Broadwind Energy's CEO Discusses Q4 2013 Results - Earnings Call Transcript

Mar.12.14 | About: Broadwind Energy, (BWEN)

Broadwind Energy, Inc. (NASDAQ:BWEN)

Q4 2013 Results Earnings Conference Call

March 12, 2014 11:00 a.m. ET

Executives

Joni Konstantelos - Investor Relations

Peter Duprey - President and Chief Executive Officer

Stephanie Kushner - Executive Vice President and Chief Financial Officer

Analysts

Katja Jancic - Sidoti and Company

Operator

Welcome to the Q4 2013 Broadwind Energy, Inc. Earnings Conference Call. My name is Adrian and I will be your operator for today's call. (Operator Instructions) I'll now turn the call over to Joni Konstantelos. Joni Konstantelos, you may begin.

Joni Konstantelos

Thank you. Good morning, and welcome to Broadwind Energy's Fourth Quarter 2013 Earnings Conference Call. With me today are Broadwind's President and CEO, Peter Duprey; and Broadwind's Executive Vice President and CFO, Stephanie Kushner.

This morning's earnings news release is available on our website at www.bwen.com. Before we begin today, I would like to caution you that this call will include some forward-looking statements regarding our plans and market outlook and also will reference some non-GAAP financial measures. Actual results may differ materially from these forward-looking statements. Please refer to our SEC filings and consider the incorporated risks and uncertainties disclosed there, including our Form 8-K and the attached news release filed with the SEC this morning and our Form 10-K which will be filed later today. We assume no obligation to update any forward-looking statements or information.

Having said that, I will turn the call over to our President and CEO, Pete Duprey.

Peter Duprey

Thanks, Joni, and thanks everyone for joining the call. This morning we reported our fourth quarter and full year 2013 results. We showed strong improvement, both for the quarter and for the year in terms of margin improvement, EBITDA generation and working capital management.

During Q4 we added over $200 million in new orders and ended the year with a record backlog of $311 million. Our Q4 revenue was in line with our outlook and up significantly from Q4 2012. Gross margins excluding restructuring improved 600 basis points from Q4 2012. EBITDA was up sharply from the prior fourth quarter. Our cash totaled $26 million in our line, was undrawn. We navigated very well through the turmoil of the wind energy market in 2013. Over 13 gigawatts of wind turbines were installed in 2012, a record high. However, wind installations in 2013 were at a 10-year low with only 1 gigawatt of installations.

Fortunately, we were aligned with turbine OEMs who anticipated the demand for wind turbines in 2014 and '15 and the started locking up the supply chain in advance. The industry continues to work on improving turbine technology to enhance the energy capture and driving out cost to achieve better grid parity with fossil fuels.

Looking at our other major markets. We are seeing an increased activity in the upstream market for pressure pumping gearing and replacement gearing on drill rigs. More natural gas is being exported to Mexico and there could be a strong opportunity to export gas to Europe if political tension increase, which should support a higher natural gas price. On the next slide, I wanted to reflect back after three years of being on the job. 2013 was a pivotal year for Broadwind and I am very pleased with our accomplishments.

In 2011, we laid out a restructuring plan to reduce our manufacturing and office footprint by 600,000 square feet. With the sale of our Brandon Tower facility in Q2 and the gearing plant consolidation nearly finished, the original plan is 88% complete and in line with our original budget. We have grown the top line at a consistent 12% compounded annual growth rate while reducing SG&A as a percentage of revenue by 10 percentage points. We have shown consistent improvement in EBITDA each year with an overall cumulative improvement of $20 million over three years. Our guidance for 2013 shows a similar improvement of approximately $6 million over 2013.

We also resolved our environmental investigation and shareholder's suit, both of which were initiated shortly after I joined the company. The balance sheet has improved with a reduction of $36 million in debt and the establishment of a $20 million line of credit which was undrawn at the end of the year. These accomplishments were in the face of an uncertain business and regulatory climate. Our results show how well the team has navigated through these difficult times and I truly believe the company is stronger because of it.

