What changed in this filing

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Item 1. Financial Statements

2022-05-06 compared with 2021-11-10 · 248 added, 447 removed, 737 unchanged (49% of the section changed)

4 unchanged sentences

(in thousands, except share and per share data)

September 30,

CURRENT ASSETS:

$ 2,335  

$ 3,372  

Accounts receivable, net

52 unchanged sentences

30,000,000 shares authorized;

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

20,292,073 and 19,859,650 shares issued as of March 31, 2022, and December 31, 2021, respectively

Treasury stock, at cost, 273,937 shares as of March 31, 2022 and December 31, 2021

( 1,842 )  

15 unchanged sentences

(in thousands, except per share data)

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

$ 41,844  

$ 32,728  

Cost of sales

39,832  

32,446  

OPERATING EXPENSES:

2 unchanged sentences

Total operating expenses

Operating (loss) income

Operating loss

( 2,073 )  

OTHER (EXPENSE) INCOME, net:

Paycheck Protection Program loan forgiveness

Interest expense, net

Total other (expense) income, net

Net (loss) income before provision for income taxes

Provision for income taxes

NET (LOSS) INCOME

NET (LOSS) INCOME PER COMMON SHARE—BASIC:

Net (loss) income

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING—BASIC

NET (LOSS) INCOME PER COMMON SHARE—DILUTED:

Net (loss) income

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING—DILUTED

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

BROADWIND, INC.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’

(in thousands, except share data)

Treasury Stock

BALANCE, December 31, 2019

( 345 )  

( 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 )  

Total other (expense) income, net

( 324 )  

Stock issued for restricted stock

Share-based compensation

Sale of common stock, net

Net loss before provision for income taxes

( 2,397 )  

Provision for income taxes

( 2,404 )  

BALANCE, September 30, 2020

NET LOSS PER COMMON SHARE—BASIC:

$ ( 0.12 )  

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING—BASIC

19,708  

17,178  

NET LOSS PER COMMON SHARE—DILUTED:

$ ( 0.12 )  

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING—DILUTED

19,708  

17,178  

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

BROADWIND, INC.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’

(in thousands, except share data)

Treasury Stock

BALANCE, December 31, 2020

23 unchanged sentences

$ 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

BALANCE, December 31, 2021

19,859,650  

5 unchanged sentences

Stock issued for restricted stock

480,595  

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

4 unchanged sentences

( 411 )  

Sale of common stock, net

( 2,404 )  

( 2,105 )  

BALANCE, September 30, 2021

BALANCE, March 31, 2022

20,292,073  

9 unchanged sentences

(in thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

CASH FLOWS FROM OPERATING ACTIVITIES:

$ ( 2,404 )  

Adjustments to reconcile net cash used in operating activities:

Depreciation and amortization expense

Paycheck Protection Program loan forgiveness

Deferred income taxes

2 unchanged sentences

Allowance for doubtful accounts

( 23 )  

Common stock issued under defined contribution 401(k) plan

Gain on disposal of assets

Loss (gain) on disposal of assets

Changes in operating assets and liabilities:

Accounts receivable

( 5,073 )  

Employee retention credit receivable

Contract assets

( 2,038 )  

( 5,690 )  

Prepaid expenses and other current assets

Accounts payable

10,538  

Accrued liabilities

( 254 )  

Customer deposits

( 3,683 )  

Other non-current assets and liabilities

( 45 )  

Net cash used in operating activities

( 6,005 )  

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchases of property and equipment

( 492 )  

Proceeds from disposals of property and equipment

Net cash used in investing activities

( 492 )  

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from line of credit

Payments on line of credit

Proceeds from line of credit, net

Proceeds from long-term debt

1 unchanged sentence

Principal payments on finance leases

( 495 )  

Shares withheld for taxes in connection with issuance of restricted stock

( 411 )  

Proceeds from sale of common stock, net

Net cash provided by financing activities

NET (DECREASE) INCREASE IN CASH

NET DECREASE IN CASH

( 79 )  

CASH beginning of the period

CASH end of the period

$ 2,929  

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

14 unchanged sentences

Operating results for the 

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 .

three months ended March 31, 2022 are not necessarily indicative of the results that may be expected for the twelve months ending December 31, 2022, 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, 2021 .

The December 31, 2021 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 

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 .

three months ended March 31, 2022 as compared to the significant accounting policies described in the Company’s Annual Report on Form 10 -K for the year ended December 31, 2021 .

Company Description   

2 unchanged sentences

The Company’s capabilities include, but are not limited to the following:

heavy fabrications, welding, metal rolling, coatings, gear cutting and shaping, heat treatment, assembly, engineering and packaging solutions.

heavy fabrications, welding, metal rolling, coatings, gear cutting and shaping, gearbox repair, heat treatment, assembly, engineering and packaging solutions.

