What changed in this filing

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Item 7. Management’s Discussion and Analysis

2026-03-11 compared with 2025-03-05 · 76 added, 64 removed, 158 unchanged (47% of the section changed)

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(Dollar amounts are presented in thousands, except per share data and unless otherwise stated)

We booked $107,813 in net new orders in 2024, up from $101,060 in 2023.

Within our Heavy Fabrications segment, orders increased 7% over the prior year reflecting an increase in orders associated with wind repowering projects, partially offset by a decrease in industrial fabrication product line orders primarily due to reduced demand for our PRS units.

Gearing segment orders increased 7% from the prior year primarily due to improved demand from industrial and aftermarket wind customers, partially offset by reduced demand from O&G customers.

Industrial Solutions segment orders increased by 6% in 2024 from the prior year primarily due to an increase in orders associated with new gas turbine projects, partially offset by reduced demand for aftermarket projects.

We recognized revenue of $143,136 in 2024, down 30% from revenue of $203,477 in 2023.

Heavy Fabrications segment revenues decreased 38% primarily due to a 41% decrease in wind revenue as a global wind turbine manufacturer shifted approximately half of its contracted tower section orders initially planned for 2024 into 2025.

Additionally, industrial fabrication product line revenues decreased primarily due to lower shipments of our PRS units in the current year.

Gearing segment revenue decreased 22% relative to 2023 primarily due to reduced shipments to O&G and steel customers, partially offset by increased shipments to aftermarket wind customers.

Industrial Solutions segment revenue increased 4% from the prior year primarily due to increased shipments to new and aftermarket gas turbine customers, partially offset by decreased shipments to international customers.

We reported net income of $1,152 or $0.05 per share in 2024, compared to net income of $7,649 or $0.36 per share in 2023 primarily due to lower sales and the corresponding decrease in the “AMP credits” recognized in the current year.

In January 2023, we announced that we 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 was to occur beginning in 2023 through year-end 2024.

In early November 2023, the parties jointly agreed 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 OBBBA which was signed into law on July 4, 2025, eliminates AMP credits for components produced and sold after December 31, 2027.

The OBBBA shortened the time period in which we could benefit from the AMP credits, which could have a material adverse effect on our business in the near term.

Under the OBBBA, wind projects that begin construction after July 4, 2026, must be placed in service by December 31, 2027, to qualify for the production tax credit (“PTC”) or the investment tax credit (“ITC”).

Any wind project that begins construction after July 4, 2026, and is not placed in service by December 31, 2027, will not qualify for the PTC or the ITC.

The PTC and ITC drive demand for new wind projects by providing financial incentives to developers.

We expect the changes to the PTC and the ITC could lead to a decrease in the number of new wind projects, which would cause a corresponding decrease in demand for our wind products.

Lower demand for our wind products, coupled with the expedited phase out of the AMP credits, would adversely impact the profitability of our Heavy Fabrications segment.

We booked $131,438 in new net orders in 2025, up 22% from $107,813 in 2024.

Wind tower orders within the Heavy Fabrications segment increased significantly as we began to recognize meaningful wind tower orders again after an extended period of production against a long-term customer agreement announced in the first quarter of 2023.

Industrial Solutions segment orders increased 79% versus the prior year due primarily to an increase in orders associated with new and aftermarket gas turbine projects as well as an increase in orders from other markets served.

Gearing segment orders increased 52% versus the prior year, most notably within the power generation market which reflects significant orders from a leading OEM of natural gas turbines, as well as increased orders from O&G customers.

These increases were partially offset by lower wind repowering and industrial fabrication product line orders associated with the wind down of operations in Manitowoc.

In addition, we experienced a decrease in orders for our PRS units.

We recognized revenue of $158,052 in 2025, up 10% from revenue of $143,136 in 2024.

Heavy Fabrications segment revenues increased 22% primarily due to a 36% increase in wind revenue as we completed the limited tower production run at our Manitowoc facility we began earlier in the year and recognized increased wind repowering revenue.

