What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2024-05-14 compared with 2023-11-13 · 349 added, 903 removed, 240 unchanged (84% of the section changed)

Financial Statements

BROADWIND, INC.

BROADWIND, INC.

AND SUBSIDIARIES

1 unchanged sentence

(in thousands, except share and per share data)

September 30,

CURRENT ASSETS:

$ 1,740  

$ 12,732  

$ 1,073 $ 1,099

Accounts receivable, net

41,253  

17,018  

14,601 19,231

AMP credit receivable

11,217  

Contract assets

Inventories, net

39,906  

44,262  

37,386 37,405

Prepaid expenses and other current assets

Total current assets

99,746  

79,258  

58,281 69,746

LONG-TERM ASSETS:

Property and equipment, net

46,889  

45,319  

47,137 47,123

Operating lease right-of-use assets, net

15,086  

16,396  

15,159 15,593

Intangible assets, net

$ 164,599  

$ 144,540  

LIABILITIES AND STOCKHOLDERS’

$ 123,071 $ 135,156

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES:

Line of credit and current portion of long-term debt

$ 19,762  

$ 1,170  

Line of credit and current maturities of long-term debt

$ 1,428 $ 5,903

Current portion of finance lease obligations

1 unchanged sentence

Accounts payable

25,269  

26,255  

16,298 20,728

Accrued liabilities

Customer deposits

29,904  

34,550  

11,403 16,500

Total current liabilities

84,445  

70,178  

39,654 53,612

LONG-TERM LIABILITIES:

2 unchanged sentences

Long-term operating lease obligations, net of current portion

15,583  

16,696  

15,374 15,888

Total long-term liabilities

25,792  

28,089  

25,376 25,525

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS’

STOCKHOLDERS’ EQUITY:

Preferred stock, $ 0.001 par value;

3 unchanged sentences

30,000,000 shares authorized;

21,673,800 and 21,127,130 shares issued as of September 30, 2023, and December 31, 2022, respectively

Treasury stock, at cost, 273,937 shares as of September 30, 2023 and December 31, 2022

( 1,842 )  

21,947,606 and 21,840,301 shares issued as of March 31, 2024, and December 31, 2023, respectively

Treasury stock, at cost, 273,937 shares as of March 31, 2024 and December 31, 2023

( 1,842 ) ( 1,842 )

Additional paid-in capital

398,750  

397,240  

399,848 399,336

Accumulated deficit

( 342,568 )  

Total stockholders’

54,362  

46,273  

TOTAL LIABILITIES AND STOCKHOLDERS’

$ 164,599  

$ 144,540  

( 339,987 ) ( 341,497 )

Total stockholders’ equity

58,041 56,019

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

$ 123,071 $ 135,156

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

BROADWIND, INC.

BROADWIND, INC.

AND SUBSIDIARIES

1 unchanged sentence

(in thousands, except per share data)

Three Months Ended September 30,

Nine Months Ended September 30,

$ 57,163  

$ 44,843  

$ 156,879  

$ 136,699  

Three Months Ended March 31,

$ 37,616 $ 48,873

Cost of sales

46,996  

41,095  

131,403  

128,545  

10,167  

25,476  

30,979 41,897

OPERATING EXPENSES:

Selling, general and administrative

16,113  

12,109  

Intangible amortization

Total operating expenses

16,611  

12,659  

Operating income (loss)

( 520 )  

Operating income

OTHER EXPENSE, net:

Interest expense, net

( 932 )  

( 1,234 )  

( 2,171 )  

( 13 )  

( 37 )  

( 532 ) ( 488 )

Total other expense, net

( 945 )  

( 1,238 )  

( 2,208 )  

Net income (loss) before provision for income taxes

( 1,758 )  

( 529 ) ( 490 )

Net income before provision for income taxes

Provision for income taxes

NET INCOME (LOSS)

( 1,772 )  

NET INCOME (LOSS) PER COMMON SHARE—BASIC:

Net income (loss)

$ 0.21  

$ ( 0.09 )  

$ 0.31  

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING—BASIC

21,337  

20,506  

21,101  

20,156  

NET INCOME (LOSS) PER COMMON SHARE—DILUTED:

Net income (loss)

$ 0.20  

$ ( 0.09 )  

$ 0.31  

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING—DILUTED

21,574  

20,506  

21,451  

20,156  

NET INCOME PER COMMON SHARE—BASIC:

$ 0.07 $ 0.04

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING—BASIC

21,595 20,869

NET INCOME PER COMMON SHARE—DILUTED:

$ 0.07 $ 0.04

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING—DILUTED

21,807 21,387

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

BROADWIND, INC.

BROADWIND, INC.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except share data)

1 unchanged sentence

BALANCE, December 31, 2022

Stock issued for restricted stock

21,127,130 $ 21 ( 273,937 ) $ ( 1,842 ) $ 397,240 $ ( 349,146 ) $ 46,273

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

64,807 — — — 302 — 302

Share-based compensation

Shares withheld for taxes in connection with issuance of restricted stock

— — — — 178 — 178

— — — — — 769 769

BALANCE, March 31, 2023

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

BALANCE, June 30, 2022

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

21,191,937 $ 21 ( 273,937 ) $ ( 1,842 ) $ 397,720 $ ( 348,377 ) $ 47,522

BALANCE, December 31, 2023

21,840,301 $ 22 ( 273,937 ) $ ( 1,842 ) $ 399,336 $ ( 341,497 ) $ 56,019

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

107,305 — — — 287 — 287

Share-based compensation

— — — — 225 — 225

— — — — — 1,510 1,510

BALANCE, March 31, 2024

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

BALANCE, June 30, 2023

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

Share-based compensation

BALANCE, September 30, 2023

21,947,606 $ 22 ( 273,937 ) $ ( 1,842 ) $ 399,848 $ ( 339,987 ) $ 58,041

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

BROADWIND, INC.

BROADWIND, INC.

AND SUBSIDIARIES

1 unchanged sentence

(in thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income (loss)

Adjustments to reconcile net cash used in operating activities:

$ 1,510 $ 769

Adjustments to reconcile net cash provided by (used in) operating activities:

Depreciation and amortization expense

Deferred income taxes

Change in fair value of interest rate swap agreements

Share-based compensation

Stock-based compensation

Allowance for doubtful accounts

Common stock issued under defined contribution 401(k) plan

Loss on disposal of assets

Changes in operating assets and liabilities:

Accounts receivable

4,632 ( 8,841 )

AMP credit receivable

Employee retention credit receivable

5,319 ( 3,162 )

Contract assets

1 unchanged sentence

Accounts payable

( 4,005 ) ( 784 )

Accrued liabilities

Customer deposits

( 5,097 ) ( 12,799 )

Other non-current assets and liabilities

Net cash used in operating activities

Net cash provided by (used in) operating activities

5,857 ( 25,984 )

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchases of property and equipment

Proceeds from disposals of property and equipment

( 1,744 ) ( 1,065 )

Net cash used in investing activities

( 1,744 ) ( 1,065 )

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from line of credit, net

Payments for deferred financing costs

(Payments on) proceeds from line of credit, net

( 4,657 ) 16,945

Proceeds from long-term debt

Payments on long-term debt

( 325 ) ( 634 )

Principal payments on finance leases

Shares withheld for taxes in connection with issuance of restricted stock

Proceeds from sale of common stock, net

Net cash provided by financing activities

NET (DECREASE) INCREASE IN CASH

( 401 ) ( 265 )

Net cash (used in) provided by financing activities

( 4,139 ) 16,046

NET DECREASE IN CASH

( 26 ) ( 11,003 )

CASH beginning of the period

CASH end of the period

$ 1,073 $ 1,729

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

BROADWIND, INC.

BROADWIND, INC.

AND SUBSIDIARIES

1 unchanged sentence

(Dollars are presented in thousands, except share, per share and per employee data or unless otherwise stated)

NOTE 1 —

BASIS OF PRESENTATION  

NOTE 1 — BASIS OF PRESENTATION

The unaudited condensed consolidated financial statements presented herein include the accounts of Broadwind, Inc.

(the “Company”) and its wholly-owned subsidiaries Broadwind Heavy Fabrications, Inc.

(“Broadwind Heavy Fabrications”), Brad Foote Gear Works, Inc.

(“Brad Foote”) and Broadwind Industrial Solutions, LLC (“Broadwind Industrial Solutions”).

(the “Company”) and its wholly-owned subsidiaries Broadwind Heavy Fabrications, Inc.

(“Broadwind Heavy Fabrications”), Brad Foote Gear Works, Inc.

(“Brad Foote”) and Broadwind Industrial Solutions, LLC (“Broadwind Industrial Solutions”).

All intercompany transactions and balances have been eliminated.

The financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and in accordance with the instructions to Form 10 -Q and Article 10 of Regulation S- X.

Accordingly, the financial statements do not include all of the information and notes required by GAAP for complete financial statements.

In the opinion of management, all adjustments, including normal recurring accruals, considered necessary for a fair presentation have been included.

Operating results for the 

three and nine months ended September 30, 2023 are not necessarily indicative of the results that may be expected for the twelve months ending December 31, 2023, 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, 2022  and as supplemented by the risk factors set forth in our other filings with the Securities and Exchange Commission (the “SEC”).

Operating results for the three months ended March 31, 2024 are not necessarily indicative of the results that may be expected for the twelve months ending December 31, 2024, 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, 2023 .

The December 31, 2023 condensed consolidated balance sheet was derived from audited financial statements, but does not include all disclosures required by GAAP.

This financial information should be read in conjunction with the consolidated financial statements and notes included in the Company’s Annual Report on Form 10 -K for the year ended December 31, 2022 .

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

nine months ended September 30, 2023 as compared to the significant accounting policies described in the Company’s Annual Report on Form 10 -K for the year ended December 31, 2022 .

