What changed in this filing

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Item 1. Financial Statements

2021-11-10 compared with 2021-08-06 · 320 added, 227 removed, 864 unchanged (39% of the section changed)

4 unchanged sentences

(in thousands, except share and per share data)

September 30,

CURRENT ASSETS:

36 unchanged sentences

18,819  

Total current liabilities

17 unchanged sentences

30,000,000 shares authorized;

19,658,998 and 17,211,498 shares issued as of June 30, 2021, and December 31, 2020, respectively

Treasury stock, at cost, 273,937 shares as of June 30, 2021 and December 31, 2020

19,753,256 and 17,211,498 shares issued as of September 30, 2021, and December 31, 2020, respectively

Treasury stock, at cost, 273,937 shares as of September 30, 2021 and December 31, 2020

( 1,842 )  

15 unchanged sentences

(in thousands, except per share data)

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Cost of sales

4 unchanged sentences

Operating (loss) income

OTHER INCOME (EXPENSE), net:

OTHER (EXPENSE) INCOME, net:

Paycheck Protection Program loan forgiveness

Interest expense, net

Total other income (expense), net

Net income before provision for income taxes

Total other (expense) income, net

Net (loss) income before provision for income taxes

Provision for income taxes

NET INCOME PER COMMON SHARE—BASIC:

NET (LOSS) INCOME

NET (LOSS) INCOME PER COMMON SHARE—BASIC:

Net (loss) income

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING—BASIC

NET INCOME PER COMMON SHARE—DILUTED:

NET (LOSS) INCOME PER COMMON SHARE—DILUTED:

Net (loss) income

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING—DILUTED

6 unchanged sentences

BALANCE, December 31, 2019

16,830,930  

( 273,937 )  

$ ( 1,842 )  

$ 383,361  

$ ( 340,776 )  

$ 40,760  

Stock issued for restricted stock

83,050  

Share-based compensation

BALANCE, March 31, 2020

16,913,980  

( 273,937 )  

$ ( 1,842 )  

$ 383,669  

$ ( 339,822 )  

$ 42,022  

Stock issued for restricted stock

199,636  

Share-based compensation

BALANCE, June 30, 2020

17,113,616  

( 273,937 )  

$ ( 1,842 )  

$ 383,917  

$ ( 339,293 )  

$ 42,799  

Stock issued for restricted stock

Share-based compensation

Sale of common stock, net

91,481  

( 1,003 )  

BALANCE, September 30, 2020

17,211,498  

( 273,937 )  

$ ( 1,842 )  

$ 384,356  

$ ( 340,296 )  

$ 42,235  

BALANCE, December 31, 2020

17,211,498  

( 273,937 )  

$ ( 1,842 )  

$ 384,749  

$ ( 342,263 )  

$ 40,661  

Stock issued for restricted stock

241,806  

Stock issued under defined contribution 401(k) retirement savings plan

26,265  

Share-based compensation

Shares withheld for taxes in connection with issuance of restricted stock

( 105,399 )  

( 847 )  

Sale of common stock, net

1,100,000  

( 1,210 )  

BALANCE, March 31, 2021

18,474,170  

( 273,937 )  

$ ( 1,842 )  

$ 390,479  

$ ( 343,473 )  

$ 45,182  

Stock issued for restricted stock

440,611  

Stock issued under defined contribution 401(k) retirement savings plan

71,334  

Share-based compensation

Shares withheld for taxes in connection with issuance of restricted stock

( 124,814 )  

( 644 )  

Sale of common stock, net

797,697  

10,252  

BALANCE, June 30, 2021

19,658,998  

( 273,937 )  

$ ( 1,842 )  

$ 393,839  

$ ( 333,221 )  

$ 58,796  

Stock issued for restricted stock

Stock issued under defined contribution 401(k) retirement savings plan

87,615  

Share-based compensation

Shares withheld for taxes in connection with issuance of restricted stock

( 2,940 )  

( 12 )  

Sale of common stock, net

( 20 )  

( 2,105 )  

BALANCE, September 30, 2021

19,753,256  

( 273,937 )  

$ ( 1,842 )  

$ 394,300  

$ ( 335,326 )  

$ 57,152  

The accompanying notes are an integral part of these condensed consolidated financial statements.

3 unchanged sentences

(in thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

31 unchanged sentences

Net cash provided by financing activities

NET INCREASE (DECREASE) IN CASH

NET (DECREASE) INCREASE IN CASH

CASH beginning of the period

16 unchanged sentences

Operating results for the 

three and six months ended June 30, 2021 are not necessarily indicative of the results that may be expected for the twelve months ending December 31, 2021, or any other interim period, which may differ materially due to, among other things, the risk factors set forth in our Annual Report on Form 10 -K for the year ended December 31, 2020 .

three and nine months ended September 30, 2021 are not necessarily indicative of the results that may be expected for the twelve months ending December 31, 2021, or any other interim period, which may differ materially due to, among other things, the risk factors set forth in our Annual Report on Form 10 -K for the year ended December 31, 2020 .

The December 31, 2020 condensed consolidated balance sheet was derived from audited financial statements, but does not include all disclosures required by GAAP.

1 unchanged sentence

There have been no material changes in the Company’s significant accounting policies during the 

six months ended June 30, 2021 as compared to the significant accounting policies described in the Company’s Annual Report on Form 10 -K for the year ended December 31, 2020 .

nine months ended September 30, 2021 as compared to the significant accounting policies described in the Company’s Annual Report on Form 10 -K for the year ended December 31, 2020 .

Company Description   

5 unchanged sentences

wind energy industry, which accounted for 66 % and 72 % of the Company’s revenue during the first  

six months of 2021  and 2020, respectively. 

nine months of 2021  and 2020, respectively. 

The Company typically meets its short term liquidity needs through cash generated from operations, its available cash balances, the Credit Facility (as defined below), equipment financing, and access to the public or private debt and/or equity markets, including the option to raise capital from the sale of our securities under the Form S- 3  (as discussed below).

2 unchanged sentences

Total debt and finance lease obligations at 

June 30, 2021 totaled $ 11,079 , which includes current outstanding debt and finance leases totaling $ 8,193 .

The Company's revolving line of credit balance is included in the line titled “Line of credit and other notes payable” line item in the Company's condensed consolidated balance sheet. Long-term debt at December 31, 2020 

September 30, 2021 totaled $ 10,321 , which includes current outstanding debt and finance leases totaling $ 7,331 .

The Company's revolving line of credit balance is included in the “Line of credit and other notes payable”

line item in the Company's condensed consolidated balance sheet. Long-term debt at December 31, 2020 

included $ 9,151 of Payroll Protection Program loans (“PPP Loans”), which were forgiven by the U.S.

Small Business Administration (“SBA”) during the quarter ended June 30, 2021.

The loan forgiveness is recorded in “Other income (expense), net”

in the Company’s condensed consolidated statement of operations. See Note 7,  “Debt and Credit Agreements,”

Small Business Administration (“SBA”) during the quarter ended June 30, 2021. 

See Note 7,  “Debt and Credit Agreements,”

of these condensed consolidated financial statements for a complete description of the PPP Loans. 

6 unchanged sentences

Pursuant to the terms of the Equity Distribution Agreement, the Company issued 1,897,697  

shares of the Company’s common stock thereunder during the six months ended June 30, 

shares of the Company’s common stock thereunder during the first two quarters of 

The net proceeds (before upfront costs) to the Company from the sale of such shares were approximately $ 9,725  

6 unchanged sentences

Therefore, the maximum tax credit that can be claimed by an eligible employer in 2021 is $7,000 per employee per calendar quarter.

In the first quarter of 2021, the Company received an ERC benefit of $ 3,372 , which was recorded in “Other income (expense), net”

in the Company’s condensed consolidated statement of operations. The Company also qualified for the ERC in the second quarter of 2021 because it had a gross receipts decrease of more than 20% for the first quarter of 2021 compared to the first quarter of 2019, the relevant criteria for the ERC.

In the first and second quarters of 2021, the Company received ERC benefits of $ 3,372 and $ 3,593 , respectively, which were recorded in “Other income (expense), net”

in the Company’s condensed consolidated statement of operations. The Company qualified for the ERC in the first quarter of 2021 because it experienced a reduction in gross receipts of more than 20% for the first quarter of 2021 compared to the first quarter of 2019, the relevant criteria for the ERC.

Since the Company qualified for the ERC in the first quarter of 2021, it automatically qualified for the ERC in the second quarter of 2021.

