Broadwind Energy, Inc. (BWEN)

FORM 8-K/A | Amended Current report
Mar. 24, 2017 4:46 PM
|
About: Broadwind Energy, Inc. (BWEN)View as PDF
BROADWIND ENERGY, INC. (Form: 8-K/A, Received: 03/24/2017 16:48:14)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K/A

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of report (Date of earliest event reported): February 1, 2017

 

PICTURE 4Click to enlarge

 

BROADWIND ENERGY, INC.

(Exact Name of Registrant as Specified in Its Charter)

 

 

 

 

 

Delaware

 

001-34278

 

                 88-0409160

(State or Other Jurisdiction of Incorporation)

 

(Commission File Number)

 

(IRS Employer Identification No.)

 

3240 South Central Avenue, Cicero, Illinois 60804

(Address of Principal Executive Offices) (Zip Code)

Registrant’s Telephone Number, Including Area Code: (708) 780-4800

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 

 

 


 

Explanatory Note

 

Broadwind Energy, Inc., a Delaware corporation (the “Company”), filed a Form 8-K with the Securities and Exchange Commission on February 1, 2017 (the “Original Filing”) to report the completion of its acquisition of Red Wolf Company, LLC.,   a North Carolina limited liability company (“Red Wolf”). In the Original Filing, the Company stated that the required financial statements and pro forma financial information would be filed by amendment within 71 calendar days from the due date of the Original Filing. This Form 8 K/A amends the Original Filing to provide the required financial statements and pro forma financial information described under Item 9.01 below.

 

Item 9.01 Financial Statements and Exhibits.

 

(a)

Financial Statements of Business Acquired

 

The audited financial statements Red Wolf as of and for the year ended December 31, 2015 are filed as Exhibit 99.1 to this Form 8-K/A and are incorporated herein by reference.

 

The unaudited financial statements of Red Wolf as of and for the nine month period ended September 30, 2016 and September 30, 2015 are filed as Exhibit 99.2 to this Form 8-K/A and are incorporated herein by reference.

 

(b)

Pro Forma Financial Information

 

The unaudited pro forma combined consolidated balance sheet for the Company as of September 30, 2016 and the unaudited pro forma combined consolidated statement of operations for the year ended December 31, 2015 and the nine months ended September 30, 2016, giving effect to the acquisition of Red Wolf, and the notes thereto, are filed as Exhibit 99.3 to this Form 8-K/A and are incorporated herein by reference.

 

(d) Exhibits

 

 

 

Exhibit No.  

Description

23.1

Consent of Moore Beauston Woodham LLP

99.1

Audited financial statements of Red Wolf as of and for the year ended December 31, 2015

99.2

Unaudited financial statements as of and for the nine month periods ended September 30, 2016 and September 30, 2015

99.3

Unaudited pro forma combined consolidated balance sheet as of September 30, 2016, unaudited pro forma combined consolidated statement of operations for the nine months ended September 30, 2016 and unaudited pro forma combined consolidated statement of operations for the year ended December 31, 2015

 

 

2

 


 

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

 

 

BROADWIND ENERGY, INC.

 

 

 

March 24, 2017

By:

/s/ Stephanie K. Kushner

 

 

 

 

 

Stephanie K. Kushner

 

 

Chief Executive Officer and Chief Financial Officer

 

 

(Principal Executive Officer and Principal Financial Officer)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3

 


 

EXHIBIT INDEX  

 

 

 

 

Exhibit No.  

Description

23.1

Consent of Moore Beauston Woodham LLP

99.1

Audited financial statements of Red Wolf as of and for the year ended December 31, 2015

99.2

Unaudited financial statements as of and for the nine month periods ended September 30, 2016 and September 30, 2015

99.3

Unaudited pro forma combined consolidated balance sheet as of September 30, 2016, unaudited pro forma combined consolidated statement of operations for the nine months ended September 30, 2016 and unaudited pro forma combined consolidated statement of operations for the year ended December 31, 2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4

 


EXHIBIT 23.1

 

 

 

CONSENT OF INDEPENDENT AUDITORS

We consent to the incorporation by reference in the registration statements of Broadwind Energy, Inc.  (Nos. 333-176066 and 333-159487) on Form S-3 and (Nos. 333-160039, 333-181168, 333-181170, 333-181901, 333-190311, and 333-203736) on Form S-8 of Broadwind Energy, Inc. of  our independent auditors’ report dated February 19, 2016 with respect to the balance sheet of Red Wolf Company, LLC as of December 31, 2015, and the related statement of income and members’ equity and statement of cash flows for the year then ended which report appears in the Form 8-K/A of Broadwind Energy, Inc. dated March 24, 2017.

/s/ Moore Beauston Woodham LLP

Hartsville, South Carolina

March 16, 2017


Exhibit 99.1

 

 

 

 

 

 

Financial Statements and

Independent Auditors’ Report

Red Wolf Company, LLC

As of and for the Year Ended

December 31, 2015

 

 

 

 

 

 

 

 

 

1


 

Independent Auditors’ Report

To the Members of Red Wolf Company, LLC

We have audited the accompanying financial statements of Red Wolf Company, LLC, which comprise the balance sheet as of December 31, 2015 and the related statements of income and members’ equity, and cash flows for the year then ended, and the related notes to the financial statements.

Management's Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor's Responsibility

Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion the financial statements referred to in the first paragraph present fairly, in all material respects, the financial position of Red Wolf Company, LLC as of December 31, 2015, and the results of its operations and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America.

Updated Opinion

In our report dated February 19, 2016, we expressed a qualified opinion that except for the possible effect on the statement of income, members’ equity and cash flows that could have resulted from our inability to observe the inventory at December 31, 2014, the 2015 financial statements presented, fairly the financial position, results of operations, and cash flows in accordance with accounting principles generally accepted in the United States of America. As described in Note 2, the Company was able to provide sufficient evidence to support the inventory balances as of December 31, 2014. Accordingly, our present opinion on the 2015 financial statements, as presented herein, is different from that expressed in our previous report.

/s/ Moore Beauston Woodham LLP

Hartsville, South Carolina

February 19, 2016

 

 

 

 

 

 

2


 

Red Wolf Company, LLC

Balance Sheet

As of December 31, 2015

 

 

 

 

ASSETS

 

 

Current assets:

 

 

Cash and cash equivalents

 

$
66

Accounts receivable, net

 

2,185,545

Inventory

 

5,092,932

Due from members

 

52,687

Related party receivables

 

928

Prepaid expenses

 

360

Total current assets

 

7,332,518

Property, plant and equipment, net

 

646,466

Total assets

 

$
7,978,984

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

Current liabilities:

 

 

Accounts payable

 

$
2,909,448

Accrued expenses

 

268,984

Member distributions payable

 

52,687

Line of credit

 

1,417,731

Current portion of long-term debt

 

79,405

Deferred revenue

 

678,008

Total current liabilities

 

5,406,263

Non-current liabilities:

 

 

Long-term debt, less current portion

 

181,055

Total liabilities

 

5,587,318

Members' equity

 

2,391,666

Total liabilities and members' equity

 

$
7,978,984

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes and independent auditors’ report.

