What changed in this filing

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Item 1. Financial Statements

2022-11-08 compared with 2022-08-09 · 234 added, 301 removed, 910 unchanged (37% of the section changed)

4 unchanged sentences

(in thousands, except share and per share data)

September 30,

CURRENT ASSETS:

$ 1,509  

Accounts receivable, net

52 unchanged sentences

30,000,000 shares authorized;

20,744,988 and 19,859,650 shares issued as of June 30, 2022, and December 31, 2021, respectively

Treasury stock, at cost, 273,937 shares as of June 30, 2022 and December 31, 2021

20,944,873 and 19,859,650 shares issued as of September 30, 2022, and December 31, 2021, respectively

Treasury stock, at cost, 273,937 shares as of September 30, 2022 and December 31, 2021

( 1,842 )  

15 unchanged sentences

(in thousands, except per share data)

Three Months Ended June 30,

Six Months Ended June 30,

$ 50,012  

$ 46,491  

$ 91,856  

$ 79,219  

Three Months Ended September 30,

Nine Months Ended September 30,

Cost of sales

47,618  

44,293  

87,450  

76,739  

OPERATING EXPENSES:

3 unchanged sentences

Operating loss

( 1,912 )  

( 2,311 )  

( 3,985 )  

OTHER (EXPENSE) INCOME, net:

1 unchanged sentence

Interest expense, net

( 776 )  

( 318 )  

( 1,121 )  

Total other (expense) income, net

( 776 )  

12,608  

( 1,100 )  

15,741  

Net (loss) income before provision for income taxes

( 2,688 )  

10,297  

( 5,085 )  

Provision for income taxes

NET (LOSS) INCOME

( 2,703 )  

10,252  

( 5,107 )  

NET (LOSS) INCOME PER COMMON SHARE—BASIC:

Net (loss) income

$ ( 0.13 )  

$ 0.55  

$ ( 0.26 )  

$ 0.50  

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING—BASIC

20,244  

18,761  

19,977  

17,974  

NET (LOSS) INCOME PER COMMON SHARE—DILUTED:

Net (loss) income

$ ( 0.13 )  

$ 0.53  

$ ( 0.26 )  

$ 0.48  

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING—DILUTED

20,244  

19,400  

19,977  

18,864  

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

5 unchanged sentences

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

Share-based compensation

Shares withheld for taxes in connection with issuance of restricted stock

Sale of common stock, net

BALANCE, September 30, 2021

BALANCE, December 31, 2021

19,859,650  

( 273,937 )  

$ ( 1,842 )  

$ 395,372  

$ ( 339,416 )  

$ 54,134  

Stock issued for restricted stock

480,595  

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

146,790  

Share-based compensation

Shares withheld for taxes in connection with issuance of restricted stock

( 194,962 )  

( 411 )  

( 2,404 )  

BALANCE, March 31, 2022

20,292,073  

( 273,937 )  

$ ( 1,842 )  

$ 395,435  

$ ( 341,820 )  

$ 51,793  

Stock issued for restricted stock

328,139  

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

207,722  

Share-based compensation

Shares withheld for taxes in connection with issuance of restricted stock

( 82,946 )  

( 133 )  

( 2,703 )  

BALANCE, June 30, 2022

20,744,988  

( 273,937 )  

$ ( 1,842 )  

$ 396,021  

$ ( 344,523 )  

$ 49,676  

Stock issued for restricted stock

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

Share-based compensation

Shares withheld for taxes in connection with issuance of restricted stock

Sale of common stock, net

BALANCE, September 30, 2022

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:

Net (loss) income

$ ( 5,107 )  

$ 9,042  

Adjustments to reconcile net cash used in operating activities:

9 unchanged sentences

Accounts receivable

( 7,389 )  

Employee retention credit receivable

Contract assets

( 2,194 )  

( 1,552 )  

Prepaid expenses and other current assets

2 unchanged sentences

Customer deposits

( 7,789 )  

Other non-current assets and liabilities

Net cash used in operating activities

( 8,264 )  

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchases of property and equipment

( 1,697 )  

Proceeds from disposals of property and equipment

Net cash used in investing activities

( 1,697 )  

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from line of credit, net

10,687  

Payments for deferred financing costs

Proceeds from long-term debt

Payments on long-term debt

( 107 )  

Principal payments on finance leases

( 1,003 )  

Shares withheld for taxes in connection with issuance of restricted stock

( 544 )  

Proceeds from sale of common stock, net

Net cash provided by financing activities

12,114  

NET (DECREASE) INCREASE IN CASH

( 803 )  

NET INCREASE (DECREASE) IN CASH

CASH beginning of the period

CASH end of the period

$ 4,757  

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

14 unchanged sentences

Operating results for the 

three and six months ended June 30, 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 .

three and nine months ended September 30, 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 

six months ended June 30, 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 .

nine months ended September 30, 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   

5 unchanged sentences

wind energy industry, which accounted for 51 % and 66 % of the Company’s revenue during the first  

six months of 2022  and 2021, respectively. 

nine 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 2016 Credit Facility and the 2022 Credit Facility, as applicable (each, as defined in Note 7, “Debt and Credit Agreements,”

3 unchanged sentences

Total debt and finance lease obligations at 

June 30, 2022 totaled $ 22,975 , which includes current outstanding debt and finance leases totaling $ 19,348 .

September 30, 2022 totaled $ 28,966 , which includes current outstanding debt and finance leases totaling $ 17,596 .

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

7 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 first two quarters of 

shares of the Company’s common stock, par value $ 0.001 per share, 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  

1 unchanged sentence

and before deducting other expenses of $ 411 . 

On September 12, 2022, the Company entered into a Sales Agreement (the “Sales Agreement”) with Roth Capital Partners, LLC and HC Wainwright & Co., LLC (collectively, the “Agents”).

Pursuant to the terms of the Sales Agreement, the Company may sell from time to time through the Agents shares of the Company’s common stock, par value $ 0.001 per share with an aggregate sales price of up to $ 12,000 .