As a result of the Company averaging 

500 or fewer full-time employees in 2019, all wages paid to employees were eligible for the ERC (rather than only wages paid to employees not providing services).

During the second quarter of 2021, the Company recorded a benefit of $ 3,593  in “Other income (expense), net”

in the Company’s condensed consolidated statement of operations.

The Company used $ 1,879 of this amount to reduce payroll tax payments. The receivable for the remaining ERC benefit was $ 1,714  as of June 30, 2021 and is included in the line titled “Employee retention credit receivable”

in the Company’s condensed consolidated balance sheet at June 

The Company anticipates that current cash resources, expected cash proceeds or savings from the ERC, amounts available under the Credit Facility, cash to be generated from operations and any potential proceeds from the sale of further Company securities under the Form S- 3 will be adequate to meet the Company’s liquidity needs for at least the next twelve months.

If assumptions regarding the Company’s production, sales and subsequent collections from certain of the Company’s large customers, as well as customer deposits and revenues generated from new customer orders, are materially inconsistent with management’s expectations, particularly in light of the COVID- 19 pandemic, emerging variants and its effects on domestic and global economies, the Company may in the future encounter cash flow and liquidity issues.

If the Company’s operational performance deteriorates significantly, it may be unable to comply with existing financial covenants, and could lose access to the Credit Facility.

During the third quarter of 2021 due to relatively higher revenues in 2021 as compared to the third quarter of 2019, the Company did not qualify for the ERC benefit.

The receivable for the remaining uncollected ERC benefit is $503  as of September 

30, 2021 and is included in the “Employee retention credit receivable”

line item in the Company’s condensed consolidated balance sheet at September 

The Company anticipates that current cash resources, amounts available under the Credit Facility, cash to be generated from operations and any potential proceeds from the sale of further Company securities under the Form S- 3 will be adequate to meet the Company’s liquidity needs for at least the next twelve months.

If assumptions regarding the Company’s production, sales and subsequent collections from certain of the Company’s large customers, as well as receipt of customer deposits and revenues generated from new customer orders, are materially inconsistent with management’s expectations, particularly in light of the COVID- 19 pandemic, emerging variants and its effects on domestic and global economies, the Company may in the future encounter cash flow and liquidity issues.

If the Company’s operational performance deteriorates significantly, it may be unable to comply with existing financial covenants, and could lose access to its Credit Facility.

This could limit the Company’s operational flexibility, require a delay in making planned investments and/or require the Company to seek additional equity or debt financing.

7 unchanged sentences

Revenues are recognized when the promised goods or services are transferred to customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services.

The following table presents the Company’s revenues disaggregated by revenue source for the three and six months ended June 30, 2021 and 2020 :

Three Months Ended June 30,

Six Months Ended June 30,

The following table presents the Company’s revenues disaggregated by revenue source for the three and nine months ended September 30, 2021 and 2020 :

Three Months Ended September 30,

Nine Months Ended September 30,

Heavy Fabrications

12 unchanged sentences

$ 40,389  

$ 54,614  

$ 119,608  

$ 158,174  

Revenue within the Company’s Gearing and Industrial Solutions segments, as well as industrial fabrication product line revenues within the Heavy Fabrications segment, are generally recognized at a point in time, typically when the promised goods or services are physically transferred to its customers in an amount that reflects the consideration it expects to be entitled to in exchange for those goods or services.

5 unchanged sentences

Assuming these required revenue recognition criteria are met, revenue is recognized upon completion of product manufacture and customer acceptance.

During the six  months ended June 

During the nine  months ended September 

2021, the Company recognized a portion of revenue within the Gearing and Heavy Fabrications segments over time, as the products had no alternative use to the Company and the Company had an enforceable right to payment, including profit, upon termination of the contracts.

Since the projects are labor intensive, the Company uses labor hours as the input measure of progress for the applicable contracts.

Within the Heavy Fabrications segment, the Company recognized revenue over time of $ 1,276 and $ 2,429 for the three  and six months ended June 30, 2021, respectively. Within the Gearing segment, the Company recognized revenue over time of $ 975  and $ 1,532  for the three and six months ended June 30, 2021, respectively. Contract assets are recorded when performance obligations are satisfied but the Company is not yet entitled to payment.

Within the Heavy Fabrications segment, the Company recognized revenue over time of $ 1,791  and $ 4,220  for the three  and nine  months ended September 

30, 2021, respectively. Within the Gearing segment, the Company recognized revenue over time of $ 499  and $ 2,444  for the three and nine  months ended September 

30, 2021, respectively. Contract assets are recorded when performance obligations are satisfied but the Company is not yet entitled to payment.

Contract assets represent the Company’s rights to consideration for work completed but not billed at the end of the period.

The Company did not recognize any revenue over time during the three and six months ended June 

During the three and nine  months ended September 

30, 2020, the Company recognized revenue over time of $ 1,475 from one customer within the Gearing segment. 

The Company generally expenses sales commissions when incurred.

5 unchanged sentences

EARNINGS PER SHARE  

The following table presents a reconciliation of basic and diluted earnings per share for the three and six months ended June 30, 2021 and 2020 , as follows: 

The following table presents a reconciliation of basic and diluted earnings per share for the three and nine months ended September 30, 2021 and 2020 , as follows: 

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Basic earnings per share calculation:

Net (loss) income

$ ( 2,105 )  

6 unchanged sentences

16,741,481  

Basic net income per share

Basic net (loss) income per share

$ ( 0.11 )  

3 unchanged sentences

Diluted earnings per share calculation:

Net (loss) income

$ ( 2,105 )  

10 unchanged sentences

536,920  

889,874  

255,336  

Weighted average number of common shares outstanding

3 unchanged sentences

17,278,401  

Diluted net income per share

Diluted net (loss) income per share

$ ( 0.11 )  

4 unchanged sentences

INVENTORIES  

The components of inventories as of June 30, 2021 and December 31, 2020 are summarized as follows:

The components of inventories as of September 30, 2021 and December 31, 2020 are summarized as follows:

September 30,

Raw materials

3 unchanged sentences

12,634  

Finished goods

10 unchanged sentences

Intangible assets are amortized on a straight-line basis over their estimated useful lives, with a remaining life range from 1  

As of June 30, 2021 and December 31, 2020 , the cost basis, accumulated amortization and net book value of intangible assets were as follows:

June 30, 2021

As of September 30, 2021 and December 31, 2020 , the cost basis, accumulated amortization and net book value of intangible assets were as follows:

September 30, 2021

December 31, 2020

21 unchanged sentences

$ 4,186  

As of June 30, 2021 , estimated future amortization expense was as follows:

As of September 30, 2021 , estimated future amortization expense was as follows:

2026 and thereafter

3 unchanged sentences

ACCRUED LIABILITIES

Accrued liabilities as of June 30, 2021 and December 31, 2020 consisted of the following: 

Accrued liabilities as of September 30, 2021 and December 31, 2020 consisted of the following: 

September 30,

Accrued payroll and benefits

13 unchanged sentences

DEBT AND CREDIT AGREEMENTS

The Company’s outstanding debt balances as of June 30, 2021 and December 31, 2020 consisted of the following:

The Company’s outstanding debt balances as of September 30, 2021 and December 31, 2020 consisted of the following:

September 30,

Line of credit

13 unchanged sentences

On October 

29, 2020, the Company executed the First Amendment to the 2016 Amended and Restated Loan Agreement, implementing a payoff of a syndicated lender and a pricing grid based on the Company’s trailing twelve month EBITDA under which applicable margins range from 2.25 % to 2.75 % for LIBOR rate loans and 0.00 % and 0.75 % for base rate loans, and extending the term of the Credit Facility to 

29, 2020, the Company executed the First Amendment to the Amended and Restated Loan Agreement, implementing a payoff of a syndicated lender and a pricing grid based on the Company’s trailing twelve month EBITDA under which applicable margins range from 2.25 % to 2.75 % for London Interbank Offering Rate (“LIBOR”) rate loans and 0.00 % and 0.75 % for base rate loans, and extending the term of the Credit Facility to 

On February 23, 2021, the Company executed the Second Amendment to the Amended and Restated Loan Agreement, which waived testing of the fixed charge coverage covenant for the quarters ended March 31, 2021 and June 20, 2021, added a new liquidity covenant applicable to the quarter ended March 31, 2021 and new minimum EBITDA covenants applicable to the quarters ended March 31, 2021 and June 30, 2021.

