Table of Contents

 



UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 10-K


 

(Mark One)

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 20172022

Or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from             to           

Commission File Number 001-34278

 

bwen20201002_10kimg001.jpg

BROADWIND ENERGY,, INC.

(Exact name of Registrant as specified in its charter)

Delaware
(State of or other jurisdiction of
incorporation or organization)

88-0409160
(I.R.S. Employer
Identification No.)

3240 S. Central Avenue
Cicero, Illinois

(Address of principal executive offices)

60804
(Zip code)

Registrant’s telephone number, including area code: (708) 780-4800

Securities registered pursuant to Section 12(b) of the Exchange Act: None

Securities registered pursuant to Section 12(g)12 (b) of the Exchange Act:

Registrant’s telephone number, including area code: (708) 780-4800

Title of Class

Trading Symbol

Name of Exchange on which Registered

Common Stock, $0.001 par value

BWEN

The Nasdaq Capital Market

 

Indicate by check mark whether the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. Yes ☐ No ☒

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405) is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ☒

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and “smaller reporting“emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐

Accelerated filer ☐

Non-accelerated filer ☐
(Do not check if a smaller

Smaller reporting company)company ☒

Smaller reporting company ☒

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period to comply with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

Indicate by check mark whether the Registrant is a shell company, as defined in Rule 12b‑212b-2 of the Exchange Act. Yes ☐ No ☒

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

As of June 30, 20172022 the aggregate market value of the Registrant’s voting common stock held by non‑affiliatesnon-affiliates of the Registrant was approximately $50,551,000,$29,365,000, based upon the $5.04$1.64 per share closing sale price of the Registrant’s common stock as reported on the NASDAQ Capital Market. For purposes of this calculation, the Registrant’s directors and executive officers and holders of 5% or more of the Registrant’s outstanding shares of voting common stock have been assumed to be affiliates, with such affiliates holding an aggregate of 5,006,0002,565,000 shares of the Registrant’s voting common stock on June 30, 2017.2022.

The number of shares of the Registrant’s common stock, par value $0.001, outstanding as of February 22, 2018,March 6, 2023, was 15,206,362.20,853,193.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant’s Proxy Statement for the Registrant’s 20182023 Annual Meeting of Stockholders are incorporated by reference in Part III of this Form 10-K.



 

 



 

Table of Contents

BROADWIND, INC.

BROADWIND ENERGY, INC.

FORM 10‑K10-K

TABLE OF CONTENTS

 

Page

PART I

3

ITEM 1.

BUSINESS

3

4

ITEM 1A.

RISK FACTORS

8

11

ITEM 1B.

UNRESOLVED STAFF COMMENTS

16

17

ITEM 2.

PROPERTIES

16

18

ITEM 3.

LEGAL PROCEEDINGS

16

18

ITEM 4.

MINE SAFETY DISCLOSURES

16

18

PART II

19

ITEM 5.

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

17

19

ITEM 6.

SELECTED FINANCIAL DATA[RESERVED]

17

20

ITEM 7.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

18

20

ITEM 7A.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

24

29

ITEM 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

24

29

ITEM 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

24

30

ITEM 9A.

CONTROLS AND PROCEDURES

24

30

ITEM 9B.

OTHER INFORMATION

25

30
ITEM 9C.DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS 

PART III

31

ITEM 10.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

26

31

ITEM 11.

EXECUTIVE COMPENSATION

26

31

ITEM 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

26

31

ITEM 13.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

26

32

ITEM 14.

PRINCIPAL ACCOUNTANT FEES AND SERVICES

27

32

PART IV

33

ITEM 15.

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

28

33

ITEM 16.

FORM 10-K SUMMARY

28

33

 

 

2



 

PART I

Cautionary Note Regarding Forward‑LookingForward-Looking Statements

This Annual Report on Form 10 10-K (“Annual Report”) contains “forward looking statements”—that is, statements related to future, not past, events—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. Forward looking statements include any statement that does not directly relate to a current or historical fact. 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:following, many of which are, and will be, amplified by the COVID-19 pandemic: (i) the impact of global health concerns, including the impact of the current COVID-19 pandemic on the economies and financial markets and the demand for our products; (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 and state renewable portfolio standards; (ii)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; (iii)(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, in light of the COVID-19 pandemic; (v) our ability to continue to grow our business organically and through acquisitions; (iv)acquisitions, and the impairment thereto by the impact of the COVID-19 pandemic; (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, including with respect to any remote work arrangements implemented in response to the COVID-19 pandemic; (viii) the sufficiency of our liquidity and alternate sources of funding, if necessary; (v)(ix) our ability to realize revenue from customer orders and backlog; (vi)(x) our ability to operate our business efficiently, comply with our debt obligations, manage capital expenditures and costs effectively, and generate cash flow; (vii)(xi) the economy, including its stability in light of the COVID-19 pandemic, and the potential impact it may have on our business, including our customers; (viii)(xii) the state of the wind energy market and other energy and industrial markets generally and the impact of competition and economic volatility in those markets; (ix)(xiii) the effects of market disruptions and regular market volatility, including fluctuations in the price of oil, gas and other commodities; (x)(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; (xi)(xvi) our ability to successfully integrate and operate the business of Red Wolf Company, LLCacquired companies and to identify, negotiate and execute future acquisitions; (xii)(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) our ability to utilize various relief options enabled by the CARES Act; (xix) the limited trading market for our securities and (xiii)the volatility of market price for our securities; and (xx) 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. 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.

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

3

ITEM 1. BUSINESS

As used in this Annual Report, the terms “we,” “us,” “our,” “Broadwind” and the “Company” refer to Broadwind, Energy, Inc., a Delaware corporation headquartered in Cicero, Illinois, and its wholly‑ownedwholly-owned subsidiaries (the “Subsidiaries”). Dollars are presented in thousands unless otherwise stated.

Business Overview

Broadwind is a precision manufacturer of structures, equipment and components for clean technology and other specialized applications. We provide technologically advanced high‑high value products to customers with complex systems and stringent quality standards that operate in energy, mining and infrastructure sector customers,sectors, primarily in the United States of America (the “U.S.”). Our capabilities include but are not limited to the following: heavy fabrications, welding, metal rolling, coatings, gear cutting and shaping, gearbox manufacturing and repair, heat treat, assembly, engineering and packaging solutions.

We were incorporated in 1996 in Nevada as Blackfoot Enterprises, Inc., and through a series of subsequent transactions, became Broadwind Energy, Inc., a Delaware corporation, in 2008. Through acquisitions in 2007 and 2008, we focused on expanding upon our core platform as a wind tower manufacturer, established our Gearing segment, and developed and broadened our industrial fabrications capabilities. In early 2017, we acquired Red Wolf Company, LLC, a kitter and assembler of industrial components primarily supporting the global gas turbine market.In 2020, we rebranded to Broadwind, Inc., a reflection of our diversification progress to date and our continued strategy to expand our product and customer diversification outside of wind energy. Effective with our 2020 rebranding, we renamed certain segments. Our Towers and Heavy Fabrications segment was renamed to Heavy Fabrications and our Process Systems segment was renamed to Industrial Solutions. Our Gearing segment name remained the same.

Heavy Fabrications

We provide large, complex and precision fabrications to customers in a broad range of industrial markets. Our most significant presence is within the U.S. wind energy industry, although we have diversified into other industrial markets in order to improve our capacity utilization, reduce our customer concentration, and reduce our exposure to uncertainty related to governmental policies currently impacting the U.S. wind energy industry. The December 2015 multi-year extension of the federal Production Tax Credit (the “PTC”) and the Investment Tax Credit (“ITC”) for new wind energy development projects have helped stabilize wind energy markets for the medium term. Within the U.S. wind energy industry, we provide productssteel towers and repowering adapters primarily to wind turbine manufacturers. Our 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 (1650 tower sections), sufficient to support turbines generating more than 1,100 MW of power. We also provide precision gearinghave expanded our production capabilities and specialty weldments to a broad range of industrial customers forleveraged our 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. We manufacture components for buckets, shovels, car bodies, drill masts and other products that support mining and construction markets. In other industrial markets, we provide crane components, pressure vessels, frames and other structures.

Gearing

We provide gearing and gearboxes to a broad set of customers in diverse markets including; onshore and offshore O&G fracking and drilling, surface and underground mining, wind energy, steel, material handling, infrastructure, marine and other industrial applications.markets. We provide gearbox repair services and have manufactured loose gearing, gearboxes and systems, and provided heat treat services for aftermarket and OEM applications for nearly a century. While a significant portion of our business is manufactured to our customer’s specifications, we employ design and metallurgical engineers to meet our customer’s stringent quality requirements, to improve product performance, and reliability and to develop custom products that are integrated into our customer’s product offerings.

On January 30, 2017, we announced we had agreed upon

Industrial Solutions

We provide supply chain solutions, light fabrication, inventory management, kitting and assembly services, primarily serving the material terms to acquire Red Wolf Company, LLC (“Red Wolf”), a Sanford, North Carolina-based, privately held fabricator, kitter and assembler of industrial systems primarily supporting the globalcombined cycle natural gas turbine (“NGT”) market, for approximately $18,983. The transaction closed on February 1, 2017, and Red Wolf is being operated as a wholly-owned subsidiary, as more fully described in Note 21,  

3


“Business Combinations” in the notes to our consolidated financial statements.  The Red Wolf acquisition enables us to expandmarket. We have recently expanded our market reach competencies, capabilitiesinto the solar power generation market by leveraging our existing core competencies. We leverage a global supply chain to provide instrumentation & controls, valve assemblies, sensor devices, fuel system components, electrical junction boxes & wiring, energy storage services and customer relationships.  The Red Wolf acquisition aligns with our growth strategy focused on expandingelectromechanical devices. We also provide packaging solutions and diversifying our business through organic growthfabricate panels and strategic bolt-on acquisitions.  Red Wolf’s operations are reported in the “Process Systems” segment.    

In September 2015, our Board of Directors (the “Board”) approved a plan to divest or otherwise exit our Services segment. The divestiture was substantially completed in December 2015. Consequently, this segment has been reported as a discontinued operation. All current and prior period financial results have been revised to reflect these changes. As a result of the 2017 Red Wolf acquisition and the divestiture of the Services segment, we revised our segment presentation to include three reportable operating segments: Towers and Weldments, Gearing, and Process Systems. See Note 16 “Segment Reporting” for further discussion of our segments. In the fourth quarter 2017, the Towers and Heavy Fabrications segment changed its name from Towers and Weldments to Towers and Heavy Fabrications to more accurately reflect the nature of the business’ activities.

In 2017, 72% of our sales were linked to new wind energy installations, predominantly for towers used for new wind turbines, down from 92% in 2016. The market for new U.S. wind energy installations is affected by a number of factors, including: (i) economic growth and the associated demand for new electricity generation; (ii) the cost of competing energy sources, primarily natural gas and solar power; (iii) federal and state‑level renewable energy development incentives; (iv) available transmission infrastructure and the proliferation of smart grid technology; (v) improvements in wind energy cost competitiveness resulting from the maturation of technologies and services within the wind energy industry; and (vi) state and federal government actions relating to regulation of carbon emissions.

The highest impact development incentive has been the PTC for new wind energy projects. Legislative support for the PTC has been intermittent in the past, which has caused volatility in the demand for new wind energy projects. For example, after the PTC was allowed to expire briefly in 2013, new installations at wind farms fell 92%, causing significant disruption in the industry. In December 2015, the PTC was extended for an additional five-year period, which is helping to stabilize wind energy markets and attract new investment in the medium term. The 2015 extension phases-out the amount of the credit allowed over time based on the year when construction of the wind project is started. The phase-out schedule provides for: 100% extension of the credit for projects commenced in 2015 and 2016, 80% for projects commenced in 2017, 60% in 2018 and 40% in 2019. Although the clearer investment horizon provided by the long-term extension is expected to stabilize the market for our products, it may also attract new competition in our industry.

The market for wind towers is closely correlated to the demand for new wind turbines. However, demand for our towers is also reflective of the level of market competition, the strength of our customer relationships and the proximity of our plants to wind farm development sites, the economics and availability of imported towers, as well as other factors. In 2016, orders for our wind towers were strong, driven by a multi-year baseload order received in response to the PTC extension. Our orders weakened in 2017 due principally to the consolidation of our two largest customers, and their decisionsub-assemblies to reduce inventories of towers and other turbine components globally.

Outside of the market for new wind energy installations, we serve a number of other industrial markets, including O&G exploration and extraction, mining, NGT, compressed natural gas (“CNG”) distribution, and steel production, as well as replacement gearing for the installed wind energy base. The market for O&G equipment and mining equipment was extremely weak in 2016 due to the sustained decline in energy prices, with a rebound occurring in this market early in 2017 as prices recovered significantly in response to changes in the supply and demand balance. Due to the rebound in the market conditions, we have increased our workforce and raised production in order to meet our customers’ demand. Our products sold into these markets include gearboxes (both newcosts, improve manufacturing velocity and rebuilt), loose gearing and Heavy Fabrications, including CNG equipment. reliability.