Any shares offered and sold under the Sales Agreement are to be issued pursuant to the Form S- 3 and the 424 (b) prospectus supplement relating to the offering dated September 12, 2022.

The Company will pay a commission to the Agents of 2.75 % of the gross proceeds of the sale of the shares sold under the Sales Agreement and reimburse the Agents for the expenses incident to the performance of their obligations under the Sales Agreement.

During the quarter ended September 30, 2022, the Company issued 100,379 shares of the Company’s common stock under the Sales Agreement and the net proceeds (before upfront costs) to the Company from the sale of the Company’s common stock were approximately $ 323 after deducting commissions paid of approximately $ 9 and before deducting other expenses of $ 93 .

As of September 30, 2022, shares of the Company’s common stock having a value of approximately $ 11,667  remained available for issuance under the Sales Agreement.

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. 

13 unchanged sentences

Fees incurred in connection with the agreements are recorded as interest expense by the Company.

During the three  and six months ended June 30, 2022, the Company sold account receivables totaling $ 30,133  

and $ 45,493 , respectively, related to supply chain financing arrangements, of which customers’

During the three  and nine  months ended September 

30, 2022, the Company sold account receivables totaling $ 30,662  and $ 77,099 , respectively, related to supply chain financing arrangements, of which customers’

financial institutions applied discount fees totaling $ 615  and $ 1,110 , respectively.

During the three and six months ended June 30, 2021, the Company sold account receivables totaling $ 32,694  and $ 54,011 , respectively, related to supply chain financing arrangements, of which customers’

During the three and nine  months ended September 

30, 2021, the Company sold account receivables totaling $ 23,998  and $ 78,661 , respectively, related to supply chain financing arrangements, of which customers’

financial institutions applied discount fees totaling $ 47  and $ 183 , respectively.

The Company anticipates that current cash resources, amounts available under the 2022 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.

The Company anticipates that current cash resources, amounts available under the 2022 Credit Facility, cash to be generated from operations and equipment financing, potential proceeds from the sale of Company securities under the Sales Agreement 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.

If the Company’s operational performance deteriorates significantly, it may be unable to comply with existing financial covenants, and could lose access to the 2022 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, 2022 and 2021 :

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, 2022 and 2021 :

Three Months Ended September 30,

Nine Months Ended September 30,

Heavy Fabrications

14 unchanged sentences

$ 136,699  

$ 119,608  

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.

7 unchanged sentences

and $ 2,444  

for the three and six  months ended June 30, 

2021, respectively, 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.

for the three and nine  months ended September 

2021, respectively, 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.

During the six  months ended June 30, 

During the nine  months ended September 

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 Heavy Fabrications segment, the Company recognized revenue over time of $ 4,182  and $ 7,409  for the three and six months ended June 30, 2022, respectively. 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. 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 $ 5,927  and $ 13,336  for the three and nine  months ended September 

30, 2022, respectively and recognized revenue over time of $ 1,791  

and $ 4,220  for the three and nine  months ended September 

30, 2021, respectively.

The Company also uses labor hours as the input measure of progress for the applicable Heavy Fabrications contracts since the projects are labor intensive.

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. 

6 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, 2022 and 2021 , as follows: 

The following table presents a reconciliation of basic and diluted earnings per share for the three and nine months ended September 30, 2022 and 2021 , as follows: 

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Basic earnings per share calculation:

28 unchanged sentences

757,976  

889,874  

Weighted average number of common shares outstanding

8 unchanged sentences

$ 0.36  

( 1 ) Restricted stock units granted and outstanding of 829,890  as of June 30, 2022, 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 and six months ended June 30, 2022.

( 1 ) Restricted stock units granted and outstanding of 811,342  as of September 

30, 2022, 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 and nine  months ended September 

NOTE 4 —

INVENTORIES  

The components of inventories as of June 30, 2022 and December 31, 2021 are summarized as follows:

The components of inventories as of September 30, 2022 and December 31, 2021 are summarized as follows:

September 30,

Raw materials

16 unchanged sentences

Intangible assets are amortized on a straight-line basis over their estimated useful lives, with a remaining life range from 0  

As of June 30, 2022 and December 31, 2021 , the cost basis, accumulated amortization and net book value of intangible assets were as follows:

June 30, 2022

As of September 30, 2022 and December 31, 2021 , the cost basis, accumulated amortization and net book value of intangible assets were as follows:

September 30, 2022

December 31, 2021

21 unchanged sentences

$ 3,453  

As of June 30, 2022 , estimated future amortization expense was as follows:

As of September 30, 2022 , estimated future amortization expense was as follows:

2027 and thereafter

3 unchanged sentences

ACCRUED LIABILITIES

Accrued liabilities as of June 30, 2022 and December 31, 2021 consisted of the following: 

Accrued liabilities as of September 30, 2022 and December 31, 2021 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, 2022 and December 31, 2021 consisted of the following:

The Company’s outstanding debt balances as of September 30, 2022 and December 31, 2021 consisted of the following:

September 30,

Line of credit

1 unchanged sentence

$ 6,350  

Current portion of term loan

Other notes payable

3 unchanged sentences

Long-term debt, net of current maturities

$ 8,489  

Credit Facility

2 unchanged sentences

On February 25, 2019, the line of credit was expanded and extended for three years when the Company and its subsidiaries entered into an Amended and Restated Loan and Security Agreement (the “Amended and Restated Loan Agreement”), with CIBC as administrative agent and sole lead arranger and the other financial institutions party thereto, providing the Company and its subsidiaries with a $ 35,000 secured credit facility (as amended to date, the “2016 Credit Facility”).

The obligations under the 2016 Credit Facility are secured by, subject to certain exclusions, (i) a first priority security interest in all accounts receivable, inventory, equipment, cash and investment property, and (ii) a mortgage on the Abilene, Texas tower and Pittsburgh, Pennsylvania gearing facilities.

The obligations under the 2016 Credit Facility were secured by, subject to certain exclusions, (i) a first priority security interest in all accounts receivable, inventory, equipment, cash and investment property, and (ii) a mortgage on the Abilene, Texas tower and Pittsburgh, Pennsylvania gearing facilities.