As of September 30, 2021, the Company transitioned back to a fixed charge coverage covenant.

On November 8, 2021, the Company executed the Third Amendment to the Amended and Restated Loan Agreement (the “Third Amendment”) which waived the fixed charge coverage ratio default for the quarter ended September 30, 2021, suspended testing of the fixed charge coverage ratio covenant through September 30, 2022, added a minimum EBITDA covenant applicable to the three -month period ending December 31, 2021, the six -month period ending March 31, 2022, the nine -month period ending June 30, 2022 and the twelve -month period ending September 30, 2022 

and added a reserve of $ 5,000,000 to the Revolving Loan Availability through December 31, 2022.

For a more detailed description of the Third Amendment, refer to Item 5 of Part II of this Form 10 -Q.

The Credit Facility is an asset-based revolving credit facility, pursuant to which the CIBC advances funds against a borrowing base consisting of approximately (a) 85 % of the face value of eligible receivables of the Company and the subsidiaries, plus (b) the lesser of (i) 50 % of the lower of cost or market value of eligible inventory of the Company, (ii) 85 % of the orderly liquidation value of eligible inventory and (iii) $ 12.5 million, plus (c) the lesser of (i) the sum of (A) 75 % of the appraised net orderly liquidation value of the Company’s eligible machinery and equipment plus (B) 50 % of the fair market value of the Company’s mortgaged property and (ii) $ 12 million.

Subject to certain borrowing base conditions, the aggregate Credit Facility limit under the 2016 Amended and Restated Loan Agreement is $ 35 million with a sublimit for letters of credit of $ 10 million.

Subject to certain borrowing base conditions, the aggregate Credit Facility limit under the Amended and Restated Loan Agreement is $ 35 million with a sublimit for letters of credit of $ 10 million.

Borrowings under the Credit Facility bear interest at a per annum rate equal to, at the option of the Company, the one, two or three -month LIBOR rate or the base rate, plus a margin.

3 unchanged sentences

The Credit Facility contains customary representations and warranties applicable to the Company and its subsidiaries.

It also contains a requirement that the Company, on a consolidated basis, maintain a minimum quarterly fixed charge coverage ratio, along with other customary restrictive covenants, certain of which are subject to materiality thresholds, baskets and customary exceptions and qualifications.

The Company was in compliance with all covenants under the Credit Facility as of June 

On February 

2021,  the Company executed the Second Amendment to the 

2016  Amended and Restated Loan Agreement, which waived testing of the fixed charge coverage covenant for the quarters ending March 31, 2021 and June 30, 2021, added a new liquidity covenant applicable to the quarter ending March 31, 2021, and new minimum EBITDA covenants applicable to the quarters ending March 31, 2021 and June 30 2021.

As of June 30, 2021, the Company was in compliance with the terms of the Credit Facility. Pursuant to the Second Amendment, as of the September 30, 2021 reporting date, the Company will transition back to a fixed charge coverage covenant. 

In conjunction with the 2016 Amended and Restated Loan Agreement, during June 2019, the Company entered into a floating to fixed interest rate swap with CIBC.

In conjunction with the Amended and Restated Loan Agreement, during June 2019, the Company entered into a floating to fixed interest rate swap with CIBC.

The swap agreement has a notional amount of $ 6,000 and a schedule matching that of the underlying loan that synthetically fixes the interest rate on LIBOR borrowings for the entire term of the Credit Facility at 2.13 %, before considering the Company’s risk premium.

2 unchanged sentences

The interest rate swap liability is included in the “Accrued liabilities”

line item of the Company’s condensed consolidated financial statements as of June 30, 2021 and December 31, 2020 .

As of June 30, 2021 , there was $ 6,000  

of outstanding indebtedness under the Credit Facility, with the ability to borrow an additional $ 18,928 , under the Credit Facility.

line item of the Company’s condensed consolidated financial statements as of September 30, 2021 and December 31, 2020 .

As of September 30, 2021 , there was $ 5,284  

of outstanding indebtedness under the Credit Facility, with the ability to borrow an additional $ 18,743 .

In 2016, the Company entered into a $ 570 loan agreement with the Development Corporation of Abilene which is included in the “Long-term debt, less current maturities”

line item of our condensed consolidated financial statements as of June 30, 2021 and December 31, 2020 .

line item of our condensed consolidated financial statements as of September 30, 2021 and December 31, 2020 .

The loan is forgivable upon the Company meeting and maintaining specific employment thresholds.

During each of the years 2020, 2019, and 2018, $ 114 of the loan was forgiven.

As of June 30, 2021 , the loan balance was $ 228 .

As of September 30, 2021 , the loan balance was $ 228 .

In addition, the Company has outstanding notes payable for capital expenditures in the amount of $ 161  

and $ 163 as of June 30, 2021 and December 31, 2020 , respectively, with $ 392  

and $ 161  included in the “Line of credit and other notes payable”

line item of the Company’s condensed consolidated financial statements as of June 30, 2021 and December 31, 2020 , respectively.

and $ 163 as of September 30, 2021 and December 31, 2020 , respectively, with $ 161  included in the “Line of credit and other notes payable”

line item of the Company’s condensed consolidated financial statements as of September 30, 2021 and December 31, 2020 .

The notes payable have monthly payments that range from $ 1 to $ 16  and an interest rate of approximately 4 %.

1 unchanged sentence

The outstanding notes payable have maturity dates that range from March 

2022  to August 2024.

2022  to September 

On April 15, 2020, the Company received funds under notes and related documents with CIBC, under the Paycheck Protection Program (the “PPP”) which was established under the CARES Act enacted on March 27, 2020 in response to the COVID- 19 pandemic and is administered by the SBA.

The Company received total proceeds of $ 9,530 from the PPP Loans and made repayments of $ 379 on May 13, 2020.

Under the terms of the CARES Act, as amended by the Paycheck Protection Program Flexibility Act of 2020 enacted on June 5, 2020 ( the “Flexibility Act”), the PPP Loans, and accrued interest and fees may be forgiven following a period of twenty-four weeks after PPP Loan proceeds are received (the “covered period”) if they are used for qualifying expenses as described in the CARES Act including payroll costs and certain employee benefits (which must equal or exceed 60% of the amount requested to be forgiven), rent, mortgage interest, and utilities.

The amount of loan forgiveness will be reduced if the borrower terminates employees or significantly reduces salaries during such period, subject to certain exceptions.

Subject to the terms and conditions applicable to loans administered by the SBA under the PPP, as amended by the Flexibility Act, the unforgiven portion of a PPP Loan is payable over a two year period at an interest rate of 1.00%, with a deferral of payments of principal, interest and fees until the date on which the SBA remits the loan forgiveness amount to the lender (or notifies the lender that no loan forgiveness is allowed), provided that the borrower applies for forgiveness within 10 months after the last day of the covered period (and if not, payment of principal and interest shall commence 10 months after the last day of the covered period).

Under the terms of the CARES Act, as amended by the Paycheck Protection Program Flexibility Act of 2020 enacted on June 5, 2020 ( the “Flexibility Act”), the PPP Loans, and accrued interest and fees are eligible to be forgiven following a period of twenty-four weeks after PPP Loan proceeds are received (the “covered period”) if they are used for qualifying expenses as described in the CARES Act including payroll costs and certain employee benefits (which must equal or exceed 60% of the amount requested to be forgiven), rent, mortgage interest, and utilities.

The amount of loan forgiveness is reduced if the borrower terminates employees or significantly reduces salaries during such period, subject to certain exceptions.

The Company used at least 60% of the amount of the PPP Loans proceeds to pay for payroll costs and the balance on other eligible qualifying expenses consistent with the terms of the PPP and submitted its forgiveness applications to CIBC during the first quarter of 2021.

During the second quarter of 2021, all loans were forgiven by the SBA and a gain of $ 9,151 was recorded in “Other income (expense), net”

During the quarter ended June 

2021, all loans were forgiven by the SBA and a gain of $ 9,151 was recorded in “Other income (expense), net”

in the Company's condensed consolidated statements of operations. 

9 unchanged sentences

The Company has elected to apply the short-term lease exception to all leases of one year or less.

During the six months ended June 30, 2021 , the Company had an additional operating lease that resulted in right-of-use assets obtained in exchange for lease obligations of $907.

During the nine months ended September 30, 2021  and 2020, the Company had additional operating leases that resulted in right-of-use assets obtained in exchange for lease obligations of $ 907 and $ 4,380 , respectively.