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

wind energy industry, which accounted for 53 % and 63 % of the Company’s revenue during the first  

nine months of 2021  and 2020, respectively. 

three months of 2022  and 2021, 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 

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

March 31, 2022 totaled $ 19,988 , which includes current outstanding debt and finance leases totaling $ 16,105 .

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. 

See Note 7,  “Debt and Credit Agreements,”

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

line item in the Company's condensed consolidated balance sheet. 

On August 18, 2020, the Company filed a “shelf”

9 unchanged sentences

and before deducting other expenses of $ 411 . 

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was signed into law providing numerous tax provisions and other stimulus measures, including an 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.

The ERC is available for wages paid through December 31, 2021 and is equal to 70% of qualified wages (which includes employer qualified health plan expenses) paid to employees.

During each quarter of 

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.

The ERC is available for wages paid through September 

30, 2021 and is equal to 70% of qualified wages (which includes employer qualified health plan expenses) paid to employees.

The maximum tax credit that could be claimed by an eligible employer in 2021 was $7,000 per employee per calendar quarter.

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 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.

in the Company’s condensed consolidated statement of operations.

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

The receivable for the remaining uncollected ERC benefit was $ 497  as of December 31, 2021 and was included in the “Employee retention credit receivable”

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

The remaining $ 497 for the uncollected ERC benefit was collected during January 2022.

The Company anticipates that current cash resources, amounts available under the Credit Facility, cash to be generated from operations and equipment financing, 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.

5 unchanged sentences

The preparation of financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities as of the date of the financial statements and reported amounts of revenues and expenses during the reported period.

Significant estimates, among others, include revenue recognition, future cash flows, inventory reserves, warranty reserves, impairment of long-lived assets, allowance for doubtful accounts and health insurance reserves.

Although these estimates are based upon management’s best knowledge of current events and actions that the Company may undertake in the future, actual results could differ from these estimates, particularly in light of the COVID- 19 pandemic.

1 unchanged sentence

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 nine months ended September 30, 2021 and 2020 :

Three Months Ended September 30,

Nine Months Ended September 30,

The following table presents the Company’s revenues disaggregated by revenue source for the three months ended March 31, 2022 and 2021 :

Three Months Ended March 31,

Heavy Fabrications

2 unchanged sentences

10,584  

$ 125,424  

20,315  

20,273  

Industrial Solutions

2 unchanged sentences

$ 32,728  

( 32 )  

( 346 )  

$ 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.

2 unchanged sentences

If applicable, the transaction price of a contract is allocated to each distinct performance obligation and recognized as revenue when or as the customer receives the benefit of the performance obligation.

For tower sales within the Company’s Heavy Fabrications segment, products are sold under terms included in bill and hold sales arrangements that result in different timing for revenue recognition.

For many tower sales within the Company’s Heavy Fabrications segment, products are sold under terms included in bill and hold sales arrangements that result in different timing for revenue recognition.

The Company recognizes revenue under these arrangements only when there is a substantive reason for the agreement, the ordered goods are identified separately as belonging to the customer and not available to fill other orders, the goods are currently ready for physical transfer to the customer, and the Company does not have the ability to use the product or to direct it to another customer.

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

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 $ 1,791  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.

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. 

During the three  months ended March 31, 

2022 and 2021, the Company recognized a portion of revenue within the Heavy Fabrications segment 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.

Within the Gearing segment, the Company recognized revenue over time of $ 172  for the three months ended March 31, 

2021  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 Company's projects are labor intensive, the Company uses labor hours as the input measure of progress for the applicable contracts.

During the fourth quarter of 2021, the Company ceased recording revenue over time within the Gearing segment due to a change in terms.

Within the Heavy Fabrications segment, the Company recognized revenue over time of $ 2,471  and $ 1,256  for the three  months ended March 

31, 2022 and 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 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 nine months ended September 30, 2021 and 2020 , as follows: 

The following table presents a reconciliation of basic and diluted earnings per share for the three months ended March 31, 2022 and 2021 , as follows: 

Three Months Ended

Nine Months Ended

September 30,

Basic earnings per share calculation:

Net (loss) income

$ ( 2,404 )  

$ ( 1,003 )  

$ 6,937  

Weighted average number of common shares outstanding

1 unchanged sentence

17,178,136  

18,460,444  

16,741,481  

Basic net (loss) income per share

$ ( 0.11 )  

$ ( 0.06 )  

$ 0.38  

Basic net loss per share

$ ( 0.12 )  

Diluted earnings per share calculation:

Net (loss) income

$ ( 2,404 )  

$ ( 1,003 )  

$ 6,937  

Weighted average number of common shares outstanding

1 unchanged sentence

17,178,136  

18,460,444  

16,741,481  

Common stock equivalents:

Non-vested stock awards (1)

757,976  

536,920  

Weighted average number of common shares outstanding

1 unchanged sentence

17,178,136  

19,218,420  

17,278,401  

Diluted net (loss) income per share

$ ( 0.11 )  

$ ( 0.06 )  

$ 0.36  

Diluted net loss per share

$ ( 0.12 )  

( 1 ) Restricted stock units granted and outstanding of 623,191  and 1,171,093  as of March 31, 2022 and 2021, are excluded from the computation of diluted earnings due to the anti-dilutive effect as a result of the Company’s net loss for the three months ended March 31, 2022 and 2021.