Company Description   

There have been no material changes in the Company’s significant accounting policies during the three months ended March 31, 2024 as compared to the significant accounting policies described in the Company’s Annual Report on Form 10 -K for the year ended December 31, 2023 .

Company Description

Through its subsidiaries, the Company is a precision manufacturer of structures, equipment and components for clean technology and other specialized applications.

The Company provides 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.”).

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

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

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

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

nine months of both 

2023  and 2022.

See Note 8, “Debt and Credit Agreements,”

of these condensed consolidated financial statements for a description of the 2022 Credit Facility and the Company’s other debt. 

Debt and finance lease obligations at 

September 30, 2023 totaled $ 31,564 , which includes current outstanding debt and finance leases totaling $ 21,374 .

The Company’s outstanding debt includes $ 18,518  

outstanding from the senior secured revolving credit facility under the 2022 Credit Facility.

The Company had $ 6,405  drawn on the senior secured term loan as of September 

The Company’s revolving line of credit balance is included in the “Line of credit and current portion of long-term debt”

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

), replacing a prior shelf registration statement which expired on October 12, 2023.

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

wind energy industry, which accounted for 39 % and 50 % of the Company’s revenue during the first three months of 2024 and 2023, respectively.

The Company typically meets its short term liquidity needs through cash generated from operations, its available cash balances, the 2022 Credit Facility (as defined below), equipment financing, and access to the public and private debt and/or equity markets, and has the option to raise capital from the sale of the Company’s securities under the Company’s registration statement on Form S- 3 (as discussed below), and proceeds from sales of Advanced Manufacturing Production tax credits (“AMP credits”) (discussed in Note 5 “AMP Credits” of these condensed consolidated financial statements).

See Note 8, “Debt and Credit Agreements,” of these condensed consolidated financial statements for a description of the 2022 Credit Facility and the Company’s other debt.

Debt and finance lease obligations at March 31, 2024 totaled $ 13,628 , which includes current outstanding debt and finance leases totaling $ 3,633 .

The Company’s outstanding debt includes $ 5,864 outstanding from the senior secured term loan under the 2022 Credit Facility.

During the three months ended March 31, 2024, the Company borrowed on the revolving line of credit and repaid such borrowings during the quarter.

The Company had no amounts drawn on the revolving line of credit as of March 31, 2024.

The Company’s revolving line of credit balance, if any, is included in the “Line of credit and current maturities of long-term debt” line item in the Company's condensed consolidated balance sheet.

This shelf registration statement, which includes a base prospectus, allows the Company to offer any combination of securities described in the prospectus in one or more offerings.

Unless otherwise specified in the prospectus supplement accompanying the base prospectus, the Company would use the net proceeds from the sale of any securities offered pursuant to the shelf registration statement for general corporate purposes.

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 .

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”).

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 year ended December 31, 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 .

No shares of the Company’s common stock were issued under the Sales Agreement during the nine  months ended September 

As of September 

30, 2023, shares of the Company’s common stock having a value of approximately $ 11,667  remained available for issuance under the Sales Agreement.

During the year ended December 31, 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 .

No shares of the Company’s common stock were issued under the Sales Agreement during the year ended December 31, 2023 or during the three months ended March 31, 2024.

As of March 31, 2024, shares of the Company’s common stock having a value of approximately $ 11,667 remained available for issuance under the Sales Agreement.

Any additional shares offered and sold under the Sales Agreement are to be issued pursuant to the Form S- 3 and a 424 (b) prospectus supplement.

The Company also utilizes supply chain financing arrangements as a component of its funding for working capital, which accelerates receivable collections and helps to better manage cash flow.

The Company also utilizes supply chain financing arrangements as a component of its funding for working capital, which accelerates receivable collections and helps to better manage cash flow.

Under these agreements, the Company has agreed to sell certain of its 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.

2 unchanged sentences

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

During the three and nine  months ended September 

30, 2023, the Company sold account receivables totaling $ 12,084  and $ 31,081 , respectively, related to supply chain financing arrangements, of which customers’

financial institutions applied discount fees totaling $ 334  and $ 649 , respectively. 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. 

In January 2023, the Company announced that it had entered into a supply agreement for wind tower purchases valued at approximately $ 175 million with a leading global wind turbine manufacturer. 

During the three months ended March 31, 2024 and March 31, 2023, the Company sold account receivables totaling $ 6,805 and $ 9,614 , respectively, related to supply chain financing arrangements, of which customers’ financial institutions applied discount fees totaling $ 164 and $ 131 , respectively.

In January 2023, the Company announced that it had entered into a supply agreement for wind tower purchases valued at approximately $ 175 million with a leading global wind turbine manufacturer.

Under the terms of the supply agreement, order fulfillment is to occur beginning in 2023 through year-end 2024.

In early November 2023, the parties discussed their joint intent to shift approximately half of the contracted tower section orders initially planned for 2024 into 2025, while maintaining the total number of tower sections stipulated under the supply agreement.

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, the Company’s ability to finalize the terms of the remaining obligations under a supply agreement from a leading global wind turbine manufacturer, as well as receipt of customer deposits and revenues generated from new customer orders, are materially inconsistent with management’s expectations, the Company may in the future encounter cash flow and liquidity issues.

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

Any additional equity financing, if available, may be dilutive to stockholders, and additional debt financing, if available, would likely require new financial covenants or impose other restrictions on the Company.

While the Company believes that it will continue to have sufficient cash available to operate its businesses and to meet its financial obligations and debt covenants, there can be no assurances that its operations will generate sufficient cash, or that credit facilities will be available in an amount sufficient to enable the Company to meet these financial obligations.

The Company anticipates that current cash resources, amounts available under the 2022 Credit Facility, sales of shares under the Sales Agreement, cash to be generated from operations and equipment financing, access to the public and private debt and/or equity markets, any potential proceeds from the sale of further Company securities under the Form S- 3, and proceeds from sales of AMP credits 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, the Company’s ability to finalize the terms of the remaining obligations under a supply agreement with a leading global wind turbine manufacturer, as well as receipt of customer deposits and revenues generated from new customer orders, are materially inconsistent with management’s expectations, the Company may in the future encounter cash flow and liquidity issues.

If the Company’s operational performance deteriorates, the Company 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 us to seek additional equity or debt financing.

Any attempt to raise equity through the public markets could have a negative effect on the Company’s stock price, making an equity raise more difficult or more dilutive.

Any additional equity financing or equity-linked financing, if available, will be dilutive to stockholders, and additional debt financing, if available, would likely require new financial covenants or impose other operating and financial restrictions on the Company.

While management believes that the Company will continue to have sufficient cash available to operate its businesses and to meet the Company’s financial obligations and debt covenants, there can be no assurances that the Company’s operations will generate sufficient cash, or that credit facilities or equity or equity-linked financings will be available in an amount sufficient to enable the Company to meet these financial obligations.

Reclassifications

Certain prior year amounts have been reclassified to conform to current year presentation in the condensed consolidated financial statements and the notes to the condensed consolidated financial statements.  

Management’s Use of Estimates

Certain prior year amounts have been reclassified to conform to current year presentation in the condensed consolidated financial statements and the notes to the condensed consolidated financial statements.

Management’s Use of Estimates

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

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

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

NOTE 2 —

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

The following table presents the Company’s revenues disaggregated by revenue source for the three and nine months ended September 30, 2023 and 2022 :

Three Months Ended September 30,

Nine Months Ended September 30,

Significant estimates, among others, include inventory reserves, warranty reserves, impairment of long-lived assets, allowance for doubtful accounts, health insurance reserves, and valuation allowances on deferred taxes.

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

NOTE 2 — REVENUES

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 months ended March 31, 2024 and 2023 :

Three Months Ended March 31,

Heavy Fabrications

$ 38,326  

$ 30,640  

$ 103,864  

$ 93,486  

11,404  

10,190  

34,347  

30,890  

$ 22,016 $ 31,593

Industrial Solutions

19,125  

13,142  

( 457 )  

$ 57,163  

$ 44,843  

$ 156,879  

$ 136,699  

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.

( 731 ) ( 108 )

$ 37,616 $ 48,873

A performance obligation is a promise in a contract to transfer a distinct product or service to the customer.

1 unchanged sentence

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

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

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

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

During the nine  months ended September 

2023  and 2022, 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 $ 1,424  

and $ 5,285  

for the three and nine  months ended September 

30, 2023, respectively, and $ 5,927  

and $ 13,336  

for the three and nine  months ended September 

30, 2022, respectively.

The Company uses labor hours as the input measure of progress for the applicable Heavy Fabrications contracts because 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. 

During the three months ended March 31, 2024 and 2023, 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 for contracts that meet over time criteria of $ 280 and $ 3,669 for the three months ended March 31, 2024 and March 31, 2023, respectively.

The Company uses labor hours as the input measure of progress for the applicable Heavy Fabrications contracts because 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.

The Company generally expenses sales commissions when incurred.

1 unchanged sentence

Customer deposits, deferred revenue and other receipts are deferred and recognized when the revenue is realized and earned.

Cash payments to customers are classified as reductions of revenue in the Company’s statement of operations.

The Company does not disclose the value of the unsatisfied performance obligations for contracts with an original expected length of one year or less.