On October 

5 unchanged sentences

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 2016 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 original term of the 2016 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 fixed the interest rate on LIBOR borrowings for the entire original term of the 2016 Credit Facility at 2.13 %, before considering the Company’s risk premium.

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

5 unchanged sentences

February 2022. 

On August 4, 2022, the Company entered into a credit agreement (the “

Wells Fargo Credit Agreement”) with Wells Fargo Bank, National Association, as lender (“Wells Fargo”), providing the Company and its subsidiaries with a $ 35,000  senior secured revolving credit facility (which may be further increased by up to an additional $ 10,000  upon the request of the Company and at the sole discretion of Wells Fargo) and a $ 7,578 senior secured term loan (collectively, the “2022 Credit Facility”).

On August 4, 2022, the Company entered into a credit agreement (the “2022 Credit Agreement”) with Wells Fargo Bank, National Association, as lender (“Wells Fargo”), providing the Company and its subsidiaries with a $ 35,000  senior secured revolving credit facility (which may be further increased by up to an additional $ 10,000  upon the request of the Company and at the sole discretion of Wells Fargo) and a $ 7,578 senior secured term loan (collectively, the “2022 Credit Facility”).

The proceeds of the 2022 Credit Facility are available for general corporate purposes, including strategic growth opportunities.

The 2022 Credit Facility replaces the 2016 Credit Facility.

The 2022 Credit Facility replaced the 2016 Credit Facility.

All obligations outstanding under the 2016 Credit Facility were refinanced by the 2022 Credit Facility on August 5, 2022.

3 unchanged sentences

and (ii) as of each twelve -month period thereafter to be greater than 1.1 to 1.0 and minimum EBITDA (as defined in the 2022 Credit Facility) on a month-end basis of $ 0 for the six month period ending June 30, 2022, $ 1,500  for the nine -month period ending September 30, 2022, $ 2,500  for the twelve -month period ending December 31, 2022, $ 3,600  for the twelve -month period ending March 31, 2023, and $ 5,100  for the twelve -month period ending June 30, 2023.

The initial term of the revolving credit facility matures August 4, 2027 and the term loan also matures on August 4, 2027, with monthly payments based on an 84 -month amortization.

The initial term of the revolving credit facility matures August 4, 2027.

The term loan also matures on August 4, 2027, with monthly payments based on an 84 -month amortization.

Borrowings under the 2022 Credit Facility bear interest at the following rates depending on the classification of the borrowing:

5 unchanged sentences

first  priority security interest in all accounts, inventory, equipment, general intangibles, intellectual property, money and investment property, and (ii) a deed of trust, assignment of leases and rents and security agreement and fixture filing on the Abilene, Texas facility.

In connection with the 2022 Credit Facility, on August 4, 2022, the Company, its subsidiaries and 5100 Neville Road, LLC (collectively, the “Guarantors”) entered into a guaranty (the “Guaranty”) in favor of Wells Fargo, whereby the Guarantors guaranteed the full payment of all the obligations of the Company and its subsidiaries under the 2022 Credit Facility.

Each of the Company’s additional subsidiaries, upon it becoming a direct or indirect subsidiary, will be required to become a party to the Guaranty.

As of June 30, 2022 , there was $ 17,037  

of outstanding indebtedness under the 2016 Credit Facility, with the ability to borrow an additional $ 10,178 . The Company was in compliance with all financial covenants under the 2016 Credit Facility as of June 30, 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 June 30, 2022 and December 31, 2021 .

In connection with the 2022 Credit Facility, on August 4, 2022, the Company and its subsidiaries (collectively, the “Guarantors”) entered into a guaranty (the “Guaranty”) in favor of Wells Fargo, whereby the Guarantors guaranteed the full payment of all the obligations of the Company and its subsidiaries under the 2022 Credit Facility.

Each of the Company’s additional subsidiaries, if any, upon becoming a direct or indirect subsidiary, will be required to become a party to the Guaranty.

Additionally, in connection with the 2022 Credit Facility, the Company incurred deferred financing costs in the amount of $ 470 primarily related to the revolving credit loan. These costs are included in the “Other assets”

line item of the Company's condensed consolidated financial statements as of September 30, 2022. 

As of September 30, 2022 , there was $ 21,893  

of outstanding indebtedness under the 2022  Credit Facility, with the ability to borrow an additional $ 13,315 .

As of September 30, 2022, the Company was in compliance with all financial covenants under the 2022  Credit Facility.

In 2016, the Company entered into a $ 570 loan agreement with the Development Corporation of Abilene which is included in the “Line of credit and other notes payable”

line item of the Company’s condensed consolidated financial statements as of September 30, 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 June 30, 2022 , the loan balance was $ 114 .

In addition, the Company has outstanding notes payable for capital expenditures in the amount of $ 714  and $ 363  as of June 30, 2022 and December 31, 2021 , respectively, with $ 27  and $ 186  included in the “Line of credit and other notes payable”

line item of the Company’s condensed consolidated financial statements as of June 30, 2022 and December 31, 2021 .

As of September 30, 2022 , the loan balance was $ 114 .

In addition, the Company has outstanding notes payable for capital expenditures in the amount of $ 2,111  and $ 363  as of September 30, 2022 and December 31, 2021 , respectively, with $ 26  and $ 186  included in the “Line of credit and other notes payable”

line item of the Company’s condensed consolidated financial statements as of September 30, 2022 and December 31, 2021 .

The notes payable have monthly payments that range from $ 3  to $ 16  and an interest rate of approximately 6 %.

7 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, 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.

During the nine months ended September 30, 2022  and 2021, the Company had additional operating leases that resulted in right-of-use assets obtained in exchange for lease obligations of $ 187  and $ 907 , respectively.