NOTE 4 —

INVENTORIES  

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

September 30,

The components of inventories as of March 31, 2022 and December 31, 2021 are summarized as follows:

Raw materials

3 unchanged sentences

12,574  

13,639  

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 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

As of March 31, 2022 and December 31, 2021 , the cost basis, accumulated amortization and net book value of intangible assets were as follows:

March 31, 2022

December 31, 2021

21 unchanged sentences

$ 3,453  

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

As of March 31, 2022 , estimated future amortization expense was as follows:

2027 and thereafter

3 unchanged sentences

ACCRUED LIABILITIES

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

September 30,

Accrued liabilities as of March 31, 2022 and December 31, 2021 consisted of the following: 

Accrued payroll and benefits

13 unchanged sentences

DEBT AND CREDIT AGREEMENTS

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

September 30,

The Company’s outstanding debt balances as of March 31, 2022 and December 31, 2021 consisted of the following:

Line of credit

6 unchanged sentences

Long-term debt, net of current maturities

$ 9,381  

Credit Facility

8 unchanged sentences

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 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.

The Company must also pay an unused facility fee equal to 0.50 % per annum on the unused portion of the Credit Facility along with other standard fees.

With the exception of the balance impacted by the interest rate swap (as described below), the Company is allowed to prepay in whole or in part advances under the Credit Facility without penalty or premium other than customary “breakage”

costs with respect to LIBOR loans.

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. 

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

On February 28, 2022, the Company executed the Fourth Amendment to the Amended and Restated Loan Agreement (the “Fourth Amendment”) which reduced the line of credit from $ 35,000 to $ 30,000 , extended the maturity date until January 31, 2024, waived the minimum EBITDA covenant for the three -month period ended December 31, 2021, revised the fixed charge coverage ratio covenant as of December 31, 2022 for the trailing nine -month period after March 31, 2022, revised the minimum EBITDA covenant applicable to the three -month period ending March 31, 2022, the six -month period ending June 30, 2022 and the nine -month period ending September 30, 2022, revised the liquidity reserve to $ 2,500 and amended certain other provisions in connection with the discontinuation of LIBOR and replacement with the forward-looking term Secured Overnight Financing Rate (Term SOFR) administered by CME Group, Inc.

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

It also contains a requirement that the Company, on a consolidated basis, maintain customary restrictive covenants, certain of which are subject to materiality thresholds, baskets and customary exceptions and qualifications. 

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.

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 original term of the Credit Facility at 2.13 %, before considering the Company’s risk premium.

The interest rate swap is accounted for using mark-to-market accounting.

1 unchanged sentence

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

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 September 30, 2021 and December 31, 2020 .

line item of the Company’s condensed consolidated financial statements as of  

December 31, 2021 .

The interest rate swap expired in 

February 2022. 

As of March 31, 2022 , there was $ 13,556  

of outstanding indebtedness under the Credit Facility, with the ability to borrow an additional $ 13,944 . The Company was in compliance with all financial covenants under the Credit Facility as of March 31, 2022.

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

line item of the Company’s condensed consolidated financial statements as of March 31, 2022 and December 31, 2021 .

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

During each of the years 2021, 2020, 2019, and 2018, $114 of the loan was forgiven.

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

As of March 31, 2022 , the loan balance was $114.

In addition, the Company has outstanding notes payable for capital expenditures in the amount of $ 355  

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 %.

and $ 363  as of March 31, 2022 and December 31, 2021 , respectively, with $ 185 and $ 186  included in the “Line of credit and other notes payable”

line item of the Company’s condensed consolidated financial statements as of March 31, 2022 and December 31, 2021 .

The notes payable have monthly payments that range from $ 3  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 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 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 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. 

The outstanding notes payable mature in 

September 

NOTE 8 —

The Company leases certain facilities and equipment.

On January 1, 2019, the Company adopted Accounting Standard Update (“ASU”) 

2016 - 02, Leases (“Topic 842”

) and ASU 

2018 - 11 using the cumulative effect method and has elected to apply each available practical expedient.

The adoption of Topic 842 resulted in the Company recognizing operating lease liabilities totaling $ 19,508 with a corresponding right-of-use (“ROU”) asset of $ 17,613 based on the present value of the minimum rental payments of such leases.

The variance between the ROU asset balance and the lease liability is a deferred rent liability that existed prior to the adoption of Topic 842 and was offset against the ROU asset balance during the adoption.