Additionally, during the 

six months ended June 30, 2021  and 2020, the Company had additional finance leases that resulted in property, plant, and equipment obtained in exchange for lease obligations of $ 1,896  

nine months ended September 30, 2021  and 2020, the Company had additional finance leases that resulted in property, plant, and equipment obtained in exchange for lease obligations of $ 2,444  

and $ 2,253 , respectively. 

3 unchanged sentences

Quantitative information regarding the Company’s leases is as follows:

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Components of lease cost

17 unchanged sentences

$ 3,847  

Supplemental cash flow information related to our operating leases is as follows for the six months ended June 30, 2021 and 2020:

Supplemental cash flow information related to our operating leases is as follows for the nine months ended September 30, 2021 and 2020:

Cash paid for amounts included in the measurement of lease liabilities:

7 unchanged sentences

Variable lease costs consist primarily of taxes, insurance, utilities, and common area or other maintenance costs for the Company’s leased facilities and equipment.

As of June 30, 2021 , future minimum lease payments under finance leases and operating leases were as follows:

$ 1,120  

$ 1,754  

As of September 30, 2021 , future minimum lease payments under finance leases and operating leases were as follows:

$ 1,519  

43 unchanged sentences

Inputs reflect management’s best estimate of what market participants would use in valuing the asset or liability at the measurement date.

The following tables represent the fair values of the Company’s financial liabilities as of June 30, 2021 and December 31, 2020 :

June 30, 2021

The following tables represent the fair values of the Company’s financial liabilities as of September 30, 2021 and December 31, 2020 :

September 30, 2021

Liabilities measured on a recurring basis:

8 unchanged sentences

Effective tax rates differ from federal statutory income tax rates primarily due to changes in the Company’s valuation allowance, permanent differences and provisions for state and local income taxes.

As of June 30, 2021 , the Company has a full valuation allowance recorded against deferred tax assets.

During the six months ended June 30, 2021 , the Company recorded a provision for income taxes of $ 77 , compared to a provision for income taxes of $ 83  during the six months ended June 30, 2020 . 

As of September 30, 2021 , the Company has a full valuation allowance recorded against deferred tax assets.

During the nine months ended September 30, 2021 , the Company recorded a provision for income taxes of $ 101 , compared to a provision for income taxes of $ 103  during the nine months ended September 30, 2020 . 

The Company files income tax returns in U.S.

federal and state jurisdictions.

As of June 30, 2021 , open tax years in federal and some state jurisdictions date back to 1996 due to the taxing authorities’

As of September 30, 2021 , open tax years in federal and some state jurisdictions date back to 1996 due to the taxing authorities’

ability to adjust operating loss carryforwards.

20 unchanged sentences

12, 2013 will not trigger the preferred share purchase rights unless they acquire additional shares after that date. 

As of June 30, 2021 , the Company had no unrecognized tax benefits.

As of September 30, 2021 , the Company had no unrecognized tax benefits.

The Company recognizes interest and penalties related to uncertain tax positions as income tax expense.

The Company had no accrued interest and penalties as of June 30, 2021 .

The Company had no accrued interest and penalties as of September 30, 2021 .

NOTE 11 —

SHARE-BASED COMPENSATION  

There was no  stock option activity during the six months ended June 30, 2021  and no  stock options were outstanding as of June 30, 2021 . 

The following table summarizes the Company’s restricted stock unit and performance award activity during the six months ended June 30, 2021 : 

There was no  stock option activity during the nine months ended September 30, 2021  and no  stock options were outstanding as of September 30, 2021 . 

The following table summarizes the Company’s restricted stock unit and performance award activity during the nine months ended September 30, 2021 : 

Weighted Average

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$ 1.93  

Unvested as of June 30, 2021

( 108,144 )  

$ 2.95  

Unvested as of September 30, 2021

926,338  

$ 2.74  

Under certain situations, shares are withheld from issuance to cover taxes for the vesting of restricted stock units and performance awards.

For the six  months ended June 

For the nine  months ended September 

30, 2021, 233,153  of such shares were withheld to cover $ 1,503  of tax obligations. 

The following table summarizes share-based compensation expense included in the Company’s condensed consolidated statements of operations for the six months ended June 30, 2021 and 2020 , as follows: 

Six Months Ended June 30,

The following table summarizes share-based compensation expense included in the Company’s condensed consolidated statements of operations for the nine months ended September 30, 2021 and 2020 , as follows: 

Nine Months Ended September 30,

Share-based compensation expense:

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The Company’s most significant presence is within the U.S.

wind energy industry, although it has diversified into other industrial markets in order to improve capacity utilization, reduce customer concentrations, and reduce exposure to uncertainty related to governmental policies currently impacting the U.S.

wind energy industry, although it has diversified into other industrial markets in order to improve capacity utilization, reduce customer concentration, and reduce exposure to uncertainty related to governmental policies currently impacting the U.S.

wind energy industry.

Within the U.S.

wind energy industry, the Company provides steel towers and adapters primarily to wind turbine manufacturers.

wind energy industry, the Company provides steel towers and tower adapters primarily to wind turbine manufacturers.

Production facilities, located in Manitowoc, Wisconsin and Abilene, Texas, are situated in close proximity to the primary U.S.

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Industrial Solutions 

The Company provides supply chain solutions, inventory management, kitting and assembly services, primarily serving the combined cycle natural gas turbine market, as well as other clean technology markets.

The Company provides supply chain solutions, light fabrication, inventory management, kitting and assembly services, primarily serving the combined cycle natural gas turbine market, as well as other clean technology markets.

“Corporate”

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of these condensed consolidated financial statements.

Summary financial information by reportable segment for the three and six months ended June 30, 2021 and 2020 is as follows:

Summary financial information by reportable segment for the three and nine months ended September 30, 2021 and 2020 is as follows:

Heavy Fabrications

Industrial Solutions

For the Three Months Ended June 30, 2021

For the Three Months Ended September 30, 2021

Revenues from external customers

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40,389  

Operating profit (loss)

Operating (loss) profit

( 445 )  

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Industrial Solutions

For the Three Months Ended June 30, 2020

For the Three Months Ended September 30, 2020

Revenues from external customers

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43,440  

( 32 )  

54,614  

Operating profit (loss)

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Industrial Solutions

For the Six Months Ended June 30, 2021

For the Nine Months Ended September 30, 2021

Revenues from external customers

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( 346 )  

Operating loss

119,608  

Operating loss

( 1,873 )  

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Industrial Solutions

For the Six Months Ended June 30, 2020

For the Nine Months Ended September 30, 2020

Revenues from external customers

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20,273  

12,516  

( 39 )  

158,174  

Operating profit (loss)

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Total Assets as of

September 30,

Heavy Fabrications

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Changes in trends in any of the factors that the Company believes may impact the collectability of its accounts receivable, as noted above, or modifications to its credit standards, collection practices and other related policies may impact the Company’s allowance for doubtful accounts and its financial results.

The activity in the accounts receivable allowance liability for the six months ended June 30, 2021 and 2020 consisted of the following: 

For the Six Months Ended June 30,

The activity in the accounts receivable allowance liability for the nine months ended September 30, 2021 and 2020 consisted of the following: 

For the Nine Months Ended September 30,

Balance at beginning of period

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There was no reserve for liquidated damages as of 

June 30, 2021 or December 31, 2020. 

September 30, 2021 or December 31, 2020. 

Management’s Discussion and Analysis of Financial Condition and Results of Operations  

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Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Net (loss) income

Adjusted EBITDA (1)

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We define operating working capital as accounts receivable and inventory net of accounts payable and customer deposits.

Total debt at June 30, 2020 includes PPP Loans totaling $9,151.

Our backlog at June 30, 2021 is net of revenue recognized over time. 

Total debt at September 30, 2020 includes PPP Loans totaling $9,151.

Our backlog at September 30, 2021 and September 30, 2020 is net of revenue recognized over time. 

We define the book-to-bill as the ratio of new orders we received, net of cancellations, to revenue during a period.

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Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Net (loss) income

Interest expense

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OUR BUSINESS  

Second Quarter Overview  

We booked $26,441 in new orders in the second quarter of 2021, down from $39,558 in the second quarter of 2020.

Within our Heavy Fabrication segment, wind tower orders decreased 61%, as customers delayed orders due to elevated steel prices and uncertainty regarding the timing and likelihood of potential wind energy incentives. 