 

 

 

3


 

 

 

Red Wolf Company, LLC

Statement of Income and Members’ Equity

For the Year Ended December 31, 2015

 

 

 

 

Revenue, net

 

$
23,345,386

Cost of goods sold

 

16,950,383

Gross profit

 

6,395,003

Selling, general and administrative expenses

 

 

Salaries and related benefits

 

2,366,852

Rent

 

308,291

Technology consulting and fees

 

164,887

Depreciation expense

 

132,976

Insurance

 

128,549

Utilities

 

89,903

Repair and maintenance

 

61,275

Travel and entertainment

 

57,041

Telephone

 

51,239

Professional fees

 

44,318

Office expense

 

37,373

Property, sales and use taxes

 

18,758

Other expenses

 

17,416

License and fees

 

14,932

Advertising

 

8,443

Dues and subscriptions

 

7,831

Charitable contributions

 

4,705

Total selling, general, and administrative expenses

 

3,514,789

Operating income (loss)

 

2,880,214

Other income (expense)

 

 

Gain (loss) on sale of assets

 

500

Interest expense

 

(36,732)

Total other income (expense)

 

(36,232)

Net income

 

2,843,982

Members' equity at beginning of year

 

2,006,826

Members' distributions

 

(2,459,142)

Members' equity at end of year

 

$
2,391,666

 

 

 

 

 

 

 

 

 

See accompanying notes and independent auditors’ report.

 

 

 

4


 

Red Wolf Company, LLC

Statement of Cash Flows

For the Year Ended December 31, 2015

 

 

 

 

Cash flows from operating activities:

 

 

Net income

 

$
2,843,982

Adjustments to reconcile net income to net cash provided

 

 

by operating activities:

 

 

Depreciation

 

132,976

Changes in operating assets - (increase) decrease

 

 

Accounts receivable

 

(578,039)

Inventory

 

(2,278,316)

Due from shareholders

 

(52,687)

Related party receivables

 

4,961

Prepaid assets

 

39

Changes in operating liabilities - increase (decrease)

 

 

Accounts payable

 

642,542

Accrued expenses

 

137,664

Shareholder distributions payable

 

14,769

Deferred revenue

 

676,798

Net cash provided by operating activities

 

1,544,689

Cash flows from investing activities:

 

 

Purchases of property, plant, & equipment

 

(81,258)

Net cash provided by investing activities

 

(81,258)

Cash flows from financing activities:

 

 

Borrowings on line of credit

 

1,258,780

Member distributions

 

(2,459,142)

Payments on notes payable

 

(263,409)

Net cash provided by financing activties

 

(1,463,771)

Net increase in cash

 

(340)

Cash at beginning of year

 

406

Cash at end of year

 

$
66

Supplemental disclosure of cash flow information:

 

 

Total interest paid

 

$
36,732

Noncash investing and financing activities

 

 

Purchase of property and equipment

 

$
(271,599)

Proceeds from long term debt

 

190,341

Cash paid for property and equipment

 

$
(81,258)

 

 

 

 

See accompanying notes and independent auditors’ report.

 

 

5


 

 

Red Wolf Company, LLC

Notes to the Financial Statements

For the Year Ended December 31, 2015

 

Note 1 - Nature of Operations and Summary of Significant Accounting Policies

 

Description of Business

 

Red Wolf Company, LLC (the “Company”), was organized as a limited liability company in the State of North Carolina on April 13, 2007. The Company provides business to business contract manufacturing services that include build-to-spec, kitting and inventory management for customers throughout the United States and in foreign countries. The Company's products are sold through its warehouse in Sanford, North Carolina.

 

Accounting Method

 

The Company uses the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP). Sales are recognized when revenue is realized or becomes realizable and has been earned. In general, revenue is recognized when the earnings process is complete, which is upon shipment of products. Expenses related to the revenues are recorded upon completion of the event to which they are applicable regardless of the timing of related cash flows.

 

Management Estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

 

Cash and Cash Equivalents

 

For the purposes of balance sheet classification and statement of cash flows presentation, investments with a maturity of three months or less are considered cash equivalents.

 

Revenue Recognition

 

Sales are recognized when revenue is realized or becomes realizable and has been earned. In general, revenue is recognized when the earnings process is complete, which is upon shipment of products.

 

Accounts Receivable and Allowance for Doubtful Accounts

 

Accounts receivable are reported at the amount management expects to collect from outstanding balances. Differences between the amount due and the amount management expects to collect are reported in the results of operations of the year in which those differences are determined, with an offsetting entry to a valuation allowance for trade accounts receivable. Balances that are still outstanding after management has used reasonable collection efforts are written off through a charge to the valuation allowance and a credit to trade accounts receivable. The Company has chosen to record no allowance for doubtful accounts at December 31, 2015.

 

The Company extends credit to many of its customers in the ordinary course of business. Generally, these sales are unsecured. The Company performs periodic credit evaluations of its customers and generally does not require collateral. The Company does not believe significant credit risks exist at December 31, 2015, with respect to its accounts receivable.

 

Customer accounts typically are collected within a short period of time, and, based on its assessment of current conditions, management believes realization losses on amounts outstanding at the end of 2015 will be immaterial.

 

 

 

 

 

 

 

 

6


 

 

Red Wolf Company, LLC

Notes to the Financial Statements

For the Year Ended December 31, 2015

 

Note 1 - Nature of Operations and Summary of Significant Accounting Policies (continued)

 

Inventory for Resale

 

Inventory consists of parts and materials stated at the lower of cost or market value. Cost is determined by the first in, first out method.

 

Property and Equipment

 

Property and equipment is shown at cost net of accumulated depreciation. Property and equipment acquired with cost in excess of $5,000 is carried at cost and depreciated using straight-line over their estimated useful lives. Maintenance and repairs are charged to expense as incurred; major renewals and betterments are capitalized.

 

The cost of assets retired or otherwise disposed of and the related accumulated depreciation are removed from the accounts and the resulting gain or loss is reflected in the statement of income.

 

Income Taxes

 

The members of the Company have elected to be taxed as a Subchapter 'S' Corporation under existing federal and state regulation, whereby its income is taxed to its members. Therefore, no provision for income taxes has been included in the accompanying financial statements. The Company's federal income tax returns for 2012, 2013 and 2014 are open to examination by the IRS and the State of North Carolina.

 

Presentation of Sales Taxes

 

The State of North Carolina and Lee County impose a sales tax of 4.75% and 2.00%, respectively, on all of the Company's sales to nonexempt customers. The Company collects sales taxes from customers and remits the entire amount to the State and County. The Company's accounting policy is to exclude the tax collected and remitted to the State from revenues and cost of sales.

 

Shipping and Handling Costs

 

The company classifies freight billed to customers as sales revenue and the related freight costs as cost of sales.

 

Advertising

 

The Company expenses advertising production costs as they are incurred and advertising communication costs the first time the advertising takes place. The total advertising cost for the year ended December 31, 2015 was $8,443.

 

Note 2 – Beginning Inventory

 

Management conducted an evaluation and roll back of 2015 ending inventory to support the December 31, 2014 inventory balance which was not observed by the external auditors when originally conducted. The external auditors’ were able to obtain sufficient evidence to support their opinion regarding the inventory balance as of December 31, 2014. No adjustments to the 2015 financial statements were made related to the evaluation.

 

Note 3 – Concentrations

 

Balances due from the Company's five largest accounts comprise 79% of the carrying amount. Management maintains that realization losses on amounts outstanding at the end of 2015 will be immaterial, as they were in prior years. Accordingly, customer accounts are reported at the amount of principal outstanding.

 

 

 

 

 

 

 

7


 

 

Red Wolf Company, LLC

Notes to the Financial Statements

For the Year Ended December 31, 2015

 

Note 3 – Concentrations (continued)

 

The Company maintains a cash balance at a commercial bank. Accounts at this bank are insured by Federal Deposit Insurance Corporation (FDIC). The balances are insured by the Federal Deposit Insurance Corporation up to $250,000. At December 31, 2015, the Company had no uninsured cash balances with financial institutions.

 

Note 4 – Property, Plant and Equipment

 

Property and equipment consisted of the following at December 31, 2015:

 

 

 

 

 

 

 

 

Estimated useful

 

 

 

 

lives

 

 

Machinery & equipment

 

3-20

 

$
498,197

Computer equipment

 

3-5

 

53,612

Furniture & fixtures

 

5-15

 

39,430

Vehicles

 

5

 

355,051

Leasehold improvements

 

15

 

245,293

 

 

 

 

1,191,583

Less: accumulated depreciation

 

 

 

(545,117)

Property and equipment, net

 

 

 

$
646,466

 

 

The book depreciation for the year ended December 31, 2015 was $132,976.

 

Note 5 – Line of Credit

 

The Company has a $2,500,000 line of credit agreement with a financial institution. As of December 31, 2015 $1,417,731 was outstanding on the revolving line of credit. The line bears interest at a variable rate equal to the bank's Prime rate plus 1.0%. The line is collateralized by all assets of the Company. Any outstanding principal is due in full on the maturity date. The line matured on July 15, 2016 or such date to which the Line may be extended or renewed in the sole discretion of the financial institution by written notice to the Company. In October 2016, the line was renewed and increased to $4,500,000.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

8


 

 

 

Red Wolf Company, LLC

Notes to the Financial Statements

For the Year Ended December 31, 2015

 

 

Note 6 – Long Term Debt

 

Long term debt consisted of the following at December 31, 2015:

 

 

 

 

Note payable to a financial institution, requiring consecutive monthly installments of principal and interest of $473, bearing interest at a rate of 6.24%, and maturing in October, 2019. The note is secured by the vehicle it served to finance.

 

$
19,322

Note payable to a financial institution, requiring consecutive monthly installments of principal and interest of $1,166, bearing interest at a rate of 6.24%, and maturing in January, 2021. The note is secured by the vehicle it served to finance.

 

62,392

Note payable to a financial institution, requiring consecutive monthly installments of principal and interest of $1,191, bearing interest at a rate of 5.39%, and maturing in January, 2021. The note is secured by the vehicle it served to finance.

 

61,096

Note payable to a financial institution, requiring consecutive monthly installments of principal and interest of $1,276, bearing interest at a rate of 5.39%, and maturing in January, 2021. The note is secured by the vehicle it served to finance.

 

66,853

Note payable to a financial institution, requiring consecutive monthly installments of principal and interest of $2,134, bearing interest at a rate of 5.25%, and maturing in June, 2016. The note is secured by the vehicle it served to finance.

 

7,575

Note payable to a financial institution, requiring consecutive monthly installments of principal and interest of $2,665, bearing interest at a rate of 4.75%, and maturing in June, 2016. The note is secured by the vehicle it served to finance.

 

30,636

Note payable to a financial institution, requiring consecutive monthly installments of principal and interest of $550, bearing interest at a rate of 4.25%, and maturing in December, 2017. The note is secured by the equipment.

 

12,586

Total long-term debt

 

$
260,460

Less: current portion

 

(79,405)

Long-term debt, less current portion

 

$
181,055

 

 

Maturities of long-term debt for the years succeeding December 31, 2015, are as follows:

 

 

 

2016

$
79,405

2017

47,230

2018

43,115

2019

44,472

2020

42,168

Thereafter

4,070

 

$
260,460

 

 

 

9


 

Red Wolf Company, LLC

Notes to the Financial Statements

For the Year Ended December 31, 2015

 

 

Note 7 - Operating Lease Obligations

 

The company rents office space under non-cancellable lease agreements with an initial term of 24 months and a second term of 36 months, and the option to renew annually at the end of the second 36 month term. Rent paid under this lease was $308,291 for the year ended December 31, 2015.

 

The following is a schedule of future minimum payments required under the above operating lease as of December 31, 2015:

 

 

 

2016

$
288,612

2017

288,612

2018

48,102

 

$
625,327

 

 

Note 8 - Retirement Plan

 

On January 1, 2010 the Company adopted a 401(k) profit sharing plan which covers substantially all employees. Participating employees may elect to contribute, on a tax-deferred basis, a portion of their compensation, in accordance with Section 401(k) of the Internal Revenue Code. The Company matches a 100% of employee salary deferrals up to 3% plus 50% of salary deferrals between 3% and 5%. The Company match was $84,104 for the year ended December 31, 2015.

 

Additional Company contributions may be made to the plan at the discretion of the Board of Directors, with the maximum limitation being the amount the Company can deduct for federal income tax purposes. The Company made no discretionary profit sharing contributions for 2015.

 

Note 9 - Subsequent Events

 

Management has evaluated subsequent events through February 19, 2016, the date the financial statements were available to be issued. Based upon the evaluation, no adjustments were required in the financial statements.