The discount rates used for leases accounted for under ASC 842 are based on an interest rate yield curve developed for the leases in the Company’s lease portfolio.

The leases are accounted for under Accounting Standard Update 2016 - 02, Leases (“Topic 842”

) and the Company elected to apply each available practical expedient. The discount rates used for the leases are based on an interest rate yield curve developed for the leases in the Company’s lease portfolio.

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

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.

During the three months ended March 31, 2022  and 2021, the Company had additional operating leases that resulted in right-of-use assets obtained in exchange for lease obligations of $ 0 and $ 907 , respectively.

Additionally, during the 

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  

three months ended March 31, 2022  and 2021, the Company had additional finance leases that resulted in property, plant, and equipment obtained in exchange for lease obligations of $ 92  

and $ 263 , respectively. 

3 unchanged sentences

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

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Components of lease cost

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( 47 )  

( 45 )  

( 140 )  

Total operating lease costs

2 unchanged sentences

$ 1,393  

$ 4,281  

$ 3,847  

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

Supplemental cash flow information related to our operating leases is as follows for the three months ended March 31, 2022 and 2021:

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

Operating cash outflow from operating leases

$ 2,722  

$ 2,638  

Weighted-average remaining lease term-finance leases at end of period (in years)

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

As of March 31, 2022 , future minimum lease payments under finance leases and operating leases were as follows:

$ 2,006  

$ 2,605  

$ 4,611  

2027 and thereafter

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of these condensed consolidated financial statements.

The fair value of the interest rate swap is estimated as the net present value of projected cash flows based on forward interest rates at the balance sheet date.

The fair value of the interest rate swap is estimated as the net present value of projected cash flows based on forward interest rates at the balance sheet date. The interest rate swap expired in February 2022. 

The Company is required to provide disclosure and categorize assets and liabilities measured at fair value into one of three different levels depending on the assumptions (i.e., inputs) used in the valuation.

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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 September 30, 2021 and December 31, 2020 :

September 30, 2021

The following tables represent the fair values of the Company’s financial liabilities as of March 31, 2022 and December 31, 2021 :

March 31, 2022

Liabilities measured on a recurring basis:

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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 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 . 

As of March 31, 2022 , the Company has a full valuation allowance recorded against deferred tax assets.

During the three months ended March 31, 2022 , the Company recorded a provision for income taxes of $ 7 , compared to a provision for income taxes of $ 32  during the three months ended March 31, 2021 . 

The Company files income tax returns in U.S.

federal and state jurisdictions.

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

As of March 31, 2022 , open tax years in federal and some state jurisdictions date back to 1996 due to the taxing authorities’

ability to adjust operating loss carryforwards.

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382 of the Internal Revenue Code of 1986, as amended (the “IRC”), generally imposes an annual limitation on the amount of NOL carryforwards and associated built-in losses that may be used to offset taxable income when a corporation has undergone certain changes in stock ownership.

The Company’s ability to utilize NOL carryforwards and built-in losses may be limited, under IRC Section 382 or otherwise, by the Company’s issuance of common stock or by other changes in stock ownership.

Upon completion of the Company’s analysis of IRC Section 

382 in 2010, the Company determined that aggregate changes in stock ownership have triggered an annual limitation on NOL carryforwards and built-in losses available for utilization, thereby currently limiting annual NOL usage to $ 14,284 per year.

The Company’s ability to utilize NOL carryforwards and built-in losses may be limited, under Section 382 of the IRC or otherwise, by the Company’s issuance of common stock or by other changes in stock ownership.

Upon completion of the Company’s analysis of 

Section 

382 of the IRC in 2010, the Company determined that aggregate changes in stock ownership have triggered an annual limitation on NOL carryforwards and built-in losses available for utilization, thereby currently limiting annual NOL usage to $ 14,284 per year.

Further limitations may occur, depending on additional future changes in stock ownership.

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corporate income tax earlier than it would be if the Company were able to use NOL carryforwards and built-in losses without such limitation, which could result in lower profits and the loss of benefits from these attributes. 

In February 2013, the Company adopted a Stockholder Rights Plan, which was amended and extended in February 2016 and again in February 2019 ( as amended, the “Rights Plan”).

The Rights Plan is designed to preserve the Company’s substantial tax assets associated with NOL carryforwards under IRC Section 382.

The amendment to the Rights Plan was most recently approved by the Company’s stockholders at the Company’s 2019 Annual Meeting of Stockholders and has a term of three years.

In February 2013, the Company adopted a Stockholder Rights Plan, which was amended in February 2016 and approved by the Company’s stockholders (as amended, the “Rights Plan”), designed to preserve the Company’s substantial tax assets associated with NOL carryforwards under Section 

382 of the IRC.