Additionally, during the 

six months ended June 30, 2022  and 2021, the Company had additional finance leases that resulted in property, plant, and equipment obtained in exchange for lease obligations of $ 1,773  

nine months ended September 30, 2022  and 2021, the Company had additional finance leases that resulted in property, plant, and equipment obtained in exchange for lease obligations of $ 1,773  

and $ 2,444 , 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

$ 4,281  

Supplemental cash flow information related to our operating leases is as follows for the six months ended June 30, 2022 and 2021:

Supplemental cash flow information related to our operating leases is as follows for the nine months ended September 30, 2022 and 2021:

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, 2022 , future minimum lease payments under finance leases and operating leases were as follows:

$ 1,358  

$ 1,738  

As of September 30, 2022 , future minimum lease payments under finance leases and operating leases were as follows:

$ 1,615  

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, 2022 and December 31, 2021 :

June 30, 2022

The following tables represent the fair values of the Company’s financial liabilities as of September 30, 2022 and December 31, 2021 :

September 30, 2022

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, 2022 , the Company has a full valuation allowance recorded against deferred tax assets.

During the six months ended June 30, 2022 , the Company recorded a provision for income taxes of $ 22 , compared to a provision for income taxes of $ 77  during the six months ended June 30, 2021 . 

As of September 30, 2022 , the Company has a full valuation allowance recorded against deferred tax assets.

During the nine months ended September 30, 2022 , the Company recorded a provision for income taxes of $ 36 , compared to a provision for income taxes of $ 101  during the nine months ended September 30, 2021 . 

The Company files income tax returns in U.S.

federal and state jurisdictions.

As of June 30, 2022 , open tax years in federal and some state jurisdictions date back to 1996 due to the taxing authorities’

As of September 30, 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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12, 2013 will not trigger the preferred share purchase rights unless they acquire additional shares after that date. 

As of June 30, 2022 , the Company had no unrecognized tax benefits.

As of September 30, 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 June 30, 2022 .

The Company had no accrued interest and penalties as of September 30, 2022 .

NOTE 11 —

SHARE-BASED COMPENSATION  

There was no  stock option activity during the six months ended June 30, 2022  and no  stock options were outstanding as of June 30, 2022 . 

The following table summarizes the Company’s restricted stock unit and performance award activity during the six months ended June 30, 2022 : 

There was no  stock option activity during the nine months ended September 30, 2022  and no  stock options were outstanding as of September 30, 2022 .

During the three months ended September 30, 2022, the Company recorded share-based compensation expense in the amount of $ 425 for liability awards that will be settled in shares in 2023.

The liability is recognized in the “Accrued liabilities”

line item of the Company’s condensed consolidated balance sheet and has a balance of $ 425 as of 

September 30, 2022. 

The following table summarizes the Company’s restricted stock unit and performance award activity during the nine months ended September 30, 2022 : 

Weighted Average

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$ 2.60  

Unvested as of June 30, 2022

Unvested as of September 30, 2022

811,342  

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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 six  months ended June 

For the nine  months ended September 

30, 2022, 280,175  shares were withheld to cover $ 546  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, 2022 and 2021 , 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, 2022 and 2021 , as follows: 

Nine Months Ended September 30,

Share-based compensation expense:

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Net effect of share-based compensation expense on net income

$ 1,185  

Reduction in earnings per share:

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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, 2022 and 2021 is as follows:

Summary financial information by reportable segment for the three and nine months ended September 30, 2022 and 2021 is as follows:

Heavy Fabrications

Industrial Solutions

For the Three Months Ended June 30, 2022

For the Three Months Ended September 30, 2022

Revenues from external customers

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44,843  

( 727 )  

50,012  

Operating income (loss)

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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 income (loss)

Operating (loss) income

( 445 )  

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Industrial Solutions

For the Six Months Ended June 30, 2022

For the Nine Months Ended September 30, 2022

Revenues from external customers

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( 819 )  

136,699  

Operating 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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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, 2022 and 2021 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, 2022 and 2021 consisted of the following: 

For the Nine Months Ended September 30,

Balance at beginning of period

Bad debt expense

Other adjustments

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There was no reserve for liquidated damages as of 

June 30, 2022 or December 31, 2021. 

September 30, 2022 or December 31, 2021. 

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

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We provide non-GAAP adjusted EBITDA (earnings before interest, income taxes, depreciation, amortization, share based compensation and other stock payments, restructuring costs, impairment charges, and other non-cash gains and losses) as supplemental information regarding our business performance.

Our management uses adjusted EBITDA when they internally evaluate the performance of our business, review financial trends and make operating and strategic decisions.

Our management uses adjusted EBITDA when it internally evaluates the performance of our business, reviews financial trends and makes operating and strategic decisions.

We believe that this non-GAAP financial measure is useful to investors because it provides a better understanding of our past financial performance and future results, and it allows investors to evaluate our performance using the same methodology and information as used by our management.

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

Our backlog at June 30, 2022 and 2021 is net of revenue recognized over time. 

Our backlog at September 30, 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.

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Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Net (loss) income

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OUR BUSINESS  

Second Quarter Overview  

We booked $26,046 in new orders in the second quarter of 2022, slightly down from $26,441 in the second quarter of 2021.

Within our Heavy Fabrications segment, wind tower orders decreased 82% compared to the prior year quarter as wind customers continued to pause and delay orders due to uncertainty regarding the timing and likelihood of potential wind energy incentives provided by the federal government and elevated steel prices.

Industrial fabrications product line orders, within the Heavy Fabrications segment, increased 242% primarily due to improved industrial demand and increasing order volume for Pressure Reducing Systems (“PRS”) units.

Gearing segment orders increased 14% compared to the prior year quarter primarily due to higher demand from industrial customers partially offset by decreased demand from oil and gas (“O&G”) customers. Orders within our Industrial Solutions segment increased by 8% as compared to the prior year quarter, primarily due to the timing of orders associated with aftermarket projects and projects from other diverse customers partially offset by a decrease in new gas turbine orders.

We recognized revenue of $50,012 in the second quarter of 2022, up 8% compared to the second quarter of 2021, primarily due to a 154% increase in industrial fabrications product line revenue within the Heavy Fabrications segment. The increase in industrial fabrication revenue is attributable to strong recent order intake from industrial and mining customers, in addition to revenue recognized on our PRS units. Overall Heavy Fabrications segment revenues were flat compared to the prior year quarter as the industrial fabrications product line increase was offset by a 47% decrease in tower sections sold. Gearing revenue increased by 37%, primarily driven by strong order intake in recent quarters from O&G and industrial customers, partially offset by a decrease in aftermarket wind revenue. Industrial Solutions segment revenue increased 43% compared to the prior year quarter, primarily due to the timing of new gas turbine and aftermarket projects. 