Industrial fabrications product line orders, within the Heavy Fabrications segment, doubled compared to the prior year quarter, primarily due to higher order intake within mining markets, as customers resumed capital spending and inventory purchases. Gearing segment orders more than doubled compared to the second quarter of 2020 primarily due to increased demand from oil and gas (“O&G”) and mining customers. Orders within our Industrial Solutions segment decreased by 14% as compared to the prior year, primarily due to the timing of orders associated with gas turbine and aftermarket projects.

We recognized revenue of $46,491 in the second quarter of 2021, down 15% compared to the second quarter of 2020, primarily due to a decrease in the Heavy Fabrications segment, as tower sections sold decreased 6% compared to the prior year quarter due to project delays, lower industry wide activity levels and a lower average selling price due to the mix of tower designs sold. 

Industrial fabrications product line revenue, within the Heavy Fabrications segment, decreased 42% primarily due to timing of projects and lower order levels in the second half of 2020. Gearing revenue increased by $482  

from the second quarter of 2020, driven by higher order intake in recent quarters from O&G customers, partially offset by decreased revenue from industrial customers.

Industrial Solutions revenue decreased $856 from the second quarter of 2020, representing a 19% decrease compared to the prior year quarter, primarily due to the timing of new gas turbine customer projects and global logistics delays.

We recorded net income of $10,252 or $0.55 per share in the second quarter of 2021, compared to net income of $529 or $0.03 per share in the second quarter of 2020 primarily due to income of $9,151 recognized from the Paycheck Protection Program (“PPP”) loan forgiveness and a $3,593 ERC benefit (described below).

Both of these items were recognized in “Other income (expense), net”

in our condensed consolidated statement of operations for the three months ended June 30, 2021.

This income was partially offset by the volume related decrease discussed above. 

Third Quarter Overview  

We booked $42,597 in new orders in the third quarter of 2021, up from $39,555 in the third quarter of 2020.

Gearing segment orders increased 258% compared to the third quarter of 2020 primarily due to increased demand from oil and gas (“O&G”) and mining customers. Within our Heavy Fabrications segment, wind tower orders decreased 38% versus the prior year quarter as customers continue to delay orders due to uncertainty regarding the timing and likelihood of potential wind energy incentives provided by the federal government and elevated steel prices.

Consistent with the Company's diversification strategy, this reduction was partially offset by an increase in industrial fabrications product line orders of 262% primarily due to higher order intake within all markets served as customers resumed capital spending and inventory purchases. Orders within our Industrial Solutions segment decreased by 9% as compared to the prior year, primarily due to the timing of orders associated with aftermarket projects.

We recognized revenue of $40,389 in the third quarter of 2021, down 26% compared to the third quarter of 2020, primarily due to a 37% decrease in tower sections sold as a result of project delays and lower industry wide activity levels. Industrial fabrications product line revenue within the Heavy Fabrications segment increased 14% primarily due to recognizing our first revenue associated with our Modular Pressure Reducing Systems (“PRS”) units.

Gearing revenue increased by $437 from the third quarter of 2020, driven by higher order intake in recent quarters from O&G and steel customers, partially offset by decreased revenue from other industrial customers.

Industrial Solutions revenue increased $132 from the third quarter of 2020, representing a 3% increase compared to the prior year quarter, primarily due to the timing of new gas turbine projects.

We recorded a net loss of $2,105 or $0.11 per share in the third quarter of 2021, compared to a net loss of $1,003 or $0.06 per share in the third quarter of 2020 primarily due to a 37% decrease in tower sections sold due to project delays and underutilization of plant capacity in the quarter.

This was partially offset by higher sales and improved manufacturing efficiencies in the Gearing segment. 

On March 27, 2020, the CARES Act was signed into law providing numerous tax provisions and other stimulus measures, including the Employee Retention Credit (“ERC”), which is a refundable tax credit against certain employment taxes. The Taxpayer Certainty and Disaster Tax Relief Act of 2020 and the American Rescue Plan Act of 2021 extended and expanded the availability of the ERC.

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Therefore, the maximum tax credit that can be claimed by an eligible employer in 2021 is $7,000 per employee per calendar quarter.

In addition to qualifying in the first quarter, we also qualified for the ERC in the second quarter of 2021 because we had a gross receipts decrease of more than 20% for the first quarter of 2021 compared to the first quarter of 2019, the relevant criteria for the ERC.

As a result of us averaging 500 or fewer full-time employees in 2019, all wages paid to employees were eligible for the ERC (rather than only wages paid to employees not providing services). In the first quarter of 2021, we received an ERC benefit of $3,372, which was recorded in “Other income (expense), net”

in our condensed consolidated statement of operations. During the second quarter of June 30, 2021, we recorded an additional benefit of $3,593 in “Other income (expense), net”

in our condensed consolidated statement of operations.

We used $1,879 of this amount to reduce payroll tax payments.

The remaining receivable for the ERC benefit is $1,714 as of June 30, 2021 and is included in the line titled “Employee retention credit receivable”

in our condensed consolidated balance sheet at June 30, 2021. 

We qualified for the ERC in the first quarter of the year because we experienced a reduction in gross receipts of more than 20% for the first quarter of 2021 compared to the first quarter of 2019, the relevant criteria for the ERC. Since we qualified for the ERC in the first quarter of 2021, we automatically qualified for the ERC in the second quarter of 2021.

In the first and second quarters of 2021, we received ERC benefits of $3,372 and $3,593, respectively, which were recorded in “Other income (expense), net”

in our condensed consolidated statement of operations. During the third quarter of 2021 due to relatively higher revenues in 2021 as compared to the third quarter of 2019, we did not qualify for the ERC benefit.

The receivable for the remaining uncollected ERC benefit is $503  

as of September 30, 2021 and is included in the “Employee retention credit receivable”

line item in our condensed consolidated balance sheet at September 30, 2021. 

COVID-19 Pandemic

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and global economies, including in the regions in which we operate. 

Overall, through June 30, 2021, we have experienced an adverse impact to our business, operations and financial results as a result of this pandemic due in part to a decline in order activity levels, manufacturing inefficiencies associated with supply chain disruptions and employee staffing constraints due to the spread of the COVID-19 pandemic. 

Our facilities continued to operate as essential businesses in light of the customers and markets served.

In response to the pandemic, we continue to right-size our workforce and delay certain capital expenditures.

Our facilities continued to operate as essential businesses in light of the customers and markets served. However, through September 30, 2021, we have experienced an adverse impact to our business, operations and financial results as a result of this pandemic due in part to a decline in order activity levels, manufacturing inefficiencies associated with supply chain disruptions and employee staffing constraints due to the spread of the COVID-19 pandemic. In response to the pandemic, we continue to right-size our workforce and delay certain capital expenditures.

In future periods, we may experience weaker customer demand, requests for extended payment terms, customer bankruptcies, additional supply chain disruption, employee staffing constraints and difficulties, government restrictions or other factors that could negatively impact the Company and its business, operations and financial results.

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RESULTS OF OPERATIONS  

Three months ended June 30, 2021, Compared to Three months ended June 30, 2020  

The condensed consolidated statement of operations table below should be read in connection with a review of the following discussion of our results of operations for the three months ended June 30, 2021, compared to the three months ended June 30, 2020.

Three Months Ended June 30,

Three months ended September 30, 2021, Compared to Three months ended September 30, 2020  

The condensed consolidated statement of operations table below should be read in connection with a review of the following discussion of our results of operations for the three months ended September 30, 2021, compared to the three months ended September 30, 2020.

Three Months Ended September 30,

Cost of sales

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Total operating expenses

Operating (loss) income

Other income (expense), net

Paycheck Protection Program loan forgiveness

Operating loss

Other (expense) income, net

Interest expense, net

Total other income (expense), net

Net income before provision for income taxes

Total other (expense) income, net

Net loss before provision for income taxes

Provision for income taxes

Consolidated  

Revenues decreased by $8,435 versus the prior year quarter, which was primarily driven by project delays in our Heavy Fabrications segment, which realized a 6% decrease in  

tower sections sold, a lower average selling price due to mix of tower designs sold, and a 42% decrease in industrial fabrications revenue. Gearing segment revenue was up $482 from the second quarter of 2020, primarily driven by higher order intake in recent quarters from O&G customers, partially offset by decreased revenue from industrial customers.

Industrial Solutions revenue decreased $856 representing a 19% decrease compared to the prior year quarter, primarily due to the timing of new gas turbine customer projects and global logistics delays.

Gross profit decreased by $3,219 from the prior year quarter primarily due to lower Heavy Fabrications segment sales and higher manufacturing inefficiencies within the Gearing segment.