NOTE 3 —

EARNINGS PER SHARE  

The following table presents a reconciliation of basic and diluted earnings per share for the three and nine months ended September 30, 2023 and 2022 , as follows: 

NOTE 3 — EARNINGS PER SHARE

The following table presents a reconciliation of basic and diluted earnings per share for the three months ended March 31, 2024 and 2023 , as follows:

Three Months Ended

Nine Months Ended

September 30,

Basic earnings per share calculation:

Net income (loss)

$ 4,394  

$ ( 1,772 )  

$ 6,578  

$ 1,510 $ 769

Weighted average number of common shares outstanding

21,336,957  

20,505,884  

21,100,876  

20,155,548  

Basic net income (loss) per share

$ 0.21  

$ ( 0.09 )  

$ 0.31  

21,594,664 20,869,035

Basic net income per share

$ 0.07 $ 0.04

Diluted earnings per share calculation:

Net income (loss)

$ 4,394  

$ ( 1,772 )  

$ 6,578  

$ 1,510 $ 769

Weighted average number of common shares outstanding

21,336,957  

20,505,884  

21,100,876  

20,155,548  

21,594,664 20,869,035

Common stock equivalents:

Non-vested stock awards

237,054  

350,197  

212,118 517,979

Weighted average number of common shares outstanding

21,574,011  

20,505,884  

21,451,073  

20,155,548  

Diluted net income (loss) per share

$ 0.20  

$ ( 0.09 )  

$ 0.31  

( 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  months and nine  months ended September 

NOTE 4 —

INVENTORIES  

The components of inventories as of September 30, 2023 and December 31, 2022 are summarized as follows:

September 30,

21,806,782 21,387,014

Diluted net income per share

$ 0.07 $ 0.04

NOTE 4 — INVENTORIES

The components of inventories as of March 31, 2024 and December 31, 2023 are summarized as follows:

Raw materials

$ 27,020  

$ 27,644  

$ 21,381 $ 24,651

Work-in-process

10,460  

13,843  

14,138 10,390

Finished goods

42,304  

46,403  

Reserve for excess and obsolete inventory

( 2,398 )  

39,628 39,636

( 2,242 ) ( 2,231 )

Net inventories

$ 39,906  

$ 44,262  

NOTE 5 —

AMP CREDITS

During the three and nine  months ended September 30, 2023, the Company recognized Advanced Manufacturing Production tax credits (“AMP credits”) totaling $ 4,488  and $ 11,217 , respectively, within the Heavy Fabrications segment.

These AMP credits were introduced as part of the Inflation Reduction Act (“IRA”) which was enacted on August 16, 2022. 

The IRA includes advanced manufacturing tax credits for manufacturers of eligible components, including wind and solar components.

Manufacturers of wind components qualify for the AMP credits based on the total rated capacity, expressed on a per watt basis, of the completed wind turbine for which such component is designed.

The credit applies to each component produced and sold in the U.S.

$ 37,386 $ 37,405

NOTE 5 — AMP CREDITS

During the three months ended March 31, 2024 and March 31, 2023, the Company recognized gross AMP credits totaling $ 1,872 and $ 3,162 , respectively, within the Heavy Fabrications segment.

These AMP credits were introduced as part of the IRA, which was enacted on August 16, 2022.

The Inflation Reduction Act (“IRA”) includes advanced manufacturing tax credits for manufacturers of eligible components, including wind components.

Manufacturers of wind components qualify for the AMP credits based on the total rated capacity, expressed on a per watt basis, of the completed wind turbine for which such component is designed.

The credit applies to each component produced and sold in the U.S.

beginning in 2023 through 2032.

 Wind towers within the Company’s Heavy Fabrications segment are eligible for credits of $ 0.03 per watt for each wind tower produced. In calculating the eligible credit, the Company relied on the megawatt rating provided by the customer.

Manufacturers who qualify for the AMP credits can apply to the Internal Revenue Service for cash refunds of the AMP credits or sell the AMP credits to third parties for cash.

The Company recognized the AMP credits as a reduction to cost of sales in the Company’s condensed consolidated statements of operations for the three and nine  months ended September 

The assets related to the AMP credits are recognized as current assets in the “AMP credit receivable”

line item in the Company's condensed consolidated balance sheet as of September 

 There are currently several critical and complex aspects of the IRA pending technical guidance and regulations from the Internal Revenue Service and the U.S.

Treasury Department.

Any modifications to the law or its effects arising, for example, through technical guidance and regulations from the Internal Revenue Service and the U.S.

Treasury Department could result in changes to the expected and/or actual benefits in the future, which could have a material adverse effect on the Company, results of operations, financial performance and future development efforts.

The potential shift in contracted tower section orders initially planned for 2024 into 2025  under the supply agreement referenced in Note 1, “Basis of Presentation,”

of these condensed consolidated financial statements could impact the availability of AMP credits for monetization by the Company in 2024.

NOTE 6 —

INTANGIBLE ASSETS

Intangible assets represent the fair value assigned to definite-lived assets such as trade names and customer relationships as part of the Company’s acquisition of Brad Foote completed in 2007 as well as the noncompetition agreements, trade names and customer relationships that were part of the Company’s acquisition of Red Wolf Company, LLC completed in 2017.

Intangible assets are amortized on a straight-line basis over their estimated useful lives, with a remaining life range from 2  

to 4  years.

As of September 30, 2023 and December 31, 2022 , the cost basis, accumulated amortization and net book value of intangible assets were as follows:

September 30, 2023

Wind towers within the Company’s Heavy Fabrications segment are eligible for credits of $ 0.03 per watt for each wind tower produced.

In calculating the eligible credit, the Company relied on the megawatt rating provided by the customers.

Manufacturers who qualify for the AMP credits can apply to the Internal Revenue Service for cash refunds of the AMP credits, sell the AMP credits to third parties for cash, or apply the AMP credits against taxable income.

The Company recognized the AMP credits as a reduction to cost of sales in the Company’s condensed consolidated statements of operations for the three months ended March 31, 2024 and March 31, 2023.

The assets related to the AMP credits are recognized as current assets in the “AMP credit receivable” line item in the Company’s condensed consolidated balance sheet as of March 31, 2024 and December 31, 2023.

On December 21, 2023, the Company entered into an agreement to sell 2023 and 2024 AMP credits to a third party.

At that time, the Company sold a portion of the gross 2023 credits in the amount of $ 6,952 and recognized a 6.5 % discount on the sale in the amount of $ 452 which was recognized in cost of sales.

In addition, the Company wrote down the remaining receivable of $ 7,541 to net realizable value and recorded the expected loss on sale of $ 490 in cost of sales.

The remaining 2023 AMP credit receivable was collected during the first quarter of 2024.

The Company also incurred other miscellaneous administrative costs related to selling the credits in the amount of $ 254 , $ 197 of which has been recorded as cost of sales, with the remaining capitalized and included in the “Prepaid expenses and other current assets” line item of the Company’s condensed consolidated financial statements at December 31, 2023.

During the three months ended March 31, 2024, the Company recognized gross AMP credits totaling $ 1,872 and recognized a 6.5 % discount on the credits totaling $ 122 , which was recognized in cost of sales.

The Company also incurred other miscellaneous administrative costs related to the credits in the amount of $ 33 , which have been recorded as cost of sales.

Additionally, costs totaling $ 42 are included in the “Prepaid expenses and other current assets” line item of the Company’s condensed consolidated financial statements at March 31, 2024.

NOTE 6 — INTANGIBLE ASSETS

Intangible assets are amortized on a straight-line basis over their estimated useful lives, with a remaining life range from 2 to 4 years.

As of March 31, 2024 and December 31, 2023 , the cost basis, accumulated amortization and net book value of intangible assets were as follows:

March 31, 2024

December 31, 2023

1 unchanged sentence

Noncompete agreements

$ ( 170 )  

$ ( 167 )  

$ 170 $ ( 170 ) $ — $ — — $ 170 $ ( 170 ) $ — $ — —

Customer relationships

15,979  

( 7,777 )  

( 7,592 )  

15,979  

( 7,581 )  

( 7,592 )  

( 7,480 )  

( 7,180 )  

15,979 ( 7,907 ) ( 7,592 ) 480 1.8 15,979 ( 7,842 ) ( 7,592 ) 545 2.1

9,099 ( 7,680 ) — 1,419 3.5 9,099 ( 7,580 ) — 1,519 3.8

Intangible assets

$ 25,248  

$ ( 15,427 )  

$ ( 7,592 )  

$ 2,229  

$ 25,248  

$ ( 14,928 )  

$ ( 7,592 )  

$ 2,728  

As of September 30, 2023 , estimated future amortization expense was as follows:

$ 2,229  

NOTE 7 —

ACCRUED LIABILITIES

Accrued liabilities as of September 30, 2023 and December 31, 2022 consisted of the following: 

September 30,

$ 25,248 $ ( 15,757 ) $ ( 7,592 ) $ 1,899 3.1 $ 25,248 $ ( 15,592 ) $ ( 7,592 ) $ 2,064 3.3

As of March 31, 2024 , estimated future amortization expense was as follows:

NOTE 7 — ACCRUED LIABILITIES

Accrued liabilities as of March 31, 2024 and December 31, 2023 consisted of the following:

Accrued payroll and benefits

$ 4,397  

$ 3,110  

$ 5,187 $ 5,051

Accrued property taxes

3 unchanged sentences

Self-insured workers compensation reserve

Long term incentive plan accrual

Accrued sales tax

Accrued other

Total accrued liabilities

$ 6,238  

$ 4,313  

NOTE 8 —

DEBT AND CREDIT AGREEMENTS

The Company’s outstanding debt balances as of September 30, 2023 and December 31, 2022 consisted of the following:

September 30,

$ 6,406 $ 6,477

NOTE 8 — DEBT AND CREDIT AGREEMENTS

The Company’s outstanding debt balances as of March 31, 2024 and December 31, 2023 consisted of the following:

Line of credit

$ 18,518  

Other notes payable

Long-term debt

26,324  

Current portion

( 19,762 )  

current maturities

( 1,428 ) ( 5,903 )

Long-term debt, net of current maturities

$ 6,562  

$ 7,141  

$ 6,262 $ 6,250

Credit Facility

On August 4, 2022, the Company entered into a credit agreement (the “2022 Credit Agreement”) with Wells Fargo which replaced its prior credit facility and provided 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 which replaced its prior credit facility and provided 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.

In connection with the 2022 Credit Facility, the Company incurred deferred financing costs in the amount of $ 368  primarily related to the revolving credit loan, which is net of accumulated amortization of $ 112 . These costs are included in the “Other assets”

line item of the Company's condensed consolidated financial statements at September 

30, 2023 and December 31, 2022. 

