(465) |
|
|
|
|
|
|
|
Capital lease obligations, noncurrent portion |
|
$ |
1,038 |
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016 |
|
||||||||||
|
|
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
Total |
|
||||
Assets measured on a recurring basis: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate & municipal bonds and money market funds |
|
|
$ |
— |
|
$ |
5,049 |
|
$ |
— |
|
$ |
5,049 |
|
Assets measured on a nonrecurring basis: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gearing equipment |
|
|
|
— |
|
|
— |
|
|
353 |
|
|
353 |
|
Gearing Cicero Ave. facility |
|
|
|
— |
|
|
— |
|
|
560 |
|
|
560 |
|
Services assets |
|
|
|
— |
|
|
— |
|
|
455 |
|
|
455 |
|
Total assets at fair value |
|
|
$ |
— |
|
$ |
5,049 |
|
$ |
1,368 |
|
$ |
6,417 |
|
|
|
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 |
|
|
|
|
For the Years Ended December 31, |
|
|||||
|
|
2016 |
|
2015 |
|
|
||
Current provision |
|
|
|
|
|
|
|
|
Federal |
|
$ |
— |
|
$ |
— |
|
|
Foreign |
|
|
— |
|
|
— |
|
|
State |
|
|
(2) |
|
|
(36) |
|
|
Total current benefit |
|
|
(2) |
|
|
(36) |
|
|
Deferred credit |
|
|
|
|
|
|
|
|
Federal |
|
|
487 |
|
|
(7,165) |
|
|
State |
|
|
5,226 |
|
|
(2,403) |
|
|
Total deferred credit |
|
|
5,713 |
|
|
(9,568) |
|
|
(Decrease) increase in deferred tax valuation allowance |
|
|
(5,713) |
|
|
9,568 |
|
|
Total benefit for income taxes |
|
$ |
(2) |
|
$ |
(36) |
|
|
|
|
As of December 31, |
|
||||
|
|
2016 |
|
2015 |
|
||
Noncurrent deferred income tax assets: |
|
|
|
|
|
|
|
Net operating loss carryforwards |
|
$ |
79,966 |
|
$ |
81,221 |
|
Intangible assets |
|
|
19,021 |
|
|
22,886 |
|
Accrual and reserves |
|
|
5,201 |
|
|
5,919 |
|
Other |
|
|
52 |
|
|
75 |
|
Total noncurrent deferred tax assets |
|
|
104,240 |
|
|
110,101 |
|
Valuation allowance |
|
|
(103,623) |
|
|
(109,336) |
|
Noncurrent deferred tax assets, net of valuation allowance |
|
|
617 |
|
|
765 |
|
Noncurrent deferred income tax liabilities: |
|
|
|
|
|
|
|
Fixed assets |
|
|
(617) |
|
|
(765) |
|
Intangible assets |
|
|
— |
|
|
— |
|
Total noncurrent deferred tax liabilities |
|
|
(617) |
|
|
(765) |
|
Net deferred income tax liability |
|
$ |
— |
|
$ |
— |
|
Valuation allowance as of December 31, 2015 |
|
$ |
(109,336) |
|
Gross decrease for current year activity |
|
|
5,713 |
|
Valuation allowance as of December 31, 2016 |
|
$ |
(103,623) |
|
|
|
For the Year Ended |
|||
|
|
December 31, |
|||
|
|
2016 |
|
2015 |
|
Statutory U.S. federal income tax rate |
|
34.0 |
% |
34.0 |
% |
State and local income taxes, net of federal income tax benefit |
|
34.4 |
|
4.6 |
|
Permanent differences |
|
12.7 |
|
(0.4) |
|
Change in valuation allowance |
|
(68.8) |
|
(38.2) |
|
Change in uncertain tax positions |
|
(14.8) |
|
0.2 |
|
Other |
|
1.8 |
|
— |
|
Effective income tax rate |
|
(0.7) |
% |
0.2 |
% |
|
|
For the Year |
|
||||
|
|
Ended |
|
||||
|
|
December 31, |
|
||||
|
|
2016 |
|
2015 |
|
||
Beginning balance |
|
$ |
56 |
|
$ |
81 |
|
Tax positions related to current year: |
|
|
|
|
|
|
|
Additions |
|
|
— |
|
|
— |
|
Reductions |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
— |
|
Tax positions related to prior years: |
|
|
|
|
|
|
|
Additions |
|
|
— |
|
|
— |
|
Reductions |
|
|
— |
|
|
— |
|
Settlements |
|
|
— |
|
|
— |
|
Lapses in statutes of limitations |
|
|
(29) |
|
|
(25) |
|
Additions from current year acquisitions |
|
|
— |
|
|
— |
|
|
|
|
(29) |
|
|
(25) |
|
Ending balance |
|
$ |
27 |
|
$ |
56 |
|
|
|
|
|
|
|
|
|
|
Weighted Average |
|
Aggregate Intrinsic |
|
|
|
|
|
|
|
Weighted Average |
|
Remaining |
|
Value |
|
||
|
|
|
Options |
|
Exercise Price |
|
Contractual Term |
|
(in thousands) |
|
||
Outstanding as of December 31, 2015 |
|
|
144,197 |
|
$ |
17.98 |
|
|
|
|
|
|
Granted |
|
|
— |
|
|
— |
|
|
|
|
|
|
Exercised |
|
|
(5,647) |
|
|
3.39 |
|
|
|
|
|
|
Forfeited |
|
|
— |
|
|
— |
|
|
|
|
|
|
Expired |
|
|
(71,112) |
|
|
12.52 |
|
|
|
|
|
|
Outstanding as of December 31, 2016 |
|
|
67,438 |
|
$ |
24.96 |
|
4.38 |
|
$ |
24,220 |
|
Exercisable as of December 31, 2016 |
|
|
67,438 |
|
$ |
24.96 |
|
4.38 |
|
$ |
24,220 |
|
|
|
|
|
Options Outstanding |
|
|
Options Exercisable |
|
||||||||
|
|
|
|
|
|
|
|
|
Weighted Average |
|
|
|
|
|
|
|
|
|
|
|
Number of options |
|
Weighted Average |
|
Remaining |
|
|
Number |
|
Weighted Average |
|
||
Exercise Price or Range |
|
outstanding |
|
Exercise Price |
|
Contractual Term |
|
|
Exercisable |
|
Exercise Price |
|
||||
$3.39 |
- |
$13.50 |
|
52,115 |
|
$ |
6.29 |
|
5.01 |
years |
|
52,115 |
|
$ |
6.29 |
|
$54.40 |
- |
$92.50 |
|
5,823 |
|
|
57.67 |
|
3.07 |
years |
|
5,823 |
|
|
57.67 |
|
$99.90 |
- |
$128.50 |
|
9,500 |
|
|
107.34 |
|
1.75 |
years |
|
9,500 |
|
|
107.34 |
|
|
|
|
|
67,438 |
|
$ |
24.96 |
|
4.38 |
years |
|
67,438 |
|
$ |
24.96 |
|
|
|
|
|
|
Weighted Average |
|
|
|
|
|
|
|
Grant-Date Fair Value |
|
|
|
|
|
Number of Shares |
|
Per Share |
|
|
Unvested as of December 31, 2015 |
|
|
377,810 |
|
$ |
4.87 |
|
Granted |
|
|
411,910 |
|
$ |
2.84 |
|
Vested |
|
|
(198,762) |
|
$ |
4.73 |
|
Forfeited |
|
|
(98,782) |
|
$ |
3.22 |
|
Unvested as of December 31, 2016 |
|
|
492,176 |
|
$ |
3.56 |
|
|
|
|
For the Years Ended |
|
||||
|
|
|
December 31, |
|
||||
|
|
|
2016 |
|
2015 |
|
||
Share-based compensation expense: |
|
|
|
|
|
|
|
|
Cost of sales |
|
|
$ |
90 |
|
$ |
131 |
|
Selling, general and administrative |
|
|
|
663 |
|
|
788 |
|
Income tax benefit (1) |
|
|
|
— |
|
|
— |
|
Net effect of share-based compensation expense on net income (loss) |
|
|
$ |
753 |
|
$ |
919 |
|
Reduction in earnings per share: |
|
|
|
|
|
|
|
|
Basic earnings per share |
|
|
$ |
0.05 |
|
$ |
0.06 |
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share |
|
|
$ |
0.05 |
|
$ |
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 years ended December 31, 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. |
(2) |
Diluted earnings per share for the year ended December 31, 2015 does not include common stock equivalents due to their anti‑dilutive nature as a result of the Company’s net losses for the period. Accordingly, basic earnings per share and diluted earnings per share are identical for the period. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Towers and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weldments |
|
Gearing |
|
Corporate |
|
Eliminations |
|
Consolidated |
|
|||||
For the Year Ended December 31, 2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from external customers |
|
|
$ |
160,210 |
|
$ |
20,630 |
|
$ |
— |
|
$ |
— |
|
$ |
180,840 |
|
Intersegment revenues |
|
|
|
— |
|
|
18 |
|
|
— |
|
|
(18) |
|
|
— |
|
Net revenues |
|
|
|
160,210 |
|
|
20,648 |
|
|
— |
|
|
(18) |
|
|
180,840 |
|
Operating profit (loss) |
|
|
|
12,788 |
|
|
(3,244) |
|
|
(7,636) |
|
|
1 |
|
|
1,909 |
|
Depreciation and amortization |
|
|
|
4,166 |
|
|
2,545 |
|
|
203 |
|
|
— |
|
|
6,914 |
|
Capital expenditures |
|
|
|
6,161 |
|
|
386 |
|
|
77 |
|
|
— |
|
|
6,624 |
|
Assets held for sale |
|
|
|
— |
|
|
353 |
|
|
455 |
|
|
— |
|
|
808 |
|
Total assets |
|
|
|
45,367 |
|
|
30,415 |
|
|
244,639 |
|
|
(202,759) |
|
|
117,662 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Towers and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weldments |
|
Gearing |
|
Corporate |
|
Eliminations |
|
Consolidated |
|
|||||
For the Year Ended December 31, 2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from external customers |
|
$ |
170,540 |
|
$ |
28,616 |
|
$ |
— |
|
$ |
— |
|
$ |
199,156 |
|
Intersegment revenues |
|
|
379 |
|
|
972 |
|
|
— |
|
|
(1,351) |
|
|
— |
|
Net revenues |
|
|
170,919 |
|
|
29,588 |
|
|
— |
|
|
(1,351) |
|
|
199,156 |
|
Operating profit (loss) |
|
|
4,702 |
|
|
(8,235) |
|
|
(8,378) |
|
|
3 |
|
|
(11,908) |
|
Depreciation and amortization |
|
|
3,954 |
|
|
5,031 |
|
|
194 |
|
|
— |
|
|
9,179 |
|
Capital expenditures |
|
|
2,096 |
|
|
583 |
|
|
110 |
|
|
— |
|
|
2,789 |
|
Assets held for sale |
|
|
554 |
|
|
506 |
|
|
3,343 |
|
|
— |
|
|
4,403 |
|
Total assets |
|
|
38,622 |
|
|
39,735 |
|
|
256,238 |
|
|
(224,688) |
|
|
109,907 |
|
|
|
|
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 |
|
|
2016 |
|
First |
|
Second |
|
Third |
|
Fourth |
|
||||
Revenues |
|
$ |
46,757 |
|
$ |
43,380 |
|
$ |
42,552 |
|
$ |
48,151 |
|
Gross profit |
|
|
3,962 |
|
|
4,142 |
|
|
5,331 |
|
|
4,704 |
|
Operating (loss) profit |
|
|
(224) |
|
|
181 |
|
|
1,360 |
|
|
592 |
|
(Loss) income from continuing operations, net of tax |
|
|
(358) |
|
|
42 |
|
|
1,245 |
|
|
406 |
|
Net (loss) income |
|
|
(377) |
|
|
(474) |
|
|
872 |
|
|
298 |
|
(Loss) income from continuing operations per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
(0.02) |
|
$ |
0.00 |
|
$ |
0.08 |
|
$ |
0.03 |
|
Diluted |
|
$ |
(0.02) |
|
$ |
0.00 |
|
$ |
0.08 |
|
$ |
0.03 |
|
Net (loss) income per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
(0.03) |
|
$ |
(0.03) |
|
$ |
0.06 |
|
$ |
0.02 |
|
Diluted |
|
$ |
(0.03) |
|
$ |
(0.03) |
|
$ |
0.06 |
|
$ |
0.02 |
|
2015 |
|
First |
|
Second |
|
Third |
|
Fourth |
|
||||
Revenues |
|
$ |
49,229 |
|
$ |
62,563 |
|
$ |
49,791 |
|
$ |
37,573 |
|
Gross profit (loss) |
|
|
2,745 |
|
|
8,499 |
|
|
2,831 |
|
|
(6,208) |
|
Operating (loss) profit |
|
|
(2,364) |
|
|
3,616 |
|
|
(2,135) |
|
|
(11,025) |
|
(Loss) income from continuing operations, net of tax |
|
|
(2,523) |
|
|
3,387 |
|
|
(2,383) |
|
|
(10,727) |
|
Net (loss) income |
|
|
(5,015) |
|
|
1,615 |
|
|
(7,613) |
|
|
(10,794) |
|
(Loss) income from continuing operations per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
(0.17) |
|
$ |
0.23 |
|
$ |
(0.16) |
|
$ |
(0.73) |
|
Diluted |
|
$ |
(0.17) |
|
$ |
0.23 |
|
$ |
(0.16) |
|
$ |
(0.73) |
|
Net (loss) income per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
(0.34) |
|
$ |
0.11 |
|
$ |
(0.52) |
|
$ |
(0.73) |
|
Diluted |
|
$ |
(0.34) |
|
$ |
0.11 |
|
$ |
(0.52) |
|
$ |
(0.73) |
|
|
Period |
|
Net revenues |
|
Net income (loss) |
|
For the Year Ended 2016 |
|
$ 213,218 |
|
$ 6,274 |
|
For the Year Ended 2015 |
|
$ 222,501 |
|
$ (18,963) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|