This was partially offset by a decrease in PRS and industrial fabrication product line revenues in the current year.

Industrial Solutions segment revenue increased 16% from the prior year primarily due to increased shipments to new gas turbine customers.

Gearing segment revenue decreased 23% relative to 2024 reflective of reduced shipments within most markets served, partially offset by increased power generation shipments.

We reported net income of $5,242 or $0.23 per share in 2025, compared to net income of $1,152 or $0.05 per share in 2024.

This increase is primarily due to the $8,200 gain on the sale of the Manitowoc industrial fabrication operations in the current year, partially offset by manufacturing inefficiencies experienced within the Heavy Fabrications segment and lower sales volumes within the Gearing segment.

During 2025 and 2024, we recognized gross AMP credits totaling $13,059 and $9,588, respectively, within the Heavy Fabrications segment.

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beginning in 2023 through 2032.

The OBBBA enacted on July 4, 2025, eliminates the credit for components produced and sold after 2027.

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

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The assets related to the AMP credits are recognized as current assets in the “AMP credit receivable” line item in our consolidated balance sheets as of December 31, 2025 and 2024.

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

At that time, we 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, we 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.

We 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 our consolidated financial statements at December 31, 2023.

The OBBBA also introduced new restrictions on foreign supply chains and foreign owners or investors in tax-credit-supported facilities, referred to as PFE restrictions.

Taxpayers cannot claim AMP credits in taxable years beginning after enactment of the OBBBA if they are prohibited foreign entities (which are generally entities that are formed in or controlled by covered nations, including China, Russia, Iran, and North Korea, as well as entities determined to be under effective control as a result of contracts entered into with such entities).

AMP credits are also disallowed in taxable years beginning after enactment of the OBBBA for eligible components that receive material assistance from a PFE.

These restrictions generally took effect on January 1, 2026, and the Treasury Department is required to issue final regulations implementing them by December 31, 2026.

On February 12, 2026, the Treasury Department released interim guidance that further clarified methods for calculating material assistance and included a request for comments by March 30.

We cannot predict with certainty what the final guidance, or any other future guidance, will provide, or how it will impact the potential impact for our AMP credits claimed in 2026 and future years.

During 2025, we recognized gross AMP credits totaling $13,059 and recognized a 6.5% discount on the credits totaling $849, which was recognized in cost of sales.

We also incurred other miscellaneous administrative costs related to the credits in the amount of $98, which have been recorded as cost of sales.

Additionally, costs totaling $7 are included in the “Prepaid expenses and other current assets” line item of our consolidated financial statements at December 31, 2025.

During 2024, we recognized gross AMP credits totaling $9,588 and recognized a 6.5% discount on the credits totaling $623, which was recognized in cost of sales.

We also incurred other miscellaneous administrative costs related to the credits in the amount of $146, which have been recorded as cost of sales.

We use our credit facility to fund working capital requirements and believe that our credit facility, together with the operating cash generated by our businesses, and any potential proceeds from access to the public or private debt or equity markets, are sufficient to meet all cash obligations over the next twelve months.

On December 31, 2024, we had no amounts outstanding under our senior secured revolving credit facility, $7,578 outstanding under our senior secured term loan, $7,721 of cash on hand, with the ability to borrow an additional $24,901.

On December 31, 2025, we had $3,901 outstanding under our senior secured revolving credit facility, $4,982 outstanding under our senior secured term loan, $456 of cash on hand, with the ability to borrow an additional $24,456.

For a further discussion of our capital resources and liquidity, including a description of recent amendments and waivers under our credit facility, please see the discussion under “Liquidity, Financial Position and Capital Resources” in this Annual Report on Form 10-K.

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In addition to measures of financial performance presented in our consolidated financial statements in accordance with generally accepted accounting principles (“GAAP”), we use certain other financial measures to analyze our performance.

These non-GAAP financial measures primarily consist of 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) 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.