Deferred financing costs related to the 2022 Credit Facility were $ 333 primarily related to the revolving credit loan, which is net of accumulated amortization of $ 167 , at March 31, 2024.

Deferred financing costs related to the 2022 Credit Facility were $ 359 which is net of accumulated amortization of $ 141 , at December 31, 2023.

These costs are included in the “Other assets” line item of the Company's condensed consolidated financial statements at March 31, 2024 and December 31, 2023.

On February 8, 2023, the Company executed Amendment No.

1 to Credit Agreement and Limited Waiver which waived the Company’s fourth quarter minimum EBITDA (as defined in the 2022 Credit Agreement) requirement for the period ended December 31, 2022, amended the Fixed Charge Coverage Ratio (as defined in the 2022 Credit Agreement) requirements for the twelve -month period ending January 31, 2024 through and including June 30, 2024 and each twelve -month period thereafter, and amended the minimum EBITDA requirements applicable to the twelve -month periods ending March 31, 2023, June 30, 2023, September 30, 2023, and December 31, 2023.

The 2022 Credit Agreement, as amended, contains customary covenants limiting the Company’s and its subsidiaries’

ability to, among other things, incur liens, make investments, incur indebtedness, merge or consolidate with others or dispose of assets, change the nature of its business, and enter into transactions with affiliates. The initial term of the revolving credit facility matures August 4, 2027.

The 2022 Credit Agreement, as amended, contains customary covenants limiting the Company’s and its subsidiaries’ ability to, among other things, incur liens, make investments, incur indebtedness, merge or consolidate with others or dispose of assets, change the nature of its business, and enter into transactions with affiliates.

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.

As of September 30, 2023 , there was $ 24,923  

of outstanding indebtedness under the 2022  Credit Facility, with the ability to borrow an additional $ 11,906 .

As of September 

30, 2023, the Company was in compliance with all financial covenants under the 2022  Credit Facility. As of September 

30, 2023, the effective interest rate of the senior secured revolving credit facility and the senior secured term loan was 7.82 %. As of December 

31, 2022, the effective interest rate of the senior secured revolving credit facility was 6.55 % and the effective rate of the senior secured term loan was 6.80 %. 

 In addition, the Company has outstanding notes payable for capital expenditures in the amount of $ 1,401  and $ 1,094  as of September 30, 2023 and December 31, 2022 , respectively, with $ 161  and $ 88  included in the “Line of credit and current portion of long-term debt”

line item of the Company’s condensed consolidated financial statements as of September 30, 2023 and December 31, 2022 , respectively.

The notes payable have monthly payments that range from $ 3  to $ 15  and an interest rate of approximately 6 %.

As of March 31, 2024 , there was $ 5,864 of outstanding indebtedness under the 2022 Credit Facility, with the ability to borrow an additional $ 21,326 .

As of March 31, 2024, the Company was in compliance with all financial covenants under the 2022 Credit Facility.

As of March 31, 2024, the effective interest rate of the senior secured revolving credit facility was 7.32 % and the senior secured term loan was 7.82 %.

As of December 31, 2023, the effective interest rate of the senior secured revolving credit facility was 7.64 % and the effective rate of the senior secured term loan was 7.89 %.

In addition, the Company has outstanding notes payable for capital expenditures in the amount of $ 1,826 and $ 1,361 as of March 31, 2024 and December 31, 2023 , respectively, with $ 345 and $ 163 included in the “Line of credit and current maturities of long-term debt” line item of the Company’s condensed consolidated financial statements as of March 31, 2024 and December 31, 2023 , respectively.

The notes payable have monthly payments that range from $ 3 to $ 20 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 

NOTE 9 —

The outstanding notes payable mature in September 2028.

NOTE 9 — LEASES

The Company leases certain facilities and equipment.

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

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

The leases are accounted for under Accounting Standard Update 2016 - 02, Leases (“Topic 842” ), and the Company elected to apply each available practical expedient.

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

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

During the nine months ended September 30, 2023  and 2022, the Company had additional operating leases that resulted in right-of-use assets obtained in exchange for lease obligations of $ 65  and $ 187 , respectively.

During the 

nine months ended September 30, 2023  and 2022, the Company had additional finance leases that resulted in property, plant, and equipment obtained in exchange for lease obligations of $ 780  

and $ 1,773 , respectively. 

Some of the Company’s facility leases include options to renew.

The exercise of the renewal options is typically at the Company’s discretion.

During the three months ended March 31, 2024 and 2023, the Company did not have additional operating leases that resulted in right-of-use assets obtained in exchange for lease obligations.

During the three months ended March 31, 2024 and 2023, the Company had additional finance leases associated with property, plant, and equipment of $ 813 and $ 0 respectively.

Some of the Company’s facility leases include options to renew.

The exercise of the renewal options is typically at the Company’s discretion.

The Company regularly evaluates the renewal options and includes them in the lease term when the Company is reasonably certain to exercise them.

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

Three Months Ended September 30,

Nine Months Ended September 30,

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

Three Months Ended March 31,

Components of lease cost

8 unchanged sentences

Sublease income

( 49 )  

( 64 )  

( 146 )  

( 50 ) ( 48 )

Total operating lease costs

Total lease cost

$ 1,391  

$ 1,432  

$ 4,300  

$ 4,256  

Supplemental cash flow information related to our operating leases is as follows for the nine months ended September 30, 2023 and 2022:

$ 1,472 $ 1,558

Supplemental cash flow information related to our operating leases is as follows for the three months ended March 31, 2024 and 2023:

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

Operating cash outflow from operating leases

$ 2,592  

$ 2,609  

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

2 unchanged sentences

Weighted-average discount rate-operating leases at end of period

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

As of September 30, 2023 , future minimum lease payments under finance leases and operating leases were as follows:

$ 1,483  

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 March 31, 2024 , future minimum lease payments under finance leases and operating leases were as follows:

$ 2,137 $ 2,516 $ 4,653

1,456 3,447 4,903

1,199 3,442 4,641

912 3,144 4,056

671 3,153 3,824

2029 and thereafter

10,955  

11,969  

343 7,802 8,145

Total lease payments

24,106  

30,135  

Less—portion representing interest

( 789 )  

( 6,863 )  

6,718 23,504 30,222

Less—portion representing interest

( 780 ) ( 6,216 ) ( 6,996 )

Present value of lease obligations

17,243  

22,483  

Less—current portion of lease obligations

( 1,612 )  

( 1,660 )  

5,938 17,288 23,226

Less—current portion of lease obligations

( 2,205 ) ( 1,914 ) ( 4,119 )

Long-term portion of lease obligations

$ 3,628  

$ 15,583  

$ 19,211  

NOTE 10 —

FAIR VALUE MEASUREMENTS  

Fair Value of Financial Instruments  

The carrying amounts of the Company’s financial instruments, which include cash, accounts receivable, accounts payable and customer deposits, approximate their respective fair values due to the relatively short-term nature of these instruments.

Based upon interest rates currently available to the Company for debt with similar terms, the carrying value of the Company’s long-term debt is approximately equal to its fair value. 

$ 3,733 $ 15,374 $ 19,107

NOTE 10 — FAIR VALUE MEASUREMENTS

Fair Value of Financial Instruments

Based upon interest rates currently available to the Company for debt with similar terms, the carrying value of the Company’s long-term debt is approximately equal to its fair value.

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

4 unchanged sentences

The fair value hierarchy is defined as follows:

Level 1 —

Valuations are based on unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2 —

Valuations are based on quoted prices for similar assets or liabilities in active markets, or quoted prices in markets that are not active for which significant inputs are observable, either directly or indirectly. 

Level 3 —

Valuations are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement.

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

NOTE 11 —

INCOME TAXES  

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

As of September 30, 2023 , the Company has a full valuation allowance recorded against deferred tax assets.

During the nine months ended September 30, 2023 , the Company recorded a provision for income taxes of $ 79 , compared to a provision for income taxes of $ 36  

during the nine months ended September 30, 2022 . On 

August 16, 2022, Congress enacted the IRA which includes advanced manufacturing tax credits for manufacturers of eligible components, including wind and solar components produced and sold in the U.S.

beginning in 

2023 through 2032.

The Company assumed no tax impact for the nine  months ended September 

30, 2023 since the Company believes the credits will not be taxable. 

Level 1 — Valuations are based on unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2 — Valuations are based on quoted prices for similar assets or liabilities in active markets, or quoted prices in markets that are not active for which significant inputs are observable, either directly or indirectly.

Level 3 — Valuations are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement.

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

NOTE 11 — INCOME TAXES

As of March 31, 2024 , the Company has a full valuation allowance recorded against deferred tax assets.

During the three months ended March 31, 2024 , the Company recorded a provision for income taxes of $ 39 , compared to a provision for income taxes of $ 23 during the three months ended March 31, 2023 .

On August 16, 2022, Congress enacted the IRA which includes advanced manufacturing tax credits for manufacturers of eligible components, including wind components produced and sold in the U.S.

beginning in 2023 through 2032.

These credits will have no impact on income tax expense.

The Company files income tax returns in U.S.

federal and state jurisdictions.

As of September 30, 2023 , open tax years in federal and some state jurisdictions date back to 1996 due to the taxing authorities’

ability to adjust operating loss carryforwards.

As of December 31, 2022 , the Company had federal and unapportioned state net operating loss (“NOL”) carryforwards of $ 288,462  of which $ 227,781 will generally begin to expire in 2026.

As of March 31, 2024 , open tax years in federal and some state jurisdictions date back to 1996 due to the taxing authorities’ ability to adjust operating loss carryforwards.

As of December 31, 2023 , the Company had federal and unapportioned state net operating loss (“NOL”) carryforwards of $ 290,233 of which $ 227,781 will generally begin to expire in 2026.

The majority of the NOL carryforwards will expire in various years from 2028 through 2037.