 As a result, gross margin decreased to 4.7% during the three months ended June 30, 2021, from 9.9% during the three months ended June 30, 2020.

Due to lower revenue levels, operating expenses as a percentage of sales increased to 9.7% in the current-year quarter from 8.0% in the prior year quarter.

Net income was $10,252 during the three months ended June 30, 2021, compared to $529 during the three months ended June 30, 2020.

The increase was primarily due to income of $9,151 recognized from the PPP Loan forgiveness and income of $3,593  

recognized from the ERC benefit.

Both of these items were recognized in “Other income (expense), net”

in our condensed consolidated statements of operations. 

Revenues decreased by $14,225 versus the prior year quarter, which was primarily driven by a 37% decrease in tower sections sold in our Heavy Fabrications segment, reflecting both project delays and an industry-wide reduction in activity. Partly offsetting this was a 14% increase in industrial fabrications product line revenue, primarily due to recognizing our first revenue associated with our PRS units.

Gearing segment revenue was up $437 from the third quarter of 2020, primarily driven by higher order intake in recent quarters from O&G and steel customers, partially offset by decreased revenue from other industrial customers. Industrial Solutions segment revenue increased $132 representing a 3% increase compared to the prior year quarter, primarily due to the timing of new gas turbine customer projects.

Gross profit decreased by $1,664 from the prior year quarter primarily due to reduced operating leverage associated with lower wind tower production.

This decrease was partially offset by higher sales and improved manufacturing efficiencies within the Gearing segment.

 As a result, gross margin decreased to 5.1% during the three months ended September 30, 2021, from 6.8% during the three months ended September 30, 2020.

Due to lower revenue levels, higher commission expenses, and an increase in employee costs, operating expenses as a percentage of sales increased to 10.1% in the current-year quarter from 7.7% in the prior year quarter.

Net loss was $2,105 during the three months ended September 30, 2021, compared to $1,003 during the three months ended September 30, 2020.

This erosion was primarily due to the factors described above, partially offset by a 47% reduction in interest expense. 

Heavy Fabrications Segment  

Three Months Ended

September 30,

Tower sections sold

Operating income

Operating (loss) income

Operating margin

Heavy Fabrications segment wind tower orders decreased 61% as compared to the second quarter of 2020 as customers delayed orders due to elevated steel prices and uncertainty regarding the timing and likelihood of potential wind energy incentives. Industrial fabrication product line orders,  

within the Heavy Fabrication segment, doubled quarter-over-quarter primarily due to higher order intake within mining markets as customers resumed capital spending and inventory purchases.

Segment revenues decreased $7,784 from the prior year quarter primarily due to a 6% decrease in tower sections sold due to project delays and a lower average selling price due to the mix of tower designs sold.

Lower industrial fabrication order intake from mining and industrial customers in recent quarters lead to lower revenue in the current year quarter. 

Heavy Fabrications segment wind tower orders decreased 38% as compared to the third quarter of 2020 as customers delayed orders due to uncertainty regarding the timing and likelihood of potential U.S.

federal wind energy incentives and elevated steel prices. Industrial fabrication product line orders increased 262% quarter-over-quarter as customers resumed capital spending and inventory purchases in all end markets.

Segment revenues decreased $14,765 from the prior year quarter primarily due to a 37% decrease in tower sections sold due to the aforementioned project delays.

This was partially offset by increased industrial fabrication revenues as we recognized our first revenue associated with our PRS units in the current year quarter.

Heavy Fabrications segment operating income decreased by $2,465  

compared to the prior year.

The quarter-over-quarter degradation in operating performance reflects the adverse volume impacts described previously as well as the underutilization of plant capacity in the quarter.

Operating margin was 0.8% during the three months ended June 30, 2021, a decrease from 7.3% during the three months ended June 30, 2020.

The quarter-over-quarter degradation in operating performance reflects the adverse volume impacts described previously, manufacturing inefficiencies caused by supply chain disruptions, and the underutilization of plant capacity in the quarter.

Operating margin was (1.6)% during the three months ended September 30, 2021, a decrease from 4.7% during the three months ended September 30, 2020.

Gearing Segment

Three Months Ended

September 30,

Operating loss

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Gearing segment orders increased 258% from the prior year period primarily due to increased demand from O&G and mining customers.

Gearing revenue was up 7% relative to the comparable prior year period, a reflection of higher order intake in the current year, primarily from O&G customers.

Gearing segment operating loss increased $231  

Gearing revenue was up 6% relative to the comparable prior year period, a reflection of higher order intake in the current year, primarily from O&G and steel customers, partially offset by a decrease in revenue from other industrial customers.

Gearing segment operating loss decreased $804  

from the prior year period.

This was primarily attributable to a less profitable product mix sold and increased manufacturing inefficiencies.

Operating margin was (11.9)% during the three months ended June 30, 2021, down from (9.4)% during the three months ended June 30, 2020, driven primarily by the items identified above.

This was primarily attributable to higher sales and improved manufacturing efficiencies.

Operating margin was (2.9)% during the three months ended September 30, 2021, an improvement from (14.4)% during the three months ended September 30, 2020, driven primarily by the items identified above.

Industrial Solutions Segment  

Three Months Ended

September 30,

Operating (loss) income

Operating margin

Industrial Solutions segment orders decreased by 14% from the prior year period primarily due to the timing of orders associated with aftermarket projects. Segment revenue decreased by 19% from the prior year period primarily due to the timing of new gas turbine projects and global logistics delays.

The decrease in operating income versus the prior-year quarter was primarily a result of lower sales  

during the quarter. 

Industrial Solutions segment orders decreased by 9% from the prior year period primarily due to the timing of orders associated with aftermarket projects. Segment revenue increased by 3% from the prior year period primarily due to the timing of new gas turbine projects.

The decrease in operating income versus the prior-year quarter was primarily a result of a lower margin sales mix sold. 

Corporate and Other  

Corporate and Other expenses during the three months ended June 30, 2021 decreased from the prior year period primarily due to lower insurance expenses. 

Six Months Ended June 30, 2021, Compared to Six Months Ended June 30, 2020

The condensed consolidated statement of operations table below should be read in connection with a review of the following discussion of our results of operations for the six months ended June 30, 2021, compared to the six months ended June 30, 2020.

Six Months Ended June 30,

Corporate and Other expenses during the three months ended September 30, 2021 decreased from the prior year period primarily due to lower incentive compensation and decreased professional service expenses. 

Nine Months Ended September 30, 2021, Compared to Nine Months Ended September 30, 2020

The condensed consolidated statement of operations table below should be read in connection with a review of the following discussion of our results of operations for the nine months ended September 30, 2021, compared to the nine months ended September 30, 2020.

Nine Months Ended September 30,

Cost of sales

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Consolidated  

Revenues decreased by $24,341 from the six months ended June 30, 2020, primarily due to a 25% decrease in  

tower sections sold due to customer driven project delays and a lower average selling price due to the mix of tower designs sold. The industrial  

fabrications product line, within the Heavy Fabrications segment, was adversely impacted by lower order intake in recent quarters. Gearing revenue was down $396 from the first half of 2020, primarily driven by lower order intake in the second half of the prior year, from industrial and mining customers, partially offset by increased revenue from O&G and aftermarket wind.

Industrial Solutions revenue decreased $290 from the six months ended June 30, 2020, representing a 3% decrease, primarily due to the timing of aftermarket customer installations and global logistics delays.

Gross profit decreased by $9,109 from the first half of 2020 primarily due to lower sales and manufacturing inefficiencies caused by supply chain disruptions, a temporary shut-down of our Abilene, Texas plant due to a weather event in the first quarter and increased manufacturing variances within our Gearing segment.

As a result, gross margin decreased to 3.1% during the six months ended June 30, 2021, from 11.2% during the six months ended June 30, 2020.

Due to lower revenue levels, operating expenses as a percentage of sales increased to 11.5% in the current year from 8.6% in the prior year period.

Revenues decreased by $38,566 from the nine months ended September 30, 2020, primarily due to a 29% decrease in  

tower sections sold due to customer driven project delays and a lower average selling price due to the mix of tower designs sold. 

Gross profit decreased by $10,773 from the first nine months of 2020 primarily due to lower sales volumes and due to manufacturing inefficiencies caused by supply chain disruptions, and a temporary shut-down of our Abilene, Texas plant due to a weather event in the first quarter of 2021.

As a result, gross margin decreased to 3.8% during the nine months ended September 30, 2021, from 9.7% during the nine months ended September 30, 2020.

