What changed in this filing

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Item 1. Business

2023-03-09 compared with 2022-03-02 · 54 added, 58 removed, 187 unchanged (37% of the section changed)

7 unchanged sentences

Business Overview

Broadwind is a precision manufacturer of structures, equipment and components for clean tech and other specialized applications.

Broadwind is a precision manufacturer of structures, equipment and components for clean technology and other specialized applications.

We provide technologically advanced high value products to customers with complex systems and stringent quality standards that operate in energy, mining and infrastructure sectors, primarily in the United States of America (the “U.S.”).

Our capabilities include but are not limited to the following:

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

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

We were incorporated in 1996 in Nevada as Blackfoot Enterprises, Inc., and through a series of subsequent transactions, became Broadwind Energy, Inc., a Delaware corporation, in 2008.

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We provide gearing and gearboxes to a broad set of customers in diverse markets including;

onshore and offshore O&G fracking and drilling, surface and underground mining, wind energy, steel, material handling and other industrial markets.

We have manufactured loose gearing, gearboxes and systems, and provided heat treat services for aftermarket and OEM applications for nearly a century.

onshore and offshore O&G fracking and drilling, surface and underground mining, wind energy, steel, material handling, infrastructure, marine and other industrial markets.

We provide gearbox repair services and have manufactured loose gearing, gearboxes and systems, and provided heat treat services for aftermarket and OEM applications for nearly a century.

While a significant portion of our business is manufactured to our customer’s specifications, we employ design and metallurgical engineers to meet our customer’s stringent quality requirements, to improve product performance, and reliability and to develop custom products that are integrated into our customer’s product offerings.

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Gas Power Generation

-Construction

-Material Handling

-Surface and Underground Mining

-Solar Power Generation

-Material Handling

-Wind Power Generation

-Steel Production

-Wind Power Generation

-Construction

-Infrastructure

-Wind Power Generation

-Pulp and Paper

-Waste Processing

-Material Handling

-Infrastructure

-Custom Gearboxes

-Waste Processing

-Loose Gearing

-Supply Chain Solutions

-Industrial Fabrications:

-Loose Gearing

-Custom Gearboxes

-Inventory Management

Mining Components

-Heat Treat Services

-Gearbox Repair

-Kitting and Assembly

Crane Components

-Gearbox Repair

Pressure Vessels

Other Frames/Structures

-Heat Treat Services

-Solar Inverter Racks

Pressure Reducing Systems

-Solar Powered Shelters/Charging Stations

Other Frames/Structures

Pressure Vessels

Business and Operating Strategy

We intend to capitalize on the markets for wind energy, gas turbines, O&G, mining, and other industrial verticals in North America by leveraging our core competencies in welding, manufacturing, assembling and kitting.

Our strategic objectives include the following, many of which are subject to risks and uncertainties that are, and will be, exacerbated by the COVID-19 pandemic and any worsening of the global business and economic environment as a result:

Our strategic objectives include the following, many of which are subject to risks and uncertainties that are, and have been, exacerbated by the COVID-19 pandemic and any worsening of the global business and economic environment as a result:

Diversify our customer and product line concentrations .

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This is an improvement as compared to 2017, when our top five customers comprised 85% of total sales and sales in the wind energy industry represented 72% of total sales.

To reduce the concentration of our sales, we have focused our market research activities and our sales force on expanding and diversifying our customer base and product lines.

To reduce the concentration of our sales, we have focused our product development activities and our sales force on expanding and diversifying our customer base and product lines.

We are leveraging existing customer relationships within each of our segments to cross sell our broad portfolio of capabilities.

We have introduced a new product development process, a stage gate model, which provides a framework for evaluating opportunities and commercialization.

Additionally, we have adopted new customer and product revenues as metrics within our variable executive compensation programs. Our diversification efforts are impacted in part by the end-market demand outlook. 

We utilize a stage gate model for new product development, which provides a framework for evaluating opportunities and commercialization.

Additionally, we continue to use new customer and product revenues as metrics within our variable executive compensation programs. Our diversification efforts are impacted in part by the end-market demand outlook. 

Improve capacity utilization and broaden our manufacturing capabilities .

We have manufacturing capacity available that could support a significant increase in our annual revenues for heavy fabrications, gearing and industrial solutions.