We recorded a net loss of $2,703 or $0.13 per share in the second quarter of 2022, compared to net income of $10,252 or $0.55 per share in the second quarter of 2021 primarily due to the absence of $3,593 of other income related to the employee retention credit recorded under the CARES Act and the $9,151 recognized as a result of forgiveness of the Paycheck Protection Program (“PPP”) loan during the second quarter of 2021. 

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.

Third Quarter Overview  

We booked $84,457 in new orders in the third quarter of 2022, up significantly from $42,597 in the third quarter of 2021.

Within our Heavy Fabrications segment, wind tower orders increased 223% compared to the prior year quarter as tower customers secured 2022 and 2023 production capacity to support ongoing wind turbine tower installation projects.

Partially offsetting the increase in tower orders within the Heavy Fabrication segment was a 41% decrease in industrial fabrication orders.

Gearing segment orders increased 34% compared to the prior year quarter primarily due to higher demand from oil and gas (“O&G”), industrial, and mining customers. Orders within our Industrial Solutions segment increased by 34% as compared to the prior year quarter, primarily due to an increase in new gas turbine orders. 

We recognized revenue of $44,843 in the third quarter of 2022, up 11% compared to the third quarter of 2021, primarily due to a 95% increase in industrial fabrications product line revenue within the Heavy Fabrications segment and a 35% increase in Gearing segment revenue. The increase in industrial fabrication revenue is primarily attributable to strong recent order intake from industrial customers and revenue recognized on our Pressure Reducing Systems (“PRS”) units.

This increase was partially offset by a 26% decrease in tower sections sold.

The Gearing revenue increase was primarily driven by strong order intake in recent quarters from O&G customers, partially offset by a decrease in aftermarket wind revenue. Industrial Solutions segment revenue decreased 5% compared to the prior year quarter, primarily due to global logistics delays.

We recorded a net loss of $1,772 or $0.09 per share in the third quarter of 2022, compared to a net loss $2,105 or $0.11 per share in the third quarter of 2021.This decrease in net loss was due primarily to higher sales, partially offset by higher material costs and increased interest expense. 

COVID-19 Pandemic

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and globally.

Through June 30, 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.

Through September 30, 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.

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RESULTS OF OPERATIONS  

Three months ended June 30, 2022, Compared to Three months ended June 30, 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 June 30, 2022, compared to the three months ended June 30, 2021.

Three Months Ended June 30,

Three months ended September 30, 2022, Compared to Three months ended September 30, 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 September 30, 2022, compared to the three months ended September 30, 2021.

Three Months Ended September 30,

Cost of sales

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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

Net loss before provision for income taxes

Provision for income taxes

Net (loss) income

Consolidated  

Revenues increased by $4,454 versus the prior year quarter.

This increase was primarily due to a 154% increase in industrial fabrications product line revenue within the Heavy Fabrications segment.

The increase in industrial fabrication revenue is attributable to strong recent order intake from industrial and mining customers, in addition to revenue recognized on our PRS units.

Overall the Heavy Fabrications segment revenues were flat compared to the prior year quarter as the industrial fabrications product line increase was offset by a 47% decrease in tower sections sold. Gearing segment revenue was up 37% from the second quarter of 2021, primarily driven by higher recent order intake from O&G and industrial customers, partially offset by a decrease in aftermarket wind revenue.

Industrial Solutions segment revenue increased by 43%, primarily due to the timing of new gas turbine customer and aftermarket projects.  

Gross profit increased marginally by $196 when compared to the prior year quarter as higher sales volumes within the Gearing and Industrial Solutions segments were largely offset by lower sales volumes in the Heavy Fabrications segment.

Due to higher revenue levels, lower legal expenses, and reduced salaries and benefits, operating expenses as a percentage of sales decreased to 8.6% in the current-year quarter from 9.7% in the prior year quarter.

Net loss was $2,703 during the three months ended June 30, 2022, compared to net income of $10,252 during the three months ended June 30, 2021 primarily due to the factors described above, the absence of the $3,593 ERC benefit, and the $9,151 PPP loan forgiveness recorded in the prior year quarter. 

This increase was primarily due to a 95% increase in industrial fabrications product line revenue within the Heavy Fabrications segment compared to the prior year quarter primarily as a result of strong recent order intake from industrial customers and revenue recognized on our PRS units.

This increase was partially offset by a 26% decrease in tower sections sold compared to the prior year quarter. Gearing segment revenue was up 35% from the third quarter of 2021, primarily driven by higher recent order intake from O&G customers, partially offset by a decrease in aftermarket wind revenue.

Industrial Solutions segment revenue decreased by 5% from the third quarter of 2021 primarily due to global logistics delays. 

Gross profit increased by $1,674 when compared to the prior year quarter, primarily due to the higher sales volumes within the Gearing and Heavy Fabrications segments, partially offset by higher material costs. 

Due primarily to higher revenue levels, operating expenses as a percentage of sales decreased to 9.5% in the current-year quarter from 10.1% in the prior year quarter.

Net loss was $1,772 during the three months ended September 30, 2022, compared to a net loss of $2,105 during the three months ended September 30, 2021.

This decrease in net loss was primarily due to the factors described above, partially offset by higher interest expense.

Heavy Fabrications Segment  

Three Months Ended

September 30,

Tower sections sold

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Operating margin

Wind tower orders decreased 82% versus the prior year quarter as wind customers continue to pause and delay orders due to uncertainty regarding the timing and likelihood of potential wind energy incentives provided by the federal government and elevated steel prices.

Industrial fabrications product line orders, also within the Heavy Fabrications segment, increased 242% from the prior year quarter primarily due to improved industrial demand and increasing order volume for PRS units. Heavy Fabrications segment revenues were flat compared to the prior year as a 154% increase in industrial fabrication line revenues was offset by a 47% decrease in tower sections sold. 