Due to lower revenue levels, higher legal expenses and an increase in professional service fees, operating expenses as a percentage of sales increased to 11.0% in the current year from 8.3% in the prior year period.

Net income was $6,937  

during the six months ended June 30, 2021, compared to $1,482 during the six months ended June 30, 2020.

during the nine months ended September 30, 2021, compared to $480 during the nine months ended September 30, 2020.

The increase was primarily attributable to income of $9,151 recognized from the PPP Loan forgiveness and income of $6,965  

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Both of these items were recognized in “Other income (expense), net”

in our condensed consolidated statements of operations. 

This was partially offset by adverse volume impacts in our Heavy Fabrications segment. 

Heavy Fabrications Segment  

Six Months Ended

Nine Months Ended

September 30,

Tower sections sold

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Operating margin

Heavy Fabrications segment wind tower orders decreased 30% compared to the prior year as customers delayed orders due to elevated steel prices and uncertainty regarding the timing and likelihood of potential wind energy incentives. 

Industrial fabrication product line orders, within the Heavy Fabrication segment, were flat year-over-year. Segment revenues decreased by $23,376 from the prior year primarily due to a 25% decrease in tower sections sold and a lower average selling price due to the mix of tower designs sold.

Revenues also decreased due to lower order intake within our industrial fabrication product line in recent quarters.

Heavy Fabrications segment wind tower orders decreased 34% compared to the prior year period as customers delayed orders due to uncertainty regarding the timing and likelihood of potential federal wind energy incentives and elevated U.S.

steel prices. 

Industrial fabrication product line orders, within the Heavy Fabrication segment, increased 48% year-over-year. Segment revenues decreased by $38,142  

from the prior year period primarily due to a 29% decrease in tower sections sold and a lower average selling price due to the mix of tower designs sold. 

Heavy Fabrications segment operating income decreased by $10,633  

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The year-over-year  

degradation in operating performance reflects the adverse volume impacts described previously, the underutilization of plant capacity, manufactured inefficiencies caused by supply chain disruptions and a temporary shut-down of our Abilene, Texas plant due to a weather event in the first quarter.

Operating margin was (2.4)% during the six months ended June 30, 2021, a decrease from 8.2% during the six months ended June 30, 2020.

degradation in operating performance reflects the adverse volume impacts described previously, the underutilization of plant capacity, manufacturing inefficiencies caused by supply chain disruptions and a temporary shut-down of our Abilene, Texas plant due to a weather event in the first quarter of 2021.

Operating margin was (2.1)% during the nine months ended September 30, 2021, a decrease from 7.0% during the nine months ended September 30, 2020.

Gearing Segment

Six Months Ended

Nine Months Ended

September 30,

Operating loss

Operating margin

Gearing segment orders increased 10% from the six months ended June 30, 2020 primarily due to increased demand from O&G customers, partially offset by the timing of aftermarket wind gearing orders, which can fluctuate based on customer order patterns and market conditions.

Gearing revenue was down 3% compared to the prior year, a reflection of lower order intake in the second half of the prior year, primarily within industrial and mining markets, partially offset by increased revenue from O&G and aftermarket wind customers.

Gearing segment orders increased 51% from the nine months ended September 30, 2020 primarily due to increased demand from O&G customers, partially offset by the timing of aftermarket wind gearing orders, which can fluctuate based on customer order patterns and market conditions. Gearing revenue was flat as lower order intake in the second half of the prior year from industrial and mining customers was offset by increased revenue from O&G and aftermarket wind customers.

Gearing segment operating loss increased $155 from the prior year period.

This was primarily attributable to lower revenue and increased manufacturing inefficiencies.

Operating margin was (14.7)% during the six months ended June 30, 2021, down from (6.9)% during the six months ended June 30, 2020, driven primarily by the items identified above.

This was primarily attributable to increased manufacturing inefficiencies.

Operating margin was (10.3)% during the nine months ended September 30, 2021, down from (9.5)% during the nine months ended September 30, 2020, driven primarily by the items identified above.

Industrial Solutions Segment  

Six Months Ended

Nine Months Ended

September 30,

Operating (loss) income

Operating margin

Industrial Solutions segment orders decreased by 29% from the prior year period primarily due to the timing of orders associated with new gas turbine and aftermarket projects. Segment revenue decreased by 3% from the prior year period primarily due to the timing of aftermarket installations and global logistics delays.

The decrease in operating income versus the prior year was primarily a result of a lower margin sales mix sold during the first half of 2021. 

Industrial Solutions segment orders decreased by 22% from the prior year period primarily due to the timing of orders associated with new gas turbine and aftermarket projects. Segment revenue decreased by 1% from the prior year period primarily due to the timing of aftermarket installations.

The decrease in operating income versus the prior year was primarily a result of a lower margin sales mix sold during the first nine months of 2021. Operating margin was (1.4)% during the nine months ended September 30, 2021, a decrease from 4.0% during the nine months ended September 30, 2020.

Corporate and Other  

Corporate and Other expenses during the six months ended June 30, 2021 decreased from the prior year period due to lower marketing expenses and incentive compensation. 

Corporate and Other expenses during the nine months ended September 30, 2021 decreased from the prior year period primarily due to lower incentive compensation and decreased professional service expenses. 

LIQUIDITY, FINANCIAL POSITION AND CAPITAL RESOURCES  

As of June 30, 2021, cash and cash equivalents totaled $4,757, an increase of $1,385  

As of September 30, 2021, cash totaled $2,335, a decrease of $1,037  

from December 31, 2020.

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in the notes to our condensed consolidated financial statements), which is in a drawn position.

Debt and finance lease obligations at June 30, 2021 totaled $11,079.

As of June 30, 2021, we had the ability to borrow up to an additional $18,928 un der the Credit Facility.

On March 9, 2021, we entered into a $10,000 Equity Distribution Agreement (the “Equity Distribution Agreement”) with Craig-Hallum Capital Group, LLC (the Manager”).

Pursuant to the terms of the Equity Distribution Agreement, we issued 1,897,697 shares of the Company's common stock thereunder during the six month period ended June 30, 2021.

Debt and finance lease obligations at September 30, 2021 totaled $10,321.

As of September 30, 2021, we had the ability to borrow up to an additional $18,743 un der the Credit Facility.

On March 9, 2021, we entered into a $10,000 Equity Distribution Agreement (the “Equity Distribution Agreement”) with Craig-Hallum Capital Group, LLC (the “Manager”).

Pursuant to the terms of the Equity Distribution Agreement, we issued 1,897,697 shares of the Company's common stock thereunder during the first two quarters of 2021.

The net proceeds (before upfront costs) to the Company from the sales of such shares were approximately $9,725 after deducting commissions paid of approximately $275  

and before deducting other expense of $396. 

We anticipate that current cash resources, expected cash proceeds or savings from the ERC, amounts available under the Credit Facility, cash to be generated from operations and any potential proceeds from the sale of further securities under the Form S-3 will be adequate to meet our liquidity needs for at least the next twelve months.

If assumptions regarding our production, sales and subsequent collections from certain of our large customers, as well as customer deposits and revenues generated from new customer orders, are materially inconsistent with management’s expectations, particularly in light of the COVID-19 pandemic, and emerging variants, and its effects on domestic and global economies, we may encounter cash flow and liquidity issues.

On November 8, 2021, we executed the Third Amendment to the Amended and Restated Loan Agreement (the “Third Amendment”) which waived the fixed charge coverage ratio default for the quarter ended September 30, 2021, suspended testing of the fixed charge coverage ratio covenant through September 30, 2022, added a minimum EBITDA covenant applicable to the three-month period ending December 31, 2021, the six-month period ending March 31, 2022, the nine-month period ending June 30, 2022 and the twelve-month period ending September 30, 2022 and added a reserve of $5,000,000 to the Revolving Loan Availability through December 31, 2022.

We anticipate that current cash resources, amounts available under the Credit Facility, cash to be generated from operations and any potential proceeds from the sale of further securities under the Form S-3 will be adequate to meet our liquidity needs for at least the next twelve months.

If assumptions regarding our production, sales and subsequent collections from certain of our large customers, as well as receipt of customer deposits and revenues generated from new customer orders, are materially inconsistent with management’s expectations, particularly in light of the COVID-19 pandemic, and emerging variants, and its effects on domestic and global economies, we may encounter cash flow and liquidity issues.

If our operational performance deteriorates, we may be unable to comply with existing financial covenants, and could lose access to the Credit Facility.