Turning to orders and backlog. We added $200 million in orders in the fourth quarter and $400 million for the year. Tower orders surged in 2013 and we added over $360 million in new orders during the year, a record for the segment. Gearing orders from industrial customers were down from the prior year quarter and for the full year. This is associated with a softer natural gas and mining market. In services, orders were down quite dramatically compared to the prior year fourth quarter due to a large industrial gearbox assembly order that was received in Q4 2012. With the lack of new turbine construction activity in 2013, our services business was off substantially as customer deployed construction resources to maintenance services. We are now seeing an increased activity in 2014 because of the increase in new wind installations.

Our backlog of $311 million at the end of the year was the highest in the company's history. At the end of the year over 80% of our 2014 revenue was included in our backlog. Looking at the wind market, the trend we saw in 2013 was reminiscent of 2004 when the Production Tax Credit last expired. Although the PTC was reinstated in January of 2013, it was too late to ramp up installations since developers and segments of the supply chain had shutdown in anticipation of the PTC expiration. The result was a drop of 92% installations from a record 13 gigawatts in 2012. Installations for 2014 through 2016 are expected to return to a more normal level at around 6 gigawatts per year. There are currently 19 gigawatts of projects that are in late stage development of construction. Approximately 11 gigawatts of turbine orders have been placed since January 2013 through February of 2014. So there are still some opportunities for further orders that could benefit our towers business.

Next slide outlines where some of the wind activity is occurring and more importantly, some of the power purchase agreements that are being contracted. Our power purchase agreement is a critical step in the development cycle of a wind project since it's usually required to finance construction. In areas with strong wind regimes, PPAs are being contracted in the $30 per megawatt hour range, which provides a long-term levelized cost with no carbon risk. This is a strong value proposition and is one of the reasons more utilities are rate basing wind assets. This is why the industry believes that with a few more years of R&D effort, we will be able to reach grid parity with fossil fuel generation across most states that make economic sense for wind energy.

With the tower business recovering nicely from 2012, I think the gearing business is the next big opportunity for growth and cash generation. I have mentioned in the past, this business has gone through a lot of change. We continue to move from being a high volume producer of loose gearing for a few wind customers to more specialized gearboxes and precision gearing for a wider group of industrial customers. The business has not adapted well to this change and this shows in our financial results and our on time delivery. We are committed to turning around the performance of this business by taking the following steps.

Increasing our order intake through deeper deployment of manufacturer reps, it will increase our geographic coverage outside of the Midwest. As we mentioned in the past, our market penetration is in the low single-digits in our target markets. In January, we reduced the gearing workforce by 20%. This was in part a result of the consolidation of the two facilities in Cicero, Illinois and in part due to the reduced activity levels. We continue to focus on process improvement. There's been a greater focus on improving visibility of the flow through production and reducing machine set up times. We are working to ensure bottlenecks are identified timely and remedial actions are taken quickly. Ensuring the safe operation of facilities is also a part of this continuous improvement initiative.

Machine uptime is also a critical area. We are working to ensure that critical spare parts are on hand and scheduled maintenance is completed within the OEMs recommended timeframes. This area is critical to eliminate bottlenecks and improve on time delivery.

And then finally I would like to discuss some of our objectives for 2014. Achieving profitability is a significant milestone for the business in 2014 and we plan to reach it. Our financial metrics are shifting from EBITDA to operating earnings focus. With the bookings in our tower business, we believe 20% top line growth is a reasonable objective for 2014. Again, 80% of our revenue for 2014 is in our backlog. We will also plant the seeds for growth in our higher margin industrial weldments business to further diversify into the oil and gas markets.

In gearing, 2014 will be a decisive year in terms of regaining growth and improving profitability. We are making some investments in our IT platform to ensure we are getting timely operating data to better manage the business and ensuring we are able to scale the business to meet the market demands as we look to the future.

I will now turn the call over to Stephanie to talk about the financials in more detail.

Stephanie Kushner

Thanks, Pete. So I am referring to Slide 10. On $56.4 million of revenue our fourth quarter gross profit margin of 7.8% represented a four-fold increase from last year's Q4. All due to better tower segment results. Now our fourth and first quarters are typically weaker than the others, mainly for services in towers due to the effects of challenging weather and fewer workdays. So this improvement is very encouraging. This bought the full year gross margin excluding restructuring to 8%, double the 2012 figure.

Q4 SG&A expense of $5.7 million was up $700,000 from the prior year due to higher incentive compensation, severance and professional services expenses. Excluding restructuring, SG&A as a percent of sales was 10.3% of the quarter, bringing the year-to-date figure to 11.3%. With a 20% to 25% increase in sales in 2014, we expect to reduce SG&A to the 9% to 10% of sales range this year. Our adjusted EBITDA was $2.8 million, in line with our guidance and sharply better than the weak Q4 of 2012. The EPS loss of $0.26 was worse than our guidance because of $1.7 million earlier than planned write-down of the gearing plant which we are vacating and which we have on the market to sell. This charge mainly represents an acceleration of timing of restructuring expense.

On the next slide, towers delivered another outstanding quarter particularly compared with Q4 of 2012. We sold 111 towers during the quarter, 60% more than last year's quarter which was weak because of the PTC uncertainty faced by the industry as 2012 was closing out. During the 2013 quarter we again produced only three section towers versus last year when we were producing a mix of tower sizes. Therefore, while our tower count was up more than 60% year-over-year, our section count which is more representative of our activity level was up only 39%. Both tower plants operated very smoothly during the quarter with great labor productivity which resulted in posting an operating margin above 13%, which exceeded our guidance.

In general, we are experiencing better incremental margins on the volume growth as expected, in part because of a continuous improvement focus on consumables usage. Our variable overhead is running lower than expected, which boosted our margins by about 2 points. Our 2013 full year operating margin on the 392 towers was 12.3%. As I said last quarter, we have got visibility on low double-digit operating margins for the foreseeable future because of stability in the production flow and continuous improvement initiatives which will continue to boost our efficiency and lower our manufacturing cost.

As shown in the bottom right hand corner, we did achieve a 7% revenue gain in weldments revenue despite the reduced order inflow from Caterpillar, which is currently our largest customer for this product line. We have been adding some fixed overhead and expanding our sales and engineering resources to accelerate the growth of this product line into the oil and gas market and to diversify our customer base. For 2014, our total tower segment revenue should be up $10 million to $12 million per quarter due to adding about 100 additional towers in total for the year and penetrating new markets for heavy weldments. Our total operating margin should remain in the 11% to 12% range. Q1 should be markedly better than Q1 of 2013 but down sequentially because of some weather and supply chain production disruptions early in the quarter and because of the professional service expenses associated with the investigation regarding the restatement. We are looking for Q1 revenue of about $45 million to $48 million in this segment with an operating margin of about 11%.

Next slide please. Gearing had another down quarter with $11.6 million of revenue and an operating loss of $5.6 million including $2.5 million of restructuring cost. At this point, we have less than $1 million of restructuring expense left to incur, which will flow into the first half of 2014 results. Versus 2012, EBITDA was down $2.2 million on a $2.7 million reduction in sale. Of the $2.7 million reduction in sales, $1.6 million was due to lower orders and the balance due to difficulties with plant or throughput. The net effect of the lower volumes accounted for about $800,000 of the earnings variance. Additionally, manufacturing variances were negative by $900,000, partly due to un-forecast increases in inventory reserves.