1 unchanged sentence

Since the Company has no unrecognized tax benefits, they will not have an impact on the condensed consolidated financial statements as a result of the expiration of the applicable statues of limitations within the next twelve months.

In addition, Section 

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

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

Upon completion of the Company’s analysis of 

Section 

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

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

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

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

To the extent the Company’s use of NOL carryforwards and associated built-in losses is significantly limited in the future, the Company’s income could be subject to U.S.

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

In February 2013, the Company adopted a Stockholder Rights Plan, which was approved by the Company’s stockholders and extended in 2016, 2019 and 2022 for additional three -year periods (as amended, the “Rights Plan”), designed to preserve the Company’s substantial tax assets associated with NOL carryforwards under Section 

382 of the IRC.

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

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

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

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

Stockholders who owned 4.9 % or more of the outstanding shares of the Company’s common stock as of February 

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

As of September 30, 2023 , the Company had no unrecognized tax benefits.

To the extent the Company’s use of NOL carryforwards and associated built-in losses is significantly limited in the future, the Company’s income could be subject to U.S.

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

Stockholders who owned 4.9 % or more of the outstanding shares of the Company’s common stock as of February 12, 2013 will not trigger the preferred share purchase rights unless they acquire additional shares after that date.

As of March 31, 2024 , the Company had no unrecognized tax benefits.

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

The Company had no accrued interest and penalties as of September 30, 2023 .

NOTE 12 —

SHARE-BASED COMPENSATION  

There was no  stock option activity during the nine months ended September 30, 2023  and no  stock options were outstanding as of September 30, 2023 . 

The following table summarizes the Company’s restricted stock unit and performance award activity during the nine months ended September 30, 2023 : 

The Company had no accrued interest and penalties as of March 31, 2024 .

NOTE 12 — SHARE-BASED COMPENSATION

There was no stock option activity during the three months ended March 31, 2024 and March 31, 2023 and no stock options were outstanding as of March 31, 2024 or March 31, 2023.

The following table summarizes the Company’s restricted stock unit and performance award activity during the three months ended March 31, 2024 :

Weighted Average

1 unchanged sentence

Unvested as of December 31, 2023

822,737  

$ 2.37  

342,104  

$ 4.10  

( 324,926 )  

$ 2.13  

( 48,063 )  

$ 3.13  

Unvested as of September 30, 2023

791,852  

$ 3.53  

687,206 $ 3.03

( 1,398 ) $ 3.43

Unvested as of March 31, 2024

685,808 $ 3.03

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

For the nine  months ended September 

30, 2023, 92,984 shares were withheld to cover $ 117 of tax obligations. 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 nine months ended September 30, 2023 and 2022 , as follows: 

Nine Months Ended September 30,

For the three months ended March 31, 2024 and 2023, no shares were withheld to cover tax obligations.

The following table summarizes share-based compensation expense included in the Company’s condensed consolidated statements of operations for the three months ended March 31, 2024 and 2023 , as follows:

Three Months Ended March 31,

Share-based compensation expense:

2 unchanged sentences

Net effect of share-based compensation expense on net income

$ 1,185  

Reduction in earnings per share:

Basic earnings per share

$ 0.03  

$ 0.06  

$ 0.01 $ 0.01

Diluted earnings per share

$ 0.03  

$ 0.06  

NOTE 13 —

LEGAL PROCEEDINGS AND OTHER MATTERS

$ 0.01 $ 0.01

NOTE 13 — LEGAL PROCEEDINGS AND OTHER MATTERS

Legal Proceedings

The Company is party to a variety of legal proceedings that arise in the normal course of its business.

While the results of these legal proceedings cannot be predicted with certainty, management believes that the final outcome of these proceedings will not have a material adverse effect, individually or in the aggregate, on the Company’s results of operations, financial condition or cash flows.

Due to the inherent uncertainty of litigation, there can be no assurance that the resolution of any particular claim or proceeding would not have a material adverse effect on the Company’s results of operations, financial condition or cash flows.

It is possible that if one or more of such matters were decided against the Company, the effects could be material to the Company’s results of operations in the period in which the Company would be required to record or adjust the related liability and could also be material to the Company’s financial condition and cash flows in the periods the Company would be required to pay such liability.

NOTE 14 —

RECENT ACCOUNTING PRONOUNCEMENTS  

NOTE 14 — RECENT ACCOUNTING PRONOUNCEMENTS

The Company reviews new accounting standards as issued.

Although some of the accounting standards issued or effective in the current fiscal year may be applicable to it, the Company believes that none of the new standards have a significant impact on its condensed consolidated financial statements.

In June 2016, the Financial Accounting Standards Board issued Accounting Standards Update 

2016 - 13, “Financial Instruments-Credit Losses (Topic 326 ),”

which replaces the current incurred loss impairment methodology for most financial assets with the current expected credit loss (“CECL”) methodology.

The series of new guidance amends the impairment model by requiring entities to use a forward-looking approach based on expected losses rather than incurred losses to estimate credit losses on certain types of financial instruments, including trade receivables and contract assets.

The guidance should be applied on either a prospective transition or modified-retrospective approach depending on the subtopic.

The guidance is effective for annual periods beginning after December 15, 2022, including interim periods within those fiscal years, with early adoption permitted.

The Company implemented CECL during the three months ended March 31, 2023.

The impact on the Company's financial statements was not material. See Note 16, “Commitments and Contingencies,”

of these condensed consolidated financial statements for a further discussion of CECL. 

NOTE 15—

SEGMENT REPORTING  

The Company is organized into reporting segments based on the nature of the products offered and business activities from which it earns revenues and incurs expenses for which discrete financial information is available and regularly reviewed by the Company’s chief operating decision maker.

The Company’s segments and their product and service offerings are summarized below: 

In November 2023, the Financial Accounting Standards Board issued Accounting Standards Update No.

2023 - 07, “Segment Reporting (Topic 280 ):

Improvements to Reportable Segment Disclosures,” which requires additional disclosure of significant segment expenses on an annual and interim basis.

This guidance will be applied retrospectively and will be effective for the annual periods beginning the year ended December 31, 2024, and for interim periods beginning January 1, 2025.

The Company does not expect the adoption of this guidance to have a material impact on its consolidated financial statements.

In December 2023, the Financial Accounting Standards Board issued Accounting Standards Update No.

2023 - 09, “Income Taxes (Topic 740 ):

Improvements to Income Tax Disclosures,” which improves the transparency of income tax disclosures by requiring consistent categories and greater disaggregation of information in the effective tax rate reconciliation and income taxes paid disaggregated by jurisdiction.

This guidance will be effective for the annual periods beginning the year ended December 31, 2025.

The Company does not expect the adoption of this guidance to have a material impact on the Company's consolidated financial statements.

NOTE 15— SEGMENT REPORTING

The Company’s segments and their product and service offerings are summarized below:

Heavy Fabrications

The Company provides large, complex and precision fabrications to customers in a broad range of industrial markets.

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

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

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

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

wind energy industry.

Within the U.S.

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

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

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

domestic wind energy and equipment manufacturing hubs.

The two facilities have a combined annual tower production capacity of up to approximately 550 towers ( 1,650 tower sections), sufficient to support turbines generating more than 1,100  megawatts of power. The Company has expanded production capabilities and leveraged manufacturing competencies, including welding, lifting capacity and stringent quality practices, into aftermarket and original equipment manufacturer (“OEM”) components utilized in surface and underground mining, construction, material handling, oil and gas (“O&G”) and other infrastructure markets.

Gearing 

The Company provides 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 infrastructure markets.

The Company has manufactured loose gearing, gearboxes and systems, and provided heat treat services for aftermarket and OEM applications for nearly a century.

The Company uses an integrated manufacturing process, which includes machining and finishing processes in Cicero, Illinois, and heat treatment and gearbox repair in Neville Island, Pennsylvania.

Industrial Solutions 

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

“Corporate”

includes the assets and selling, general and administrative expenses of the Company’s corporate office.

“Eliminations”

comprises adjustments to reconcile segment results to consolidated results. 

The accounting policies of the reportable segments are the same as those referenced in Note 1, “Basis of Presentation”

of these condensed consolidated financial statements.

Summary financial information by reportable segment for the three and nine months ended September 30, 2023 and 2022 is as follows:

Heavy Fabrications

The two facilities have a combined annual tower production capacity of up to approximately 550 towers ( 1,650 tower sections), sufficient to support turbines generating more than 1,100 MW of power.

The Company has expanded its production capabilities and leveraged manufacturing competencies, including welding, lifting capacity and stringent quality practices, into aftermarket and original equipment manufacturer (“OEM”) components utilized in surface and underground mining, construction, material handling, oil and gas (“O&G”) and other infrastructure markets.

The Company has designed and manufactures a mobile, modular pressure reducing system for the compressed natural gas virtual pipeline market.

The Company manufactures components for buckets, shovels, car bodies, drill masts and other products that support mining and construction markets.

In other industrial markets, the Company provides crane components, pressure vessels, frames and other structures.

The Company provides gearing, gearboxes and precision machined components to a broad set of customers in diverse markets including;

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

The Company has manufactured loose gearing, gearboxes and systems, and provided heat treat services for aftermarket and OEM applications for a century.

The Company uses an integrated manufacturing process, which includes machining and finishing processes in addition to gearbox repair in Cicero, Illinois, and heat treatment and gearbox repair in Neville Island, Pennsylvania.

Industrial Solutions

For the Three Months Ended September 30, 2023

Revenues from external customers

$ 38,326  

$ 11,404  

$ 7,433  

$ 57,163  

Intersegment revenues

38,326  

11,404  

57,163  

Operating income (loss)

( 1,535 )  

Depreciation and amortization

Capital expenditures

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

The Company has recently expanded into the U.S.

wind power generation market, by providing tower internals kitting solutions for on-site installations, as OEMs domesticate their supply chain due to lead time and reliability issues.