Heavy Fabrications segment operating income decreased by $193 compared to the prior year quarter.

The quarter-over-quarter decrease in operating performance is primarily a result of lower sales volumes and costs associated with transitioning the workforce to support growth in the industrial fabrications product line.

Operating margin was 0.2% during the three months ended June 30, 2022, a decrease from 0.8% during the three months ended June 30, 2021.

Wind tower orders increased 223% compared to the prior year quarter as tower customers secured 2022 and 2023 production capacity to support ongoing wind turbine tower installation projects.

Industrial fabrications product line orders decreased 41% from the prior year quarter primarily due to lower mining demand. Heavy Fabrications segment revenues increased 7% compared to the prior year primarily due to a 95% increase in industrial fabrication line revenues, which was partially offset by a 26% decrease in tower sections sold. 

Heavy Fabrications segment operating income increased by $817 compared to the prior year quarter.

The quarter-over-quarter improvement in operating performance is primarily a result of higher sales volumes and labor efficiencies, partially offset by higher material costs. Operating margin was 1.2% during the three months ended September 30, 2022, an increase from (1.6)% during the three months ended September 30, 2021.

Gearing Segment

Three Months Ended

Operating loss

September 30,

Operating income (loss)

Operating margin

Gearing segment orders increased 14% from the prior year period primarily due to increased demand from industrial customers, partially offset by reduced demand from O&G customers.

Gearing revenue was up 37% relative to the comparable prior year period due to higher order intake in recent quarters from O&G and industrial customers, partially offset by a decrease in aftermarket wind revenue.

Gearing segment operating loss decreased $297 from the prior year period.

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

Operating margin was (5.8%) during the three months ended June 30, 2022, an improvement from (11.9)% during the three months ended June 30, 2021, driven primarily by the items identified above.

Gearing segment orders increased 34% from the prior year period primarily due to increased demand from industrial, mining, and O&G customers.

Gearing revenue was up 35% relative to the comparable prior year period primarily due to higher order intake in recent quarters from O&G customers, partially offset by a decrease in aftermarket wind revenue.

Gearing segment operating income improved by $843 from the prior year period.

This improvement was primarily attributable to higher sales partially offset by increased fixed costs to support volumes.

Operating margin was 6.1% during the three months ended September 30, 2022, an improvement from (2.9)% during the three months ended September 30, 2021, driven primarily by the items identified above.

Industrial Solutions Segment  

Three Months Ended

Operating income (loss)

September 30,

Operating loss

Operating margin

Industrial Solutions segment orders increased by 8% from the prior year period primarily due to the timing of orders associated with aftermarket projects and projects from other diverse customers, partially offset by a decrease in new gas turbine orders.

Segment revenue increased by 43% from the prior year period primarily due to the timing of new gas turbine and aftermarket projects.

The improved operating income versus the prior-year quarter was primarily a result of a higher sales, partially offset by increased variable expenses such as freight costs. 

Industrial Solutions segment orders increased by 34% from the prior year period primarily due to the timing of orders associated with new gas turbine orders.

Segment revenue decreased by 5% from the prior year period primarily due to global logistics delays.

Operating loss increased versus the prior-year quarter primarily as a result of lower sales and  

higher freight and packaging costs. 

Corporate and Other  

Corporate and Other expenses during the three months ended June 30, 2022 decreased from the prior year period primarily due to lower salaries and benefits. 

Six months ended June 30, 2022, Compared to Six months ended June 30, 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 six months ended June 30, 2022, compared to the six months ended June 30, 2021.

Six Months Ended June 30,

Corporate and Other expenses during the three months ended September 30, 2022 increased from the prior year period primarily due to higher compensation-related expenses. 

Nine months ended September 30, 2022, Compared to Nine months ended September 30, 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 nine months ended September 30, 2022, compared to the nine months ended September 30, 2021.

Nine Months Ended September 30,

Cost of sales

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Consolidated  

Revenues increased by $12,637 versus the prior year. 

Gearing segment revenue was up 62% from the first half of 2021, primarily driven by strong recent order intake from O&G and mining customers, partially offset by a decrease in aftermarket wind revenue.

Heavy Fabrications segment revenues increased by 7% as lower tower demand was more than offset by a 105% increase in industrial fabrications product line revenue attributable to higher recent order intake from industrial customers and revenue recognized on our PRS units.

Industrial Solutions segment revenue increased by 12%, primarily due to the timing of new gas turbine customer and aftermarket projects.

Gross profit increased by $1,926 when compared to the prior year primarily due to higher sales volumes in the Gearing segment, partially offset by higher material costs, ramp-up costs, and increased fixed costs to support volumes. As a result, gross margin increased to 4.8% during the six months ended June 30, 2022, from 3.1% during the six months ended June 30, 2021.

Due to higher revenue levels, lower legal expenses, and reduced salaries and benefits, operating expenses as a percentage of sales decreased to 9.1% in the current-year from 11.5% in the prior year.

Net loss was $5,107 during the six months ended June 30, 2022, compared to net income of $9,042 during the six months ended June 30, 2021 primarily due to the factors described above and the absence of the $6,965 ERC benefit and the $9,151 PPP loan forgiveness recorded in the prior year quarter. 

Revenues increased by $17,091 versus the prior year period. 

Gearing segment revenue was up 52% from 2021, primarily driven by strong recent order intake from O&G, mining, and industrial customers, partially offset by a decrease in aftermarket wind revenue.

Heavy Fabrications segment revenues increased by 7% as lower tower demand was more than offset by a 101% increase in industrial fabrications product line revenue.

The industrial fabrications product line revenue increase was primarily attributable to higher recent order intake from industrial and mining customers, in addition to revenue recognized on our PRS units.

Industrial Solutions segment revenue increased by 6%, primarily due to an increase in revenue from aftermarket projects, partially offset by a decrease in revenue from new gas turbine projects.