On February 7, 2019, the Board of Directors (the “Board”) approved an amendment extending the Rights Plan for an additional three years, which was subsequently approved by the Company’s stockholders at the 2019 Annual Meeting of Stockholders held on April 23, 2019 ( the “2019 Annual Meeting of Stockholders”). On February 3, 2022, the Board approved an amendment which included an extension of the Rights Plan for an additional three years, which was subsequently approved at the 

2022 Annual Meeting of Stockholders.

The Rights Plan is intended to act as a deterrent to any person or group, together with its affiliates and associates, becoming the beneficial owner of 4.9 % or more of the Company’s common stock and thereby triggering a further limitation of the Company’s available NOL carryforwards.

In connection with the adoption of the Rights Plan, the Board declared a non-taxable dividend of one preferred share purchase right (a “Right”) for each outstanding share of the Company’s common stock to the Company’s stockholders of record as of the close of business on February 

Each Right entitles its holder to purchase from the Company one one -thousandth of a share of the Company’s Series A Junior Participating Preferred Stock at an exercise price of $ 4.25 per Right, subject to adjustment.

Each Right entitles its holder to purchase from the Company one one -thousandth of a share of the Company’s Series A Junior Participating Preferred Stock at an exercise price of $ 7.26  per Right, subject to adjustment.

As a result of the Rights Plan, any person or group that acquires beneficial ownership of 4.9 % or more of the Company’s common stock without the approval of the Board would be subject to significant dilution in the ownership interest of that person or group.

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

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

As of March 31, 2022 , 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 September 30, 2021 .

The Company had no accrued interest and penalties as of March 31, 2022 .

NOTE 11 —

SHARE-BASED COMPENSATION  

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 : 

There was no  stock option activity during the three months ended March 31, 2022  and no  stock options were outstanding as of March 31, 2022 . 

The following table summarizes the Company’s restricted stock unit and performance award activity during the three months ended March 31, 2022 : 

Weighted Average

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$ 1.91  

Unvested as of September 30, 2021

Unvested as of March 31, 2022

623,191  

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

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 nine months ended September 30, 2021 and 2020 , as follows: 

Nine Months Ended September 30,

For the three months ended March 

31, 2022, 194,962  shares were withheld to cover $ 411  of tax obligations. 

The following table summarizes share-based compensation expense included in the Company’s condensed consolidated statements of operations for the three months ended March 31, 2022 and 2021 , as follows: 

Three Months Ended March 31,

Share-based compensation expense:

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of these condensed consolidated financial statements.

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 September 30, 2021

Revenues from external customers

$ 28,675  

$ 7,562  

$ 4,152  

$ 40,389  

Intersegment revenues

( 61 )  

28,675  

( 61 )  

40,389  

Operating (loss) profit

( 445 )  

( 219 )  

( 108 )  

( 1,248 )  

Depreciation and amortization

Capital expenditures

Heavy Fabrications

Industrial Solutions

For the Three Months Ended September 30, 2020

Revenues from external customers

$ 43,434  

$ 7,100  

$ 4,080  

$ 54,614  

Intersegment revenues

( 32 )  

43,440  

( 32 )  

54,614  

Operating profit (loss)

( 1,023 )  

( 1,559 )  

Depreciation and amortization

Capital expenditures

Summary financial information by reportable segment for the three months ended March 31, 2022 and 2021 is as follows:

Heavy Fabrications

Industrial Solutions

For the Nine Months Ended September 30, 2021

For the Three Months Ended March 31, 2022

Revenues from external customers

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41,844  

119,608  

Operating loss

7 unchanged sentences

Industrial Solutions

For the Nine Months Ended September 30, 2020

For the Three Months Ended March 31, 2021

Revenues from external customers

6 unchanged sentences

32,728  

20,273  

12,516  

Operating loss

( 1,700 )  

( 989 )  

Operating profit (loss)

( 14 )  

3 unchanged sentences

Total Assets as of

September 30,

Heavy Fabrications

10 unchanged sentences

$ 130,455  

$ 118,047  

NOTE 15 —

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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 nine months ended September 30, 2021 and 2020 consisted of the following: 

For the Nine Months Ended September 30,

The activity in the accounts receivable allowance liability for the three months ended March 31, 2022 and 2021 consisted of the following: 

For the Three Months Ended March 31,

Balance at beginning of period

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There was no reserve for liquidated damages as of 

September 30, 2021 or December 31, 2020. 

March 31, 2022 or December 31, 2021. 

NOTE 16 —

12 -MONTH EARNINGS STATEMENT

Pursuant to Section 11 of the Securities Act of 1933, as amended and Rule 158 promulgated thereunder, the following is an unaudited earnings statement for the twelve months ended March 

$ 154,735  

Cost of sales

147,494  

Operating expenses

17,597  

Operating loss

Other income (expense), net

12,008  

Net income before benefit for income taxes

Benefit for income taxes

$ 1,653  

Net income per common share-basic

$ 0.09  

Net income per common share-diluted

$ 0.08  

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

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Three Months Ended

Nine Months Ended

September 30,

Net (loss) income

Adjusted EBITDA (1)

2 unchanged sentences

Operating working capital (3)

Total debt (4)

Backlog at end of period (4)

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

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. 