 

In October 2016, the Company’s line of credit agreement with a financial institution line was renewed and increased to $4,500,000. The line matures on November 1, 2017.

 

In October 2016, the Company received a letter of intent for the sale of the Company. It was amended December 2, 2016. The Company is currently in the due diligence process and working through the final elements of a purchasing agreement. The target close date is January 31, 2017.

10


Exhibit 99.2

 

 

 

 

 

Financial Statements and

Independent Accountants’ Review Report

As of and for the Nine-Month Periods Ended

September 30, 2016 and 2015

Red Wolf Company, LLC

 

 

 

 

 

 

 

 

 

 

1


 

INDEPENDENT ACCOUNTANTS’ REVIEW REPORT

To the Members of Red Wolf Company, LLC

We have reviewed the accompanying financial statements of Red Wolf Company, LLC, which comprise the balance sheets as of September 30, 2016 and 2015, and the related statements of income and members’ equity and cash flows for the nine-month periods then ended, and the related notes to the financial statements. A review includes primarily applying analytical procedures to management’s financial data and making inquiries of company management. A review is substantially less in scope than an audit, the objective of which is the expression of an opinion regarding the financial statements as a whole. Accordingly, we do not express such an opinion.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement whether due to fraud or error.

Accountants’ Responsibility

Our responsibility is to conduct the review engagements in accordance with Statements on Standards for Accounting and Review Services promulgated by the Accounting and Review Services Committee of the AICPA. Those standards require us to perform procedures to obtain limited assurance as a basis for reporting whether we are aware of any material modifications that should be made to the financial statements for them to be in accordance with accounting principles generally accepted in the United States of America. We believe that the results of our procedures provide a reasonable basis for our conclusion.

Accountants’ Conclusion

Based on our reviews, we are not aware of any material modifications that should be made to the accompanying financial statements in order for them to be in accordance with accounting principles generally accepted in the United States of America.

/s/ Moore Beauston Woodham

Hartsville, South Carolina

January 19, 2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2


 

Red Wolf Company , LLC

Balance Sheets

As of September 30, 2016 and 2015

 

 

 

 

 

 

 

 

 

2016

 

2015

ASSETS

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$
7,249

 

$
360

Accounts receivable, net

 

2,219,884

 

1,533,759

Inventory

 

6,816,660

 

4,211,604

Tax refund receivable

 

1,057

 

1,422

Related party receivables

 

3,159

 

6,062

Prepaid expenses

 

 -

 

360

Total current assets

 

9,048,009

 

5,753,567

Property, plant and equipment, net

 

528,089

 

449,236

Total assets

 

$
9,576,098

 

$
6,202,803

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

Current liabilities:

 

 

 

 

Accounts payable

 

$
2,348,856

 

$
3,668,158

Accrued expenses

 

270,468

 

128,079

Member distributions payable

 

 -

 

 -

Line of credit

 

1,131,217

 

940,983

Current portion of long-term debt

 

47,230

 

62,138

Deferred revenue

 

325,920

 

1,210

Total current liabilities

 

4,123,691

 

4,800,568

Non-current liabilities:

 

 

 

 

Long-term debt, less current portion

 

148,551

 

24,418

Total liabilities

 

4,272,242

 

4,824,986

Members' equity

 

5,303,856

 

1,377,817

Total liabilities and members' equity

 

$
9,576,098

 

$
6,202,803

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes and independent accountants’ report.

 

 

 

 

 

 

 

 

 

3


 

Red Wolf Company , LLC

Statements of Income and Members’ Equity

For the Nine-Month Periods Ended September 30, 2016 and 2015

 

 

 

 

 

 

 

 

2016

 

2015

Revenue, net

 

$
24,934,035

 

$
15,433,383

Cost of goods sold

 

16,178,756

 

11,338,862

Gross profit

 

8,755,279

 

4,094,521

Selling, general and administrative expenses

 

 

 

 

Salaries and related benefits

 

1,529,605

 

1,155,840

Insurance

 

488,284

 

357,702

Rent

 

216,459

 

212,086

Technology consulting and fees

 

207,415

 

142,016

Depreciation expense

 

126,632

 

99,732

Equipment expense

 

63,938

 

21,150

Utilities

 

59,124

 

84,565

Office expense

 

57,680

 

26,547

Advertising

 

50,170

 

2,320

Travel and entertainment

 

46,632

 

45,610

Telephone

 

41,502

 

15,814

Property, sales and use taxes

 

38,241

 

15,374

Other expenses

 

37,457

 

3,968

Repair and maintenance

 

21,512

 

22,724

License and fees

 

12,281

 

11,779

Charitable contributions

 

7,218

 

2,840

Professional fees

 

7,015

 

40,568

Dues and subscriptions

 

5,030

 

2,493

Total selling, general, and administrative expenses

 

3,016,195

 

2,263,128

Operating income (loss)

 

5,739,084

 

1,831,393

Other income (expense)

 

 

 

 

Gain (loss) on sale of assets

 

35,880

 

 -

Interest expense

 

(40,868)

 

(24,591)

Total other income (expense)

 

(4,988)

 

(24,591)

Net income

 

5,734,096

 

1,806,802

Members' equity at beginning of period

 

2,391,664

 

2,006,825

Members' distributions

 

(2,821,904)

 

(2,435,810)

Members' equity at end of period

 

$
5,303,856

 

$
1,377,817

 

 

 

 

 

See accompanying notes and independent accountants’ report.

 

 

 

 

 

 

 

 

 

 

 

4


 

Red Wolf Company , LLC

Statements of Cash Flows

For the Nine-Month Periods Ended September 30, 2016 and 2015

 

 

 

 

 

 

 

 

2016

 

2015

Cash flows from operating activities:

 

 

 

 

Net income

 

$
5,734,096

 

$
1,806,802

Adjustments to reconcile net income to net cash provided

 

 

 

 

by operating activities:

 

 

 

 

Depreciation

 

126,632

 

99,732

Gain on disposition of fixed assets

 

35,880

 

 -

Changes in operating assets - (increase) decrease

 

 

 

 

Accounts receivable

 

(34,339)

 

73,747

Taxes receivable

 

(1,057)

 

(1,422)

Inventory

 

(1,723,728)

 

(1,396,988)

Due from shareholders

 

52,687

 

 -

Related party receivables

 

(2,231)

 

(173)

Prepaid assets

 

360

 

39

Changes in operating liabilities - increase (decrease)

 

 

 

 

Accounts payable

 

(560,592)

 

1,375,451

Accrued expenses

 

1,484

 

(15,358)