Subject to labor availability, we have manufacturing capacity available that could support a significant increase in our annual revenues for heavy fabrications, gearing and industrial solutions.

We are working to improve our capacity utilization and financial results by leveraging our existing manufacturing capacity and adjusting capacity where we can, in response to changing market conditions.

In our Heavy Fabrications segment, we have expanded production capabilities and leveraged our fabrication competencies to support growth in mining, material handling, and other industrial markets. In late 2021, we resumed the expansion of our manufacturing capabilities which had been curtailed in 2020 as a result of the COVID-19 pandemic. 

In our Heavy Fabrications segment, we have expanded production capabilities and leveraged our fabrication competencies to support growth in mining, material handling, and other industrial markets. 

Pursue opportunistic acquisitions as well as organic investments.

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improve manufacturing competencies, support our existing capacity utilization strategy, enhance our diversification strategy and/or augment our penetration into renewable markets. 

Additionally, we are developing new products such as PRS units which supply compressed natural gas to regions without established infrastructure as part of the virtual pipeline.

We believe that execution of our investment strategy provides significant opportunity to generate stockholder value, through profitable growth and leveraging a significant unrealized economic asset, over $277 million of net operating losses (“NOLs”) as of December 31, 2021 which can be used to cover future perspective tax liabilities. 

Additionally, we are developing new variations of our Pressure Reducing Systems (“PRS”) unit which supplies compressed natural gas to regions without established infrastructure as part of the virtual pipeline.

We believe that execution of our investment strategy provides significant opportunity to generate stockholder value, through profitable growth and leveraging a significant unrealized economic asset, over $288 million of net operating losses (“NOLs”) as of December 31, 2022 which can be used to cover future prospective tax liabilities. 

Streamline front-end processes to operational efficiency . We believe that the proper coordination and integration of the supply chain, consistent use of systems to manage our production activities and “Continuous Improvement”

initiatives are key factors that enable high operating efficiencies, increased reliability, better delivery and lower costs.

We have introduced robust Advanced Product Quality Processes (APQP) to support the introduction of new products.

We utilize robust Advanced Product Quality Processes (APQP) to support the introduction of new products.

We have developed better supply chain expertise, worked with lean enterprise resources, upgraded and improved systems utilization and invested capital to enhance our operational efficiency and flexibility.

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We have staffed our operations with Continuous Improvement experts in order to optimize our production processes to increase output, leverage our scale and lower our costs while maintaining product quality.

During 2021, supply chain and staffing constraints caused by the COVID-19 pandemic resulted in increased manufacturing inefficiencies. 

During 2022 and 2021, supply chain and staffing constraints caused by the COVID-19 pandemic resulted in increased manufacturing inefficiencies. 

SALES AND MARKETING

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Within our other industrial markets served, our customer base includes steel producers, ship builders, and manufacturers of material handling, pulp and paper and other power generation equipment.

Sales to Siemens Gamesa Renewable Energy (“SGRE”) and GE Renewable Energy  

represented greater than 10% of our consolidated revenues for the year ended December 31, 2021 and sales to SGRE and Nordex USA Inc.

(“Nordex”) each represented greater than 10% of our consolidated revenues for the year ended December 31, 2020.

The loss of one of these customers could have a material adverse effect on our business, results of operation or financial condition.

Sales to Siemens Gamesa Renewable Energy (“SGRE”) and GE Renewable Energy each represented greater than 10% of our consolidated revenues for the years ended December 31, 2022 and 2021. The loss of one of these customers could have a material adverse effect on our business, results of operation or financial condition.

As a result, we have an ongoing initiative to diversify our customer base.

Each of our businesses faces competition from both domestic and international companies.

The December 2015 extension of the production tax credit attracted additional investment and competition for wind towers.

In recent years, the industrial gearing industry has experienced consolidation of producers and acquisitions by strategic buyers in response to strong international competition, although recent tariff and trade uncertainties have caused buyers to shift more of their purchases to domestic gear manufacturers.

In recent years, the industrial gearing industry has experienced consolidation of producers and acquisitions by strategic buyers in response to strong international competition, although recent tariff and supply chain uncertainties have caused buyers to shift more of their purchases to domestic gear manufacturers. 

