Welcome to the Second Quarter 2012 Broadwind Energy Incorporated Earnings Conference Call. My name is Christine, and I'll be your operator for today's conference. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session. Please note today's conference is being recorded. I will now turn the call over to John Segvich. You may begin.

Thank you. Good morning, and welcome to Broadwind Energy's Second Quarter 2012 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 bwen.com. Second slide, please. 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-Q 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

Thanks, John, and thanks everyone for joining our call. Let's start out on slide three. This morning, we reported second quarter results with reported revenue growing 43% over last year’s Q2 and EBITDA improving by $1 million. Overall the quarter was strong and both our Gearing and Service businesses demonstrated great progress against a year ago. I'll briefly review the highlights of each of the businesses. Gearing revenue was up 13%; 98% of that revenue went into industrial markets or to replace wind gearing already installed rather than for new wind turbines. We continue to see strong demand particularly in oil and mining sectors. EBITDA improved by $1.7 million over the same period last year. In our Services business, revenue was up 141%. As the installed fleet ages, we are seeing strong demand for our non-routine services on blades, drivetrain and the other major components. Our Tower business reported revenue of 51%, but much of the increase was associated with higher steel content versus fabrication only which we discussed in the past. Our small, but fast-growing Weldment business had orders increase of 172% in the first half of 2012 versus 2011. I’ll highlight some of the things that went well for the quarter and some of the things that we need to improve. The Gearing business successfully navigated through a significant downturn in gearing for frac where $3 million of orders were pushed out late in the fulfillment process. Services is showing good progress and growing and diversifying its business. During the quarter they made their first service calls on industrial gearing customers. We see nice opportunities to cross-sell customers on the gearbox and fabrication components. This provides greater value add for our customers which should create long-lasting relationships. Finally, you'll see in the disclosures in the 10-Q that we've…

Thanks, Pete, and good morning. Turning to the consolidated income statement on slide 10, Q2 revenue was $56.3 million up sharply from last year. As Pete noted, a significant portion of the increase was due to higher steel content in our towers. If we were to adjust for that it would increase 2011 revenue by $10.5 million and our year-over-year revenue growth would decline to 13%. We posted a gross profit of $1.7 million for the quarter including $400,000 of restructuring expenses for a 3.7% gross margin. This is about the same as last year's full year rate, reflecting the progress of Gearing and Services offset by lower Tower margins and the impact of a high steel content on Towers. Improving our gross margins continues to be a critical focus area. Our year-to-date gross margin excluding restructuring was 4.2%. Although we expect the rate to improve to about 6% in the second half of the year. We are reducing our expected full year outlook to 5% gross profit margin. The improvement in operating expenses is more significant, at $5.8 million Q2 operating expenses were well below 2011 with improvements across the board, including lower expenses for legal and other professional fees and lower salary expense. At $12 million for the first six month, we are well-positioned to meet or improve upon our targeted spend of $25 million to $26 million for the year. Reflecting benefits from a potion of the restructuring actions already completed including the closure of the European office, another reduction. So these savings will probably compensate for the lower gross profit. Our operating loss was $4.2 million including $440,000 of restructuring charges. Adjusted EBITDA totaled $1.1 million up sharply from a $100,000 last year and the loss per share narrow to $0.03. Moving to slide 11, Towers…

(Operator Instruction) The first question comes from Chris Blansett from JPMorgan. Please go ahead. Christopher Blansett – JP Morgan Securities LLC: Thank you, Pete, quick question about your expectations for the Tower business next year; how do we think about the breakout of U.S. revenue versus, maybe, non-U.S. revenue. Just to kind of get a feel for how much you think is going to come from these new regions?

I mean, Chris, at this point it's really hard to say. As I mentioned in my prepared remarks, we do have experience shipping towers to South America. So particularly with some of our customers who are active there, I mean, South America is a good market, it's hard to venture right now what exactly, what the breakout would be, I could venture an estimate of potentially a third of our revenue would come from South America, and we are still working through some of the logistics with Canada, but I think it’s looking fairly promising right now. Christopher Blansett – JP Morgan Securities LLC: And then in general when you think about the EBITDA target of greater than $5 million, how much of that is due to a reduced competitive environment versus maybe the addition of the Weldments, I’m just trying to understand the improvement in the profitability and on the lower overall revenue levels, just to kind of get a feel for what’s really driving that?

I’ll let Stephanie take that one.

Again, it’s difficult to say. Right now we are assuming certainly a benefit of higher margins from Weldments, and perhaps more intensity in terms of the competition and the pricing on the U.S. towers. So it's difficult to say how those two factors play out, but we think the $5 million number is a conservative number. Christopher Blansett – JP Morgan Securities LLC: Okay, and then I guess the other question I had is related to, on your Gearing business. Essentially it looks like you are fully transitioned out of selling or producing new gears for new wind turbines, I mean is this the general trend going forward, it’s really, I mean that business for overall purposes is over as far as you can tell we shouldn't expect any ongoing new Tower business there?