Despite the behind the scenes progress, our CI activities did not yield visible results during the quarter. For the full year, gearing revenue declined to $43 million with negative EBITDA of $3.6 million. As Pete said, we remained focused on improving the performance of this business unit although we are off to a challenging start in Q1 of 2014. Our objective in 2014 is to show sustainable year-over-year progress, a positive book to bill ratio that will translate into growing sales, and shrinking the loss so that we are not losing cash. CI activities are continuing and we have increased the resources supporting the improvement initiative.

Now services. The services Q4 results were inline with our guidance with revenue of $2 million and EBITDA loss of $1.1 million. Q4 is traditionally a weak quarter for this segment and this year was no different. As shown on the graph on the bottom right hand side, the 90% drop in wind turbine installations during 2013 depressed the entire market for outsourced service business. As Pete mentioned, the market is looking better in 2014. We expect 20% revenue growth and to trim the EBITDA loss to about $1 million for the year. First quarter of 2014 will look a lot like fourth quarter of 2013 but performance should improve sharply in the second and third quarters.

Slide 14. Operating working capital remained very low at $5 million or 2% of sales. This is impacted very significantly by the high level of customer deposits we received in 2013, mainly to support steel purchases for towers. Large steel payments are being made during this first quarter of 2014 in accordance with our production schedule. However, this will reduce our cash balances but also our payables and our customer advances. Our receivables remain very well managed. We achieved 31 days sales outstanding again this quarter.

Inventories climbed a little to support the increase in our tower production rate. Year-end inventory turn slipped to 6.4%, still a very respectable figure. As a result of the improvement in EBITDA and lower working capital requirements, operating cash flow for the 2013 year totaled $26.3 million. As I said, we are projecting working capital to rise this year, particularly during the first half of the year. We are expecting the customer deposits to decline as they have been unusually high during 2013. A move up to 8% of working capital utilization, which is still at the low end of normal, would translate into more than $15 million reduction in cash balances. We are seeing some of that happen today as our cash balance at the end of February was down to about $17 million.

Turning to the next slide. Liquidity remained very strong at year-end. Dept plus capital lease balance declined to $5.1 million at a composite average interest rate of just over 1%, thanks to the low and zero interest rate grants. We generated $4.7 million of operating cash flow in the fourth quarter so that net debt was again negative, about $19.9 million at 12/31. Our credit line was undrawn at year-end and remains undrawn today.

Turning to the next slide, the financial outlook. We expect revenue of between $61 million and $63 million in Q1, up about 34% from last year. With a gross margin in the 7% to 8% range. Adjusted EBITDA of $1.5 million and a per share loss in the $0.15 to $0.20 range. As I mentioned earlier, Q1 and Q4 are traditionally our weaker quarters and the severe weather in the Midwest and some supply chain issues in towers have had some negative impacts on production. We expect the year-over-year improvement to widen as the year unfolds.

For the full year we are projecting revenue of $260 million to $270 million of which $215 million or 80% was in backlog at the end of 2013. We expect to achieve a full year average gross margin in the 10% to 11% range and SG&A in the 9% to 10% range. Full year EBITDA should exceed $16 million and our EPS should be positive for the first time. Achieving profitability for the first time in our history is a high priority for 2014. This slide shows the transition from the $0.72 per share loss in 2013 to an expected positive EPS in the current year.

The first item is the savings from the wind down of restructuring activities. 2013 was our heaviest year yet for restructuring charges due to the work associated with consolidating the two gearing plants. In total, in 2013 we incurred $6.1 million of restructuring expense but had a $2.9 million dollar gain on the sale of our Brandon plant for a net negative impact of $3.2 million. In 2014 our restructuring expense should be less than $1 million, so this change will boost results by about $0.16 per share. The second item is the absence of the environmental penalty we incurred in 2013. With that issue behind us, we pick up another $0.11 per share.

And the third item is reduced depreciation and amortization as the heavy depreciation expense that’s associated with the gearing assets that were written up at the time of the acquisition begins to roll off. This benefits us by about $0.09 per share. So these three items are more or less guaranteed and this provides us about $0.36 per share improvement versus 2013.