The following table detailssummarizes the percentagekey markets served and product offering of our revenue generated in each sector for the past two years:three segments:

 

 

 

 

 

 

 

 

Annual

 

 

 

Revenue

 

 

 

2017

 

2016

 

Wind

    

72

%  

92

%  

Industrial

 

28

%  

 8

%  

Total

 

100

%  

100

%  

4


 

Segment

Heavy Fabrications

Gearing

Industrial Solutions

Key Markets Served

-Wind Power Generation

-Onshore & Offshore

-Combined Cycle Natural

-Surface and Underground Mining

Oil and Gas Fracking/Drilling

Gas Power Generation

-Material Handling-Surface and Underground Mining-Solar Power Generation

-Oil and Gas

-Steel Production

-Wind Power Generation

-Construction

-Infrastructure

-Infrastructure

-Wind Power Generation

-Pulp and Paper

-Material Handling

-Marine

-Waste Processing

Products

-Wind Towers

-Loose Gearing

-Supply Chain Solutions

-Industrial Fabrications:

-Custom Gearboxes

-Inventory Management

Mining Components

-Gearbox Repair

-Kitting and Assembly

Crane Components-Heat Treat Services-Solar Inverter Racks
Pressure Reducing Systems-Solar Powered Shelters/Charging Stations

Other Frames/Structures

Pressure Vessels

Business and Operating Strategy

We intend to capitalize on the markets for wind energy, NGT power generation,gas turbines, O&G, mining, and other industrial verticals in North America by leveraging our core competencies in large precision gearingwelding, manufacturing, assembling and drivetrains and industrial welding.kitting. Our strategic objectives include the following:following, many of which are subject to risks and uncertainties that are, and have been, exacerbated by the COVID-19 pandemic and any worsening of the global business and economic environment as a result:

·

Improve our commercial efforts and expand and diversifyDiversify our customer base.  and product line concentrations. In 2017,2022, sales derived from our top five customers represented 69% of total sales and sales into the wind energy industry represented 48% of total sales. This is an improvement as compared to 2017, when our top five customers comprised 85% of total sales modestly improved diversification versus 91%and sales in 2016.the wind energy industry represented 72% of total sales. To reduce the concentration of sales and our wind energy industry concentration,sales, we have focused our market researchproduct development activities and our sales force on expanding and diversifying our customer base. The Red Wolf acquisition in early 2017 further improvedbase and product lines. We are leveraging existing customer relationships within each of our segments to cross sell our broad portfolio of capabilities. We utilize a stage gate model for new product development, which provides a framework for evaluating opportunities and commercialization. Additionally, we continue to use new customer and end market diversification.product revenues as metrics within our variable executive compensation programs. Our diversification efforts are impacted in part by the end-market demand outlook. 

5

·

Improve capacity utilization and profitability.  broaden our manufacturing capabilities. Subject to labor availability, we have manufacturing capacity available that could support a significant increase in our annual revenues for heavy fabrications, gearing and industrial solutions. We are working to improve our capacity utilization and financial results by leveraging our existing manufacturing capacity and adjusting capacity where we can, in response to changing market conditions. TowerIn our Heavy Fabrications segment, we have expanded production capabilities and gearleveraged our fabrication competencies to support growth in mining, material handling, and other industrial markets. 

Pursue opportunistic acquisitions as well as organic investments. In addition to existing business and operating strategies, we are endeavoring to identify, and opportunistically execute on, accretive acquisitions and organic investments that will allow us to achieve further growth. Our investment criteria for opportunistic acquisitions as well as organic investments include, among other things, our ability to: improve manufacturing each requirecompetencies, support our existing capacity utilization strategy, enhance our diversification strategy and/or augment our penetration into renewable markets.  Additionally, we are developing new variations of our Pressure Reducing Systems (“PRS”) unit which supplies compressed natural gas to regions without established infrastructure as part of the virtual pipeline. We believe that execution of our investment strategy provides significant capital investments. We have manufacturing capacity available that could supportopportunity to generate stockholder value, through profitable growth and leveraging a significant increase in our annual revenues, particularly for gearing and heavy fabrications. In 2017, we expanded our Abilene, Texas tower plant (the “Abilene Tower Facility”unrealized economic asset, over $288 million of net operating losses (“NOLs”)as of December 31, 2022 which can be used to take advantage of the strong regional demand for towers.cover future prospective tax liabilities. 

·

Reduce fixed manufacturing costs and operating expensesStreamline front-end processes to improve profitability. During 2016, we accelerated our focus on aggressively managing down our manufacturing overhead and expense base in order to improve profit margins and profitability. We established a targeted year-over-year reduction in these costs of $8 million, which we successfully met in 2016.In response to lower tower demand from our customers in 2017, we further reduced our cost structure by $2.3 million.  In our Gearing segment, after several years of reducing workforce and selling excess gear cutting and grinding equipment, we are modestly increasing our production capacity in response to improving market conditions. Outside of Gearing, we have focused on reducing professional fees and expenses, lowering our administrative costs and eliminating non-critical overhead positions.

·

Improve production technology and operational efficiency.  efficiencyWe believe that the proper coordination and integration of the supply chain, plusconsistent use of systems to manage our production activities and “Continuous Improvement” initiatives are key factors that enable high operating efficiencies, increased reliability, better delivery and lower costs. As customer specifications have become increasingly stringent,We utilize robust Advanced Product Quality Processes (APQP) to support the supply chain has globalized and the tower industry has matured, we have periodically experienced difficulties maintaining consistent output in our manufacturing facilities.introduction of new products. We have developed better supply chain expertise, worked with lean enterprise resources, upgraded and improved systems utilization and invested capital to help enhance our operational efficiency and flexibility. We have implemented scheduling software and have expanded our engineering organization to support the growing complexity of our expanded customer base and product lines. We have staffed our operations with Continuous Improvement experts in order to optimize our production processes to increase output, leverage our scale and lower our costs while maintaining product quality. During 2022 and 2021, supply chain and staffing constraints caused by the COVID-19 pandemic resulted in increased manufacturing inefficiencies. 

COMPANY HISTORY

We were incorporated in 1996 in Nevada as Blackfoot Enterprises, Inc., and through a series of subsequent transactions, became Broadwind Energy, Inc., a Delaware corporation, in 2008. Through several acquisitions in 2007 and 2008, we focused on expanding upon our core platform as a wind tower component manufacturer, established our Gearing segment, and developed our Heavy Fabrications capabilities. In early 2017, we acquired Red Wolf, a kitter and assembler of industrial systems primarily supporting the global NGT market.

SALES AND MARKETING

We market our towers, gearing, kitting and heavy fabrications, productsgearing, and industrial solutions through a direct sales force, andsupplemented with independent sales agents.agents in certain markets. Our sales and marketing strategy is to develop and maintain long‑termlong-term relationships with our existing customers, and seek opportunities to expand these relationships across our business units. Our business development team uses market data, including marketing databases, information gathered at industry and trade shows, internet research and website marketing to identify and target new customers. 

6

CUSTOMERS

We manufacture products for a variety of customers in the wind energy, O&G, gas turbine, mining, and infrastructure sector customers.other industrial markets. Within the wind energy industry, our customer base consists primarily of wind turbine manufacturers who supply end‑end users and wind farm operators with wind turbines, and wind farm operatorsgearbox re-manufacturers who use our replacement gears in their installed turbines.replacement gearboxes. The wind turbine market is very concentrated. According to Wood Mackenzie Power & Renewables 2022 industry data, the top fourwind turbine manufacturers comprised approximately 90% of the U.S. market. As a result, although we have historically produced towers for a broad range of wind turbine manufacturers, in any given year a limited number of customers have accounted for the majority of our revenues. Within the O&G and mining industries, our customer base consists of manufacturers of hydraulic fracturing and mud pumps, drilling and production equipment, mining equipment, and off‑off highway vehicles. Within the NGTgas turbine industry, our customers supply end-users with natural gas turbines and after-market replacement and efficiency upgrade packages. To support the effortsWithin our other industrial markets served, our customer base includes steel producers, ship builders, and manufacturers of material handling, pulp and paper and other power generation equipment. Sales to Siemens Gamesa Renewable Energy (“SGRE”) and GE Renewable Energy each represented greater than 10% of our sales force,consolidated revenues for the years ended December 31, 2022 and 2021. The loss of one of these customers could have a material adverse effect on our business, results of operation or financial condition. As a result, we utilize a number of marketing tacticshave an ongoing initiative to builddiversify our brand and position and promote our products. Our efforts include participation in industry conferences, media relations, use of social media and other channels and use of our website to connect with customers.customer base.

5


 

Table of Contents

COMPETITION

COMPETITION

Each of our businesses faces competition from both domestic and international companies. The December 2015 extension ofIn recent years, the PTC has boosted the market but has also attracted additional investment and competition in the wind energy industry. The industrial gearing industry has experienced consolidation of producers and acquisitions by strategic buyers in response to strong international competition, although recent tariff and reduced O&G and mining demand priorsupply chain uncertainties have caused buyers to 2017.shift more of their purchases to domestic gear manufacturers. 

For

Within the wind tower product line of our Towers and Heavy Fabrications segment, the largest North American based competitor is Arcosa Inc., which was formerly a Trinity Industries.Industries company. Other competitors include VestasC.S. Wind, Systems, which has periodically produced towers for third party customers in addition to meeting its own captive tower requirements, anda South Korean Company, Marmen Industries, a Canadian company, that also hasand GRI Renewable Industries, a Spanish company, each of which have production facilityfacilities in the U.S. We also face competition from imported towers, although importsin recent years a number of trade cases have periodically significantly reduced competition from imports. 

Imports from China and Vietnam have substantially ceaseddeclined following a determination by the U.S. International Trade Commission (“USITC”) in 2013 that wind towers from those countries were being sold in the U.S. at less than fair value. As a result of the determination, the U.S. Department of Commerce (“USDOC”) issued antidumping and countervailing duty orders on imports of wind towers from China and an antidumping duty order on imports of towers from Vietnam. We continueIn May 2018, the U.S. Court of Appeals affirmed the decision from the U.S. Court of International Trade and at the same time excluded CS Wind Vietnam from the antidumping order. In April 2019, the USDOC extended the term of these duties for an additional five-year period. Following a renewed surge of tower imports from countries not impacted by existing tariffs, in July 2020, the USDOC issued antidumping and countervailing duty orders on imports of wind towers from Canada, Indonesia, and Vietnam and an antidumping order on imports of towers from Korea.  Then in September 2020, a new trade case was brought before the USDOC and USITC, to monitorassess whether wind tower imports.towers imported from India, Malaysia, and Spain were being sold in the U.S. at less than fair value. The USDOC and USITC issued affirmative final determinations in all three antidumping (India, Malaysia, and Spain) and two countervailing duty cases (India and Malaysia). The USDOC imposed orders for two cases in August 2021 and the remainder in December 2021.Appeals of several of the USDOC determinations are currently pending at the CIT and the CAFC.

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Within our industrial fabrications product line of our Heavy Fabrications segment, our competitors in a fragmented market include Weldall Manufacturing and AT&F Advanced Metals, along with a large number of other regional competitors. The primary differentiator among fabricators is the range of manufacturing and machining capabilities, including lifting capacity, precision machining, heat treatment capacity and the sophistication of quality systems.

In our Gearing segment, which is focused on the O&G, wind energy, mining and steel markets, ourwe compete with domestic and international manufacturers who produce gears greater than one meter in diameter. Our key competitors in a fragmented market include Overton Chicago Gear, Cincinnati Gearing Systems, Merit Gear, Milwaukee Gear and Horsburgh & Scott. In addition, we compete with the internal gear manufacturing capacity of relevant equipment manufacturers and face competition from foreign competitors.

In our Process SystemsIndustrial Solutions segment, which is primarily focused on the NGTgas turbine market, ourwe compete with electrical supply distributors. Our key competitors include Gexpro and Eastern Industrial.other small independent companies.

ENVIRONMENTAL

REGULATION AND COMPLIANCE

Production Tax Credit/Investment Tax Credit

The most impactful development incentive for our products has been the production tax credit (“PTC”) for new wind energy projects, which provides federal income tax credits based on electricity produced from qualifying wind turbines.Legislative support for the PTC has been intermittent since its introduction in 1992, which has caused volatility in the demand for new wind energy projects. 

In December 2020, the Consolidated Appropriations Act of 2021 (“COVID IV”), a $2.3 trillion spending bill that combines a $1.4 trillion omnibus spending bill for federal fiscal year 2021 with $900 billion in stimulus relief for the COVID-19 pandemic was signed into law. As part of COVID IV, the PTC was extended for an additional year, allowing for a 60% credit for projects that start construction by the end of 2021.  In order to benefit from the PTC, qualifying projects must either be completed within four years from their start of construction, or the developer must demonstrate that its projects are in continuous construction between start of construction and completion. As a result of COVID IV, the PTC will subsidize wind projects commenced as late as 2021 and completed by 2025, or later if continuous construction can be demonstrated. Included in COVID IV is the addition of a new 30% investment tax credit (“ITC”) created for offshore wind projects that start construction by the end of 2025.  The provision will retroactively apply to projects that started production in 2016.

On August 16, 2022, the Inflation Reduction Act (“IRA”) was enacted to reduce inflation and promote clean energy in the United States. The IRA modifies and extends the PTC until the later of 2032 or when greenhouse gas emissions have been reduced by 75% compared to 2022. It provides for tax credits up to a maximum of 30%, adjusted for inflation annually, for electricity generated from qualified renewable energy sources where taxpayers meet prevailing wage standards and employ a sufficient proportion of qualified apprentices from registered apprenticeship programs. It also provides a bonus credit for qualifying clean energy production in energy communities. 

The IRA also includes advanced manufacturing tax credits for manufacturers of eligible components, including wind and solar components (“45X credits”). Manufacturers qualify for the 45X credits based on the electricity output for each component produced and sold in the US starting in 2023 through 2032. The credit amount varies based on the eligible component, which includes solar components, wind energy components, inverters, qualifying battery components, and critical minerals. Tower manufacturers are eligible for credits of $0.03 per watt for applicable components produced. Manufacturers can apply to the Internal Revenue Service for cash refunds of the 45X credits for up to five years. After the first five years, the 45X credits are transferable and can be sold to third parties for cash. We are waiting for the Internal Revenue Service and the U.S. Treasury Department to provide implementation guidance for the legislation. 