The Company leverages a global supply chain to provide instrumentation and controls, valve assemblies, sensor devices, fuel system components, electrical junction boxes and wiring, energy storage services and electromechanical devices.

The Company also provides packaging solutions and fabricates panels and sub-assemblies to reduce customers’ costs and improve manufacturing velocity and reliability.

“Corporate” includes the assets and selling, general and administrative expenses of the Company’s corporate office.

“Eliminations” comprises adjustments to reconcile segment results to consolidated results.

The accounting policies of the reportable segments are the same as those referenced in Note 1, “Basis of Presentation” of these condensed consolidated financial statements.

Summary financial information by reportable segment for the three months ended March 31, 2024 and 2023 is as follows:

Heavy Fabrications

Industrial Solutions

For the Three Months Ended September 30, 2022

For the Three Months Ended March 31, 2024

Revenues from external customers

$ 30,640  

$ 10,190  

$ 4,013  

$ 44,843  

$ 22,016 $ 8,337 $ 7,263 $ — $ — $ 37,616

Intersegment revenues

30,640  

10,190  

44,843  

— — 731 — ( 731 ) —

22,016 8,337 7,994 — ( 731 ) 37,616

Operating income (loss)

( 191 )  

( 1,322 )  

2,046 25 1,767 ( 1,760 ) — 2,078

Depreciation and amortization

911 540 100 45 — 1,596

Capital expenditures

461 1,068 215 — — 1,744

Heavy Fabrications

Industrial Solutions

For the Nine Months Ended September 30, 2023

For the Three Months Ended March 31, 2023

Revenues from external customers

$ 103,864  

$ 34,347  

$ 18,668  

$ 156,879  

$ 31,593 $ 11,965 $ 5,315 $ — $ — $ 48,873

Intersegment revenues

( 457 )  

103,864  

34,347  

19,125  

( 457 )  

156,879  

— — 108 — ( 108 ) —

31,593 11,965 5,423 — ( 108 ) 48,873

Operating income (loss)

12,448  

( 7,091 )  

Depreciation and amortization

Capital expenditures

Heavy Fabrications

Industrial Solutions

For the Nine Months Ended September 30, 2022

Revenues from external customers

$ 93,486  

$ 30,874  

$ 12,339  

$ 136,699  

Intersegment revenues

( 819 )  

93,486  

30,890  

13,142  

( 819 )  

136,699  

Operating loss

( 11 )  

( 73 )  

( 368 )  

( 4,050 )  

2,790 581 622 ( 2,711 ) — 1,282

Depreciation and amortization

858 596 94 57 — 1,605

Capital expenditures

662 385 18 — — 1,065

Total Assets as of

September 30,

Heavy Fabrications

$ 75,431  

$ 45,475  

51,891  

51,944  

$ 37,322 $ 46,931

47,207 48,599

Industrial Solutions

14,094  

12,775  

74,995  

62,809  

( 51,812 )  

$ 164,599  

$ 144,540  

NOTE 16 —

COMMITMENTS AND CONTINGENCIES  

Environmental Compliance and Remediation Liabilities  

The Company’s operations and products are subject to a variety of environmental laws and regulations in the jurisdictions in which the Company operates and sells products governing, among other things, air emissions, wastewater discharges, the use, handling and disposal of hazardous materials, soil and groundwater contamination, employee health and safety, and product content, performance and packaging.

16,127 16,295

52,329 58,487

( 29,914 ) ( 35,156 )

$ 123,071 $ 135,156

NOTE 16 — COMMITMENTS AND CONTINGENCIES

Environmental Compliance and Remediation Liabilities

Certain environmental laws may impose the entire cost or a portion of the cost of investigating and cleaning up a contaminated site, regardless of fault, upon any one or more of a number of parties, including the current or previous owners or operators of the site.

These environmental laws also impose liability on any person who arranges for the disposal or treatment of hazardous substances at a contaminated site.

Third parties may also make claims against owners or operators of sites and users of disposal sites for personal injuries and property damage associated with releases of hazardous substances from those sites. 

Allowance for Doubtful Accounts  

 Beginning January 1, 2023, the Company assessed and recorded an allowance for credit losses using the CECL model.

The adjustment for credit losses to management’s current estimate is recorded in net income as credit loss expense.

All credit losses were on trade receivables and/or contract assets arising from the Company's contracts with customers.  

The Company selected a loss-rate method for the CECL model, based on the relationship between historical write-offs of receivables and the underlying sales by major customer.

Utilizing this model, a historical loss-rate is applied against the amortized cost of applicable assets, at the time the asset is established.

The loss rate reflects the Company’s current estimate of the risk of loss (even when that risk is remote) over the expected remaining contractual life of the assets.

The Company’s policy is to deduct write-offs from the allowance for credit losses account in the period in which the financial assets are deemed uncollectible.

The adjustment for credit losses using this CECL model on accounts receivable and contract assets during the three months ended March 31, 2023 was 

not material.  

The allowance for credit losses for prior periods was prepared in accordance with legacy GAAP.

Based upon past experience and judgment, the Company established an allowance for doubtful accounts with respect to accounts receivable.

The Company’s standard allowance estimation methodology considered a number of factors that, based on its collections experience, the Company believed would have an impact on its credit risk and the collectability of its accounts receivable.

These factors included individual customer circumstances, history with the Company, the length of the time period during which the account receivable had been past due and other relevant criteria.  

Allowance for Credit Losses

Beginning January 1, 2023, the Company assessed and recorded an allowance for credit losses using the CECL model.

The adjustment for credit losses to management’s current estimate is recorded in net income as credit loss expense.

All credit losses were on trade receivables and/or contract assets arising from the Company's contracts with customers.

The adjustment for credit losses using this CECL model on accounts receivable and contract assets during the three months ended March 31, 2023 was not material.

The Company monitors its collections and write-off experience to assess whether or not adjustments to its allowance estimates are necessary.

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

The activity in the accounts receivable allowance liability for the nine months ended September 30, 2023 and 2022 consisted of the following: 

For the Nine Months Ended September 30,

Changes in trends in any of the factors that the Company believes may impact the collectability of its accounts receivable, 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 three months ended March 31, 2024 and 2023 consisted of the following:

For the Three Months Ended March 31,

Balance at beginning of period

Bad debt expense

( 38 )  

Other adjustments

Balance at end of period

Collateral  

In select instances, the Company has pledged specific inventory and machinery and equipment assets to serve as collateral on related payable or financing obligations. 

Liquidated Damages  

In select instances, the Company has pledged specific inventory and machinery and equipment assets to serve as collateral on related payable or financing obligations.

Liquidated Damages

In certain customer contracts, the Company has agreed to pay liquidated damages in the event of qualifying delivery or production delays.

These damages are typically limited to a specific percentage of the value of the product in question and/or are dependent on actual losses sustained by the customer.

The Company does not believe that this potential exposure will have a material adverse effect on the Company’s consolidated financial position or results of operations.

There was no reserve for liquidated damages at 

September 30, 2023  and 

December 31, 2022. 

NOTE 17 —

SUBSEQUENT EVENTS  

In January 2023, the Company announced that it had entered into a supply agreement for wind tower purchases valued at approximately $ 175 million with a leading global wind turbine manufacturer. 

Under the terms of the supply agreement, order fulfillment is to occur beginning in 2023 through year-end 2024.

Item 2.  

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

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes thereto in Item 1, “Financial Statements,”

of this Quarterly Report and the audited consolidated financial statements and related notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the year ended December 31, 2022.

The discussion below contains forward-looking statements that are based upon our current expectations and are subject to uncertainty and changes in circumstances including, but not limited to, those identified in “Cautionary Note Regarding Forward-Looking Statements”

at the end of Item 2.

Actual results may differ materially from these expectations due to inaccurate assumptions and known or unknown risks and uncertainties.

As used in this Quarterly Report on Form 10-Q, the terms “we,”

“us,”

“our,”

and the “Company”

refer to Broadwind, Inc., a Delaware corporation headquartered in Cicero, Illinois, and its subsidiaries, as appropriate. 

(Dollars are presented in thousands except share, per share and per employee data or unless otherwise stated)  

KEY METRICS USED BY MANAGEMENT TO MEASURE PERFORMANCE

In addition to measures of financial performance presented in our consolidated financial statements in accordance with GAAP, we use certain other financial measures to analyze our performance.

These non-GAAP financial measures primarily consist of adjusted EBITDA (as defined below) and free cash flow which help us evaluate growth trends, establish budgets, assess operational efficiencies, oversee our overall liquidity, and evaluate our overall financial performance.

Key Financial Measures

Three Months Ended

Nine Months Ended

September 30,

Net income (loss)

Adjusted EBITDA (1)

Capital expenditures

Free cash flow (2)

Operating working capital (3)

Backlog at end of period (4)

Book-to-bill (5)

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

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.

Our definition of adjusted EBITDA may be different from similar non-GAAP financial measures used by other companies and/or analysts.

We define free cash flow as adjusted EBITDA plus or minus changes in operating working capital less capital expenditures net of any proceeds from disposals of property and equipment.

We believe free cash flow is a useful measure for investors because it portrays our ability to generate cash from our business for purposes such as repaying maturing debt and funding future investments.

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

Our backlog at September 30, 2023 and 2022 is net of revenue recognized over time. Backlog is subject to adjustment based on the shift in timing of orders under the supply agreement referenced in Note 1, “Basis of Presentation,”

of the Company’s condensed consolidated financial statements. 