Our backlog at March 31, 2022 and 2021 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.

1 unchanged sentence

Three Months Ended

Nine Months Ended

September 30,

Net (loss) income

Interest expense

9 unchanged sentences

OUR BUSINESS  

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.

The ERC is available for wages paid through December 31, 2021 and is equal to 70% of qualified wages (which includes employer qualified health plan expenses) paid to employees.

During each quarter of 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.

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. 

First Quarter Overview  

We booked $52,693 in new orders in the first quarter of 2022, up from $34,214 in the first quarter of 2021.

Within our Heavy Fabrications segment, wind tower orders increased 112% compared to the prior year quarter as tower customers secured 2022 production capacity to support ongoing wind turbine tower installation projects.

Industrial fabrications product line orders, also within the Heavy Fabrications segment, decreased 36% primarily due to weaker mining demand, which is largely driven by the timing of projects.

Gearing segment orders increased 42% compared to the prior year quarter primarily due to higher demand from oil and gas (“O&G”) and mining customers, partially offset by reduced demand from steel customers. Orders within our Industrial Solutions segment increased by 28% as compared to the prior year quarter, primarily due to the timing of orders associated with aftermarket projects partially offset by a decrease in new gas turbine orders.

We recognized revenue of $41,844 in the first quarter of 2022, up 28% compared to the first quarter of 2021, primarily due to a 98% increase in Gearing revenue.

Gearing revenue was driven higher by strong order intake in recent quarters from O&G and mining customers, partially offset by a decrease in aftermarket wind revenue.

Heavy Fabrications segment revenues increased by 20% from the prior year quarter primarily due an increase in revenue associated with wind repowering projects in the current year combined with the absence of one-time adverse events that occurred during the prior year quarter such as the temporary shut-down of our Abilene, Texas plant due to a weather-related event and a customer driven project delay.

Additionally, the industrial fabrications product line revenue within the Heavy Fabrications segment, increased 57% from the prior year quarter primarily due to higher recent order intake from industrial customers and revenue recognized on our Pressure Reducing Systems (“PRS”) units.

Partially offsetting this was a decrease in revenue within our Industrial Solutions segment of $531, representing a 12% decrease compared to the prior year quarter, primarily due to the timing of new gas turbine and aftermarket projects.

We recorded a net loss of $2,404 or $0.12 per share in the first quarter of 2022, compared to a net loss of $1,210 or $0.07 per share in the first quarter of 2021 primarily due to the absence of $3,372 of other income related to the employee retention credit recorded during the first quarter of 2021 under the CARES Act, partially offset by the higher sales volumes discussed above. 

On March 27, 2020, the CARES Act was signed into law providing numerous tax provisions and other stimulus measures, including an employee retention credit (“ERC”), which is a refundable tax credit against certain employment taxes. 

The ERC is available for wages paid through September 30, 2021 and is equal to 70% of qualified wages (which includes employer qualified health plan expenses) paid to employees.

The maximum tax credit that could be claimed by an eligible employer in 2021 was $7,000 per employee per calendar quarter.

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.

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

The receivable for the remaining uncollected ERC benefit was $497 as of December 31, 2021 and was included in the “Employee retention credit receivable”

line item in the Company’s condensed consolidated balance sheet at December 31, 2021.

The remaining of $497 for the uncollected ERC benefit was collected during January 2022.

COVID-19 Pandemic

In March 2020, the World Health Organization recognized a novel strain of coronavirus (COVID-19) as a pandemic.

In response to this pandemic, the United States and various foreign, state and local governments have, among other actions, imposed travel and business restrictions and required or advised communities in which we do business to adopt stay-at-home orders and social distancing guidelines, causing some businesses to adjust, reduce or suspend operating activities.

The pandemic and the various governments’

response have caused significant and widespread uncertainty, volatility and disruptions in the U.S.

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

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.

The COVID-19 pandemic has disrupted business, trade, commerce and financial markets in the U.S.

and globally.

Through March 31, 2022, we experienced an adverse impact to our business, operations and financial results as a result of the COVID-19 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.

As we cannot predict the duration or scope of the pandemic, including in light of the emerging variants, or its impact on economic and financial markets, any negative impact to our results cannot be reasonably estimated, but it could be material.

As we cannot predict the duration or scope of the pandemic, including in light of the emerging variants, or its impact on economic and financial markets, any negative impact to our results cannot be reasonably estimated, but it could be material.

We continue to monitor closely the Company’s financial health and liquidity and the impact of the pandemic on the Company, including emerging variants.

We have been able to serve the needs of our customers while taking steps to protect the health and safety of our employees, customers, partners, and communities.

Among these steps, we have followed the guidance provided by the U.S.