New Gearing business? Christopher Blansett – JP Morgan Securities LLC: Yeah.

I would say there will be some replacement gearing for the existing fleet, but I don’t expect that to be significant, maybe 5% of the total revenue intake, but I would say we've now completed the transition to industrial. Christopher Blansett – JP Morgan Securities LLC: Okay. And the last question I had is with tighter services. How much of the improvement in the second half is associated with the kind of a burst of activity that we are going to see is to get us, when systems installed before the end of the year versus more consistent and ongoing kind of business?

There are some, what I would call traditional constructions or that’s really becoming less and less a part of the business. It’s really dealing with problems on the existing fleet, replacing gearboxes, a lot of blade work, things related to the drivetrain, so I think that business has been transitioned quite well from maybe where it was three years ago, where it was primarily construction support. So we are very focused on making sure the revenue is coming from the installed base and not new installs. Christopher Blansett – JP Morgan Securities LLC: All right, thank you.

Yeah.

The next question comes from Sanjay Shrestha from Lazard Capital. Please go ahead. Sanjay Shrestha – Lazard Capital Markets: Well, thank you. Good morning, guys. A couple of questions; first on the 2013, 100 tower that you guys have in the backlog for that year, where is that going and how firm is that backlog considering a bit of an uncertainty related to PTC for that year?

So that backlog gets called off as the specific orders and placements take place, and at this point the first 25 towers for that first quarter have been called off. We know where those are going. Sanjay Shrestha – Lazard Capital Markets: Yeah.

It’s just about normal for this time of the year, so we have no reason to think that backlog won't be honored as it is. Sanjay Shrestha – Lazard Capital Markets: Okay, perfect. So guys, given the dynamics in the wind market here in 2012, right, so how do we sort of think about spot opportunity even in Q3 versus, which you talked about and a potential for you guys to really build a very nice cash cushion as you go into a transitional year in 2013. How do you think about that?

I think we’re pretty well sold out for Q3. Sanjay Shrestha – Lazard Capital Markets: Okay.

I think there could be some opportunity in Q4. Sanjay Shrestha – Lazard Capital Markets: Early on, correct?

Again we’re trying to balance the diversification. We have taken about 20% of our Tower capacity and shifted it to Weldment. Sanjay Shrestha – Lazard Capital Markets: Yeah.

Because we think that’s important for the long-term health of the business. Sanjay Shrestha – Lazard Capital Markets: Okay, okay, fair enough. Two more then guys, if I may. So when I was thinking about the Gearing business, right, obviously I think Chris asked earlier about shifting away from wind more into the industrial market and that's a very fragmented market, so as we think 2013 and 2014, two part question. One, the level of profitability for the Gearing business in the industrial world versus the wind market and when you see that business going, looking two to three years out, how big could that business be from a revenue standpoint for you guys?

Yeah, I think as we look at Gearing business, we are very comfortable with the double-digit growth rate per year and we are seeing a lot of opportunities in mining, oil. We are getting opportunities for what I would be growth enclosed drive, so completed gearboxes, so that should become a bigger part of that business. So manufacturing seems to be strong in the U.S. so I think we’re very comfortable being able to grow that at 10% to 15% a year. Sanjay Shrestha – Lazard Capital Markets: Okay, great one final question then, guys. On the Service side, right, you guys have done a pretty good job there. It seems like things are going to continue to get better for you guys, but is there a potential risk for the Service business to maybe have somewhat of a negative impact, let's say in 2013 comparing that OEM might also say; well gee, for us to actually kind of offset some of the slowdown in the overall turbine business is try and capture more of that service opportunity. Is that a potential risk? Or given the portfolio offering you bring to the table, you will continue to win your fair share of the business?

I think we’re actually pretty well positioned to win our fair share of the business. I think a lot of the things that we do is non-routine maintenance service provider. Sanjay Shrestha – Lazard Capital Markets: Yeah.

It's something that there aren't a lot of people who are doing out there, something able to swap-out a gearbox, replace gears, overall change trucks or I think the state-of- the-art in the industry. So I think we are actually very well-positioned, we are not doing a lot of O&M, we are not doing a lot of construction of course so we – a couple of years ago we actually did think through where we wanted to position the business side. I think we are well positioned to what we thought a couple years ago. Sanjay Shrestha – Lazard Capital Markets: All right, that’s all I have. Thank you so much guys.

(Operator Instructions) The next question comes from Pavel Molchanov from Raymond James. Please go ahead. Pavel Molchanov – Raymond James & Associates: Hi, guys. Do you thinking about the potential of PTC extension in the lame-duck session, assuming it gets extended that late in the year, in December, perhaps even January. How long a trough period would there be before the industry can ramp back up at a higher activity level? I mean, are we talking kind of just Q1 of next year or could it be potentially a longer trough?