Gross profit increased by $3,600 when compared to the prior year period primarily due to higher sales volumes in the Gearing and the Heavy Fabrications segments, partially offset by higher material costs and ramp-up costs. As a result, gross margin increased to 6.0% during the nine months ended September 30, 2022, from 3.8% during the nine months ended September 30, 2021.

Due primarily to higher revenue levels and reduced legal and professional fees, operating expenses as a percentage of sales decreased to 9.3% in the current-year period from 11.0% in the prior year period.

Net loss was $6,879 during the nine months ended September 30, 2022, compared to net income of $6,937 during the nine months ended September 30, 2021 primarily due to the factors described above and the absence of the $6,965 employee retention credit (“ERC”) benefit and the $9,151 Payroll Protection Program (“PPP”) loan forgiveness recorded in the prior year. 

Heavy Fabrications Segment  

Six Months Ended

Nine Months Ended

September 30,

Tower sections sold

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Operating margin

Wind tower orders increased 25% versus the prior year 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, increased 54% from the prior year primarily due to strong demand for PRS units and strong industrial demand, partially offset by a reduction in mining demand.

Heavy Fabrications segment revenues increased 7% primarily due to a 105% increase in industrial fabrication revenues primarily due to higher recent order intake from industrial customers and revenue recognized from our PRS units in the current year.

Heavy Fabrications segment operating loss decreased by $1,046 compared to the prior year.

The improvement in operating performance is primarily a result of higher sales in the current year and the absence of one-time events that occurred during the prior year such as the weather-related event and a customer driven project delay, partially offset by increased variable costs associated with growth in the industrial fabrications product line. Operating margin was (0.6)% during the six months ended June 30, 2022, an increase from (2.4%) during the six months ended June 30, 2021.

Wind tower orders increased 106% versus the prior year period as tower customers secured 2022 and 2023 production capacity to support ongoing wind turbine tower installation projects.

Industrial fabrications product line orders increased 10% from the prior year period primarily due to increased demand for PRS units and industrial products, partially offset by a reduction in mining demand.

Heavy Fabrications segment revenues increased 7% primarily due to a 101% increase in industrial fabrication revenue primarily due to higher recent order intake from industrial and mining customers, in addition to revenue recognized from our PRS units in the current year.

The increase in industrial fabrications revenue was partially offset by a 29% decrease in tower sections sold. 

Heavy Fabrications segment operating loss improved by $1,862 compared to the prior year period.

The improvement in operating performance was primarily a result of higher sales in the current year and the absence of one-time events that occurred during the prior year period including a weather-related event and a customer driven project delay, partially offset by higher material costs and costs associated with transitioning a portion of the workforce to support growth in the industrial fabrications product line.

Operating margin was 0.0% during the nine months ended September 30, 2022, an improvement from (2.1)% during the nine months ended September 30, 2021.

Gearing Segment

Six Months Ended

Nine Months Ended

September 30,

Operating loss

Operating margin

Gearing segment orders increased 29% from the prior year period primarily due to increased demand from O&G and industrial customers.

Gearing revenue was up 62% 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 $1,174 from the prior year period.

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

Operating margin was (3.4%) during the six months ended June 30, 2022, an improvement from (14.7)% during the six months ended June 30, 2021, driven primarily by the items identified above.

Gearing segment orders increased 31% from the prior year period primarily due to increased demand from O&G, mining, and industrial customers.

Gearing revenue was up 52% relative to the comparable prior year period primarily due to higher order intake in recent quarters from O&G, industrial, and mining customers, partially offset by a decrease in aftermarket wind revenue.

Gearing segment operating loss improved by $2,017 from the prior year period.

This improvement was primarily attributable to higher sales, partially offset by higher material costs, ramp-up costs, and increased fixed costs to support higher volumes.

Operating margin was (0.2)% during the nine months ended September 30, 2022, an improvement from (10.3)% during the nine months ended September 30, 2021, driven primarily by the items identified above.

Industrial Solutions Segment  

Six Months Ended

Nine Months Ended

September 30,

Operating loss

Operating margin

Industrial Solutions segment orders increased by 17% from the prior year period primarily due to the timing of orders associated with aftermarket projects. Segment revenue increased by 12% from the prior year period primarily due to the timing of new gas turbine and aftermarket projects.

Industrial Solutions segment orders increased by 24% from the prior year period primarily due to the timing of orders associated with aftermarket projects. Segment revenue increased by 6% from the prior year period primarily due to an increase in revenue from aftermarket projects.

The increased operating loss versus the prior year was primarily a result of higher variable expenses including freight costs. 

Corporate and Other  

Corporate and Other expenses during the six months ended June 30, 2022 decreased from the prior year period primarily due to lower salaries and benefits. 

Corporate and Other expenses during the nine months ended September 30, 2022 decreased from the prior year period primarily due to lower salaries and benefits.

LIQUIDITY, FINANCIAL POSITION AND CAPITAL RESOURCES  

As of June 30, 2022, cash totaled $49, a decrease of $803  

As of September 30, 2022, cash totaled $1,509, an increase of $657  

from December 31, 2021.

Cash balances remain limited in the second quarter as operating receipts and disbursements flowed through our 2016 Credit Facility (as defined in Note 7, “Debt and Credit Agreements,”

in the notes to our condensed consolidated financial statements), which was in a drawn position as of June 30, 2022.

Debt and finance lease obligations at June 30, 2022 totaled $22,975.

As of June 30, 2022, we had the ability to borrow up to an additional $10,178 un der the 2016 Credit Facility. In addition to the Credit Facility, we also utilize supply chain financing arrangements as a component of our funding for working capital, which accelerates receivable collections and helps to better manage cash flow.

Cash balances remain limited as operating receipts and disbursements flow through our 2022 Credit Facility (as defined in Note 7, “Debt and Credit Agreements,”

in the notes to our condensed consolidated financial statements), which was in a drawn position as of September 30, 2022.

Debt and finance lease obligations at September 30, 2022 totaled $28,966.

As of September 30, 2022, we had the ability to borrow up to an additional $13,315 un der the 2022 Credit Facility. In addition to the 2022 Credit Facility, we also utilize supply chain financing arrangements as a component of our funding for working capital, which accelerates receivable collections and helps to better manage cash flow.