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

The following table reconciles our non-GAAP key financial measures to the most directly comparable GAAP measure:

Three Months Ended

Nine Months Ended

September 30,

Net income (loss)

Interest expense

Income tax provision

Depreciation and amortization

Share-based compensation and other stock payments

Proxy contest-related expenses

Adjusted EBITDA

Changes in operating working capital

Capital expenditures

Proceeds from disposal of property and equipment

Free Cash Flow

OUR BUSINESS  

Third Quarter Overview  

We received $15,890 in new orders in the third quarter of 2023, down from $84,457 in the third quarter of 2022. Within our Heavy Fabrications segment, wind tower orders decreased compared to the prior year quarter primarily due to the timing of tower orders as a major wind tower customer secured relatively longer-term capacity during the fourth quarter of 2022 instead of ordering in more regular intervals as was the case during the first three quarters of 2022. Partially offsetting this decrease was a 47% increase in industrial fabrication orders primarily due to improved demand from mining customers. Gearing segment orders decreased 81% from the prior year period primarily due to reduced demand from oil and gas (“O&G”) mining, and industrial customers. Orders within our Industrial Solutions segment decreased by 20% as compared to the prior year quarter primarily due to reduced demand for new gas turbine content, partially offset by improved aftermarket demand. 

We recognized revenue of $57,163 in the third quarter of 2023, up 27% compared to the third quarter of 2022. Within the Heavy Fabrications segment wind tower revenue increased 40% primarily due to a 31% increase in tower sections sold and increased steel content, which is generally a pass-through to customers. Gearing segment revenue increased 12% relative to the comparable prior year period primarily due to higher order intake in recent quarters from industrial and steel customers.

Industrial Solutions segment revenue increased by 85% from the prior year period primarily due to  

the timing of  

shipments  

of new gas turbine content in addition to revenue recognized from international customers.

We recorded net income of $4,394 or $0.21 per share in the third quarter of 2023, compared to a net loss $1,772 or $0.09 per share in the third quarter of 2022.

This increase in net income was primarily due to higher sales and $4,488 of AMP credits (discussed below) recognized in the current year quarter. 

During the third quarter of 2023, we recognized advanced manufacturing tax credits (“AMP credits”) of $4,488 within the Heavy Fabrications segment.

The AMP credits were a part of the Inflation Reduction Act (“IRA”) which was enacted on August 16, 2022. The IRA includes advanced manufacturing tax credits for manufacturers of eligible components, including wind and solar components.

Manufacturers qualify for the AMP credits based on the total rated capacity, expressed on a per watt basis, of the completed wind turbine for which such component is designed.

The credit is applicable for each component produced and sold in the U.S.

beginning in 2023 through 2032.

Wind towers within our Heavy Fabrications segment were eligible for credits of $0.03 per watt for each wind tower produced.

RESULTS OF OPERATIONS  

Three months ended September 30, 2023, Compared to Three months ended September 30, 2022  

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, 2023, compared to the three months ended September 30, 2022.

Three Months Ended September 30,

Cost of sales

Operating expenses

Selling, general and administrative expenses

Intangible amortization

Total operating expenses

Operating income (loss)

Other expense, net

Interest expense, net

Total other expense, net

Net income (loss) before provision for income taxes

Provision for income taxes

Net income (loss)

Consolidated  

Revenues increased by $12,320 as compared to the prior year quarter primarily due to a 40% increase in wind tower revenue primarily due to a 31% increase in tower sections sold and increased steel content, which is generally a pass-through to customers.

Industrial Solutions segment revenue increased 85% from the prior year period primarily due to the timing of shipments  

of new gas turbine content in addition to revenue recognized from international customers.

Additionally, Gearing segment revenue increased 12% relative to the comparable prior year period primarily due to higher order intake in recent quarters from industrial and steel customers. 

Gross profit increased by $6,419 when compared to the prior year quarter, primarily due to the higher sales volumes and $4,488 of AMP credits recognized in the current year quarter.

Operating expenses increased $532 compared to the prior year quarter primarily due to higher medical costs and increased incentive compensation.

Operating expenses as a percentage of sales decreased to 8.4% in the current-year quarter compared to 9.5% in the prior year quarter primarily due to higher sales. 

Net income was $4,394 during the three months ended September 30, 2023, compared to a net loss of $1,772 during the three months ended September 30, 2022.

This increase in net income was primarily due to the factors described above.

Heavy Fabrications Segment  

Three Months Ended

September 30,

Tower sections sold

Operating income

Operating margin

Within our Heavy Fabrications segment, wind tower orders decreased $57,264 compared to the prior year quarter primarily due to the timing of tower orders as a major wind tower customer secured relatively longer-term capacity during the fourth quarter of 2022 instead of ordering in more regular intervals as was the case during the first three quarters of 2022. Partially offsetting this decrease in orders was a 47% increase in industrial fabrication orders primarily due to improved demand from mining customers.

Segment revenues increased by 25% during the three months ended September 30, 2023 primarily due to a 40% increase in wind tower revenue as tower sections sold increased by 31% and increased steel content, which is generally a pass-through to customers. 

Heavy Fabrications segment operating results improved by $5,419 as compared to the prior year quarter.

The improvement in operating performance was primarily a result of reduced wind tower costs as a result of $4,488 of AMP credits recognized in the current year quarter. Operating profit margin was 15.1% during the three months ended September 30, 2023 compared to 1.2% during the three months ended September 30, 2022. 

Gearing Segment

Three Months Ended

September 30,

Operating income

Operating margin

Gearing segment orders decreased 81% from the prior year period primarily due to reduced demand from O&G, mining, and industrial customers. Gearing revenue was up 12% relative to the comparable prior year period primarily due to higher order intake in recent quarters from industrial and steel customers.

Gearing segment operating income decreased by $359 from the prior year period.

This reduction was primarily attributable to a less profitable mix of product sold as well as increased  

overhead costs. Operating margin was 2.3% during the three months ended September 30, 2023, a decrease from 6.1% during the three months ended September 30, 2022, driven primarily by the items identified above.

Industrial Solutions Segment  

Three Months Ended

September 30,

Operating income (loss)

Operating margin

Industrial Solutions segment orders decreased 20% from the prior year period primarily due to reduced demand for new gas turbine content, partially offset by increased demand for aftermarket gas turbine content.

Revenues increased 85% from the prior year period primarily due to the timing of shipments of new gas turbine content in addition to revenue recognized from international customers.

Operating income increased versus the prior-year quarter primarily as a result of higher sales and a more profitable mix of product sold. 

Corporate and Other  

Corporate and Other expenses during the three months ended September 30, 2023 increased from the prior year period primarily due to higher medical costs. 

Nine months ended September 30, 2023, Compared to Nine months ended September 30, 2022  

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, 2023, compared to the nine months ended September 30, 2022.

Nine Months Ended September 30,

Cost of sales

Operating expenses

Selling, general and administrative expenses

Intangible amortization

Total operating expenses

Operating income (loss)

Other expense, net

Interest expense, net

Total other expense, net

Net income (loss) before provision for income taxes

Provision for income taxes

Net income (loss)

Consolidated  

Revenues increased by $20,180 as compared to the prior year period primarily due to higher sales in all segments. Wind tower revenue increased 13% from the prior year period primarily as a result of less customer supplied materials in the current year and increased steel content, which is generally a pass-through to customers.

Additionally, industrial fabrication revenues increased primarily due to higher shipments of our Pressure Reducing Systems ( “PRS”) units in the current year. Industrial Solutions segment revenue increased 46% from the prior year period primarily due to the timing shipments of new and aftermarket gas turbine content in addition to revenue recognized from international customers.

Gearing segment revenue increased 11% relative to the comparable prior year period primarily due to higher order intake in recent quarters from industrial customers, partially offset by a decrease in revenue from mining customers.

Gross profit increased by $17,322 when compared to the prior year period, primarily due to the higher sales volumes within all segments and the $11,217 recognized from the AMP credits.

Due primarily to proxy-contest related expenses and higher medical costs, operating expenses as a percentage of sales increased to 10.6% in the current year period from 9.3% in the prior year period.

Net income was $6,578 during the nine months ended September 30, 2023, compared to a net loss of $6,879 during the nine months ended September 30, 2022.

This increase in net income was primarily due to the factors described above.

Heavy Fabrications Segment  

Nine Months Ended

September 30,

Tower sections sold

Operating income (loss)

Operating margin

Within our Heavy Fabrications segment, wind tower orders decreased 87% compared to the prior year period primarily due to the timing of tower orders as a major wind tower customer secured relatively longer-term capacity during the fourth quarter of 2022 instead of ordering in more regular intervals as was the case during the first three quarters of 2022. Partially offsetting this decrease in wind tower orders was a 42% increase in industrial fabrication orders primarily due to improved demand for our PRS units and higher demand from mining customers. Segment revenues increased by 11% during the nine months ended September 30, 2023 primarily due to a 13% increase in wind tower revenue primarily as a result of less customer supplied materials in the current year  

and increased steel content, which is generally a pass-through to customers. Additionally, industrial fabrication revenues increased primarily due to higher shipments of our PRS units in the current year. 

Heavy Fabrications segment operating results improved by $12,459 as compared to the prior year period.

The improvement in operating performance was primarily a result of reduced wind tower costs as a result of the AMP credits recognized of $11,217 in the current year. Operating profit margin was 12.0% during the nine months ended September 30, 2023 compared to 0.0% during the nine months ended September 30, 2022 primarily due to the factors described above. 

Gearing Segment

Nine Months Ended

September 30,

Operating income (loss)

Operating margin

Gearing segment orders decreased 45% from the prior year period primarily due to reduced demand from O&G and mining customers. Gearing revenue was up 11% relative to the comparable prior year period primarily due to higher order intake in recent quarters from industrial customers, partially offset by a decrease in mining revenue.

Gearing segment operating income improved by $1,267 from the prior year period.

This improvement was primarily attributable to higher sales, improved operational efficiencies, a more profitable product mix sold, and the absence of ramp-up costs incurred in the prior year.

Operating margin was 3.5% during the nine months ended September 30, 2023, an improvement from (0.2)% during the nine months ended September 30, 2022, driven primarily by the items identified above.

Industrial Solutions Segment  

Nine Months Ended

September 30,

Operating income (loss)

Operating margin

Industrial Solutions segment orders increased from the prior year period primarily due to improved demand for aftermarket gas turbine content.