These non-GAAP financial measures primarily consist of adjusted EBITDA (earnings before interest, income taxes, depreciation, amortization, share-based compensation and other stock payments, restructuring costs, impairment charges, proxy contest-related expenses, other non-cash gains and losses, and the gain from the sale of the Manitowoc industrial fabrication operations) 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

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Our backlog at December 31, 2025 and 2024 is net of revenue recognized over time.

Backlog as of December 31, 2024 and December 31, 2023 has been adjusted to reflect updated assumptions related to raw material pricing (which is a customer passthrough) and other variables.

Backlog as of December 31, 2024 has been adjusted to reflect updated assumptions related to raw material pricing (which is a customer passthrough) and other variables.

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

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Interest expense

Income tax provision

Income tax expense

Depreciation and amortization

Share-based compensation and other stock payments

Gain on sale of Manitowoc industrial fabrication operations

Proxy contest-related expenses

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Capital expenditures

Net proceeds from sale of Manitowoc industrial fabrication operations

Proceeds from disposal of property and equipment

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Cost of sales

Operating expenses

Operating expenses (income)

Selling, general and administrative expenses

Gain on sale of Manitowoc industrial fabrication operations

Intangible amortization

Total operating expenses

Total operating expense, net

Operating income

Other expense, net

Other (expense) income, net

Interest expense, net

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Provision for income taxes

Revenues decreased by $60,341, or 30%, during the year ended December 31, 2024 primarily due to decreased revenues within our Heavy Fabrications and Gearing segments.

Within our Heavy Fabrications segment, wind revenue decreased 41% from the prior year as a global wind turbine manufacturer shifted approximately half of its contracted tower section orders initially planned for 2024 into 2025.

Additionally, industrial fabrication product line revenues decreased 29% from the prior year primarily due to reduced shipments of our PRS units in the current year.

Gearing segment revenue decreased 22% relative to 2023 primarily due to reduced shipments to O&G and steel customers, partially offset by increased shipments to aftermarket wind customers.

Gross profit decreased by $11,319 during the year ended December 31, 2024 as compared to the prior year primarily due to lower sales volumes within the Heavy Fabrications and Gearing segments and the corresponding reduction in AMP credits recognized in the Heavy Fabrications segment, partially offset by reduced overhead costs.

Revenues increased by $14,916, or 10%, during the year ended December 31, 2025.

This was partially offset by a decrease in PRS and industrial fabrication product line revenues in the current year.

Industrial Solutions segment revenue increased 16% from the prior year primarily due to increased shipments to new gas turbine customers.

Gearing segment revenue decreased 23% relative to 2024 reflective of reduced shipments within most markets served, partially offset by increased power generation shipments.

Despite the increase in revenue described above, gross profit decreased by $5,056 during the year ended December 31, 2025 as compared to the prior year primarily due to lower sales volumes within the Gearing segment and manufacturing inefficiencies experienced within the Heavy Fabrications segment.

As a result, our gross margin decreased from 14.8% for the year ended December 31, 2024, to 10.2% for the year ended December 31, 2025.

Operating expenses as a percentage of sales increased to 11.9% in 2024 from 10.5% in 2023 primarily due to lower sales, partially offset by reduced proxy-contest related expenses, and decreased incentive compensation.

Net income decreased from $7,649 for the year ended December 31, 2023 to $1,152 for the year ended December 31, 2024.The decrease in net income was primarily due to the factors described above.

Net income increased from $1,152 for the year ended December 31, 2024 to $5,242 for the year ended December 31, 2025.The increase in net income was primarily due to the $8,200 gain on the sale of the Manitowoc industrial fabrication operations partially offset by the factors described above.

Heavy Fabrications Segment

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Operating margin

Heavy Fabrications orders increased 7% over the prior year primarily due an increase in orders associated with wind repowering projects.

This was partially offset by a decrease in industrial fabrication product line orders due to reduced demand for our PRS units.

Segment revenues decreased by 38% from the prior year primarily due to a 41% decrease in wind revenue as a global wind turbine manufacturer shifted approximately half of its contracted tower section orders initially planned for 2024 into 2025.