Investment in Infrastructure

In November 2021, the federal Infrastructure Investment and Jobs Act (“IIJA”) was signed into law. The IIJA provides for $548 billion in new infrastructure spending over the next five years and $650 billion in previously allocated funds. The IIJA allocated $62 billion to the Department of Energy for various projects focused on clean energy resources and expanding renewable energy. However the timing of the award of projects funded by the IIJA is uncertain thus the impact on our business is uncertain.

Occupational Safety and Health Administration

Our operations are subject to regulation of health and safety matters by the U.S. Occupational Safety and Health Administration. We believe that we take appropriate precautions to protect our employees and third parties from workplace injuries and harmful exposure to materials handled and managed at our facilities. However, claims asserted in the future against the Company for work-related injury or illnesses could increase our costs.

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Environmental

Our operations are subject to numerous federal, state and local environmental laws and regulations. Although it is our objective to maintain compliance with these laws and regulations, it may not be possible to quantify with certainty the potential impact of actions regardinginvolving environmental matters, particularly remediation and other compliance efforts that we may undertake in the future. Several of our facilities have a history of industrial operations, and contaminants have been detected at some of our facilities.

BACKLOG

We sell our towers under either supply agreements or individual purchase orders (“POs”), depending on the size and duration of the purchase commitment. Under the supply agreements, we typically receive a purchase commitment for towers to be delivered in future fiscal quarters, then receive POs on a periodic basis depending upon the customer’s forecast of production volume requirements within the contract terms. For our Gearing and Process SystemsIndustrial Solutions segments, sales are generally based on individual POs. As of December 31, 2017,2022, the dollar amount of our backlog believed to be firm under our supply agreements and POs awarded was approximately $138 $297million. This represents a 27% decrease 179% increasefrom the backlog at December 31, 2016, which2021. Backlog as of December 31, 2022 and 2021 is due to the receiptnet of a three-year tower framework agreementrevenue recognized over time as described in mid-2016, against which we are still delivering. The reduction in tower backlog has been partially offset by higher gearing orders due to the rebound in the O&G market, and the additionNote 2, “Revenues” of Red Wolf backlog pursuant to the February 2017 acquisition.our consolidated financial statements.

SEASONALITY

The majority of our business is not affected by seasonality.

EMPLOYEES

We had 399499 U.S.-based employees at December 31, 2017,2022, of which 329451 were in manufacturing related functions and 7048 were in administrative functions. As of December 31, 2017,2022, approximately 24%19% of our employees were covered by collective bargaining agreements with local unions in our Cicero, Illinois and Neville Island, Pennsylvania locations. We anticipate that the collective bargaining agreements with our union members will be renewed through contract renegotiation near the contract expiration dates, although there can be no assurance that any such agreements will be concluded.The three-year collective bargaining agreement with the Neville Island union was renegotiated in November 2017,2022 and is expected to remain in effect through October 2022. The2026.A four-year collective bargaining agreement within regards to the Cicero, union expiresIllinois facility was negotiated in February 2018; the parties are currently negotiating a new collective bargaining agreement.2022 and is expected to remain in effect through February 2026. We believe that our relationship with our employees is generally positive. The table below summarizes our employees as of December 31, 2022:

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Number of Employees As of

Segment

December 31, 2022

Heavy Fabrications

309

Gearing

134

Industrial Solutions

42

Corporate

14

Total

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RAW MATERIALS

The primary raw material used in the construction of wind towersheavy fabrication and gearing products is steel in the form of plate, bar stock, forgings orand castings. The market for tower steel and internal packages has become increasingly globalized. Although we are generally responsible for procurement of the raw materials, our global tower customers often negotiate the prices and terms for steel purchases, and, through a “directed buy”, we purchase under these agreements. We then pass the steelraw material cost through to our end customer plus a conversion margin.

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Outside of these directed buys, we operate a multiple supplier sourcing strategy and source our raw materials through various suppliers located throughout the U.S. and abroad. We generally do not have long‑long term supply agreements with our raw materialsmaterial suppliers, and closely match terms with those of our customers to limit our exposure to commodity price fluctuations. We believe that we will be able to obtain an adequate supply of steel and other raw materials to meet our manufacturing requirements, although from time to time we have faced shortages of specific grades of steel. Additionally, due to the globalization of the supply chain for tower steel prompted by the increasing use of directed buys, we faced supply disruptions during 2015 associated with the West Coast port labor slowdowns. Such shortages have periodically limited our ability to meet customer demand and caused manufacturing inefficiencies. We have made modifications to our supply chain management practices to deal more effectively with potential disruptions arising from these purchasing practices.

Although we have been affected by global supply chain issues that are at least partially a result of the COVID-19 pandemic, we believe that we will be able to obtain an adequate supply of steel and other raw materials in 2023 to meet our manufacturing requirements. From time to time we have faced shortages of specific grades of steel, internal packages and delays associated with other materials from foreign sources including shortages and delays resulting from the impact of the COVID-19 pandemic.  

QUALITY CONTROL

We have a long‑standinglong-standing focus on processes for ensuring the manufacture of high‑qualityhigh-quality products. To achieve high standards of production and operational quality, we implement strict and extensive quality control and inspections throughout our production processes. We maintain internal quality controls over all core manufacturing processes and carry out quality assurance inspections at the completion of each major manufacturing step to ensure the quality of our products. The manufacturing process at our Gearing segment, for example, involves transforming forged steel into precision gears through cutting, heat treating, testing and finishing. We inspect and test raw materials before they enter the assembly process, re‑testretest the raw materials after rough machining, test the functioning of gear teeth and cores after thermal treatment and accuracy test final outputs for compliance with product specifications. We believe our investment in industry‑industry leading heat treatment, high precision machining, specialized grinding technologies and cutting‑edgecutting-edge welding has contributed to our high product reliability and the consistent performance of our products under varying operating conditions. Our Gearing segment is ISO 9001:2008 certified. Our tower manufacturing plants in Manitowoc, Wisconsin and Abilene, TexasAll of our core operating facilities are ISO 9001:2010 certified. Our global NGT manufacturing plant in Sanford, North Carolina is ISO 9001:2015 certified.

CUSTOMERS

INFORMATION SYSTEMS

We manufacture products for a varietyutilize standardized information technology systems across all areas of customersquoting and estimating, enterprise resource planning, materials resource planning, capacity planning and accounting, project execution and financial controls. We provide information technology oversight and support from our corporate headquarters in Cicero, IL. The operational information systems we employ throughout the wind energy, O&G, miningCompany are industry-specific applications that in some cases have been internally developed or modified by the vendor and other infrastructure industries. The majority ofimproved to fit our wind energy industry customer base consists of wind turbine manufacturers who supply wind farm operatorsoperations. Our enterprise resource planning software is integrated with our operational information systems wherever possible to deliver relevant and wind farm developersreal-time operational data. We believe our information systems provide our people with completed wind turbines. In the other industrial sectors, we selltools to execute their individual job function and achieve our products through our trained sales force or through manufacturers’ representatives to a wide variety of customers. The wind turbine market is very concentrated. According to American Wind Energy Association 2017 industry data, the top four wind turbine manufacturers constituted approximately 99% of the U.S. market. As a result, although we have historically produced towers for most of these global wind turbine manufacturers, in any given year a limited number of customers have accounted for the majority of our revenues. Sales to Siemens Gamesa Renewable Energy (“SGRE”), a company formed in early 2017 through the merger of Siemens and Gamesa’s global wind energy businesses, represented greater than 10% of our consolidated revenues for the year ended December 31, 2017 and sales to SGREand General Electric each represented greater than 10% of our consolidated revenues for the year ended December 31, 2016. The loss of one of these customers could have a material adverse effect on our business. As a result, we are seeking to diversify our customer base.strategic initiatives.

WORKING CAPITAL

Our primary customers are wind turbine manufacturers and various other

We sell to a broad range of industrial customers. In general, we produce to order rather than to stock. For wind towers, our primary business,largest product line, the industry has historically used customized contracts with varying terms and conditions between suppliers and customers, depending on the specific objectives of each party. As such, we produce to order rather than to stock. Our practices mirror this historical industry practice of negotiating agreements on a case‑by‑casecase- by-case basis. As a result, working capital needs, including levels of accounts receivable (“A/R”), customer depositsaccounts payable (“A/P”), and inventory, can vary significantly from quarter to quarter based on the contractual terms associated with each quarter’s sales, such as whether and when we are required to purchase and supply steel pursuant to such sales.meet our contractual obligations. Customer deposits can vary significantly from quarter to quarter based on customer mix, contractual terms associated with each quarter’s sales and the timing impacts associated with customers placing orders for future production. In recent years, our larger customers have increasingly used supplier financing programs, whereby a third-party lender advances customer payments to us net of an interest charge. The combination of customer deposits and supplier financing programs arrangements may significantly reduce our working capital requirements.

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In analyzing our liquidity, we focus onan important short-term metric is our use of operating working capital (“OWC”) in relationshiprelation to revenue. OWC is comprised of A/R and inventories, net of accounts payable (“A/P”)P and customer deposits. Our OWC at December 31, 20172022 was $11,376$475, or 16%0.3% of trailing three months of sales annualized. This is an increase of $12,215 fromannualized, compared to December 31, 2016,2021, when OWC was ($839),$18,635, or (.4%)18% of trailing three months of sales annualized.  The increasedecrease in OWC was driven primarily by reducedthe timing and level of customer deposits due to lower production levels in our Towers and Heavy Fabrications segment in late 2017.received for future scheduled production.

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CORPORATE INFORMATION

Our principal executive office is located at 3240 South Central Avenue, Cicero, IL 60804. Our phone number is (708) 780‑4800780-4800 and our website address is www.bwen.com.

OTHER INFORMATION

On our website at www.bwen.com, we make available under the “Investors” menu selection, free of charge, our Annual Reports on Form 10‑K,10-K, Quarterly Reports on Form 10‑Q,10-Q, Current Reports on Form 8‑8 K, and amendments to these reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after such reports or amendments are electronically filed with, or furnished to, the Securities and Exchange Commission (the “SEC”). Materials that we file or furnish to the SEC may also be read and copied at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, DC 20549. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1‑800‑SEC‑0330. Also, the SEC maintains an Internet site at www.sec.gov that contains reports, proxy and information statements, and other information that we file electronically with the SEC.

ITEM 1A. RISK FACTORS

RISKS RELATED TO OUR INDUSTRIES

Our financial and operating performance is subject to certain factors out of our control, including the state of the wind energy market in North America.

As a supplier of products to wind turbine manufacturers and owners and operators of wind energy generation facilities, our

Our results of operations (like those of our customers) are subject to general economic conditions, and specifically to the state of the wind energy market. In addition to the state and federal government policies supporting renewable energy described above,below, the growth and development of the larger wind energy market in North America is subject to a number of factors, including, among other things:

·the availability and cost of financing for the estimated pipeline of wind energy development projects;

the availability and cost of financing for the estimated pipeline of wind energy development projects;

·

the cost of electricity, which may be affected by a number of factors, including government regulation, power transmission, seasonality, fluctuations in demand, and the cost and availability of fuel, andparticularly natural gas;

the cost of raw materials used to make wind turbines, particularly natural gas;

steel

·

the general increase in demand for electricity or “load growth”;

·the costs of competing power sources, including natural gas, nuclear power, solar power and other power sources;

the costs of competing power sources, including natural gas, nuclear power, solar power and other power sources;

·

the development of new power generating technology, advances in existing technology or advances in existing technology or discovery of power generating natural resources;

·the development of electrical transmission infrastructure;

the development of electrical transmission infrastructure;

·

state and federal laws and regulations regarding avian protection plans and noise or turbine setback requirements;

·

state and federal laws and regulations particularly those favoring low carbon energy generation alternatives;regarding avian protection plans and noise or turbine setback requirements;

·other state and federal laws and regulations, particularly those favoring low carbon energy generation alternatives;

administrative and legal challenges to proposed wind energy development projects;

·administrative and legal challenges to proposed wind energy development projects;

the effects of global climate change such as more frequent or more extreme weather events, changes in temperature and precipitation patterns, changes to ground and surface water and other related phenomena;

the improvement in efficiency and cost of wind energy, as influenced by advances in turbine design and operating efficiencies; and

public perception and localized community responses to wind energy as influenced by advances in turbine design and operating efficiencies; and

projects.

·

public perception and localized community responses to wind energy projects.

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In addition, while some of the factors listed above may only affect individual wind energy project developments or portions of the market, in the aggregate they may have a significant effect on the successful development of the wind energy market as a whole, and thus affect our operating and financial results.

The U.S. wind energy industry is significantly impacted by tax and other economic incentives and political and governmental policies. A significant change in these incentives and policies could significantly impact our results of operations and growth.

We supply products to wind turbine manufacturers and owners and operators of wind energy generation facilities. The U.S. wind energy industry is significantly impacted by federal tax incentives and state Renewable Portfolio Standards (“RPS’s”). Despite recent reductions in the cost of wind energy, due to variability in wind quality and consistency, and other regional differences, wind energy may not be economically viable in certain parts of the country absent such incentives. These programs have provided material incentives to develop wind energy generation facilities and thereby impact the demand for our products. The increased demand for our products that generally results from the credits and incentives could be impacted by the expiration or curtailment of these programs.

One such federal government program, the PTC, provides economic incentives to the owners of wind energy facilities in the form of a tax credit. The PTC has been extended several times since its initial introduction in 1992. The FY16 Omnibus Appropriations Bill, passed on December 18, 2015, included a five-year extension and phase-down of the PTC, as well as providing the option to elect the ITC for wind energy projects. As a result, the PTC has been extended at full value for projects commenced in 2015 and 2016, and will continue at 80% of full value for projects commenced in 2017, 60% for projects commended in 2018, and 40% for projects commenced in 2019. Similarly, for the ITC election, projects that started construction in 2015 and 2016 are eligible for a full 30% ITC, and projects that start construction in 2017, 2018 and 2019 are eligible for an ITC of 24%, 18% and 12%, respectively. As before, the rules allow wind energy projects to qualify so long as construction is started before the end of the respective period.