The next item is the growth in tower volume. The additional 100 towers is worth about $40 million of revenue. At a 12% margin, which may prove conservative, this should add $5 million to $6 million to earnings or $0.35 to $0.40 per share. The next item we have grouped as other operating improvements encompasses our risk-weighted assessment of the likely improvement in the gearing and services results. $0.22 to $0.30 per share or about $3 million to $4 million. If we can get both gearing and services to EBITDA neutrality, this figure could be higher.

And then lastly, we are looking at about $0.20 of additional cost or about $3 million. This encompasses a number of expense increases including an expansion of our marketing and business development resources, additional spending on health and safety and training, some upgrading of key positions and the expansion of resources to support the growth of our welding product line. So what we are trying to do is to balance our desire for improved profitability in the short run against the objective of growing and resourcing the company for the longer term.

Growing the weldments product line should help us with our diversification strategy. For example, we see significant opportunity to use our capabilities to support the rapidly growing oil and gas infrastructure build in the Gulf Coast.

On the final side, I have summarized the restructuring status. As Pete mentioned, the project is 88% complete. We have remaining less than $1 million in capital and about $800,000 of cash expense associated with the final steps of the gearing plant consolidation. We expect the project to be complete by mid-2014. I also wanted to comment on the restatement. As we noted in an 8-K in mid-February, we learned in December that our towers segment financial results earlier in 2013 had been understated by approximately $800,000. In fact, the final figure was $938,000. The total increase fell into the quarters as follows.

$200,000 in Q1, $495,000 in Q2 and $243,000 in Q3. We have filed the revised quarterly filings and we will file today a 10-K for 2013 which reflects this distribution of earnings. Obviously, a restatement, even one that increases earnings, is a serious disappointment. But we have examined the issue thoroughly and have made and are making some organizational changes to ensure our accounting controls meet our standards. And with that I will turn the call back over to Pete for questions.

Question-and-Answer Session

Operator

(Operator Instructions) And we have Katja Jancic from Sidoti and Company on line with a question. Please go ahead.

Katja Jancic - Sidoti and Company

You mentioned that the restructuring charges will be about $1 million in the first half of the year. Can you be more specific? Will we see those mostly in the first quarter or is it going to be spread out more?

Stephanie Kushner

I think it's probably -- gosh, I am not sure but I am going to say probably two-thirds in the first quarter and a third in the second.

Katja Jancic - Sidoti and Company

Okay. Now regarding the gearing segment. I know it's been underperforming and I know you are working on improving it. But let's say, what is the growth that we could really expect going forward and let's say , two, three years, what are you looking at?

Peter Duprey

I think, Katja, first we need to kind of fix some of the processes. So I think for 2014, we will see some modest growth, maybe 5% topline growth in gearing. And then that should accelerate in 2015 and 2016. We are still seeing some weakness in the mining and natural gas market although in natural gas we are seeing some improvement. So I think our, kind of base case forecast for 2014 doesn’t show a significant amount of growth in gearing. But, again, we think, you know we have capacity through our capital on equipment for over $100 million and today it's in the mid-40s. So there is still a lot of potential in gearing.

Katja Jancic - Sidoti and Company

And how is the industry? Is the industry -- are there any changes in the industry that could either hinder or boost the segment?

Peter Duprey

I think the energy revolution that’s going on in the U.S. is really the big upside for the gearing sector. If you look at, on the Texas Gulf Coast, there is about $110 billion worth of infrastructure going in around liquefaction terminals, upgrades to refining capacity, and that plays right into our wheelhouse around our gearing and our fabrication business. And then if you see a rebound in natural gas, you are going to see more rigs being deployed as more drilling and fracking is going on in the natural gas market which really kind of shut down about 18 months gas when natural gas got to be about 3.50.

Katja Jancic - Sidoti and Company

Now regarding the PTC credit. Are there any updates? Does it look like it's going to get extended or what's with that?