Segment revenues increased from the prior year period primarily due to the timing of shipments to new and aftermarket gas turbine customers, in addition to revenue recognized from international customers.

Operating income increased versus the prior-year primarily as a result of higher sales and a more profitable mix of product sold. 

Corporate and Other  

Corporate and Other expenses during the nine months ended September 30, 2023 increased from the prior year period primarily due to higher medical costs and increased professional fees associated with the contested proxy election. 

LIQUIDITY, FINANCIAL POSITION AND CAPITAL RESOURCES  

On August 4, 2022, we 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.

As of September 30, 2023, cash totaled $1,740, a decrease of $10,992 from December 31, 2022.

Debt and finance lease obligations at September 30, 2023 totaled $31,564.

As of September 30, 2023, we had the ability to borrow up to an additional $11,906 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.

The balances under these agreements are accounted for as sales of accounts receivable, as they are sold without recourse.

Cash proceeds from these agreements are reflected as operating activities included in the change in accounts receivable in the consolidated statements of cash flows.

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

We also have outstanding notes payable for capital expenditures in the amount of $1,401  

and $1,094 as of September 30, 2023 and December 31, 2022, respectively, with $161  

and $88 included in the “Line of Credit and current portion of long-term debt”

line item of our condensed consolidated financial statements as of September 30, 2023 and December 31, 2022, respectively.

The notes payable have monthly payments that range from $3 to $15 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.

On September 22, 2023, the Company filed a shelf registration statement on Form S-3, which was declared effective by the Securities and Exchange Commission (the “SEC”) on October 12, 2023 (the “Form S-3”), replacing a prior shelf registration statement which expired on October 12, 2023. This shelf registration statement, which includes a base prospectus, allows us to offer any combination of securities described in the prospectus in one or more offerings.

Unless otherwise specified in the prospectus supplement accompanying the base prospectus, we would use the net proceeds from the sale of any securities offered pursuant to the shelf registration statement for general corporate purposes.

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.

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 year ended December 31, 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.

No shares of the Company’s common stock were issued under the Sales Agreement during the nine months ended September 30, 2023. As of September 30, 2023, shares of our common stock having a value of approximately $11,667 remained available for issuance under the Sales Agreement.

Any additional shares offered and sold under the Sales Agreement are to be issued pursuant to the Form S-3 and a 424(b) prospectus supplement.

In January 2023, we announced that the Company had entered into a supply agreement for wind tower purchases valued at approximately $175 million with a leading global wind turbine manufacturer. 

Under the terms of the supply agreement, order fulfillment is to occur beginning in 2023 through year-end 2024.

In early November 2023, the parties discussed their joint intent to shift approximately half of the contracted tower section orders initially planned for 2024 into 2025, while maintaining the total number of tower sections stipulated under the supply agreement.  

We anticipate 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 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, our ability to finalize the terms of the remaining obligations under a supply agreement with a leading global wind turbine manufacturer, as well as receipt of customer deposits and revenues generated from new customer orders, are materially inconsistent with management’s expectations, we may in the future encounter cash flow and liquidity issues.

If our operational performance deteriorates, we may be unable to comply with existing financial covenants, and could lose access to the 2022 Credit Facility.

This could limit our operational flexibility, require a delay in making planned investments and/or require us to seek additional equity or debt financing.

Any attempt to raise equity through the public markets could have a negative effect on our stock price, making an equity raise more difficult or more dilutive.

While we believe that we will continue to have sufficient cash available to operate our businesses and to meet our financial obligations and debt covenants, there can be no assurances that our operations will generate sufficient cash, or that credit facilities or equity or equity-linked financings will be available in an amount sufficient to enable us to meet these financial obligations.

Sources and Uses of Cash  

The following table summarizes our cash flows from operating, investing, and financing activities for the nine months ended September 30, 2023 and 2022:

Nine Months Ended

September 30,

Total cash (used in) provided by:

Operating activities

Investing activities

Financing activities

Net (decrease) increase in cash

Operating Cash Flows  

During the nine months ended September 30, 2023, net cash used in operating activities totaled $22,593 compared to net cash used in operating activities of $10,271 during the prior year period. The increase in net cash used in operating activities during the current year period was primarily attributable to a significant increase in accounts receivable during the current year due to a change in payment terms with a major customer. 

Investing Cash Flows  

During the nine months ended September 30, 2023, net cash used in investing activities tot aled $5,300, comp ared to net cash used in investing activities of $2,757 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 a net increase in purchases of property and equipment.

Financing Cash Flows  

During the nine months ended September 30, 2023, net cash provided by financing activities tot aled $16,901, co mpared to net cash provided by financing activities of $13,685 during the prior year period.

The increase was primarily due to increased net borrowings under the 2022 Credit Facility in the current year period. 

CRITICAL ACCOUNTING ESTIMATES

There have been no material changes in our critical accounting estimates during the nine months ended September 30, 2023 as compared to the critical accounting estimates described in our Annual Report on Form 10-K for the year ended December 31, 2022. 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS  

The preceding discussion and analysis should be read in conjunction with our condensed consolidated financial statements and related notes included in Item 1 of Part I of this Quarterly Report on Form 10-Q and the audited consolidated financial statements and related notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the year ended December 31, 2022.

Portions of this Quarterly Report on Form 10-Q, including the discussion and analysis in this Part I, Item 2, contain “forward looking statements”, as defined in Section 21E of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”), that reflect our current expectations regarding our future growth, results of operations, financial condition, cash flows, performance, business prospects and opportunities, as well as assumptions made by, and information currently available to, our management.

We have tried to identify forward looking statements by using words such as “anticipate,”

“believe,”

“expect,”

“intend,”

“will,”

“should,”

“may,”

“plan”

and similar expressions, but these words are not the exclusive means of identifying forward looking statements.

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

Our forward-looking statements may include or relate to our beliefs, expectations, plans and/or assumptions with respect to the following: (i) the impact of global health concerns  

on the economies and financial markets and the demand for our products;

(ii) state, local and federal regulatory frameworks affecting the industries in which we compete, including the wind energy industry, and the related extension, continuation or renewal of federal tax incentives and grants, including the advanced manufacturing tax credits (which remain subject to further technical guidance and regulations), and state renewable portfolio standards as well as new or continuing tariffs on steel or other products imported into the United States;

(iii) our customer relationships and our substantial dependency on a few significant customers and our efforts to diversify our customer base and sector focus and leverage relationships across business units;

(iv) the economic and operational stability of our significant customers and suppliers, including their respective supply chains, and the ability to source alternative suppliers as necessary;

(v) our ability to continue to grow our business organically and through acquisitions;

(vi) the production, sales, collections, customer deposits and revenues generated by new customer orders and our ability to realize the resulting cash flows;

(vii) information technology failures, network disruptions, cybersecurity attacks or breaches in data security;

(viii) the sufficiency of our liquidity and alternate sources of funding, if necessary;

(ix) our ability to realize revenue from customer orders and backlog (including our ability to finalize the terms of the remaining obligations under a supply agreement with a leading global wind turbine manufacturer);

(x) our ability to operate our business efficiently, comply with our debt obligations, manage capital expenditures and costs effectively, and generate cash flow;

(xi) the economy and the potential impact it may have on our business, including our customers;

(xii) the state of the wind energy market and other energy and industrial markets generally, including the availability of tax credits, and the impact of competition and economic volatility in those markets;

(xiii) the effects of market disruptions and regular market volatility, including fluctuations in the price of oil, gas and other commodities;

(xiv) competition from new or existing industry participants including, in particular, increased competition from foreign tower manufacturers;

(xv) the effects of the change of administrations in the U.S.

federal government;

(xvi) our ability to successfully integrate and operate acquired companies and to identify, negotiate and execute future acquisitions;

(xvii) the potential loss of tax benefits if we experience an “ownership change”

under Section 382 of the Internal Revenue Code of 1986, as amended;

(xviii) the limited trading market for our securities and the volatility of market price for our securities;

and (xix) the impact of future sales of our common stock or securities convertible into our common stock on our stock price.

These statements are based on information currently available to us and are subject to various risks, uncertainties and other factors that could cause our actual growth, results of operations, financial condition, cash flows, performance, business prospects and opportunities to differ materially from those expressed in, or implied by, these statements including, but not limited to, those set forth under the caption “Risk Factors”

in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2022, as supplemented by the risk factors set forth under the caption “Risk Factors”

in Part II, Item IA of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2023.

We are under no duty to update any of these statements.

You should not consider any list of such factors to be an exhaustive statement of all of the risks, uncertainties or other factors that could cause our current beliefs, expectations, plans and/or assumptions to change.

Accordingly, forward-looking statements should not be relied upon as a predictor of actual results.

Item 3.  

Quantitative and Qualitative Disclosures About Market Risk  

We are a smaller reporting company as defined by Item 10(f)(1) of Regulation S-K under the Securities Act and as such are not required to provide information under this Item pursuant to Item 305I of Regulation S-K. 

Item 4.  

Controls and Procedures  

Evaluation of Disclosure Controls and Procedures  

We seek to maintain disclosure controls and procedures (as defined in Rules 13a-15I and 15d-15I under the Exchange Act) that are designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

This information is also accumulated and communicated to management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), as appropriate, to allow timely decisions regarding required disclosure.

Our management, under the supervision and with the participation of our CEO and CFO, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the most recent fiscal quarter reported on herein.

Based on that evaluation, our CEO and CFO concluded that our disclosure controls and procedures were effective as of September 30, 2023.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the three months ended September 30, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II.   OTHER INFORMATION  

Legal Proceedings  

The information required by this item is incorporated herein by reference to Note 13, “Legal Proceedings And Other Matters”

of the condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q. 

The Company does not believe that this potential exposure will have a material adverse effect on the Company’s consolidated financial position or results of operations.

There was a reserve for liquidated damages of $ 84 at March 31, 2024 and December 31, 2023.

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