Under these agreements, we have agreed to sell certain of our accounts receivable balances to banking institutions who have agreed to advance amounts equal to the net accounts receivable balances due, less a discount as set forth in the respective agreements.

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and before deducting other expense of $411. 

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.

On August 4, 2022, we executed the Wells Fargo Credit Agreement (as defined in Note 7, “Debt and Credit Agreements”

On September 12, 2022, we entered into a Sales Agreement (the “Sales Agreement”) with Roth Capital Partners, LLC and HC Wainwright & Co., LLC (collectively, the “Agents”).

Pursuant to the terms of the Sales Agreement, we may sell from time to time through the Agents shares of our common stock with an aggregate sales price of up to $12,000.

Any shares offered and sold under the Sales Agreement are to be issued pursuant to the Form S-3 and the 424(b) prospectus supplement relating to the offering dated September 12, 2022.

We will pay a commission to the Agents of 2.75% of the gross proceeds of the sale of the shares sold under the Sales Agreement and reimburse the Agents for the expenses incident to the performance of their obligations under the Sales Agreement.

During the quarter ended September 30, 2022, we issued 100,379 shares of our common stock under the Sales Agreement and the net proceeds (before upfront costs) to us from the sale of our common stock were approximately $323 after deducting commissions paid of approximately $9.

As of September 30, 2022, shares of our common stock having a value of approximately $11,667 remained available for issuance under the Sales Agreement.

On August 4, 2022, we executed the 2022 Credit Agreement (as defined in Note 7, “Debt and Credit Agreements”

in the notes to our condensed consolidated financial statements) with Wells Fargo Bank, National Association, as lender (“Wells Fargo”), providing us with a $35,000 senior secured revolving credit facility (which may be further increased by up to an additional $10,000 upon our request and at the sole discretion of Wells Fargo) and a $7,578 senior secured term loan (collectively, the “2022 Credit Facility”).

The proceeds of the 2022 Credit Facility are available for general corporate purposes, including strategic growth opportunities.

The 2022 Credit Facility replaces the 2016 Credit Facility.

All obligations outstanding under the 2016 Credit Facility were refinanced by the 2022 Credit Facility on August 5, 2022.

The 2022 Credit Facility replaces the 2016 Credit Facility (as defined in Note 7, “Debt and Credit Agreements”

in the notes to our condensed consolidated financial statements). All obligations outstanding under the 2016 Credit Facility were refinanced by the 2022 Credit Facility on August 5, 2022.

For more information on the 2022 Credit Facility, please see Note 7, “Debt and Credit Agreement”

in the notes to our condensed consolidated financial statements.

We anticipate that current cash resources, amounts available under the 2022 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.

We anticipate that current cash resources, amounts available under the 2022 Credit Facility, cash to be generated from operations and equipment financing, proceeds from the sale of securities under the Sales Agreement 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 six months ended June 30, 2022 and 2021:

Six Months Ended

The following table summarizes our cash flows from operating, investing, and financing activities for the nine months ended September 30, 2022 and 2021:

Nine Months Ended

September 30,

Total cash (used in) provided by:

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Financing activities

Net (decrease) increase in cash

Net increase (decrease) in cash

Operating Cash Flows  

During the six months ended June 30, 2022, net cash used in operating activities totale d $8,264 com pared to net cash used in operating activities of $9,987 during the prior year period. The decrease in net cash used was primarily due to improved operating performance in the current year and less operating working capital build, partially offset by the ERC benefits which were recognized in the prior year period.

During the nine months ended September 30, 2022, net cash used in operating activities totale d $10,271 com pared to net cash used in operating activities of $10,823 during the prior year period. The decrease in net cash used was primarily due to improved operating performance in the current year and less operating working capital build, partially offset by the ERC and PPP loan forgiveness benefits which were recognized in the prior year period.

Investing Cash Flows  

During the six months ended June 30, 2022, net cash used in investing activities tot aled $1,697, comp ared to net cash used in investing activities of $742 during the prior year period.

During the nine months ended September 30, 2022, net cash used in investing activities tot aled $2,757, comp ared to net cash used in investing activities of $1,336 during the prior year period.

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

Financing Cash Flows  

During the six months ended June 30, 2022, net cash provided by financing activities tot aled $9,158, co mpared to net cash provided by financing activities of $12,114 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 2016 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 June 30, 2022 and December 31, 2021.

During the nine months ended September 30, 2022, net cash provided by financing activities tot aled $13,685, co mpared to net cash provided by financing activities of $11,122 during the prior year period.

The increase was primarily due to increased net borrowings under our 2022 Credit Facility in the current year, partially offset by the proceeds from the sale of securities under the Equity Distribution Agreement received in the prior year. 

In 2016, we entered into a $570 loan agreement with the Development Corporation of Abilene which is included in the “Line of credit and other notes payable” line item of our condensed consolidated financial statements as of September 30, 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 June 30, 2022, the loan balance was $114.

As of September 30, 2022, the loan balance was $114.

In addition, we have outstanding notes payable for capital expenditures in the amount of $2,111  

and $363 as of June 30, 2022 and December 31, 2021, respectively, with $27  

and $363 as of September 30, 2022 and December 31, 2021, respectively, with $26  

and $186 included in the “Line of Credit and other notes payable”

line item of our condensed consolidated financial statements as of June 30, 2022 and December 31, 2021.

The notes payable have monthly payments that range from $3 to $16 and an interest rate of approximately 4%.

line item of our condensed consolidated financial statements as of September 30, 2022 and December 31, 2021.

The notes payable have monthly payments that range from $3 to $16 and an interest rate of approximately 6%.

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

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 Coronavirus Aid, Relief, and Economic Security Act (“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.

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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”

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 our condensed consolidated balance sheet at December 31, 2021.

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

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

CRITICAL ACCOUNTING ESTIMATES

There have been no material changes in our critical accounting estimates during the three months ended September 30, 2022 as compared to the critical accounting estimates described in our Annual Report on Form 10-K for the year ended December 31, 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