Shareholder distributions payable

 

(52,687)

 

 -

Deferred revenue

 

(352,088)

 

 -

Net cash provided by operating activities

 

3,224,417

 

1,941,830

Cash flows from investing activities:

 

 

 

 

Purchases of property, plant, & equipment

 

(44,137)

 

(41,126)

Net cash provided (used) by investing activities

 

(44,137)

 

(41,126)

Cash flows from financing activities:

 

 

 

 

Borrowings (payments) on line of credit

 

(286,514)

 

940,983

Member distributions

 

(2,821,904)

 

(2,435,810)

Payments on notes payable

 

(64,679)

 

(405,923)

Net cash provided (used) by financing activties

 

(3,173,097)

 

(1,900,750)

Net increase in cash

 

7,183

 

(46)

Cash at beginning of period

 

66

 

406

Cash at end of period

 

$
7,249

 

$
360

Supplemental disclosure of cash flow information:

 

 

 

 

Total interest paid

 

$
40,868

 

$
24,591

 

 

 

 

 

See accompanying notes and independent accountants’ report

 

 

 

 

 

 

 

 

 

 

 

5


 

Red Wolf Company, LLC

Notes to the Financial Statements

For the Nine-Month Periods Ended September 30, 2016 and 2015

 

 

Note 1 - Nature of Operations and Summary of Significant Accounting Policies

 

Description of Business

 

Red Wolf Company, LLC (the “Company”), was organized as a limited liability company in the State of North Carolina on April 13, 2007. The Company provides business to business contract manufacturing services that include build-to-spec, kitting and inventory management for customers throughout the United States and in foreign countries. The Company's products are sold through its warehouse in Sanford, North Carolina.

 

Accounting Method

 

The Company uses the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP). Sales are recognized when revenue is realized or becomes realizable and has been earned. In general, revenue is recognized when the earnings process is complete, which is upon shipment of products. Expenses related to the revenues are recorded upon completion of the event to which they are applicable regardless of the timing of related cash flows.

 

Management Estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

 

Cash and Cash Equivalents

 

For the purposes of balance sheet classification and statement of cash flows presentation, investments with a maturity of three months or less are considered cash equivalents.

 

Revenue Recognition

 

Sales are recognized when revenue is realized or becomes realizable and has been earned. In general, revenue is recognized when the earnings process is complete, which is upon shipment of products.

 

Accounts Receivable and Allowance for Doubtful Accounts

 

Accounts receivable are reported at the amount management expects to collect from outstanding balances. Differences between the amount due and the amount management expects to collect are reported in the results of operations of the year in which those differences are determined, with an offsetting entry to a valuation allowance for trade accounts receivable. Balances that are still outstanding after management has used reasonable collection efforts are written off through a charge to the valuation allowance and a credit to trade accounts receivable. The Company has chosen to record no allowance for doubtful accounts at September 30, 2016 and 2015.

 

The Company extends credit to many of its customers in the ordinary course of business. Generally, these sales are unsecured. The Company performs periodic credit evaluations of its customers and generally does not require collateral. The Company does not believe significant credit risks exist at September 30, 2016, with respect to its accounts receivable.

 

Customer accounts typically are collected within a short period of time, and, based on its assessment of current conditions, management believes realization losses on amounts outstanding at September 30, 2016 will be immaterial.

 

 

 

 

 

 

 

 

6


 

Red Wolf Company, LLC

Notes to the Financial Statements

For the Nine-Month Periods Ended September 30, 2016 and 2015

 

Note 1 - Nature of Operations and Summary of Significant Accounting Policies (continued)

 

Inventory for Resale

 

Inventory consists of parts and materials stated at the lower of cost or market value. Cost is determined by the first in, first out method.

 

Property and Equipment

 

Property and equipment is shown at cost net of accumulated depreciation. Property and equipment acquired with cost in excess of $5,000 is carried at cost and depreciated using straight-line over their estimated useful lives. Maintenance and repairs are charged to expense as incurred; major renewals and betterments are capitalized.

 

The cost of assets retired or otherwise disposed of and the related accumulated depreciation are removed from the accounts and the resulting gain or loss is reflected in the statement of income.

 

Income Taxes

 

The members of the Company have elected to be taxed as a Subchapter 'S' Corporation under existing federal and state regulation, whereby its income is taxed to its members. Therefore, no provision for income taxes has been included in the accompanying financial statements. The Company's federal income tax returns for 2013, 2014 and 2015 are open to examination by the IRS and the State of North Carolina.

 

Presentation of Sales Taxes

 

The State of North Carolina and Lee County impose a sales tax of 4.75% and 2.00%, respectively, on all of the Company's sales to nonexempt customers. The Company collects sales taxes from customers and remits the entire amount to the State and County. The Company's accounting policy is to exclude the tax collected and remitted to the State from revenues and cost of sales.

 

Shipping and Handling Costs

 

The company classifies freight billed to customers as sales revenue and the related freight costs as cost of sales.

 

Advertising

 

The Company expenses advertising production costs as they are incurred and advertising communication costs the first time the advertising takes place. The total advertising cost for the nine-month periods ended September 30, 2016 and 2015 was $50,170 and $2,320, respectively.

 

Note 2 – Concentrations

 

Balances due from the Company's five largest accounts comprise 83% and 92% of the carrying amount, as of September 30, 2016 and 2015, respectively. Management maintains that realization losses on amounts outstanding as of September 30, 2016 will be immaterial, as they were in prior years. Accordingly, customer accounts are reported at the amount of principal outstanding.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

7


 

Red Wolf Company, LLC

Notes to the Financial Statements

For the Nine-Month Periods Ended September 30, 2016 and 2015

 

 

Note 2 – Concentrations (continued)

 

The Company maintains a cash balance at a commercial bank. Accounts at this bank are insured by Federal Deposit Insurance Corporation (FDIC). The balances are insured by the Federal Deposit Insurance Corporation up to $250,000. As of September 30, 2016 and 2015, the Company had uninsured cash balances with financial institutions totaling approximately $148,900 and $-0-, respectively.

 

Note 3 – Property, Plant and Equipment

 

Property and equipment consisted of the following at September 30, 2016 and 2015:

 

 

 

 

 

 

 

 

 

 

Estimated useful

 

 

 

 

 

 

lives

 

2016

 

2015

Machinery & equipment

 

3-20

 

$
525,097

 

$
511,171

Computer equipment

 

3-5

 

61,043

 

1,495

Furniture & fixtures

 

5-15

 

39,430

 

39,430

Vehicles

 

5

 

328,975

 

164,120

Leasehold improvements

 

15

 

245,293

 

246,393

 

 

 

 

1,199,838

 

962,609

Less: accumulated depreciation

 

 

 

(671,749)

 

(513,373)

Property and equipment, net

 

 

 

$
528,089

 

$
449,236

 

The book depreciation for the nine-month periods ended September 30, 2016 and 2015 was $126,632 and $99,732, respectively.