Peter Duprey

I think the feeling from the American Wind Energy Association is that our best shot likely lame duck session after the election. And I think their feeling is, there has always been bipartisan support. We did get the credit passed in January of 2013 when there was quite a bit of dysfunction in Washington. So I think if we can come up with a deal perhaps that a scaling down of the credit over time to bring enough Republicans over to support it, maybe they compromise there. I think we are still fairly confident that we can get some legislation through to extend the credit and really give us an extra three years of runway to improve the turbine technology so that we can compete with fossil fuels on a longer-term basis without incentives. That’s really our goal, is to be able to compete without incentives and then we can manage our own destiny.

Katja Jancic - Sidoti and Company

Now let's say in the worst-case scenario that the tax credit is not extended. What would be the plan? How would you react to that because that would cause quite a damage to the tower industry, I am guessing.

Peter Duprey

Well, actually we don’t think it is as catastrophic as some people think. And the reason is, you have got 29 states out there with renewable portfolio standards. I think we feel that the levelized cost of electricity for wind turbine is close enough to fossil generation and it has no carbon risk. So it's close enough that PUC, public utility commissions are approving utilities to rate based wind assets. And we are seeing a lot of utilities wanting to own wind assets. MidAmerican, American Electric Power, PacifiCorp, Duke Energy. So I think we are close enough where if they want to grow, they can't really build a coal plant because they really don’t know what carbon legislation is going to be. It's fairly easy to rate base and build a wind plant and if they want to grow or they have load demands that they need to fulfill, wind is a reasonable option at this point.

So we have looked at some scenarios. On the low end maybe it's 3 to 4 gigawatts, on the high end it's maybe 6 to 7. So I think there is some base load demand there for wind even without the credit. The other point I will make is, with the EPA regulations coming down, it's likely that there is 60 gigawatts to 70 gigawatts of coal that will be retired over the next seven years. And that will get replaced with some wind. Most of it will be natural gas but wind will garner a portion of the replacement of those retired coal plants. So I think that too will help the wind situation in the short term.

Katja Jancic - Sidoti and Company

Just one more question. What is your expected capital expenditure for 2014?

Stephanie Kushner

We have about $1 million left on our restructuring and then there will be about another $5 million on top of that. So about $6 million.

Operator

And we have [Mike Cusum] (ph) of GF Capital Management online with a question. Please go ahead.

Unidentified Analyst

First, on the towers business as far as the first quarter margin guidance is concerned. I think you said around 11%. What would that number look like excluding the accounting restatement cost? What's kind of pressuring that number sequentially is the question?

Stephanie Kushner

The accounting restatement cost is about 1%. So it would be 12% without that.

Unidentified Analyst

Okay. And then what about steel costs or any other raw material costs that we should think about for the balance of the year in that business.

Stephanie Kushner

Yes. We don’t really take pricing risk on steel costs. We pretty much negotiate the steel purchase at the same time we are negotiating the sale of the tower. So we tend to look at that as being kind of a risk free element.

Unidentified Analyst

Okay. So outside of the restatement cost kind of on a go forward basis, it wouldn’t be unreasonable to think that business could operate at kind of a 12% to 13% level.

Stephanie Kushner

I would probably be more comfortable with 12% than 13% but...

Unidentified Analyst

Right.

Stephanie Kushner

I mean we are doing some investing in that business to grow and kind of nurture this weldment fabrication business because we think that is going to be an important growth platform beyond 2014.

Unidentified Analyst

Right. And obviously orders will start to tail off this year. Can you kind of frame what orders will look like in the towers business over the next few quarters? What the opportunities are out there still?

Peter Duprey

So there is about 5 gigawatts or 6 gigawatts of -- so if you look at the forecast for '14 through '16, it's about 16 gigawatts. There is approximately 11 gigawatts of orders that have been placed. So there is still 5 or 6 gigawatts of orders still kicking around. We still have approximately half of our volume for '15, so we still feel pretty confident. I would say by the end of the third quarter of '14 we would fill up the remainder of the volume in '15 and maybe get some tower orders starting in '16.