State RPSs generally require or encourage state‑regulated electric utilities to supply a certain proportion of electricity from renewable energy sources or to devote a certain portion of their plant capacity to renewable energy generation. Typically, utilities comply with such standards by qualifying for renewable energy credits evidencing the share of electricity that was produced from renewable sources. Under many state standards, these renewable energy credits can be unbundled from their associated energy and traded in a market system, allowing generators with insufficient credits to meet their applicable state mandate. These standards have spurred significant growth in the wind energy industry and a corresponding increase in the demand for our products. Currently, the majority of states have RPS’s in place and certain states have voluntary utility commitments to supply a specific percentage of their electricity from renewable sources. The enactment of RPS’s in additional states or any changes to existing RPS’s (including changes due to the failure to extend or renew the federal incentives described above), or the enactment of a federal RPS or imposition of other greenhouse gas regulations, may impact the demand for our products. We cannot assure that government support for renewable energy will continue. The elimination of, or reduction in, state or federal government policies that support renewable energy could have a material adverse impact on our business, results of operations, financial performance and future development efforts.

We are substantially dependent on a few significant customers.

Historically, the majority of our revenues are highly concentrated with a limited number of customers. In 2017, one customer, SGRE, accounted for more than 10% of our consolidated revenues, and our five largest customers accounted for 85% of our consolidated revenues. Certain of our customers periodically have expressed their intent to scale back, delay or restructure existing customer agreements, which has led to reduced revenues from these customers. It is possible that this may occur again in the future. As a result, our operating profits and gross margins have historically been negatively affected by significant variability in production levels, which has created production volume inefficiencies in our operations and cost structures.

Our customers may be significantly affected by disruptions and volatility in the economy and in the wind energy market.

Market disruptions and regular market volatility, including decreases in oil and commodity prices, may adversely impact our customers’ ability to pay amounts due to us and could cause related increases in our working capital or borrowing needs. In addition, our customers have in the past attempted and may attempt in the future to renegotiate the terms of contracts or reduce the size of orders with us as a result of disruptions and volatility in the markets. We cannot predict with certainty the amount of our backlog that we will ultimately ship to our customers.

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Market disruptions and regular market volatility may also result in an increased likelihood of our customers asserting warranty or remediation claims in connection with our products that they would not ordinarily assert in a more stable economic environment. In the event of such a claim, we may incur costs if we decide to compensate the affected customer or to engage in litigation with the affected customer regarding the claim. We maintain product liability insurance, but there can be no guarantee that such insurance will be available or adequate to protect against such claims. A successful claim against us could have a material adverse effect on our business.

Consolidation among wind turbine manufacturers could increase our customer concentration and/or disrupt our supply chain relationships.

Wind turbine manufacturers are among our primary customers. There has been consolidation among these manufacturers, and more consolidation may occur in the future. For example, both Siemens Energy, Inc. and Gamesa Wind US, LLC, were customers for our tower business until their business combination in early 2017, at which time SGRE became our largest customer.they merged into SGRE. Customer consolidation may result in pricing pressures, to which we are subject, leading to downward pressure on our margins and profits, and may also disrupt our supply chain relationships.

We may have difficulty maintaining our current financing arrangements or obtaining additional financing when needed or on acceptable terms, and there can be no assurance that our operations will generate cash flows in an amount sufficient to enable us to pay our indebtedness.

We rely on banks and capital markets as a source of liquidity for capital requirements not satisfied by cash flows from operations or asset sales. We have experienced operating losses for most periods during which we have operated, and our committed sources of liquidity may be inadequate to satisfy our operational needs. There can be no assurances that even if we were to achieve in part any or all of our strategic objectives that we would be successful in improving profitability. If we are not able to access capital at competitive rates, the ability to implement our business plans may be adversely affected. In the absence of access to capital resources, we could face substantial liquidity problems and might be required to dispose of material assets or operations at times when the prices for such assets or operations are depressed. In such event, we may not be able to consummate those dispositions. Furthermore, the proceeds of any such dispositions may not be adequate to meet our debt service obligations when due.

Additionally, our ability to comply with the restrictive covenants contained in our debt instruments, to make scheduled payments on our existing or future debt obligations, and to fund our operations will depend on our future financial and operating performance. There can be no assurances that our operations will generate sufficient cash flows to enable us to maintain compliance with the restrictive covenants contained in our debt instruments, pay our remaining indebtedness or to fund our other liquidity needs. If we cannot make scheduled payments on our debt, we will be in default and, as a result, among other things, our debt holders could declare all outstanding principal and interest to be due and payable which could force us to liquidate certain assets or alter our business operations or debt obligations. Moreover, if we are unable to obtain additional capital or if our current sources of financing including customer advances, are reduced or unavailable, our overall operations could be materially and negatively impacted.  In addition, raising capital in the equity capital markets could result in limitations on our ability to use our net operating loss carryforwards.

We face competition from industry participants who may have greater resources than we do.

Our businesses are subject to risks associated with competition from new or existing industry participants who may have more resources and better access to capital. Certain of our competitors and potential competitors may have substantially greater financial resources, customer support, technical and marketing resources, larger customer bases, longer operating histories, greater name recognition and more established relationships in the industry than we do. Among other things, these industry participants compete with us based upon price, quality, location and available capacity. We cannot be sure that we will have the resources or expertise to compete successfully in the future. We also cannot be sure that we will be able to match cost reductions by our competitors or that we will be able to succeed in the face of current or future competition.

OPERATIONAL RISKS

We are substantially dependent on a few significant customers and the ordering levels for our products may vary based on customer needs.

Historically, the majority of our revenues are highly concentrated with a limited number of customers.  Some of the markets we serve have a limited number of customers.  In 2022, two customers, SGRE and GE Renewable Energy, each accounted for more than 10% of our consolidated revenues, and our five largest customers accounted for69% of our consolidated revenues. Certain of our customers have periodically expressed their intent to scale back, delay or restructure existing customer agreements, which has led to reduced revenues from these customers and periodic deviations in expected ordering levels. It is possible that this may occur again in the future. Additionally, not all of our customers make purchases every year. As a result, our operating profits and gross margins have historically been negatively affected by significant variability in production levels, which has created production volume inefficiencies in our operations and cost structures. Because of this variability, we believe that comparisons of our operating results in any particular quarterly period may not be a reliable indicator of future performance.

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We face significant risks associated with uncertainties resulting from changes to policies and laws with the currentperiodic changes in the U.S. administration.administration as well as risks associated with changes in our relationship with our significant customers. 

The change

Changes of administration in the U.S. federal government may affect our business in a manner that currently cannot be reliably predicted, especially given the potentially significant changes to various laws and regulations that affect us. These uncertainties may include changes in laws and policies in areas such as corporate taxation, taxation on imports of

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internationally-sourced internationally sourced products, international trade including trade treaties such as the North American Free TradeUnited States-Mexico-Canada Agreement, environmental protection and workplace safety laws, labor and employment law, immigration and health care, which individually or in the aggregate could materially and adversely affect our business, results of operations or financial condition.

Additionally, if our relationships with significant customers should change materially, it could be difficult for us to immediately and profitably replace lost sales in a market with such concentration, which could have a material adverse effect on our operating and financial results. We could be adversely impacted by decreased customer demand for our products due to (i) the impact of current or future economic conditions on our customers, (ii) our customers’ loss of market share to their competitors that do not use our products, and (iii) our loss of market share with our customers. We could lose market share with our customers to our competitors or to our customers themselves, should they decide to become more vertically integrated and produce the products that we currently provide.

In addition, even if our customers continue to do business with us, we could be adversely affected by a number of other potential developments with our customers. For example:

·The inability or failure of our customers to meet their contractual obligations could have a material adverse effect on our business, financial position and results of operations.

The inability or failure of our customers to meet their contractual obligations could have a material adverse effect on our business, financial position and results of operations.

·

Certain customer contracts provide the customer with the opportunity to cancel a substantial portion of its volume obligation by providing us with notice of such election prior to commencement of production. Such contracts generally require the customer to pay a sliding cancelationcancellation fee based on how far in advance of commencement of commencement of production such notice is provided.

·

If we are unable to deliver products to our customers in accordance with an agreed uponagreed-upon schedule, we may become subject to liquidated damages provisions in certain supply agreements for the period of time we are unable to deliver finished products. Although the liquidated damages provisions in certain supply agreements for the period of time we are unable to deliver finished products. Although the liquidated damages provisions are generally capped, they can become significant and may have a negative impact on our profit margins and may have a negative impact on our profit margins and financial results.

·

A material change in payment terms with a significant customer could have a material adverse effect on our short‑termshort-term cash flows.

The existence of government subsidies available to our competitors in certain countries may affect our ability to compete on a price basis. 

In 2013, the USITC determined that wind towers from China and Vietnam were being sold in the U.S. at less than fair value. As a result of that determination, the USDOC issued antidumping and countervailing duty orders on imports of wind towers from China and an antidumping duty order on imports of towers from Vietnam. Since that time, imports of wind towers from those countries have substantially ceased. Those orders expire in 2018, however, and there can be no assurance that they will be renewed or extended. Additionally, producers in other countries not subject to those orders may benefit from government subsidies (particularly with respect to the price of steel, the primary raw material used in the production of wind towers) which could lead to increased competition from those producers in the U.S. market, causing us to lose market share and/or reducing our margins. The possible introduction of U.S. tariffs on imported steel, if not applied to fabricated wind towers could adversely impact our cost structure and competitiveness relative to imported towers.                    

Our plans for growth and diversification may not be successful, and could result in poor financial performance.

We have made a strategic decision to diversify our business further into NGT power generation, O&G, mining and other industries, particularly within our gearing and Heavy Fabrications businesses and through our 2017 acquisition of Red Wolf. While we have historically participated in most of these lines of business, there is no assurance that we will be able to grow our presence in these markets at a rate sufficient to compensate for a potentially weaker wind energy market. Moreover, our participation in these markets may require additional investments in personnel, equipment and operational infrastructure. If we are unable to further penetrate these markets, our plans to diversify our operations may not be successful and our anticipated future growth may be adversely affected.

We may also grow our business through increased production levels at existing facilities and through acquisitions. Such growth will require coordinated efforts across the Company and continued enhancements to our current operating infrastructure, including management and operations personnel, systems, equipment and property. Moreover, if our efforts do not adequately predict the demand of our customers and our potential customers, our future earnings may be adversely affected.

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If our projections regarding the future market demand for our products are inaccurate, our operating results and our overall business may be adversely affected.

We have previously made significant capital investments in anticipation of rapid growth in the U.S. wind energy market. However, the growth in the U.S. wind energy market has not kept pace with our expectations when some of these capital investments were made, and there can be no assurance that the U.S. wind energy market will grow and develop in a manner consistent with our expectations, or that we will be able to fill our capacity through the further diversification of our operations. Our internal manufacturing capabilities have required significant upfront fixed costs. If market demand for our products does not increase at the pace we have anticipated and align with our manufacturing capacity, we may be unable to offset these costs and achieve economies of scale, and our operating results may continue to be adversely affected by high fixed costs, reduced margins and underutilization of capacity. In light of these considerations, we may be forced to temporarily idle existing capacity or sell to third parties manufacturing capacity that we cannot utilize in the near term, in addition to the steps that we have already taken to adjust our capacity more closely to demand. Alternatively, if we experience rapid increased demand for our products in excess of our estimates, or we reduce our manufacturing capacity, our installed capital equipment and existing workforce may be insufficient to support higher production volumes, which could adversely affect our customer relationships and overall reputation. In addition, we may not be able to expand our workforce and operations in a timely manner, procure adequate resources or locate suitable third‑party suppliers to respond effectively to changes in demand for our existing products or to the demand for new products requested by our customers, and our business could be adversely affected. Our ability to meet such excess customer demand could also depend on our ability to raise additional capital and effectively scale our manufacturing operations.

Our growth strategies could be ineffective due to the risks of acquisitions and risks relating to integration.

Our growth strategy has included acquiring complementary businesses, such as Red Wolf, as more fully described in Note 21, “Business Combinations” in the notes to our consolidated financial statements. In regards to Red Wolf, or any other future acquisitions, we could fail to identify, finance or complete suitable acquisitions on acceptable terms and prices. Acquisitions and the related integration processes could increase a number of risks, including diversion of operations personnel, financial personnel and management’s attention, difficulties in integrating systems and operations, potential loss of key employees and customers of the acquired companies and exposure to unanticipated liabilities. The price we pay for a business may exceed the value realized and we cannot provide any assurance that we will realize the expected synergies and benefits of any acquisition, including Red Wolf. Our discovery of, or failure to discover, material issues during due diligence investigations of acquisition targets, either before closing with regard to potential risks of the acquired operations, or after closing with regard to the timely discovery of breaches of representations or warranties, could materially harm our business. Our failure to meet the challenges involved in integrating a new business to realize the anticipated benefits of an acquisition could cause an interruption or loss of momentum in our existing activities and could adversely affect our profitability. Acquisitions also may result in the recording of goodwill and other intangible assets which are subject to potential impairments in the future that could harm our financial position and operating results.

Our diversification outside of the wind energy market exposes us to business risks associated with the CNG, NGT, O&G and mining industries, among others, which may slow our growth or penetration in these markets.