I think with the lead time on steel you would probably be talking about a full ramp-up sometime in Q2. So a lot of it depends on how quickly you can get steel. I think, as far as our workforce, we can deploy them very quickly, but it’s more of the steel issue. Pavel Molchanov – Raymond James & Associates: Okay. And just based on what you're hearing from your industry sources right now, what do you think is a realistic level of installations next year, assuming PTC extension and then a downside scenario without PTC?

There are a lot of scenarios out there right now. I think from what we are seeing in the marketplace right now, there are some developers that are going to build regardless of PTC. So I think the 2,200 megawatts is a reasonable number for next year. So that's what we are planning on, that's what we are working with the OEMs on. Pavel Molchanov – Raymond James & Associates: So you said 2,200 megs?

Yes. Pavel Molchanov – Raymond James & Associates: Okay. That's with our without? Or is that just a base case either way?

That’s kind of the base case. Pavel Molchanov – Raymond James & Associates: All right, I understood, appreciated guys.

Okay.

The next question comes from Chris Blansett from JP Morgan. Please go ahead. Christopher Blansett – JP Morgan Securities LLC: Just want to have a quick question on the additional cost reduction activities you guys are going through, how much of that goes to the COG's line and how much to the SG&A. And I guess what I’m trying to understand is what kind of SG&A expenses should we be thinking about next year on an average run rate since we know your revenue is volatile and then just trying to get a feel for how that should trend?

So most of the restructuring, which is happening gearing now would be on the COGs line, so that's a sort of $1 million a quarter run rate that we should see in terms of an improvement. On the operating expenses, we will flex that a little bit if we see our revenue is going to be down sequentially, but not – there is not a tremendous amount of latitude there, whereas sort of 11% run rate right now, maybe you would might want to model it go down to more or like 10%. Christopher Blansett – JP Morgan Securities LLC: Okay. And I guess, is that another way of saying, Stephanie, there’s a lot of upside leverage right now?

Yeah, absolutely. Christopher Blansett – JP Morgan Securities LLC: And then lastly I just want to get a feel for your thoughts on the U.S. wind tower market in general with the subsidies taking outside the penalties for dumping an associated subsidization of foreign tower makers. I mean, is there a more normalized profitable margin we should be kind of thinking about the U.S. wind tower business in itself versus prior years and I guess kind of a lead on is that, we haven’t seen effect I guess in the second quarter results because the rulings by the Department of Commerce were kind of late in the quarter, but when should that start to take effect?

First, I would say as far as the Department of Commerce ruling, that’s really for 2013, it almost, I mean, early 2012 was pretty much locked up by the time that ruling came out, so that didn’t really help us. So we’re not expecting really any impact or a little impact for 2012 and it is roughly a third of the market. So the Chinese, the Vietnamese towers represented third of the market. So I think going forward, this ruling is very important to us. Christopher Blansett – JP Morgan Securities LLC: I guess, a simple question on that, a follow-up. I mean, in general I mean how much lower I guess was pricing on average in the market because of this dumping, is there some kind of relative reference you can provide? Single-digit, double-digit, lower than probably what's the rational level of profit or the sustainable level of profitability for this industry?

I think it’s bigger than the imports. So I think you have to look at the whole supply-demand situation. Even within the U.S. there has been oversupply but that’s correcting. So we do think certainly the imports are faster, but I think there are other changes that are going on with the supply base as well. And I think when you take all things into consideration it should start moving this business back to and more normal healthy double-digit gross margin business and but it probably won’t happen materially until we get beyond 2013. Christopher Blansett – JP Morgan Securities LLC: All right, thank you.

That concludes the question-and-answer session. I’ll turn the call back to Peter Duprey, for final remarks.

Great thanks, Christine. I think you can tell from our Q2 results that our Gearing business has kind of turned the corner. Last year, we had an EBITDA loss of $0.5 million and we are on track this year for an EBITDA more like $6 million in the Gearing business. As you can see, that Services is improving and approaching a breakeven and we have spend a lot of time talking about towers and the supply chain. I think the demand or the supply starting to come in line with the demand, which will ultimately lead to a healthier tower market. As we just mentioned, the tariffs imposed by the Department of Commerce should impacted by the third of the supply and our understanding from kind of the competitive landscape is that three competitors have exited and two have significantly shifted their capacity to other industry. So we believe that these moves will strengthen Broadwind's competitive position going forward and we've grown our tower customer base. We are committed to the market for the long-term and we think over the mid to long term, it will be a very nice market for us. I appreciate everyone for joining the call and the questions and look forward to talking about more in Q3.

Thank you for participating in the second quarter 2012 Broadwind Energy Incorporated earnings conference call. This concludes the conference for today. You may all disconnect at this time.