 

Note 4 – Line of Credit

 

The Company has a $2,500,000 line of credit agreement with a financial institution. The revolving line of credit had an outstanding balance of $1,131,217 and $940,983 as of September 30, 2016 and 2015, respectively. The line bears interest at a variable rate equal to the bank's Prime rate plus 1.0%. The line is collateralized by all assets of the Company. Any outstanding principal is due in full on the maturity date. The line was scheduled to mature on July 15, 2016 or such date to which the Line may be extended or renewed in the sole discretion of the financial institution by written notice to the Company.

 

The bank renewed the line of credit In October 2016 and increased the line to $4,500,000. The renewed line bears interest at a variable rate equal to the bank’s Prime rate plus .75%. The renewed line is collateralized by all assets of the Company and is scheduled to mature in November 2017.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

8


 

 

Red Wolf Company, LLC

Notes to the Financial Statements

For the Nine-Month Periods Ended September 30, 2016 and 2015

 

 

Note 5 – Long Term Debt

 

Long term debt consisted of the following at September 30, 2016 and 2015:

 

 

 

 

 

 

 

 

2016

 

2015

Note payable to a financial institution, requiring consecutive monthly installments of principal and interest of $2,665, bearing interest at a rate of 4.75%, and maturing in June, 2016. The note is secured by the vehicle it served to finance.

 

$ -

 

$
38,203

Note payable to a financial institution, requiring consecutive monthly installments of principal and interest of $2,134, bearing interest at a rate of 5.25%, and maturing in June, 2016. The note is secured by the vehicle it served to finance.

 

 -

 

13,820

Note payable to a financial institution, requiring consecutive monthly installments of principal and interest of $473, bearing interest at a rate of 6.24%, and maturing in October, 2019. The note is secured by the vehicle it served to finance.

 

16,429

 

20,439

Note payable to a financial institution, requiring consecutive monthly installments of principal and interest of $1,166, bearing interest at a rate of 6.24%, and maturing in January, 2021. The note is secured by the vehicle it served to finance.

 

56,182

 

 -

Note payable to a financial institution, requiring consecutive monthly installments of principal and interest of $1,191, bearing interest at a rate of 5.39%, and maturing in January, 2021. The note is secured by the vehicle it served to finance.

 

55,012

 

 -

Note payable to a financial institution, requiring consecutive monthly installments of principal and interest of $1,276, bearing interest at a rate of 5.39%, and maturing in January, 2021. The note is secured by the vehicle it served to finance.

 

60,169

 

 -

Note payable to a financial institution, requiring consecutive monthly installments of principal and interest of $550, bearing interest at a rate of 4.25%, and maturing in December, 2017. The note is secured by the equipment.

 

7,989

 

14,094

Total long-term debt

 

$
195,781

 

$
86,556

Less: current portion

 

(47,230)

 

(62,138)

Long-term debt, less current portion

 

$
148,551

 

$
24,418

 

Maturities of long-term debt for the years succeeding September 30, 2016, are as follows:

 

 

 

2017

$
47,230

2018

44,690

2019

44,583

2020

43,797

2021

15,481

 

$
195,781

 

 

 

 

 

 

 

 

 

 

 

 

9


 

Red Wolf Company, LLC

Notes to the Financial Statements

For the Nine-Month Periods Ended September 30, 2016 and 2015

 

 

Note 6 - Operating Lease Obligations

 

The company rents office space under non-cancellable lease agreements with an initial term of 24 months and a second term of 36 months, and the option to renew annually at the end of the second 36 month term. Rent paid under this lease was $216,459 and $212,086 for the nine month periods ended September 30, 2016 and 2015, respectively.

 

The following is a schedule of future minimum payments required under the above operating lease as of September 30, 2016:

 

 

 

2017

$
288,612

2018

120,255

 

$
408,867

 

 

Note 7 - Retirement Plan

 

The Company sponsors a 401(k) profit sharing plan which covers substantially all employees. Participating employees may elect to contribute, on a tax-deferred basis, a portion of their compensation, in accordance with Section 401(k) of the Internal Revenue Code. The Company matches a 100% of employee salary deferrals up to 3% plus 50% of salary deferrals between 3% and 5%. The Company match was $67,301 and $59,594 for the nine-month periods ended September 30, 2016 and 2015, respectively.

 

Additional Company contributions may be made to the plan at the discretion of the Board of Directors, with the maximum limitation being the amount the Company can deduct for federal income tax purposes. The Company made no discretionary profit sharing contributions for the nine-month periods ended September 30, 2016 or 2015.

 

Note 8 - Subsequent Events

 

Management has evaluated subsequent events through January 19, 2017, the date the financial statements were available to be issued. Based upon the evaluation, no adjustments were required in the financial statements.

 

In October 2016, the Company’s line of credit agreement with a financial institution line was renewed and increased to $4,500,000. The line matures on November 1, 2017. Also see Note 4.

 

In October 2016, the Company received a letter of intent for the sale of the Company. The Company is currently in the due diligence process and working through the final elements of a purchasing agreement. The target close date is January 31, 2017.

10


EXHIBIT 99.3

 

 

UNAUDITED PRO FORMA COMBINED CONSOLIDATED

FINANCIAL INFORMATION

 

The unaudited pro forma combined consolidated financial statements are based upon the historical consolidated financial statements of Broadwind Energy, Inc. and its subsidiaries (“Broadwind,” the “Company,” “we,” or “us”) and Red Wolf Company, LLC("Red Wolf") and have been prepared to illustrate the effect of Broadwind’s acquisition of Red Wolf for approximately $21.6 million, subject to certain adjustments.

 

The unaudited pro forma combined consolidated balance sheet combines the historical consolidated balance sheets of Broadwind and Red Wolf as of September 30, 2016 and reflects the pro forma effect as if the acquisition of Red Wolf had occurred on that date. The unaudited pro forma combined consolidated statements of operations for the nine months ended September 30, 2016 and the year ended December 31, 2015 combine the historical statements of operations of Broadwind and Red Wolf, adjusted to reflect the pro forma effect as if the acquisition of Red Wolf had occurred on January 1, 2015 (the first day of the Company’s 2015 fiscal year). Broadwind’s historical consolidated financial statements referred to above were included in its Quarterly Report on Form 10-Q for the nine months ended September 30, 2016 and Annual Report on Form 10-K for the year ended December 31, 2015. Red Wolf’s historical financial statements referred to above for Red Wolf for the comparable periods are included in this Current Report on Form 8-K/A. The accompanying unaudited pro forma combined consolidated financial information and the historical consolidated financial information presented therein should be read in conjunction with the historical consolidated financial statements and notes thereto for Broadwind described above. The historical financial statements of Red Wolf have been adjusted to reflect certain reclassifications to conform to the Company's financial statement presentation.