Additionally, industrial fabrication product line revenues decreased from the prior year primarily due to reduced shipments of our PRS units in the current year.

Heavy Fabrications segment operating results decreased by $7,878 as compared to the prior year.

The decrease in operating performance was primarily a result of lower tower sales and the corresponding reduction in AMP credits recognized, as well as lower industrial fabrication revenues.

These factors were partially offset by reduced overhead costs.

Heavy Fabrications orders decreased 22% over the prior year primarily due to a decrease in industrial fabrication product line and wind repowering orders as we wound down operations in Manitowoc, in addition to lower PRS orders.

These decreases were partially offset by a significant increase in wind tower orders as we began to recognize meaningful wind tower orders again after an extended period of production against a long-term customer agreement announced in the first quarter of 2023.

Segment revenues increased 22% from the prior year primarily due to a 36% increase in wind revenue as we completed the limited tower production run at our Manitowoc facility we began earlier in the year and recognized increased wind repowering revenue.

This was partially offset by a decrease in PRS and industrial fabrication product line revenues in the current year.

Heavy Fabrications segment operating income increased by $7,491 as compared to the prior year.

The increase in operating performance was primarily a result of the $8,200 gain on the sale of the Manitowoc industrial fabrication operations, higher segment revenue and the corresponding increase in AMP credits recognized.

These factors were partially offset by manufacturing inefficiencies associated with the production of a new, larger size wind tower model as well as inefficiencies associated with the wind down of the Manitowoc operations.

Operating profit margin was 14.5% during the year ended December 31, 2025 compared to 8.6% during the year ended December 31, 2024.

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The following table summarizes the Gearing segment operating results for the twelve months ended December 31, 2025 and 2024:

Operating (loss) income

Operating loss

Operating margin

Gearing segment orders for the year ended December 31, 2024 increased 7% compared to the year ended December 31, 2023 primarily due to improved demand from industrial and aftermarket wind customers, partially offset by reduced demand from O&G customers.

Revenues decreased 22% during the year ended December 31, 2024 from the prior year primarily due to reduced shipments to O&G and steel customers, partially offset by increased shipments to aftermarket wind customers.

The Gearing segment's operating income decreased by $1,984 during the year ended December 31, 2024 from the year ended December 31, 2023 primarily due to lower sales, partially offset by a more profitable product mix sold and cost savings.

Gearing segment orders for the year ended December 31, 2025 increased 52% compared to the year ended December 31, 2024 most notably in power generation which reflects significant orders from a leading OEM of natural gas turbines and increased orders from O&G customers.

Revenues decreased 23% during the year ended December 31, 2025 primarily due to reduced shipments within most markets served, partially offset by increased power generation shipments.

The Gearing segment's operating results decreased by $3,050 during the year ended December 31, 2025 primarily due to lower sales and production inefficiencies associated with the lower volumes.

This was partially offset by a favorable $482 property tax adjustment during the current year.

Operating margin was (11.6%) for the year ended December 31, 2025 compared to (0.4%) during the year ended December 31, 2024.

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Operating margin

Industrial Solutions segment orders increased by 6% for the year ended December 31, 2024 from the prior year primarily due to an increase in orders associated with new gas turbine projects, partially offset by reduced demand for aftermarket projects.

Segment revenue increased 4% from the prior year primarily due to increased shipments to new and aftermarket gas turbine customers, partially offset by reduced shipments to international customers.

The improvement in operating income during the year ended December 31, 2024 was a result of higher sales and a more profitable mix of product sold.

Industrial Solutions segment orders increased by 79% for the year ended December 31, 2025 versus the prior year primarily due to an increase in orders associated with new and aftermarket gas turbine projects as well as an increase in other markets served.

Segment revenue increased 16% from the prior year primarily due to increased shipments to new gas turbine customers, partially offset by reduced shipments to aftermarket customers.

The decrease in operating income during the year ended December 31, 2025 was a result of a less profitable mix of product sold and increased fixed costs to support higher production levels.