Although we have experience in the CNG and NGT market through the Process Systems segment, and experience in O&G and mining markets through our gearing and heavy fabrications businesses, these markets have not historically been our primary focus. In further diversifying our business to serve these markets, we face competitors who may have more resources, longer operating histories and more well‑established relationships than we do, and we may not be able to successfully or profitably generate additional business opportunities in these industries. Moreover, if we are able to successfully diversify into these markets, our businesses may be exposed to risks associated with these industries, which could adversely affect our future earnings and growth. These risks include, among other things:

·

the prices and relative demand for oil, gas, minerals and other commodities;

·

domestic and global political and economic conditions affecting the O&G and mining industries;

·

changes in CNG, NGT, O&G and mining technology;

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the price and availability of alternative fuels and energy sources, as well as changes in energy consumption or supply; and

·

federal, state and local regulations, including, among others, regulations relating to hydraulic fracturing and greenhouse gas emissions.

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We have substantially generated net losses since our inception.

Although our business was profitable in 2016, we have experienced operating losses for all of the other years we have been in operation. We have incurred significant costs in connection with the development of our businesses, and because we have operated at low capacity utilization in certain facilities, there is no assurance that we will generate sufficient revenues to offset anticipated operating costs. Although we anticipate deriving revenues from the sale of our products, no assurance can be given that these products can be sold on a profitable basis. We cannot give any assurance that we will be able to sustain or increase profitability on a quarterly or annual basis in the future.

Current or future litigation and regulatory actions could have a material adverse impact on us.

From time to time, we are subject to litigation and other legal and regulatory proceedings relating to our business. No assurance can be given that the results of these matters will be favorable to us. An adverse resolution of lawsuits, investigations or arbitrations could have a material adverse effect on our business, financial condition and results of operations. Defending ourselves in these matters may be time‑consuming, expensive and disruptive to normal business operations and may result in significant expense and a diversion of management’s time and attention from the operation of our business, which could impede our ability to achieve our business objectives. Additionally, any amount that we may be required to pay to satisfy a judgment or settlement may not be covered by insurance. Under our charter and the indemnification agreements that we have entered into with our officers, directors and certain third parties, we are required to indemnify and advance expenses to them in connection with their participation in certain proceedings. There can be no assurance that any of these payments will not be material.

We may need to hire additional qualified personnel, including management personnel, and the loss of our key personnel could adversely affect our business.

Our future success will depend largely on the skills, efforts and motivation of our executive officers and other key personnel. Our success also depends, in large part, upon our ability to attract and retain highly qualified management and other key personnel throughout our organization. We face competition in the attraction and retention of personnel who possess the skill sets we seek. In addition, key personnel may leave us and subsequently compete against us. The loss of the services of any of our key personnel, or our failure to attract and retain other qualified and experienced personnel on acceptable terms, could have a material adverse effect on our business, results of operations or financial condition.

We rely on unionized labor, the loss of which could adversely affect our future success.

We depend on the services of unionized labor and have collective bargaining agreements with certain of our operations workforce at our Cicero, Illinois and Neville Island, Pennsylvania Gearing facilities. The loss of the services of these and other personnel, whether through terminations, attrition, labor strike or otherwise, or a material change in our collective bargaining agreements, could have a material adverse impact on us and our future profitability. In November 2017, a three-year  collective bargaining agreement was ratified by the collective bargaining union in our Neville Island facility and is expected to remain in effect through October 2022. The collective bargaining agreement with the Cicero union expires in February 2018; the parties are currently negotiating a new collective bargaining agreement. As of December 31, 2017, these collective bargaining units represented approximately 24% of our workforce.

We could incur substantial costs to comply with environmental, health and safety (“EHS”) laws and regulations and to address violations of or liabilities under these requirements.

Our operations are subject to a variety of EHS laws and regulations in the jurisdictions in which we operate and sell products governing, among other things, health, safety, pollution and protection of the environment and natural resources, including the use, handling, transportation and disposal of non‑hazardous and hazardous materials and wastes, as well as emissions and discharges into the environment, including discharges to air, surface water, groundwater and soil, product content, performance and packaging. We cannot guarantee that we have been, or will at all times be in compliance with such laws and regulations. Changes in existing EHS laws and regulations, or their application, could cause us to incur additional or unexpected costs to achieve or maintain compliance. Failure to comply with these laws and regulations, obtain the necessary permits to operate our business, or comply with the terms and conditions of such permits may subject us to a variety of administrative, civil and criminal enforcement measures, including the imposition of civil and criminal sanctions, monetary fines and penalties, remedial obligations, and the issuance of compliance requirements limiting or preventing some or all of our operations. The assertion of claims relating to regulatory compliance, on or off‑site contamination, natural resource damage, the discovery of previously unknown environmental liabilities, the imposition of criminal or civil fines or penalties and/or other sanctions, or the obligation to undertake investigation, remediation or monitoring activities

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could result in potentially significant costs and expenditures to address contamination or resolve claims or liabilities. Such costs and expenditures could have a material adverse effect on our business, financial condition or results of operations. Under certain circumstances, violation of such EHS laws and regulations could result in us being disqualified from eligibility to receive federal government contracts or subcontracts under the federal government’s debarment and suspension system.

We also are subject to laws and regulations that impose liability and cleanup responsibility for releases of hazardous substances into the environment. Under certain of these laws and regulations, such liabilities can be imposed for cleanup of currently and formerly owned, leased or operated properties, or properties to which hazardous substances or wastes were sent by current or former operators at our current or former facilities, regardless of whether we directly caused the contamination or violated any law at the time of discharge or disposal. Several of our facilities have a history of industrial operations, and contaminants have been detected at some of our facilities. The presence of contamination from hazardous substances or wastes could interfere with ongoing operations or adversely affect our ability to sell, lease or use our properties as collateral for financing. We also could be held liable under third‑party claims for property damage, natural resource damage or personal injury and for penalties and other damages under such environmental laws and regulations, which could have a material adverse effect on our business, financial condition and results of operations.

Our ability to comply with regulatory requirements is critical to our future success, and there can be no guarantee that our businesses are in full compliance with all such requirements.

As a manufacturer and distributor of wind and other energy industry products we are subject to the requirements of federal, state, local and foreign regulatory authorities. In addition, we are subject to a number of industry standard‑setting authorities, such as the American Gear Manufacturers Association and the American Welding Society. Changes in the standards and requirements imposed by such authorities could have a material adverse effect on us. In the event we are unable to meet any such standards when adopted, our businesses could be adversely affected. We may not be able to obtain all regulatory approvals, licenses and permits that may be required in the future, or any necessary modifications to existing regulatory approvals, licenses and permits, or maintain all required regulatory approvals, licenses and permits. There can be no guarantee that our businesses are fully compliant with such standards and requirements.

We may be unable to keep pace with rapidly changing technology in wind turbine and other industrial component manufacturing.

The global market for wind turbines, as well as for our other manufactured industrial components, is rapidly evolving technologically. Our component manufacturing equipment and technology may not be suited for future generations of products being developed by wind turbine companies. For example, some wind turbine manufacturers are using wind turbine towers made partially or fully from concrete instead of steel. Other wind turbine designs have reduced the use of gearing or eliminated the gearbox entirely through the use of direct or compact drive technologies. To maintain a successful business in our field, we must keep pace with technological developments and the changing standards of our customers and potential customers and meet their constantly evolving demands. If we fail to adequately respond to the technological changes in our industry, or are not suited to provide components for new types of wind turbines, our business, financial condition and operating results may be adversely affected.

Disruptions in the supply of parts and raw materials, or changes in supplier relations, may negatively impact our operating results.

We are dependent upon the supply of certain raw materials used in our production process, and these raw materials are exposed to price fluctuations on the open market. Raw material costs for materials such as steel, our primary raw material, have fluctuated significantly and may continue to fluctuate. To reduce price risk caused by market fluctuations, we have generally tried to match raw material purchases to our sales contracts or incorporated price adjustment clauses in our contracts. However, limitations on availability of raw materials or increases in the cost of raw materials (including steel), energy, transportation and other necessary services may impact our operating results if our manufacturing businesses are not able to fully pass on the costs associated with such increases to their respective customers. Alternatively, we will not realize material improvements from declinesany decline in steel prices as the terms of our contracts generally require that we pass these cost savings through to our customers. In addition, we may encounter supplier constraints, be unable to maintain favorable supplier arrangements and relations or be affected by disruptions in the supply chain caused by events such as natural disasters, pandemics, shipping delays, power outages and labor strikes. Additionally, our supply chain has become more global in nature and, thus, more complex from a shipping and logistics perspective. In the event of limitations on availability of raw

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materials or significant changes in the cost of raw materials, particularly steel, our margins and profitability could be negatively impacted.

We rely on unionized labor, the loss of which could adversely affect our future success.

We depend on the services of unionized labor and have collective bargaining agreements with certain of our operations workforce at our Cicero, Illinois and Neville Island, Pennsylvania Gearing facilities. The loss of the services of these and other personnel, whether through terminations, attrition, labor strike or otherwise, or a material change in our collective bargaining agreements, including a significant increase in labor costs, could have a material adverse impact on us and our future profitability. In November 2022, a four-year collective bargaining agreement was ratified by the collective bargaining union in our Neville Island facility and will remain in effect through October 2026. A four-year collective bargaining agreement in regard to the Cicero, Illinois facility was negotiated in February 2022, and is expected to remain in effect through February 2026. Any failure to negotiate and conclude a new collective bargaining agreement with a union when the applicable agreement expires could result in strikes, boycotts, or other labor disruptions. As of December 31, 2022, these collective bargaining units represented approximately 19% of our workforce.

Our ability to hire and retain qualified personnel at competitive cost could adversely affect our business.

Many of the products we sell, and related services that we provide require that we have skilled labor in our manufacturing facilities. The availability of labor in the markets in which we operate has declined in recent years and competition for such labor has increased, especially under the economic crises experienced throughout and following the COVID-19 pandemic. A significant increase in wages paid by competitors, both within and outside the energy industry, for such work force could result in insufficient availability of workers or increase our labor costs, or both. In the event prevailing wage rates continue to increase in the markets in which we operate, we may be required to concurrently increase the wages paid to our employees to maintain the quality of our workforce and customer service. If the supply of skilled labor is constrained or our costs of attracting and maintaining a workforce increase, our profit margins could decrease, and our growth potential and brand image could be impaired.

We may be unable to keep pace with rapidly changing technology in wind turbine and other industrial component manufacturing.

The global markets for wind turbines and our other manufactured industrial components are rapidly evolving technologically. Our component manufacturing equipment and technology may not be suited for future generations of products being developed by wind turbine companies. As turbines grow in size, particularly to support the development of offshore windfarms, tower manufacturing becomes more complicated and may require investments in new manufacturing equipment. For example, some wind turbine manufacturers are using wind turbine towers made partially or wholly from concrete instead of steel. To maintain a successful business in our field, we must keep pace with technological developments and the changing standards of our customers and potential customers and meet their constantly evolving demands. If we fail to adequately respond to the technological changes in our industry, make the necessary capital investments or are not suited to provide components for new types of wind turbines, our business, financial condition and operating results may be adversely affected.

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If our estimates for warranty expenses differ materially from actual claims made, or if we are unable to reasonably estimate future warranty expense for our products, our business and financial results could be adversely affected.

We provide warranty terms generally ranging between one and five years to our customers depending upon the specific product and terms of the customer agreement. We reserve for warranty claims based on prior experience and estimates made by management based upon a percentage of our sales revenues related to such products. From time to time, customers have submitted warranty claims to us. However, we have a limited history on which to base our warranty estimates for certain of our manufactured products. Our assumptions could materially differ from the actual performance of our products in the future and could exceed the levels against which we have reserved. In some instances, our customers have interpreted the scope and coverage of certain of our warranty provisions differently from our interpretation of such provisions. The expenses associated with remediation activities in the wind energy industry can be substantial, and if we are required to pay such costs in connection with a customer’s warranty claim, we could be subject to additional unplanned cash expenditures. If our estimates prove materially incorrect, or if we are required to cover remediation expenses in addition to our regular warranty coverage, we could be required to incur additional expenses and could face a material unplanned cash expenditure, which could adversely affect our business, financial condition and results of operations. Market disruptions and volatility may result in an increased likelihood of our customers asserting warranty or remediation claims in connection with our products that they would not ordinarily assert in a more stable economic environment. In the event of such a claim, we may incur costs if we decide to compensate the affected customer or to engage in litigation with the affected customer regarding the claim. We maintain product liability insurance, but there can be no guarantee that such insurance will be available or adequate to protect against such claims. A successful claim against us could have a material adverse effect on our business.

Because our industry is capital intensive and we have significant fixed and semi-fixed costs, our profitability is sensitive to changes in volume.

The property, plants and equipment needed to manufacture products for our customers and provide our processes and solutions can be very expensive. We must spend a substantial amount of capital to purchase and maintain such property, plant and equipment. Although we believe our current cash balance, along with our projected internal cash flows and available financing sources, will provide sufficient cash to support our currently anticipated operating and capital needs, if we are unable to generate sufficient cash to purchase and maintain the property, plant and equipment necessary to operate our business, we may be required to reduce or delay planned capital expenditures or to incur additional indebtedness.

The COVID-19 pandemic has had, and may continue to have, adverse effects on our operations.

In prior periods, we experienced adverse impacts from the COVID-19 pandemic including a decline in order activity levels within the Gearing and Heavy Fabrications segments and customers’ postponement of scheduled purchases and project timing partially offset by the continued operation of our facilities as essential businesses in light of the customers and markets served. We continue to incur manufacturing inefficiencies associated with severe supply chain disruptions and realized employee staffing constraints due to the continued spread of the COVID-19 pandemic.