Within the wind tower product line of our Heavy Fabrications segment, the largest North American based competitor is Arcosa Inc., which was formerly a Trinity Industries company.

Other competitors include Vestas Wind Systems, which has periodically produced towers for third party customers in addition to meeting the majority of its own captive tower requirements, Marmen Industries, a Canadian company, and GRI Renewable Industries, a Spanish company, each of which have production facilities in the U.S.

Other competitors include C.S.

Wind, a South Korean Company, Marmen Industries, a Canadian company, and GRI Renewable Industries, a Spanish company, each of which have production facilities in the U.S.

We also face competition from imported towers, although in recent years a number of trade cases have periodically significantly reduced competition from imports. 

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The USDOC imposed orders for two cases in August 2021 and the remainder in December 2021.

Appeals of several of the USDOC determinations are currently pending at the CIT and the CAFC.

Within our industrial fabrications product line of our Heavy Fabrications segment, our competitors in a fragmented market include Weldall Manufacturing and AT&F Advanced Metals, along with a large number of other regional competitors.

The primary differentiator among fabricators is the range of manufacturing and machining capabilities, including lifting capacity, precision machining, heat treatment capacity and the sophistication of quality systems.

In our Gearing segment, which is focused on the O&G, wind energy, mining and steel markets, we compete with domestic and international manufacturers who produce gears greater than one meter in diameter.

In our Gearing segment, which is focused on O&G, wind energy, mining and steel markets, we compete with domestic and international manufacturers who produce gears greater than one meter in diameter.

Our key competitors include Overton Chicago Gear, Cincinnati Gearing Systems, Milwaukee Gear and Horsburgh & Scott.

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Production Tax Credit/Investment Tax Credit

The most impactful development incentive for our products has been the production tax credit (“PTC”) for new wind energy projects, which provides a supplemental payment based on electricity produced from each qualifying wind turbine.

Legislative support for the PTC has been intermittent since its introduction in 1992, which has caused volatility in the demand for new wind energy projects.

In 2015, the PTC was extended for a five-year period, with a time-based phase-out depending on the year the wind project is commenced.

The phase-out schedule legislated in 2015 provided for:

100% extension of the credit for projects commenced before the end of 2016, 80% extension of the credit for projects commenced in 2017, 60% extension of the credit for projects commenced in 2018 and 40% extension of the credit for projects commenced in 2019.

As part of a year-end tax extenders bill in 2019, the PTC was extended for an additional year, allowing for a 60% extension of the credit for projects commenced before the end of 2020.

On December 21, 2020, Congress passed the Consolidated Appropriations Act of 2021 (“COVID IV”), a $2.3 trillion spending bill that combines a $1.4 trillion omnibus appropriations bill for federal fiscal year 2021 with $900 billion in supplemental appropriations to provide relief for the COVID-19 pandemic.

The legislation was signed into law on December 27, 2020.

The most impactful development incentive for our products has been the production tax credit (“PTC”) for new wind energy projects, which provides federal income tax credits based on electricity produced from qualifying wind turbines.

Legislative support for the PTC has been intermittent since its introduction in 1992, which has caused volatility in the demand for new wind energy projects. 

In December 2020, the Consolidated Appropriations Act of 2021 (“COVID IV”), a $2.3 trillion spending bill that combines a $1.4 trillion omnibus spending bill for federal fiscal year 2021 with $900 billion in stimulus relief for the COVID-19 pandemic was signed into law.

As part of COVID IV, the PTC was extended for an additional year, allowing for a 60% credit for projects that start construction by the end of 2021. 

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Included in COVID IV is the addition of a new 30% investment tax credit (“ITC”) created for offshore wind projects that start construction by the end of 2025. 

The provision will be retroactively applied to projects that started production in 2016.

The provision will retroactively apply to projects that started production in 2016.

On August 16, 2022, the Inflation Reduction Act (“IRA”) was enacted to reduce inflation and promote clean energy in the United States.

The IRA modifies and extends the PTC until the later of 2032 or when greenhouse gas emissions have been reduced by 75% compared to 2022.

It provides for tax credits up to a maximum of 30%, adjusted for inflation annually, for electricity generated from qualified renewable energy sources where taxpayers meet prevailing wage standards and employ a sufficient proportion of qualified apprentices from registered apprenticeship programs.