The operating margin decreased from 12.5% during the year ended December 31, 2024, to 8.5% during the year ended December 31, 2025.

Corporate and Other

Corporate and Other expenses decreased by $2,854 during the year ended December 31, 2024 primarily due to reduced professional fees associated with the contested proxy election and lower incentive compensation.

Corporate and Other expenses decreased by $681 during the year ended December 31, 2025 primarily due to lower employee compensation.

SUMMARY OF CRITICAL ACCOUNTING POLICIES AND ESTIMATES

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We recognize contract assets associated with this revenue which represents our rights to consideration for work completed but not billed at the end of the period.

Warranty Liability

We provide warranty terms that generally range from one to five years for various products relating to workmanship and materials supplied by us.

In certain contracts, we have recourse provisions for items that would enable us to seek recovery from third parties for amounts paid to customers under warranty provisions.

We estimate the warranty accrual based on various factors, including historical warranty costs, current trends, product mix and sales.

Inventories consist of raw materials, work-in-process and finished goods.

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Due to triggering events identified within our segments at various times in the past, we continue to evaluate the recoverability of certain of the long-lived assets.

During the year ended December 31, 2024, we did not identify any triggering events within our segments and no impairment expense was recorded.

On September 30, 2025, we identified a triggering event associated with operating losses within the Gearing segment.

We relied upon an undiscounted cash flow analysis and concluded that no impairment to this asset group was indicated as of September 30, 2025.

No impairment charges were recorded for the year ended December 31, 2025.

We account for income taxes based upon an asset and liability approach.

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

As of December 31, 2024, cash totaled $7,721.

Debt and finance lease obligations at December 31, 2024 totaled $15,239 and we had the ability to borrow up to $24,901 under the 2022 Credit Facility.

As of December 31, 2025, cash totaled $456, debt and finance lease obligations totaled $14,723, and we had the ability to borrow up to $24,456 under 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.

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Financing activities

Net increase (decrease) in cash

Net (decrease) increase in cash

Operating Cash Flows

During the year ended December 31, 2024, net cash provided by operating activities was $13,806 compared to net cash used by operating activities of $6,946 for the year ended December 31, 2023.

The increase in net cash provided by operating activities was primarily attributable to an increase in cash related to customer deposits in the current year, versus a significant decrease in cash related to customer deposits in the prior year.

Additionally, we received proceeds from the sale of the 2023 AMP credits during the current year.

Partially offsetting this was an increase in inventory during the current year as compared to a decrease in the prior year.

During the year ended December 31, 2025, net cash used in operating activities was $15,385 compared to net cash provided by operating activities of $13,806 for the year ended December 31, 2024.

The decrease in net cash provided by operating activities was primarily attributable to a decrease in customer deposits in the current year, versus an increase in the prior year.

There was an increase in accounts receivable in the current year compared to a decrease in the prior year.

Partially offsetting this was an increase in accounts payable during the current year as compared to a decrease in the prior year.

Investing Cash Flows

During the year ended December 31, 2024, net cash used in investing activities was $3,459 compared to net cash used in investing activities of $6,384 for the year ended December 31, 2023.

The decrease was primarily due to a decrease in net purchases of property and equipment.

During the year ended December 31, 2025, net cash provided by investing activities was $8,892 compared to net cash used in investing activities of $3,459 for the year ended December 31, 2024.

The increase was primarily due to the net proceeds received from the sale of the Manitowoc industrial fabrication operations.

Financing Cash Flows

During the year ended December 31, 2024, net cash used in financing activities totaled $3,725 compared to net cash provided by financing activities of $1,697 for the year ended December 31, 2023.

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

During the year ended December 31, 2025, net cash used in financing activities totaled $772 compared to net cash used in financing activities of $3,725 for the year ended December 31, 2024.

The decrease was primarily due to increased net borrowings under the 2022 Credit Facility to fund our increased net operating working capital level.

Contractual Obligations

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

What changed 10-K

Item 7. Management’s Discussion and Analysis