 

The unaudited pro forma combined consolidated balance sheet and statements of operations include pro forma adjustments which reflect transactions and events that (a) are directly attributable to the acquisition, (b) are factually supportable, and (c) with respect to the statement of operations, are expected to have a continuing impact on consolidated results. The pro forma adjustments are described in the accompanying combined notes to the unaudited pro forma combined consolidated financial statements.

 

The unaudited pro forma combined consolidated financial information does not reflect future events that may occur after the acquisition, including potential general and administrative savings or the costs and related liabilities that would be incurred to achieve them. The unaudited pro forma combined consolidated financial information is provided for informational purposes only and is not necessarily indicative of the results of operations that would have occurred if the acquisition of Red Wolf had occurred on January 1, 2015 nor is it necessarily indicative of our future operating results. The pro forma adjustments are based upon currently available information and are subject to change.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


 

Broadwind Energy, Inc. and Subsidiaries

Unaudited Pro Forma Combined Consolidated Balance Sheet

September 30, 2016

(In thousands, except per share data)

 

 

 

 

 

 

 

 

 

 

 

 

Broadwind

 

Red Wolf

 

Pro Forma adjustments

 

Pro Forma

ASSETS

 

 

 

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$
8,091

 

$
7

 

$
(8,098)

(a)

$ -

Short-term investments

 

16,213

 

 -

 

 -

 

16,213

Restricted cash

 

39

 

 -

 

 -

 

39

Accounts receivable, net

 

14,926

 

2,224

 

 -

 

17,150

Inventories, net

 

26,231

 

6,817

 

230

(b)

33,278

Prepaid expenses and other current assets

 

2,503

 

 -

 

 -

 

2,503

Current assets held for sale

 

866

 

 -

 

 -

 

866

Total current assets

 

68,869

 

9,048

 

(7,868)

 

70,049

LONG-TERM ASSETS:

 

 

 

 

 

 

 

 

Property and equipment, net

 

51,761

 

528

 

(101)

(c)

52,188

Goodwill

 

 -

 

 -

 

8,787

(d)

8,787

Other intangible assets, net

 

4,683

 

 -

 

10,680

(e)

15,363

Other assets

 

323

 

 -

 

 -

 

323

TOTAL ASSETS

 

$
125,636

 

$
9,576

 

$
11,498

 

$
146,710

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

 

 

 

Current maturities of long-term debt

 

$ -

 

$
1,178

 

$
7,377

(f)

$
8,555

Current portions of capital lease obligations

 

156

 

 -

 

 -

 

156

Accounts payable

 

21,062

 

2,349

 

 -

 

23,411

Accrued liabilities

 

8,916

 

596

 

2,679

(g)

12,191

Customer deposits

 

21,493

 

 -

 

 -

 

21,493

Current liabilities held for sale

 

538

 

 -

 

 -

 

538

Total current liabilities

 

52,165

 

4,123

 

10,056

 

66,344

LONG-TERM LIABILITIES:

 

 

 

 

 

 

 

 

Long-term debt, net of current maturities

 

2,600

 

149

 

(149)

(h)

2,600

Long-term capital lease obligations, net of current portions

 

416

 

 -

 

 -

 

416

Other

 

2,331

 

 -

 

6,895

(i)

9,226

Total long-term liabilities

 

5,347

 

149

 

6,746

 

12,242

COMMITMENTS AND CONTINGENCIES

 

 

 

 

 

 

 

 

STOCKHOLDERS’ EQUITY:

 

 

 

 

 

 

 

 

Preferred stock, $0.001 par value; 10,000,000 shares authorized; no shares issued or outstanding

 

 -

 

 -

 

 -

 

 -

Common stock, $0.001 par value; 30,000,000 shares authorized; 15,172,245 shares issued as of September 30, 2016

 

15

 

 -

 

 -

 

15

Treasury stock, at cost, 273,937 shares as of September 30, 2016

 

(1,842)

 

 -

 

 -

 

(1,842)

Additional paid-in capital

 

378,715

 

 -

 

 -

 

378,715

Accumulated deficit

 

(308,764)

 

5,304

 

(5,304)

(j)

(308,764)

Total stockholders’ equity

 

68,124

 

5,304

 

(5,304)

 

68,124

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

 

$
125,636

 

$
9,576

 

$
11,498

 

$
146,710

 

 

 

 

See accompanying notes to unaudited pro forma combined consolidated financial statements.

 

 

 

 


 

Broadwind Energy, Inc. and Subsidiaries

Unaudited Pro Forma Combined Consolidated STATEMENT OF OPERATIONS

nine months ended September 30, 2016

(In thousands, except per share data)

 

 

 

 

 

 

 

 

 

 

 

 

Broadwind

 

Red Wolf

 

Pro Forma adjustments

 

Pro Forma

Revenues

 

$
132,689

 

$
24,934

 

$ -

 

$
157,623

Cost of sales

 

119,254

 

16,179

 

(21)

(k)

135,412

Gross profit

 

13,435

 

8,755

 

21

 

22,211

OPERATING EXPENSES:

 

 

 

 

 

 

 

 

Selling, general and administrative

 

11,785

 

3,016

 

 -

 

14,801

Intangible amortization

 

333

 

 -

 

862

(l)

1,195

Total operating expenses

 

12,118

 

3,016

 

862

 

15,996

Operating income (loss)

 

1,317

 

5,739

 

(841)

 

6,215

OTHER (EXPENSE) INCOME, net:

 

 

 

 

 

 

 

 

Interest expense, net

 

(431)

 

(41)

 

(232)

(m)

(704)

Other, net

 

27

 

36

 

 -

 

63

Total other expense, net

 

(404)

 

(5)

 

(232)

 

(641)

Net income (loss) before benefit for income taxes

 

913

 

5,734

 

(1,073)

 

5,574

Benefit for income taxes

 

(16)

 

 -

 

 -

 

(16)

INCOME (LOSS) FROM CONTINUING OPERATIONS

 

929

 

5,734

 

(1,073)

 

5,590

Income (loss) from continuing operations per common share-basic

 

$
0.06

 

 

 

 

 

$
0.38

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING—Basic

 

14,824

 

 

 

 

 