It also provides a bonus credit for qualifying clean energy production in energy communities. 

The IRA also includes advanced manufacturing tax credits for manufacturers of eligible components, including wind and solar components (“45X credits”).

Manufacturers qualify for the 45X credits based on the electricity output for each component produced and sold in the US starting in 2023 through 2032. The credit amount varies based on the eligible component, which includes solar components, wind energy components, inverters, qualifying battery components, and critical minerals. Tower manufacturers are eligible for credits of $0.03 per watt for applicable components produced.

Manufacturers can apply to the Internal Revenue Service for cash refunds of the 45X credits for up to five years. After the first five years, the 45X credits are transferable and can be sold to third parties for cash.

We are waiting for the Internal Revenue Service and the U.S.

Treasury Department to provide implementation guidance for the legislation. 

Investment in Infrastructure

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The IIJA allocated $62 billion to the Department of Energy for various projects focused on clean energy resources and expanding renewable energy.

However the timing of the award of projects funded by the IIJA is uncertain thus the impact on our business is unknown.

Additionally, a $3.5 trillion “Build Back Better”

(“BBB”) framework was announced in March 2021 by the Biden Administration.

A sweeping $2.2 trillion version of the measure passed the House of Representatives last November but has been stalled in the Senate for months over scope of programs covered and overall cost.

Consequently, a BBB bill has not become law.

The House-passed BBB and various Senate iterations include policies to address climate change, including an energy efficiency and clean energy standard.

Efforts may resume in the Senate later this year to craft a smaller, more focused bill or set of bills that can pass both the Senate and the House.

We anticipate that clean energy provisions could be included as part of a BBB bill or series of smaller bills advancing the Biden Administration’s legislative and funding agenda.

We are closely monitoring both legislative and executive agency action regarding the BBB agenda.

However the timing of the award of projects funded by the IIJA is uncertain thus the impact on our business is uncertain.

Occupational Safety and Health Administration

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Our operations are subject to numerous federal, state and local environmental laws and regulations.

Although it is our objective to maintain compliance with these laws and regulations, it may not be possible to quantify with certainty the potential impact of actions regarding environmental matters, particularly remediation and other compliance efforts that we may undertake in the future.

Although it is our objective to maintain compliance with these laws and regulations, it may not be possible to quantify with certainty the potential impact of actions involving environmental matters, particularly remediation and other compliance efforts that we may undertake in the future.

We sell our towers under either supply agreements or individual purchase orders (“POs”), depending on the size and duration of the purchase commitment.

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This represents a 179% increase from the backlog at December 31, 2021.

Backlog as of December 31, 2021 and 2020 is net of revenue recognized over time as described in Note 2, “Revenues”

Backlog as of December 31, 2022 and 2021 is net of revenue recognized over time as described in Note 2, “Revenues”

of our consolidated financial statements.

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As of December 31, 2022, approximately 19% of our employees were covered by collective bargaining agreements with local unions in our Cicero, Illinois and Neville Island, Pennsylvania locations.

We anticipate that the collective bargaining agreements with our union members will be renewed through contract renegotiation near the contract expiration dates, although there can be no assurance that any such agreements will be concluded. The five-year collective bargaining agreement with the Neville Island union was renegotiated in November 2017 and is expected to remain in effect through October 2022.

A new four-year collective bargaining agreement in regards to the Cicero, Illinois facility was negotiated in February 2022 and is expected to remain in effect through February 2026.

The collective bargaining agreement with the Neville Island union was renegotiated in November 2022 and is expected to remain in effect through October 2026.

A four-year collective bargaining agreement in regards to the Cicero, Illinois facility was negotiated in February 2022 and is expected to remain in effect through February 2026.

We believe that our relationship with our employees is generally positive.

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Our OWC at December 31, 2022 was $475, or 0.3% of trailing three months of sales annualized, compared to December 31, 2021, when OWC was $18,635, or 18% of trailing three months of sales annualized. 

The increase in  

OWC was driven primarily by an increase in inventory levels in the current year due to supply chain challenges and the timing and level of customer deposits received for future scheduled production.

The decrease in OWC was driven primarily by the timing and level of customer deposits received for future scheduled production.

CORPORATE INFORMATION

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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-K

Item 1. Business