Although availability of vaccines and reopening of state and local economies have improved the outlook for recovery from the impact of the COVID-19 pandemic, due to the ongoing global pandemic, including emerging variants, we may again experience weaker customer demand, requests for extended payment terms, customer bankruptcies, additional supply chain disruption, more employee staffing constraints and difficulties, government restrictions or other factors that could negatively impact us and our business, operations and financial results. In addition, a possible recession or market correction resulting from the spread of COVID-19 or otherwise could materially affect our business and the value of our stock. 

The impacts and potential impacts of COVID-19 that could directly or indirectly materially affect our business also include, but are not limited to, effectiveness of the vaccines against the evolving variants, additional widespread resurgences in COVID-19 infections, and evolving safety protocols such as requirements for proof of vaccination or regular testing in certain of our markets. As we cannot predict the duration or scope of the pandemic or its impact on economic and financial markets, any negative impact to our results cannot be reasonably estimated, but it could be material.

Cybersecurity incidents could disrupt our business and result in the compromise of confidential information.

Our business is at risk from and may be impacted by information security incidents, including attempts to gain unauthorized access to our confidential data, ransomware, malware, phishing emails, and other electronic security events. Such incidents can range from individual attempts to gain unauthorized access to our information technology systems to more sophisticated security threats. They can also result from internal compromises, such as human error, or malicious acts. While we seek to employ measures to prevent, detect, and mitigate these threats, there is no guarantee such efforts will be successful in preventing a cyber event. Cybersecurity incidents could disrupt our business and compromise confidential information belonging to us and third parties.

Recent increases in inflation and interest rates in the United States and elsewhere could adversely affect our business.

We are exposed to fluctuations in inflation and interest rates, which could negatively affect our business, financial condition and results of operations. The United States and other jurisdictions have recently experienced high levels of inflation. If the inflation rate continues to increase, it will likely affect our expenses, including, but not limited to, employee compensation and labor expenses and increased costs for supplies, and we may not be successful in offsetting such cost increases. In addition, historically we have carried a significant amount of variable rate debt which is subject to fluctuations in interest rates. Recent increases in interest rates will result in increased interest expense to the extent we cannot limit our debt balances.

RISKS RELATED TO OUR CORPORATE STRATEGY  

Our plans for growth and diversification may not be successful, and could result in poor financial performance.

We continue to seek to strategically diversify and grow the business to improve operational efficiency and meet customer demand. Our diversification efforts into the natural gas turbine power generation, O&G, mining and other industries may require additional investments in personnel, equipment and operational infrastructure. Moreover, although we have historically participated in most of these lines of business, there is no assurance that we will be able to grow our presence in these markets at a rate sufficient to compensate for a potentially weaker wind energy market. If we are unable to produce, maintainfurther penetrate these markets, our plans to diversify our operations may not be successful and disseminate relevant and/or reliable dataour anticipated future growth may be adversely affected.

Our growth efforts through increased production levels at existing facilities, acquisitions and information pertainingcontinuous improvement activities such as the proper coordination and integration of the supply chain, the consistent use of systems with respect to production activities, the Advanced Product Quality Processes (APQP) to support the introduction of new products, and the hiring of continuous improvement experts to optimize our production processes, will require coordinated efforts across the Company and continued enhancements to our current operating infrastructure. If the cost of making these changes increases or if our efforts are unsuccessful, the Company may not realize anticipated benefits and our future earnings may be adversely affected.

Our diversification outside of the wind energy market exposes us to business risks associated with the gas turbine, O&G, and mining industries, among others, which may slow our growth or penetration in an efficient, cost-effective, securethese markets.

Although we have experience in the gas turbine, O&G and well-controlled fashion and avoid security breaches affectingmining industry markets, these markets have not historically been our information technology systems, such inabilityprimary focus. In further diversifying our business to serve these markets, we face competitors who may have significant negative impacts onmore resources, longer operating histories and more well-established relationships than we do, and we may not be able to successfully or profitably generate additional business opportunities in these industries. Moreover, if we are able to successfully diversify into these markets, our confidentiality obligations, and proprietary needs and therefore on our future operations, profitability and competitive position.

Management relies on information technology infrastructure and architecture, including hardware, network, software, people and processes,businesses may be exposed to provide useful and confidential information to conduct our business in the ordinary course, including correspondence and commercial data and information interchangerisks associated with customers, suppliers, consultants, advisors and governmental agencies, and to support assessments and conclusions about future plans and initiatives pertaining to market demands, operating performance and competitive positioning. In addition, any material failure, interruption of service, compromised data security or cybersecurity threatthese industries, which could adversely affect our relationsfuture earnings and growth. These risks include, among other things:

Variability in the prices and relative demand for oil, gas, minerals and other commodities;

Changes in domestic and global political and economic conditions affecting the O&G and mining industries;

Changes in technology;

Changes in the price and availability of alternative fuels and energy sources and changes in energy consumption or supply; and

Changes in federal, state and local regulations, including, among other regulations, relating to hydraulic fracturing and greenhouse gas emissions.

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If our projections regarding the future market demand for our products are inaccurate, our operating results and our overall business may be adversely affected.

We have previously made significant capital investments in anticipation of rapid growth in the U.S. wind energy market. However, the growth in the U.S. wind energy market has not kept pace with our expectations when some of these capital investments were made, and there can be no assurance that the U.S. wind energy market will grow and develop in a manner consistent with our expectations, or that we will be able to fill our capacity through the further diversification of our operations. Our internal manufacturing capabilities have required significant upfront capital costs. If market demand for our products does not increase at the pace we have anticipated and align with our manufacturing capacity, we may be unable to offset these costs and achieve economies of scale, and our operating results may continue to be adversely affected by high fixed costs, reduced margins and underutilization of capacity which may prevent us from achieving or maintaining profitability. In light of these considerations, we may be forced to reduce our labor force and production to minimum levels, as was done at certain operating locations in the past, temporarily idle existing capacity or sell to third parties manufacturing capacity that we cannot utilize in the near term, in addition to the steps that we have already taken to adjust our capacity more closely to demand. Alternatively, if we experience rapid increased demand for our products in excess of our estimates, or we reduce our manufacturing capacity, our installed capital equipment and existing workforce may be insufficient to support higher production volumes, which could adversely affect our customer relationships and overall reputation. In addition, we may not be able to expand our workforce and operations in a timely manner, procure adequate resources or locate suitable third-party suppliers to respond effectively to changes in demand for our existing products or to the demand for new products requested by our customers, and our business could be adversely affected. Our ability to meet such excess customer demand could also depend on our ability to raise additional capital and effectively scale our manufacturing operations.

Additionally, most of our customers do not commit to long-term contracts or firm production schedules, and accordingly, we frequently experience volatile lead-times in customer orders. Additionally, customers may change production quantities or delay production with little advance notice. Therefore, we rely on and plan our production and inventory levels based on our customers’ advance orders, commitments and/or forecasts, as well as our internal assessments and forecasts of customer demand. The variations in volume and timing of sales make it difficult to schedule production and optimize utilization of manufacturing capacity. This uncertainty may require us to increase staffing and incur other expenses in order to meet an unexpected increase in customer demand, potentially placing a significant burden on our resources. An inability to respond to such changes in a timely manner may also cause customer dissatisfaction, which may negatively affect our customer relationships. 

Our growth strategies could be ineffective due to the risks of acquisitions and risks relating to integration.

Our growth strategy includes acquiring complementary businesses. In regards to any other future acquisitions, we could fail to identify, finance or complete suitable acquisitions on acceptable terms and prices. Acquisitions and the related integration processes could increase a number of risks, including diversion of operations personnel, financial personnel and management’s attention, difficulties in integrating systems and operations, potential loss of key employees and customers place usof the acquired companies and exposure to unanticipated liabilities. The price we pay for a business may exceed the value realized and we cannot provide any assurance that we will realize the expected synergies and benefits of any acquisitions. Our discovery of, or failure to discover, material issues during due diligence investigations of acquisition targets, either before closing with regard to potential risks of the acquired operations, or after closing with regard to the timely discovery of breaches of representations or warranties, could materially harm our business. Our failure to meet the challenges involved in violationintegrating a new business to realize the anticipated benefits of confidentialityan acquisition could cause an interruption or loss of momentum in our existing activities and data protection laws, rules and regulations, andcould adversely affect our profitability. Acquisitions also may result in negative impactsthe recording of goodwill and other intangible assets which are subject to potential impairments in the future that could diminish our market share, operationsreported earnings and profitability. Security breachesoperating results.

We are subject to risks associated with proxy contests and other actions of activist stockholders.

Publicly traded companies have increasingly become subject to campaigns by activist investors advocating corporate actions such as governance changes, financial restructurings, increased borrowings, special dividends, stock repurchases or even sales of assets or entire companies to third parties or the activists themselves. We have received a notice dated January 18, 2023 from WM Argyle Fund, LLC (“WM Argyle”), which allegedly owned approximately 1.0% of the Company’s outstanding shares at the time of submission, purporting to nominate a slate of six candidates for election as directors at our 2023 Annual Meeting of Stockholders. The Company values input from all stockholders, including WM Argyle, and remains open to ongoing engagement with WM Argyle. However, if the Company and WM Argyle cannot reach an agreement in connection with its nomination, there will be a contested election at the Company’s 2023 Annual Meeting of Stockholders. A proxy contest or related activities on the part of activist stockholders, including, among others, WM Argyle, could adversely affect our information technologybusiness for a number of reasons, including, without limitation, the following:

Responding to proxy contests and other actions by activist stockholders can be costly and time-consuming, disrupting our operations and diverting the attention of our Board of Directors (the “Board”), management and our employees;

Perceived uncertainties as to our future direction may result in the loss of potential business opportunities and may make it more difficult to attract and retain qualified personnel, business partners, customers and others important to our success, any of which could negatively affect our business and our results of operations and financial condition;

Action by activist stockholders may be exploited by our competitors, cause concern to our current or potential customers and make it more difficult to attract and retain qualified personnel;

A successful proxy contest could result in a change in control of our Board, and such an event could subject us to certain contractual obligations under several material agreements, including our existing 2015 EIP agreement and certain employment agreements;

If nominees advanced by activist stockholders are elected or appointed to our Board with a specific agenda, it may adversely affect our ability to effectively and timely implement our strategic plans or to realize long-term value from our assets, and this could in turn have an adverse effect on our business and on our results of operations and financial condition; and

Proxy contests may cause our stock price to experience periods of volatility.

FINANCIAL RISKS

We have substantially generated net losses since our inception.

We have experienced operating losses since inception, except that we were profitable in 2016 and 2021. We have incurred significant costs in connection with the development of our businesses, and because we have operated at low-capacity utilization in certain facilities, there is no assurance that we will generate sufficient revenues to offset anticipated operating costs. Although we anticipate deriving revenues from the sale of our products, no assurance can be given that these products can be sold on a profitable basis. We cannot give any assurance that we will be able to sustain or increase profitability on a quarterly or annual basis in the future. 

We may continue to incur significant losses in the future for a number of reasons, including other risks described in this Annual Report on Form 10-K, and we may encounter unforeseen expenses, difficulties, complications, delays, and other unknown factors.

Our PPP Loans were forgiven, but we may still be subject to audit and any resulting adverse audit financings of non-compliance could result in theft, destruction, loss, misappropriationthe repayment of a portion or releaseall of confidential datathe PPP Loans and may restrict our flexibility in operating our business or intellectual propertyotherwise adversely affect our results of operations.

On April 15, 2020, we received funds under notes and related documents (“PPP Loans”) with CIBC Bank, USA under the Paycheck Protection Program (the “PPP”), which was established under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), as amended by the Paycheck Protection Program Flexibility Act of 2020 in response to the COVID-19 pandemic and is administered by the U.S. Small Business Administration (the “SBA”). We received total proceeds of $9,530 from the PPP Loans and made repayments of $379 on May 13, 2020. We used at least 60% of our PPP Loan proceeds to pay for payroll costs and the balance on other eligible qualifying expenses that we believe to be consistent with the PPP.

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We submitted our forgiveness applications to CIBC Bank, USA in the first quarter of 2021, and during the second quarter of 2021, all PPP Loans were forgiven by the SBA. The U.S. Department of the Treasury has announced that it will conduct audits for PPP Loans that exceed $2,000 for a period of six years after forgiveness. Should we be audited or reviewed by the U.S. Department of the Treasury or the SBA, such audit or review could result in the diversion of management’s time and attention and cause us to incur significant costs. If we were to be audited and receive an adverse outcome in such an audit, we could be required to return the full amount of the PPP Loans and may potentially be subject to civil and criminal fines and penalties.  If it is subsequently determined that the PPP Loans must be repaid, we may be required to use a substantial portion of our available cash and/or cash flows from operations to pay interest and principal on the PPP Loans, and any future repayment of such loans, would adversely impact our futureoperations and financial results.

Future sales

RISKS RELATED TO OWNING OUR COMMON STOCK

There is a limited trading market for our securities and the market price of our securities is subject to volatility.

Our common stock trades on the Nasdaq Capital Market. Historically, we have not had an active trading market for our common stock. The absence of an active trading market increases price volatility and reduces the liquidity of our common stock. The market price and level of trading of our common stock could be subject to wide fluctuations in response to numerous factors, many of which are beyond our control. These factors include, among other things, our limited trading volume, actual or securities convertible intoanticipated variations in our common stock may depress our stock price.

Sales of a substantial number of sharesoperating results and cash flow, the nature and content of our common stockearnings releases, announcements or events that impact our business and the general state of the securities convertible intomarket, as well as general economic, political and market conditions and other factors that may affect our common stock infuture results.  In 2022, the public market, or the perception that these sales might occur, may reduce the prevailing marketclosing price of our common stock and could impairvaried from a high of $3.59per share to a low of $1.47 per share. Stockholders may have incurred substantial losses with regard to any investment in our ability to raise capital through the sale of additional equity securities and may make it more difficult for our stockholders to sell their common stock at a time and price that they deem appropriate.adversely affecting stockholder confidence.

On August 11, 2017, we filed a registration statement on Form S-3 (File No. 333-219931), which was declared effective by the SEC on October 10, 2017, to register securities that we may choose to issue in the future (the “Broadwind Form S-3”).  Under the registration statement, we have the option to offer and sell up to $50,000 in the aggregate of securities in one or more offerings.

Limitations on our ability to utilize our net operating losses (“NOLs”)NOLs may negatively affect our financial results.

We may not be able to utilize all of our NOLs. For financial statement presentation, all benefits associated with the NOL carryforwards have been reserved; therefore, this potential asset is not reflected on our balance sheet. To the extent available, we will use any NOL carryforwards to reduce the U.S. corporate income tax liability associated with our operations. However, if we do not achieve sufficient profitability prior to their expiration, we will not be able to fully utilize our NOLs to offset income. Section 382 of the IRC (“Section 382”) generally imposes an annual limitation on the amount of NOL carryforwards that may be used to offset taxable income when a corporation has undergone certain changes in stock ownership. Our ability to utilize NOL carryforwards and built‑inbuilt-in losses may be limited, under Section 382 or otherwise, by our issuance of common stock or by other changes in ownership of our stock. After analyzing Section 382 in 2010, we determined that aggregate changes in our stock ownership had triggered an annual limitation of NOL carryforwards and built‑inbuilt-in losses available for utilization to $14,284 per annum. Although this event limited the amount of pre‑pre ownership

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change date NOLs and built‑built- in losses we can utilize annually, it does not preclude us from fully utilizing our current NOL carryforwards prior to their expiration. However, subsequent changes in our stock ownership could further limit our ability to use our NOL carryforwards and our income could be subject to taxation earlier than it would if we were able to use NOL carryforwards and built‑inbuilt-in losses without an annual limitation, which could result in lower profits. To address these concerns, in February 2013 we adopted a Section 382 Stockholder Rights Plan, which was subsequently approved by our stockholders and extended in 2016 and 2019 for an additional three-year periodperiods (as amended, the “Rights Plan”), designed to preserve our substantial tax assets associated with NOL carryforwards under Section 382. The Rights Plan is intended to deter any person or group from being or becoming the beneficial owner of 4.9% or more of our common stock and thereby triggering a further limitation of our available NOL carryforwards. On February 3, 2022, the Board of Directors (the “Board”) approved an amendment which included an extension of the Rights Plan for an additional three years, which was subsequently approved by our stockholders at our 2022 Annual Meeting of Stockholders. See Note 14,13, “Income Taxes” of our consolidated financial statements for further discussion of our Rights Plan. There can be no assurance that the Rights Plan will be effective in protecting our NOL carryforwards. Additionally, because the Rights Plan subjects any person that acquires 4.9% of our common stock without the Board’s permission to significant dilution, it could make it harder for a third party to acquire us without the consent of the Board. In particular, the Rights Plan may deter a third party from completing or even initiating an acquisition of the Company, which may prevent stockholders from realizing a control premium from a potential acquirer, or from otherwise maximizing stockholder value.

INTELLECTUAL PROPERTY RISKS

Any failure to protect our customers’ intellectual property that we use in the products we manufacture for them could harm our customer relationships and subject us to liability.

The products we manufacture for our customers often contain our customers’ intellectual property, including copyrights, patents, trade secrets and know-how. Our success depends, in part, on our ability to protect our customers’ intellectual property. The steps we take to protect our customers’ intellectual property may not adequately prevent its disclosure or misappropriation. If we fail to protect our customers’ intellectual property, our customer relationships could be harmed and we may experience difficulty in establishing new customer relationships. Additionally, our customers might pursue legal claims against us for any failure to protect their intellectual property, possibly resulting in harm to our reputation and our business, financial condition and operating results.

We may not be able to protect important intellectual property and we could incur substantial costs defending against claims that our products infringe on the proprietary rights of others.

Our ability to compete effectively will depend, in part, on our ability to protect our proprietary system level technologies, systems designs and manufacturing processes. While we have attempted to safeguard and maintain our proprietary rights, we do not know whether we have been or will be successful in doing so.

Further, our competitors may independently develop or patent technologies or processes that are substantially equivalent or superior to ours. If we are found to be infringing third-party patents, we could be required to pay substantial royalties and/or damages, and we do not know whether we will be able to obtain licenses to use such patents on acceptable terms, if at all. Failure to obtain needed licenses could delay or prevent the development, manufacture or sale of our products, and could necessitate the expenditure of significant resources to develop or acquire non infringing intellectual property.

15

We may need to pursue lawsuits or legal action in the future to enforce our intellectual property rights and to determine the validity and scope of the proprietary rights of others. Litigation and other proceedings, even if they are successful, are expensive to pursue and time consuming, and we could use a substantial amount of our management and financial resources in either case.

Confidentiality agreements to which we are party may be breached, and we may not have adequate remedies for any breach. Our trade secrets may also be known without breach of such agreements or may be independently developed by competitors. Our inability to maintain the proprietary nature of our technology and processes could allow our competitors to limit or eliminate any competitive advantages we may have.

LEGAL, TAX, REGULATORY AND COMPLIANCE RISKS

The U.S. wind energy industry is significantly impacted by tax and other economic incentives. A significant change in these incentives could significantly impact our results of operations and growth. 

We sell towers to wind turbine manufacturers who supply wind energy generation facilities. The U.S. wind energy industry is significantly impacted by federal tax incentives and state Renewable Portfolio Standards (“RPSs”). Despite recent reductions in the cost of wind energy, due to variability in wind quality and consistency, and other regional differences, wind energy may not be economically viable in certain parts of the country absent such incentives. These programs have provided material incentives to develop wind energy generation facilities and thereby impact the demand for our products. The increased demand for our products that generally results from the credits and incentives could be impacted by the expiration or curtailment of these programs.

One such federal government program, the PTC, provides a supplemental payment based on electricity produced from each qualifying wind turbine. Legislative support for the PTC has been intermittent since its introduction in 1992, which has caused volatility in the demand for new wind energy projects. In 2015, the PTC was extended for a five-year period, with a time-based phase-out depending on the year the wind project is commenced. The phase-out schedule legislated in 2015 provided for: 100% extension of the credit for projects commenced before the end of 2016, 80% extension of the credit for projects commenced in 2017, 60% extension of the credit for projects commenced in 2018 and 40% extension of the credit for projects commenced in 2019. As part of a year-end tax extenders bill in 2019, the PTC was extended for an additional year, allowing for a 60% extension of the credit for projects commenced before the end of 2020.

On December 27, 2020, COVID IV was signed into law. As part of COVID IV, the PTC was extended for an additional year, allowing for a 60% credit for projects that start construction by the end of 2021.  In order to benefit from the PTC, qualifying projects must either be completed within four years from their start of construction, or the developer must demonstrate that its projects are in continuous construction between start of construction and completion. As a result of COVID IV, the PTC will subsidize wind projects commenced as late as 2021 and completed by 2025, or later if continuous construction can be demonstrated. The PTC tax benefits are available for the first ten years of operation of a wind energy facility, and also applies to significant redevelopment of existing wind energy facilities. Included in COVID IV is the addition of a new 30% ITC created for offshore wind projects that start construction by the end of 2025. The provision will be retroactively applied to projects that started production in 2016.

On August 16, 2022, the IRA was enacted to reduce inflation and promote clean energy in the United States. The IRA modifies and extends the PTC until the later of 2032 or when greenhouse gas emissions have been reduced by 75% compared to 2022. It provides for tax credits up to a maximum of 30%, adjusted for inflation annually, for electricity generated from qualified renewable energy sources where taxpayers meet prevailing wage standards and employ a sufficient proportion of qualified apprentices from registered apprenticeship programs. It also provides a bonus credit for qualifying clean energy production in energy communities. 

The IRA also includes advanced manufacturing tax credits for manufacturers of eligible components, including wind and solar components (“45X credits”). Manufacturers qualify for the 45X credits based on the electricity output for each component produced and sold in the US starting in 2023 through 2032. The credit amount varies based on the eligible component, which includes solar components, wind energy components, inverters, qualifying battery components, and critical minerals. Tower manufacturers are eligible for credits of $0.03 per watt for applicable components produced. Manufacturers can apply to the Internal Revenue Service for cash refunds of the 45X credits for up to five years. After the first five years, the 45X credits are transferable and can be sold to third parties for cash. We are waiting for the Internal Revenue Service and the U.S. Treasury Department to provide implementation guidance for the legislation. 

RPSs generally require or encourage state regulated electric utilities to supply a certain proportion of electricity from renewable energy sources or to devote a certain portion of their plant capacity to renewable energy generation. Typically, utilities comply with such standards by qualifying for renewable energy credits evidencing the share of electricity that was produced from renewable sources. Under many state standards, these renewable energy credits can be unbundled from their associated energy and traded in a market system, allowing generators with insufficient credits to meet their applicable state mandate. These standards have spurred significant growth in the wind energy industry and a corresponding increase in the demand for our products. Currently, the majority of states have RPSs in place and certain states have voluntary utility commitments to supply a specific percentage of their electricity from renewable sources. The enactment of RPSs in additional states or any changes to existing RPSs (including changes due to the failure to extend or renew the federal incentives described above), or the enactment of a federal RPS or imposition of other greenhouse gas regulations, may impact the demand for our products. We cannot assure that government support for renewable energy will continue including any assurance regarding the adoption of any of the clean energy provisions of the Build Back Better agenda. The elimination of, or reduction in, state or federal government policies that support renewable energy could have a material adverse impact on our business, results of operations, financial performance and future development efforts.

Changes to trade regulation, quotas, duties or tariffs, and sanctions caused by changing U.S. and geopolitical policies, may impact our competitive position or adversely impact our margins.

Tariffs have resulted in increased prices, including with respect to certain steel products, and could adversely affect our consolidated results of operations, financial position and cash flows. These tariffs, along with any additional tariffs or trade restrictions that may be implemented by the U.S. or other countries, could result in further increased prices and a decreased available supply of steel and other imported components and inputs. We may not be able to pass price increases on to our customers and may not be able to secure adequate alternative sources of steel on a timely basis.

The existence of government subsidies available to our competitors in certain countries may affect our ability to compete on a price basis. In 2013, the USITC determined that wind towers from China and Vietnam were being sold in the U.S. at less than fair value. Imports from China and Vietnam have declined following a determination by the USITC in 2013 that wind towers from those countries were being sold in the U.S. at less than fair value. As a result of the determination, the USDOC issued antidumping and countervailing duty orders on imports of wind towers from China and an antidumping duty order on imports of towers from Vietnam. In May 2018, the U.S. Court of Appeals affirmed the decision from the U.S. Court of International Trade and at the same time excluded CS Wind Vietnam from the antidumping order. In April 2019, the USDOC extended the term of these duties for an additional five-year period. Following a renewed surge of tower imports from countries not impacted by existing tariffs, in July 2020, the USDOC issued antidumping and countervailing duty orders on imports of wind towers from Canada, Indonesia, and Vietnam and an antidumping order on imports of towers from Korea.  Then in September 2020, a new trade case was brought before the USDOC and USITC, to assess whether wind towers imported from India, Malaysia, and Spain were being sold in the U.S. at less than fair value. The USDOC and USITC issued affirmative final determinations in all three antidumping (India, Malaysia, and Spain) and two countervailing duty cases (India and Malaysia). The USDOC imposed orders for two cases in August 2021 and the remainder in December 2021. Appeals of several of the USDOC determinations are currently pending at the CIT and the CAFC.

Additionally, the war in Ukraine has led to economic sanctions imposed against Russia by the U.S. and certain European nations, including a prohibition on doing business with certain Russian companies. Such sanctions may impact companies in many sectors and could lead to volatility of prices in the global energy industry. The extent and duration of the war and extent and strength of the sanctions are still developing, and the corresponding effect on the Company remains uncertain.  

16

We could incur substantial costs to comply with environmental, health and safety (“EHS”) laws and regulations and to address violations of or liabilities under these requirements.

Our operations are subject to a variety of EHS laws and regulations in the jurisdictions in which we operate and sell products governing, among other things, health, safety, pollution and protection of the environment and natural resources, including the use, handling, transportation and disposal of non-hazardous and hazardous materials and wastes, as well as emissions and discharges into the environment, including discharges to air, surface water, groundwater and soil, product content, performance and packaging. We cannot guarantee that we have been, or will at all times be in compliance with such laws and regulations. Changes in existing EHS laws and regulations, or their application, could cause us to incur additional or unexpected costs to achieve or maintain compliance. Failure to comply with these laws and regulations, obtain the necessary permits to operate our business, or comply with the terms and conditions of such permits may subject us to a variety of administrative, civil and criminal enforcement measures, including the imposition of civil and criminal sanctions, monetary fines and penalties, remedial obligations, and the issuance of compliance requirements limiting or preventing some or all of our operations. The assertion of claims relating to regulatory compliance, on or off-site contamination, natural resource damage, the discovery of previously unknown environmental liabilities, the imposition of criminal or civil fines or penalties and/or other sanctions, or the obligation to undertake investigation, remediation or monitoring activities could result in potentially significant costs and expenditures to address contamination or resolve claims or liabilities. Such costs and expenditures could have a material adverse effect on our business, financial condition or results of operations. Under certain circumstances, violation of such EHS laws and regulations could result in us being disqualified from eligibility to receive federal government contracts or subcontracts under the federal government’s debarment and suspension system.