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Sources and Uses of Cash  

The following table summarizes our cash flows from operating, investing, and financing activities for the six months ended June 30, 2021 and 2020:

Six Months Ended

The following table summarizes our cash flows from operating, investing, and financing activities for the nine months ended September 30, 2021 and 2020:

Nine Months Ended

September 30,

Total cash (used in) provided by:

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Financing activities

Net increase (decrease) in cash

Net (decrease) increase in cash

Operating Cash Flows  

During the six months ended June 30, 2021, net cash used in operating activities totale d $9,987  

com pared to net cash used in operating activities of $8,238 during the prior year period. The increase in net cash used was primarily due to our operating performance excluding non-cash items and the timing of accruals, partially offset by a decrease in net cash used to fund operating working capital in the current year period.

During the nine months ended September 30, 2021, net cash used in operating activities totale d $10,823  

com pared to net cash used in operating activities of $2,475 during the prior year period. The increase in net cash used was primarily due to our operating performance (excluding the PPP loan forgiveness), the timing of accruals and an increase in operating working capital in the current year period.

Investing Cash Flows  

During the six months ended June 30, 2021, net cash used in investing activities tot aled $742, comp ared to net cash used in investing activities of $929 during the prior year period.

During the nine months ended September 30, 2021, net cash used in investing activities tot aled $1,336, comp ared to net cash used in investing activities of $1,597 during the prior year period.

The decrease in net cash used in investing activities as compared to the prior-year period was primarily due to a decrease in net purchases of property and equipment.

Financing Cash Flows  

During the six months ended June 30, 2021, net cash provided by financing activities tot aled $12,114, co mpared to net cash provided by financing activities of $8,870 during the prior year period.

The increase versus the prior-year period was primarily due to proceeds from the sale of securities under the Equity Distribution Agreement received in the current year and increased net borrowings under our Credit Facility in the current year, partially offset by the PPP Loan (defined below) proceeds received in 2020. 

During the nine months ended September 30, 2021, net cash provided by financing activities tot aled $11,122, co mpared to net cash provided by financing activities of $4,197 during the prior year period.

The increase was primarily due to proceeds from the sale of securities under the Equity Distribution Agreement and increased net borrowings under our Credit Facility in the current year, partially offset by the absence of the PPP Loan (defined below) proceeds received in 2020. 

In 2016, we entered into a $570 loan agreement with the Development Corporation of Abilene which is included in the “Long-term debt, less current maturities”

line item of our condensed consolidated financial statements as of June 30, 2021 and December 31, 2020.

line item of our condensed consolidated financial statements as of September 30, 2021 and December 31, 2020.

The loan is forgivable upon the Company meeting and maintaining specific employment thresholds.

During each of the years 2020, 2019 and 2018, $114 of the loan was forgiven.

As of June 30, 2021, the loan balance was $228.

As of September 30, 2021, the loan balance was $228.

In addition, we have outstanding notes payable for capital expenditures in the amount of $161  

and $163 as of June 30, 2021 and December 31, 2020, respectively, with $392  

and $161 included in the “Line of Credit and other notes payable”

line item of our condensed consolidated financial statements as of June 30, 2021 and December 31, 2020, respectively.

and $163 as of September 30, 2021 and December 31, 2020, respectively, with $161 included in the “Line of Credit and other notes payable”

line item of our condensed consolidated financial statements as of September 30, 2021 and December 31, 2020.

The notes payable have monthly payments that range from $1 to $16 and an interest rate of approximately 4%.

The equipment purchased is utilized as collateral for the notes payable.

The outstanding notes payable have maturity dates that range from March 2022  

to August 2024.

The outstanding notes payable have maturity dates that range from March 2022 to September 2024.

On April 15, 2020, we received funds under notes and related documents executed under the Paycheck Protection Program (“PPP Loans”) with CIBC Bank, USA under the PPP which was established under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) enacted on March 27, 2020 in response to the COVID-19 pandemic and is administered by the U.S.

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We received total proceeds of $9,530 from the PPP Loans and made repayments of $379 on May 13, 2020.

Under the terms of the CARES Act, as amended by the Paycheck Protection Program Flexibility Act of 2020 enacted on June 5, 2020 (the “Flexibility Act”), the PPP Loans, and accrued interest and fees may be forgiven following a period of twenty-four weeks after PPP Loan proceeds are received (the “covered period”) if they are used for qualifying expenses as described in the CARES Act including payroll costs and benefits (which must equal or exceed 60% of the amount requested to be forgiven), rent, mortgage interest, and utilities, which are subject to certain reductions based on the number of full time equivalent employees and the level of compensation for employees during such covered period.

The amount of loan forgiveness will be reduced if the borrower terminates employees or significantly reduces salaries during such period, subject to certain exceptions.

We used at least 60% of the amount of the PPP Loans proceeds to pay for payroll costs and the balance on other eligible qualifying expenses consistent with the terms of the PPP and submitted our forgiveness applications to CIBC Bank, USA during the first quarter of 2021. During the second quarter of 2021, all loans were forgiven by the SBA and a gain of $9,151 was recorded in Other income (expense), net in our condensed consolidated statements of operations. 

Under the terms of the CARES Act, as amended by the Paycheck Protection Program Flexibility Act of 2020 enacted on June 5, 2020 (the “Flexibility Act”), the PPP Loans, and accrued interest and fees are eligible to be forgiven following a period of twenty-four weeks after PPP Loan proceeds are received (the “covered period”) if they are used for qualifying expenses as described in the CARES Act including payroll costs and benefits (which must equal or exceed 60% of the amount requested to be forgiven), rent, mortgage interest, and utilities, which are subject to certain reductions based on the number of full time equivalent employees and the level of compensation for employees during such covered period.

The amount of loan forgiveness will be reduced if the borrower terminates employees or significantly reduces salaries during such period, subject to certain exceptions. We used at least 60% of the amount of the PPP Loans proceeds to pay for payroll costs and the balance on other eligible qualifying expenses consistent with the terms of the PPP and submitted our forgiveness applications to CIBC Bank, USA during the first quarter of 2021. During the second quarter of 2021, all loans were forgiven by the SBA and a gain of $9,151 was recorded in Other income (expense), net in our condensed consolidated statements of operations. 

The CARES Act also provided for the ERC, which is a refundable tax credit against certain employment taxes. The Taxpayer Certainty and Disaster Tax Relief Act of 2020 and the American Rescue Plan Act of 2021 extended and expanded the availability of the ERC.

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During each quarter in 2021, a maximum of $10,000 in qualified wages for each employee is eligible for the ERC.

Therefore, the maximum tax credit that can be claimed by an eligible employer in 2021 is $7,000 per employee per calendar quarter.

In addition to qualifying in the first quarter, we qualified for the ERC in the second quarter of 2021 because we had a gross receipts decrease of more than 20% for the first quarter of 2021 compared to the first quarter of 2019, the relevant criteria for the ERC.

As a result of us averaging 500 or fewer full-time employees in 2019, all wages paid to employees were eligible for the ERC (rather than only wages paid to employees not providing services). In the first quarter of 2021, we received an ERC benefit of $3,372, which was recorded in “Other income (expense), net”

in our condensed consolidated statement of operations.

During the second quarter of June 30, 2021, we recorded an additional benefit of $3,593 in “Other income (expense), net”

in our condensed consolidated statement of operations.

We used $1,879 of this amount to reduce payroll tax payments.

The receivable for the ERC was $1,714 as of June 30, 2021 and is included in the line titled “Employee retention credit receivable”

in our condensed consolidated balance sheet at June 30, 2021. 

Therefore, the maximum tax credit that can be claimed by an eligible employer in 2021 is $7,000 per employee per calendar quarter. We qualified for the ERC in the first quarter of the year because we experienced a reduction in gross receipts of more than 20% for the first quarter of 2021 compared to the first quarter of 2019, the relevant criteria for the ERC. Since we qualified for the ERC in the first quarter of 2021, we automatically qualified for the ERC in the second quarter of 2021.

In the first and second quarters of 2021, we received ERC benefits of $3,372 and $3,593, respectively, which were recorded in “Other income (expense), net”

in our condensed consolidated statement of operations. During the third quarter of 2021 due to relatively higher revenues, we did not qualify for the ERC benefit.

The remaining receivable for the uncollected ERC benefit is $503 as of September 30, 2021 and is included in the “Employee retention credit receivable”

line item in our condensed consolidated balance sheet at September 30, 2021. 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS  

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements