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BASIS OF PRESENTATION | 6 Months Ended
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Jun. 30, 2015
BASIS OF PRESENTATION |
BASIS OF PRESENTATION | NOTE 1 — BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, the financial statements do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, all adjustments, including normal recurring accruals, considered necessary for a fair presentation have been included. Operating results for the three and six months ended June 30, 2015 are not necessarily indicative of the results that may be expected for the twelve months ending December 31, 2015. The December 31, 2014 condensed consolidated balance sheet was derived from audited financial statements, but does not include all disclosures required by GAAP. This financial information should be read in conjunction with the condensed consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014. The unaudited condensed consolidated financial statements presented herein include the accounts of Broadwind Energy, Inc. and its wholly-owned subsidiaries Broadwind Towers, Inc. (“Broadwind Towers”), Brad Foote Gear Works, Inc. (“Brad Foote”) and Broadwind Services, LLC (“Broadwind Services”) (collectively, the “Subsidiaries”). All intercompany transactions and balances have been eliminated. There have been no material changes in the Company’s significant accounting policies during the three and six months ended June 30, 2015 as compared to the significant accounting policies described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014. Company Description As used in this Quarterly Report on Form 10-Q, the terms “we,” “us,” “our,” and the “Company” refer to Broadwind Energy, Inc., a Delaware corporation headquartered in Cicero, Illinois, and the Subsidiaries. The Company provides technologically advanced high-value products and services to energy, mining and infrastructure sector customers, primarily in the United States (the “U.S.”). The Company’s most significant presence is within the U.S. wind energy industry, although the Company has diversified into other industrial markets in order to improve its capacity utilization and reduce its exposure to uncertainty related to favorable governmental policies currently supporting the U.S. wind energy industry. For the first six months of 2015, 80% of the Company’s revenue was derived from sales associated with new wind turbine installations. The Company’s product and service portfolio provides its wind energy customers, including wind turbine manufacturers, wind farm developers and wind farm operators, with access to a broad array of component and service offerings. Outside of the wind energy market, the Company provides precision gearing and specialty weldments to a broad range of industrial customers for oil and gas, mining and other industrial applications. Liquidity On August 23, 2012, the Company established a $20,000 secured revolving line of credit (the “Credit Facility”) with AloStar Bank of Commerce (“AloStar”). Pursuant to an amendment dated June 29, 2015, the Credit Facility was converted into a $15,000 secured revolving line of credit and a term loan in the amount of $5,000 (the “Term Loan”). The Company meets its short term liquidity needs through cash generated from operations, through its available cash balances and through the Credit Facility. The Credit Facility and the Term Loan each mature on August 31, 2016. Under the terms of the Credit Facility, AloStar will advance funds when requested up to the level of the Company’s borrowing base, which consists of approximately 85% of eligible receivables and approximately 50% of eligible inventory. Under the Credit Facility, borrowings are continuous and all cash receipts are automatically applied to the outstanding borrowed balance. The Company uses the Credit Facility from time to time to fund temporary increases in working capital, and believes the Credit Facility, together with the operating cash generated by the business, is sufficient to meet all cash obligations. As of June 30, 2015, cash and cash equivalents and short-term investments totaled $509, a decrease of $19,664 from December 31, 2014, and $527 was outstanding under the Credit Facility. The Company had the ability to borrow up to $11,973 under the Credit Facility and was in compliance with all applicable covenants as of June 30, 2015. The significant reduction in cash and cash equivalents since December 31, 2014 was due in part to sharply higher steel plate inventories, and is believed to be temporary. Towers inventory at June 30, 2015 was $8,485 higher than at December 31, 2014. The higher towers inventory is due mainly to a combination of West Coast port delays experienced in early 2015 and lower tower sales reflecting the residual effects of production issues in the Company’s Abilene, Texas tower production facility in late 2014 and early 2015. Since March, 2015 the facility has been performing near its targeted production rate. In addition, the higher towers finished goods inventory in the first quarter of 2015 was due to production re-sequencing necessitated by supply shortages caused by labor slowdowns at West Coast ports. The slowdowns required the production of certain towers ahead of schedule where materials were already on hand, so as not to lose scarce production slots and maintain capacity. The majority of the extra finished goods were sold in the second quarter of 2015, and the West Coast port labor slowdown is now resolved, but the balancing of inventory supply and customer demand will continue throughout the rest of the calendar year. Total debt and capital lease obligations at June 30, 2015 totaled $8,944, and the Company is obligated to make principal payments under the outstanding debt totaling $1,306 over the next twelve months. Since its inception, the Company has continuously incurred annual operating losses, although the size of the annual losses has been trending lower. The Company anticipates that current cash resources, amounts available under the Credit Facility, and cash to be generated from operations will be adequate to meet the Company’s liquidity needs for at least the next twelve months. If assumptions regarding the Company’s production, sales and subsequent collections from several of the Company’s large customers, as well as customer deposits and revenues generated from new customer orders, are materially inconsistent with management’s expectations, the Company may in the future encounter cash flow and liquidity issues. If the Company’s operational performance deteriorates significantly, it may be unable to comply with existing financial covenants, and could lose access to the Credit Facility. This could limit the Company’s operational flexibility or require a delay in making planned investments. Any additional equity financing, if available, may be dilutive to stockholders, and additional debt financing, if available, would likely require new financial covenants or impose other restrictions on the Company. While the Company believes that it will continue to have sufficient cash available to operate its businesses and to meet its financial obligations and debt covenants, there can be no assurances that its operations will generate sufficient cash, or that credit facilities will be available in an amount sufficient to enable the Company to meet these financial obligations. Please refer to Note 16, “Restructuring” of these condensed consolidated financial statements for a discussion of the restructuring plan which the Company initiated in the third quarter of 2011. The Company incurred a total of approximately $13,700 of net costs to implement this restructuring plan.

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