Centers for Disease Control and Prevention to protect the continued safety and welfare of our employees.

Among these steps, we follow the guidance provided by the U.S.

Centers for Disease Control and Prevention.

RESULTS OF OPERATIONS  

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,

Three months ended March 31, 2022, Compared to Three months ended March 31, 2021  

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 March 31, 2022, compared to the three months ended March 31, 2021.

Three Months Ended March 31,

Cost of sales

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Consolidated  

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. 

Revenues increased by $9,116 versus the prior year quarter. 

Gearing segment revenue was up $5,235 from the first quarter of 2021, primarily driven by higher recent order intake from O&G and mining customers, partially offset by a decrease in aftermarket wind revenue.

Heavy Fabrications segment revenues increased by 20% primarily due to an increase in revenue associated with wind repowering projects in the current year combined with the absence of one-time adverse events that occurred during the prior year quarter such as the temporary shut-down of our Abilene, Texas plant due to a weather-related event and a customer driven project delay.

Additionally, the industrial fabrications product line revenue within the Heavy Fabrications segment increased 57% from the prior year quarter primarily due to higher recent order intake from industrial customers and revenue recognized on our PRS units. Industrial Solutions segment revenue decreased by 12%, primarily due to the timing of new gas turbine customer and aftermarket projects.

Gross profit increased by $1,730 when compared to the prior year quarter primarily due to higher sales volumes and the absence of one-time events that occurred in the prior year quarter in the Heavy Fabrications segment.

This was partially offset by higher material and ramp-up costs in the Gearing segment and supply chain disruptions in the Heavy Fabrications segment. As a result, gross margin increased to 4.8% during the three months ended March 31, 2022, from 0.9% during the three months ended March 31, 2021.

Due to higher revenue levels, lower legal expenses, and reduced salaries and benefits, operating expenses as a percentage of sales decreased to 9.8% in the current-year quarter from 14.0% in the prior year quarter.

Net loss was $2,404 during the three months ended March 31, 2022, compared to $1,210 during the three months ended March 31, 2021 primarily due to the factors described above and the absence of the $3,372 ERC benefit recorded in the prior year quarter. 

Heavy Fabrications Segment  

Three Months Ended

September 30,

Tower sections sold

Operating (loss) income

Operating loss

Operating margin

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, 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.

Wind tower orders, which are within the Heavy Fabrications segment, increased 112% versus the prior year quarter as tower customers secured 2022 production capacity to support ongoing wind turbine tower installation projects.

Industrial fabrications product line orders, also within the Heavy Fabrications segment, decreased 36% from the prior year quarter primarily due to weaker mining demand, which is largely driven by the timing of projects.

Heavy Fabrications segment revenues increased 20% primarily due to an increase in revenue associated with wind repowering projects in the current year combined with the absence of one-time adverse events that occurred during the prior year quarter such as the temporary shut-down of our Abilene, Texas plant due to a weather-related event and a customer driven project delay.

Additionally, industrial fabrication revenues increased 57% from the first quarter of 2021 primarily due to higher recent order intake from industrial customers and revenue recognized from our PRS units in the current year quarter.

Heavy Fabrications segment operating loss decreased by $1,239 compared to the prior year quarter.

The quarter-over-quarter improvement in operating performance is primarily a result of higher sales in the current year quarter, and the absence of one-time events that occurred during the prior year quarter such as the weather-related event and a customer driven project delay, partially offset by ongoing supply chain disruptions.

Operating margin was (1.7)% during the three months ended March 31, 2022, a decrease from (7.5%) during the three months ended March 31, 2021.

Gearing Segment

Three Months Ended

September 30,

Operating loss

Operating margin

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 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 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.

Gearing segment orders increased 42% from the prior year period primarily due to increased demand from O&G and mining customers, partially offset by reduced demand from steel customers.

Gearing revenue was up 98% relative to the comparable prior year period due to higher order intake in recent quarters from O&G and mining customers, partially offset by a decrease in aftermarket wind revenue.

Gearing segment operating loss decreased $877 from the prior year period.

This was primarily attributable to higher sales partially offset by increased material and ramp-up costs.

Operating margin was (1.1%) during the three months ended March 31, 2022, an improvement from (18.5)% during the three months ended March 31, 2021, 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 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 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

Operating expenses

Selling, general and administrative expenses

Intangible amortization

Total operating expenses

Operating (loss) income

Other income (expense), net

Paycheck Protection Program loan forgiveness

Interest expense, net

Total other income (expense), net

Net income before provision for income taxes

Provision for income taxes

Consolidated  

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 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  

recognized from the ERC benefit.

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  

Nine Months Ended

September 30,

Tower sections sold

Operating (loss) income

Operating margin

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  

compared to the prior year.

The year-over-year  

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

Nine Months Ended

September 30,

Operating loss

Operating margin

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 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  

Nine Months Ended

September 30,

Operating (loss) income

Operating margin

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.