14,824

Income (loss) from continuing operations per common share-diluted

 

$
0.06

 

 

 

 

 

$
0.37

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING—Diluted

 

15,038

 

 

 

 

 

15,038

 

 

 

 

 

See accompanying notes to unaudited pro forma combined consolidated financial statements.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


 

 

Broadwind Energy, Inc. and Subsidiaries

Unaudited Pro Forma Combined Consolidated STATEMENT OF OPERATIONS

year ended december 31, 2015

(In thousands, except per share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

Broadwind

 

Red Wolf

 

Pro Forma adjustments

 

Pro Forma

Revenues

 

$
199,156

 

$
23,345

 

$ -

 

$
222,501

Cost of sales

 

191,289

 

16,950

 

202

(n)

208,441

Gross profit

 

7,867

 

6,395

 

(202)

 

14,060

OPERATING EXPENSES:

 

 

 

 

 

 

 

 

Selling, general and administrative

 

18,271

 

3,515

 

 -

 

21,786

Intangible amortization

 

444

 

 -

 

1,149

(o)

1,593

Restructuring

 

1,060

 

 -

 

 -

 

1,060

Total operating expenses

 

19,775

 

3,515

 

1,149

 

24,439

Operating (loss) income

 

(11,908)

 

2,880

 

(1,351)

 

(10,379)

OTHER (EXPENSE) INCOME, net:

 

 

 

 

 

 

 

 

Interest expense, net

 

(799)

 

(37)

 

400

(p)

(436)

Other, net

 

425

 

1

 

(1)

(q)

425

Total other expense, net

 

(374)

 

(36)

 

399

 

(11)

Net (loss) income before benefit for income taxes

 

(12,282)

 

2,844

 

(952)

 

(10,390)

Benefit for income taxes

 

(36)

 

 -

 

 -

 

(36)

(LOSS) INCOME FROM CONTINUING OPERATIONS

 

(12,246)

 

2,844

 

(952)

 

(10,354)

Loss from continuing operations per common share-basic and diluted

 

$
(0.83)

 

 

 

 

 

$
(0.71)

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING—Basic and diluted

 

14,677

 

 

 

 

 

14,677

 

 

 

 

 

 

See accompanying notes to unaudited pro forma combined consolidated financial statements.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


 

 

BROADWIND ENERGY, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED PRO FORMA COMBINED CONSOLIDATED

FINANCIAL STATEMENTS

(In Thousands)

 

Description of Transaction and Basis of Presentation

 

The unaudited pro forma combined consolidated financial statements are based upon the historical consolidated financial statements of Broadwind Energy, Inc. and its subsidiaries (“Broadwind,” the “Company,” “we,” or “us”) which were included in its Quarterly Report on Form 10-Q for the nine months ended September 30, 2016 and Annual Report on Form 10-K for the year ended December 31, 2015 and Red Wolf Company, LLC ("Red Wolf") financial statements for these periods which are included in this Current Report on Form 8-K/A. The unaudited pro forma combined consolidated statements of operations reflect the acquisition of Red Wolf as if it had occurred on January 1, 2015 (the first day of our 2015 fiscal year). The unaudited pro forma combined consolidated balance sheet as of September 30, 2016 reflects such acquisition as if it had occurred on that date.

 

In accordance with generally accepted accounting principles in the United States, the acquisition of Red Wolf is being accounted for using the purchase method of accounting. As a result, the unaudited pro forma combined consolidated balance sheet has been adjusted to reflect the preliminary allocation of the purchase price to identifiable net assets acquired based primarily on the Company's fair value assessment and the excess purchase price to goodwill. The purchase price allocation in these unaudited pro forma combined consolidated financial statements is based upon a purchase price of approximately $21.6 million, of which $16.5 million was paid in cash  and $5.0 million is the expected value of contingent future earn-out payments.

 

Pro Forma Adjustments

 

On February 1, 2017, Broadwind completed its acquisition of 100% of the outstanding equity of Red Wolf,  a privately held company, for $16.5 million in cash, a portion of which was applied to pay off Red Wolf’s outstanding indebtedness. The purchase price is subject to a customary net working capital adjustment and an earn-out structure under which the members of Red Wolf (“Sellers”) may become entitled to contingent consideration of up to $9.9 million, payable in cash and, at the election of the Company, up to 50% in the form of shares of the Company’s common stock. Broadwind operates Red Wolf as a wholly owned subsidiary.

 

The following pro forma adjustments are included in the unaudited pro forma combined consolidated balance sheet and/or the unaudited pro forma combined condensed consolidated statements of operations:

 

(a) Cash paid for the acquisition, assumed borrowing on the Company’s line of credit (LOC) to fund difference between cash on hand and consideration paid, and the elimination of Red Wolf cash.

(b) Fair value adjustment of inventory.

(c) Eliminate Red Wolf property and equipment not acquired, partially offset by increased fair value of acquired property and equipment.

(d) The value of goodwill as of 9/30/16.

(e) Fair value of Red Wolf intangible assets acquired.

(f)  Elimination of Red Wolf current debt as a result of the non-debt transaction structure and assumed borrowing on the Company’s LOC to fund difference between cash on hand and consideration paid.

(g) $2,679 fair value of first year earnout.

(h) Elimination of Red Wolf long-term debt.

(i)  Estimated deferred tax liabilities assumed and $2,296 fair value of second year earnout.

(j) Elimination of Red Wolf accumulated deficit.

(k)  Depreciation reduction due to Red Wolf property and equipment not acquired, partially offset by depreciation increase resulting from the fair value adjustment of acquired property and equipment.

(l) Amortization expense for acquired intangibles.

(m) Elimination of Red Wolf interest expense, partially offset by addition of interest expense on LOC.

 

 

 

 

 

 

 

 

 


 

BROADWIND ENERGY, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED PRO FORMA COMBINED CONSOLIDATED

FINANCIAL STATEMENTS

(In Thousands)

 

 

(n)  Depreciation increase due to the effect of fair value adjustment to inventories on costs of goods sold, partially offset by depreciation reduction due to Red Wolf property and equipment not acquired.

(o) Amortization expense for acquired intangibles.

(p) Elimination of Red Wolf interest expense and addition of interest expense on LOC.

(q) Elimination of Red Wolf other income.

(r) The preliminary allocation of purchase price and estimated goodwill as of February 1, 2017, the date of the transaction, is summarized below:

 

 

 

Total purchase price

$
21,621

Assets acquired:

 

Cash and cash equivalents

63

Receivables

2,795

Inventories, net

5,054

Property and equipment, net

462

Intangible assets, net

10,680

Liabilities assumed

6,841

Goodwill (estimated)

9,408