Unidentified Analyst

And remind me, 5 gigawatts translates into how many towers?

Peter Duprey

Divide by 2.

Stephanie Kushner

2500.

Unidentified Analyst

Okay. So the bookings in the first quarter will still see a fairly material number, it's not like they have dropped off a cliff.

Peter Duprey

Right. I think the orders are always kind of lumpy, so we can't really predict exactly what quarter -- it could slip into Q2, but we do think that there is enough demand out there of projects that are still kind of coming together to, that we can fill up in '15.

Unidentified Analyst

Okay. Great. And then onto the gearing business. What will the cost savings be from the 20% workforce reduction?

Stephanie Kushner

Yes. So $2 million to $2.5 million.

Unidentified Analyst

Okay. That’s a big number. All right. And then just thinking about that business, I think you indicated perhaps 5% growth this year. So what percentage, kind of on a quarterly basis, of the business comes from the backlog versus kinds of turns business?

Peter Duprey

So the backlog -- so essentially we have got six months worth of sales in backlog.

Stephanie Kushner

It typically all goes to backlog. I mean it's a custom product.

Unidentified Analyst

Okay.

Stephanie Kushner

So we are not selling any gears kind of off the shelf.

Unidentified Analyst

Okay. And then just the -- I think you will do this replacement on this wind side and the gearing business. What does that business look like for this year to you?

Stephanie Kushner

So there is two places where we tend to sell the replacement gearing. One is into the installed base of [Clipper] (ph) turbines, and then the other is through our services business when we are rebuilding either the very small kilowatt turbines or even some of the larger ones. And the combination of those is typically run like 25% or so of our sales. Maybe think $8 million to $10 million.

Unidentified Analyst

Okay. And then on the services business, given you are expecting 20% revenue growth. Off of the fourth quarter run rate, you must anticipate a pretty strong ramp by the second and third quarters. So I guess my question on that business is, how much visibility do you have into that ramp?

Peter Duprey

Again, it's a fairly short cycle business. You know I think where we are going to start to see the ramp is on commissioning support on projects. So we will deploy some of our service tax to support either an OEM or an owner-operator in commissioning new turbines. And then I think on the blade side, we expect to see an uptick there, probably because I think some people in 2013 sort of delayed some maintenance both on blades and on gearing where they could. So I think the first quarter is pretty low because of the weather but we are anticipating a lot of commissioning support and then fixing maybe some deferred issues from last year.

Stephanie Kushner

Our [coaling] (ph) activity is up.

Peter Duprey

Yes, [coaling] is up fairly dramatically.

Unidentified Analyst

Okay, great. One last question, if I may. What's the acquisition pipeline look like and then remind me, you have a very large federal NOL at this point too, right?

Stephanie Kushner

Yes, NOL is about $167 million. So when we look at acquisitions, obviously, I would like to be able to accelerate the use of that NOL. And really what we are looking at are some fairly small, maybe $15 million to $25 million bolt-on opportunities. But I don’t think there is anything that’s imminent.

Operator

(Operator Instructions) We have no further questions and I will turn the call over to Pete Duprey. Please go ahead.

Peter Duprey

Okay. I think 2013 was a great year. I think we certainly improved the performance of the business in line with our planned transformation. I think as we look at 2014, we are set up to have another strong year and I think it will be another major step forward. I think wind energy is in a good and strong position right now and we are focused on certainly fixing the gearing business and the services business and then planting some seeds in our fabrication business. We are very focused on showing tangible progress in these businesses and I actually look forward to these calls and reporting the progress we are making in 2014. And I do think it is going to be a very good year. So thanks for joining the call and we will talk to you next quarter.

Operator

Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating and you may now disconnect.

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Broadwind Energy (BWEN): Q4 EPS of -$0.26 misses by $0.07. Revenue of $56.4M (+26% Y/Y) misses by $0.14M.