Industrial Solutions segment orders increased by 28% from the prior year period primarily due to the timing of orders associated with aftermarket projects. Segment revenue decreased by 12% from the prior year period primarily due to the timing of new gas turbine and aftermarket projects.

The increased operating loss 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 nine months ended September 30, 2021 decreased from the prior year period primarily due to lower incentive compensation and decreased professional service expenses. 

Corporate and Other expenses during the three months ended March 31, 2022 decreased from the prior year period primarily due to lower salaries and benefits. 

LIQUIDITY, FINANCIAL POSITION AND CAPITAL RESOURCES  

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

As of March 31, 2022, cash totaled $773, a decrease of $79  

from December 31, 2021.

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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 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.

Debt and finance lease obligations at March 31, 2022 totaled $19,988.

As of March 31, 2022, we had the ability to borrow up to an additional $13,944 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”).

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and before deducting other expense of $411. 

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.

On February 28, 2022, we executed the Fourth Amendment to the Amended and Restated Loan Agreement (the “Fourth Amendment”) which reduced the line of credit from $35,000 to $30,000, extended the maturity date until January 31, 2024, waived the minimum EBITDA covenant for the three-month period ended December 31, 2021, revised the fixed charge coverage ratio covenant as of December 31, 2022 for the trailing nine-month period after March 31, 2022, revised the minimum EBITDA covenant applicable to the three-month period ending March 31, 2022, the six-month period ending June 30, 2022 and the nine-month period ending September 30, 2022, revised the existing liquidity reserve to $2,500 and amended certain other provisions in connection with the discontinuation of LIBOR and replacement with the forward-looking term Secured Overnight Financing Rate (Term SOFR) administered by CME Group, Inc.

We anticipate that current cash resources, amounts available under the Credit Facility, cash to be generated from operations and equipment financing, 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.

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Sources and Uses of Cash  

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,

The following table summarizes our cash flows from operating, investing, and financing activities for the three months ended March 31, 2022 and 2021:

Three Months Ended

Total cash (used in) provided by:

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Financing activities

Net (decrease) increase in cash

Net decrease in cash

Operating Cash Flows  

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.

During the three months ended March 31, 2022, net cash used in operating activities totale d $6,005  

com pared to net cash used in operating activities of $8,437 during the prior year period. The decrease in net cash used was primarily due to our operating performance and less operating working capital build, partially offset by the absence of ERC benefits recognized in the prior year period.

Investing Cash Flows  

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.

During the three months ended March 31, 2022, net cash used in investing activities tot aled $492, comp ared to net cash used in investing activities of $589 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 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 September 30, 2021 and December 31, 2020.

During the three months ended March 31, 2022, net cash provided by financing activities tot aled $6,418, co mpared to net cash provided by financing activities of $8,583 during the prior year period.

The decrease was primarily due to the absence of proceeds from the sale of securities under the Equity Distribution Agreement in the current year, partially offset by increased net borrowings under our Credit Facility in the current year. 

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

line item of our condensed consolidated financial statements as of March 31, 2022 and December 31, 2021.

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

During each of the years 2021, 2020, 2019 and 2018, $114 of the loan was forgiven.

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

As of March 31, 2022, the loan balance was $114.

In addition, we have outstanding notes payable for capital expenditures in the amount of $355  

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%.

and $363 as of March 31, 2022 and December 31, 2021, respectively, with $185 and $186 included in the “Line of Credit and other notes payable”

line item of our condensed consolidated financial statements as of March 31, 2022 and December 31, 2021.

The notes payable have monthly payments that range from $3 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 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.

Small Business Administration (the “SBA”).

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 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.

The ERC is available for wages paid through December 31, 2021 and is equal to 70% of qualified wages (which includes employer qualified health plan expenses) paid to employees.

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. 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. 

The outstanding notes payable mature in September 2028.

The CARES Act provided for the ERC, 

which is a refundable tax credit against certain employment taxes. 

The ERC is available for wages paid through September 30, 2021 and is equal to 70% of qualified wages (which includes employer qualified health plan expenses) paid to employees.

The maximum tax credit that could be claimed by an eligible employer in 2021 was $7,000 per employee per calendar quarter.

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.

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

The receivable for the remaining uncollected ERC benefit is $497 as of December 31, 2021 and is included in the “Employee retention credit receivable”

line item in our condensed consolidated balance sheet at December 31, 2021.

The remaining of $497 for the uncollected ERC benefit was collected during January 2022.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS  

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Forward looking statements include any statement that does not directly relate to a current or historical fact.

Our forward-looking statements may include or relate to our beliefs, expectations, plans and/or assumptions with respect to the following, many of which are, and will be, amplified by the COVID-19 pandemic, including as a result of emerging variants:

(i) the impact of global health concerns, including the impact of the current COVID-19 pandemic on the economies and financial markets and the demand for our products;

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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