We also are subject to laws and regulations that impose liability and cleanup responsibility for releases of hazardous substances into the environment. Under certain of these laws and regulations, such liabilities can be imposed for cleanup of currently and formerly owned, leased or operated properties, or properties to which hazardous substances or wastes were sent by current or former operators at our current or former facilities, regardless of whether we directly caused the contamination or violated any law at the time of discharge or disposal. Several of our facilities have a history of industrial operations, and contaminants have been detected at some of our facilities. The presence of contamination from hazardous substances or wastes could interfere with ongoing operations or adversely affect our ability to sell, lease or use our properties as collateral for financing. We also could be held liable under third-party claims for property damage, natural resource damage or personal injury and for penalties and other damages under such environmental laws and regulations, which could have a material adverse effect on our business, financial condition and results of operations. During 2022, we did not incur significant remediation costs or penalties related to environmental matters. 

Our ability to comply with regulatory requirements and potential environmental, social and governance (“ESG”) regulations and trends is critical to our future success, and there can be no guarantee that our businesses are in full compliance with all such requirements.

As a manufacturer and distributor of wind and other energy industry products we are subject to the requirements of federal, state, local and foreign regulatory authorities. In addition, we are subject to a number of authorities setting industry standards, such as the American Gear Manufacturers Association and the American Welding Society. Changes in the standards and requirements imposed by such authorities could have a material adverse effect on us. In the event we are unable to meet any such standards when adopted, our businesses could be adversely affected. We may not be able to obtain all regulatory approvals, licenses and permits that may be required in the future, or any necessary modifications to existing regulatory approvals, licenses and permits, or maintain all required regulatory approvals, licenses and permits. There can be no guarantee that our businesses are fully compliant with such standards and requirements.

Additionally, other ESG-related laws, regulations, treaties, and similar initiatives and programs are being proposed, adopted and implemented throughout the world. If we were to violate or become liable under environmental or certain ESG-related laws or if our products become non-compliant with such laws or market access requirements, our customers may refuse to purchase our products, and we could incur costs or face other sanctions, such as restrictions on our products entering certain jurisdictions, fines, and/or civil or criminal sanctions. In addition to potential implementation of ESG laws, investor advocacy groups, certain institutional investors, investment funds, other market participants, stockholders, and customers have focused increasingly on the ESG practices of companies, including those associated with climate change. If our ESG practices do not meet investor or other industry stakeholder expectations and standards, which continue to evolve, our brand, reputation and employee retention may be negatively impacted based on an assessment of our ESG practices.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

 

17

ITEM 2. PROPERTIES

Our corporate headquarters is located in Cicero, Illinois, a suburb located west of Chicago, Illinois. In addition, the Subsidiaries own or lease operating facilities, which are presented by operating segment as follows (information below is as of December 31, 2017)2022).

 

Owned /

Approximate

Operating Segment and Facility Type

Location

Leased

Square Footage

Towers and Heavy Fabrications (2)(1)

Tower Manufacturing

Manitowoc, WI

Leased

213,000

194,000

Tower Manufacturing

Abilene, TX

Owned

175,000

175,000

HeavyIndustrial Fabrications Manufacturing

Manitowoc, WI

Leased

30,000

113,000

Gearing and Corporate

Gearing System Manufacturing—Machining

Cicero, IL (1)

Owned

149,000

Gearing System Manufacturing—Machining and Corporate Administration

Cicero, IL

Leased

301,000

301,000

Gearing System Manufacturing—Heat Treatment and Gearbox Repair

Neville Island, PA

Owned

52,000

52,000

Process SystemsIndustrial Solutions

Red WolfIndustrial Solutions Manufacturing

Sanford, NC

Leased

105,000


 

105,000

CNG and Fabrication Manufacturing

Abilene, TX

Leased

80,000


(1)

The use by our wholly owned subsidiary Brad Foote Gear Works, Inc., an Illinois corporation (“Brad Foote”), of one of our facilities located in Cicero, Illinois (the “Cicero Avenue Facility”) for production was significantly curtailed at the end of 2013, as of December 31, 2017 this property is classified as held for sale.

(2)

The Towers and Heavy Fabrications segment listing does not include the tower storage yards of 3640 acres in Manitowoc, WI and 25 acres in Manitowoc, WI and 25 acres in Abilene, TX.

We consider our active facilities to be in good condition and adequate for our present and future needs.

ITEM 3. LEGAL PROCEEDINGS

We are party to a variety of legal proceedings that arise in the ordinary course of our 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 our 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 our results of operations, financial condition or cash flows. It is possible that if one or more of such matters were decided against us, the effects could be material to our results of operations in the period in which we would be required to record or adjust the related liability and could also be material to our financial condition and cash flows in the period in which we would be required to pay such liability.

We received a notice dated January 18, 2023 from WM Argyle Fund, LLC, which allegedly owned approximately 1.0% of our outstanding shares at the time of submission, purporting to nominate a slate of six candidates for election as directors at our 2023 Annual Meeting of Stockholders. We remain open to ongoing engagement with WM Argyle. However, if the Company and WM Argyle cannot reach an agreement in connection with its nomination, there will be a contested election at the Company’s 2023 Annual Meeting of Stockholders.

ITEM 4. MINE SAFETY DISCLOSURES

Not Applicable.

16

18

 

PART II

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

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our common stock is traded on the NASDAQ Capital Market (“NASDAQ”) under the symbol “BWEN.” The following table sets forth the high and low bid prices of our common stock traded on the NASDAQ.

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

 

High

 

Low

 

2017

    

 

    

    

 

    

 

First quarter

 

$

8.33

 

$

4.02

 

Second quarter

 

 

9.41

 

 

4.57

 

Third quarter

 

 

4.84

 

 

2.98

 

Fourth quarter

 

 

3.91

 

 

2.35

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Common Stock

 

 

High

  

Low

 

 

High

 

Low

 

2016

    

 

    

    

 

    

 

2022

      

First quarter

 

$

3.12

 

$

1.72

 

 $2.36  $1.58 

Second quarter

 

 

4.66

 

 

2.90

 

 2.17  1.52 

Third quarter

 

 

5.48

 

 

4.14

 

 3.59  1.47 

Fourth quarter

 

 

4.46

 

 

4.05

 

 2.83  1.57 

  

Common Stock

 
  

High

  

Low

 

2021

        

First quarter

 $11.55  $4.84 

Second quarter

  6.41   3.97 

Third quarter

  4.55   2.46 

Fourth quarter

  3.51   1.88 

The closing price for our common stock as of February 22, 2018March 6, 2023 was $2.30.$4.65. As of February 22, 2018,March 6, 2023, there were 5349 holders of record of our common stock.

Dividends

We have never paid cash dividends on our common stock and have no current plan to do so in the foreseeable future. The declaration and payment of dividends on our common stock are subject to the discretion of our Board and are further limited by our credit agreement and other contractual agreements we may have in place from time to time. The decision of our Board to pay future dividends will depend on general business conditions, the effect of a dividend payment on our financial condition, and other factors our Board may consider relevant. The current policy of our Board is to reinvest cash generated in our operations to promote future growth and to fund potential investments.

Repurchases

There were no repurchases of our equity securities under our repurchase program made during the years ended December 31, 20172022 and 2016.2021.

Unregistered Sales of Equity Securities

There were no unregistered sales of equity securities for the years ended December 31, 20172022 or 2016.2021.

Securities Authorized for Issuance Under Equity Compensation Plans

See Part III, Item 12 “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters” of this Annual Report on Form 10-K for information as of December 31, 20172022 with respect to shares of our common stock that may be issued under our existing share‑basedshare-based compensation plans.

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ITEM 6. SELECTED FINANCIAL DATA

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and as such are not required to provide information under this item.

17


 

[RESERVED]

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

As used in this Annual Report, the terms “we,” “us,” “our,” “Broadwind,” and the “Company”“Company” refer to Broadwind Energy,, Inc., a Delaware corporation headquarteredheadquartered in Cicero, Illinois, and its subsidiaries.Subsidiaries.

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

We booked $87,562$368,027 in net new orders in 2017, down2022, up from $275,010$159,025 in 2016. The reduction of2021. Heavy Fabrications orders increased by 215% from the prior year as demand increased for our capacity as tower customers secured production capacity through 2024 for ongoing wind turbine tower installation projects. Gearing segment orders increased 16% from the prior year primarily due to increased demand in all end markets led by industrial customers. Industrial Solutions segment orders increased by 3% in 2022 from the prior year primarily due to an increase in orders associated with new gas turbine projects. At December 31, 2022, total backlog was driven by a decrease in tower orders, driven$297,200, up 179% from $106,383 at December 31, 2021 primarily by a multi-year baseload order received in 2016, in responsedue to the December 2015 five-year extensionaforementioned increase in Heavy Fabrication segment orders.

We recognized revenue of the Production Tax Credit (“PTC”) for new wind energy development projects. We are experiencing lower orders for wind towers as customers work off inventories built to support the terms$176,759in 2022, up21% from revenue of the PTC qualification period and$145,619 in 2021. Heavy Fabrications segment revenues increased by 15% during 2022 primarily due to other market conditions. The Gearing segment realized a significant92% increase of $22,708 in ordersindustrial fabrication revenue as a result of higher recent order intake from O&Gindustrial customers and other industrial customers. Our recently formed Process Systems segment received $15,761 of ordersrevenue recognized from our PRS units in the current year. 

We recognized revenue of $146,785Gearing segment revenues increased 49% during 2022 from the prior year primarily due to recent higher order intake levels from customers in 2017, down from revenue of $180,840 in 2016. A 35% reduction in Towers and Heavy Fabrications revenue wasmost end markets, particularly O&G, partially offset by a decrease in aftermarket wind revenue. Industrial Solutions segment revenue increased 16% from the addition of Red Wolf revenue associated with our 2017 acquisition and increased Gearing segment volumes. The Towers and Heavy Fabrications segment revenues decrease wasprior year primarily due to a 41% decrease in towers sold related to a slowdown in demand following early purchases by customers to take advantagethe timing of safe harbor provisions of the PTC in the early months of 2017. The revenue impact of the tower unit sales decrease was partially offset by the impact of higher steel content related to a more complex tower design and higher material costs, which are generally passed through to customers. Gearing segment revenues were up $5,358 or 26%, driven by improved order intake throughout the current year from O&G customers.  Process Systems, which includes our Abilene, Texas compressed natural gas (“CNG”) and fabrication facility and our newly acquired subsidiary, Red Wolf Company, LLC (“Red Wolf”), recognized revenue of $17,390. At December 31, 2017, total backlog was $138,198, down 27% from $188,717 at December 31, 2016.aftermarket installations. 

We reported a net loss of $3,641,$9,730, or $0.24$0.48 per share in 2017,2022, compared to a net income of $319$2,847 or $0.02$0.15 per share in 2016.2021. The $0.26 per share decrease in earnings was primarily due to the absence of the $9,151 benefit recognized from the PPP loan forgiveness and the $6,965 ERC benefit (described below), both of which were recognized in “Other Income (expense), net” in our consolidated statement of operations for the year ended December 31, 2021. This decrease was partially offset by the volume related increases discussed above. 

On March 27, 2020, the CARES Act was signed into law providing numerous tax provisions and other stimulus measures, including the Employee Retention Credit (“ERC”), which is a refundable tax credit against certain employment taxes. The Taxpayer Certainty and Disaster Tax Relief Act of 2020 and the American Rescue Plan Act of 2021 extended and expanded the availability of the ERC. As amended, the ERC was available for wages paid through September 30, 2021 and was equal to 70% of qualified wages (which included employer qualified health plan expenses) paid to employees. During each quarter of 2021, a maximum of $10,000 in Towersqualified wages for each employee was eligible for the ERC. Therefore, the maximum tax credit that could be claimed by an eligible employer in 2021 was $7,000 per employee per calendar quarter. We qualified for the ERC in the first quarter of the year because we experienced a reduction in gross receipts of more than 20% for the first quarter of 2021 compared to the first quarter of 2019, the relevant criteria for the ERC. Since we qualified for the ERC in the first quarter of 2021, we automatically qualified for the ERC in the second quarter of 2021. In the first and Heavy Fabrications segment volume.second quarters of 2021, we received ERC benefits of $3,372 and $3,593, respectively, and under analogy to IAS 20 “Accounting for Government Grants and Disclosure of Government Assistance” were recorded in “Other income (expense), net” in our consolidated statement of operations. During the third quarter of 2021 due to relatively higher revenues in 2021 as compared to the third quarter of 2019, we did not qualify for the ERC benefit. The receivable for the remaining uncollected ERC benefit was $497 as of December 31, 2021 and was included in the “Employee retention credit receivable” line item in our consolidated balance sheet at December 31, 2021. The $497 receivable balance was collected during January 2022.  

20

We use our credit facility from time to time to fund temporary increases in 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, isare sufficient to meet all cash obligations over the next twelve months. On December 31, 2022, we had $0 outstanding under our senior secured revolving credit facility, $7,217 outstanding under our senior secured term loan, $12,732 of cash on hand, with the ability to borrow an additional $27,351. 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.

COVID-19 Pandemic

18

Our facilities continued to operate as essential businesses in light of the customers and markets served. However, through December 31, 2022, we have experienced an adverse impact to our business, operations and financial results as a result of this pandemic due in part to manufacturing inefficiencies associated with supply chain disruptions and employee staffing constraints due to the spread of the COVID-19 pandemic. In response to the pandemic, we continue to right-size our workforce and delay certain capital expenditures. In future periods, we may experience weaker customer demand, requests for extended payment terms, customer bankruptcies, additional supply chain disruption, employee staffing constraints and difficulties, government restrictions or other factors that could negatively impact the Company and its business, operations and financial results. As we cannot predict the duration or scope of the pandemic, including in light of the emerging variants, or its impact on economic and financial markets, any negative impact to our results cannot be reasonably estimated, but it could be material.

Although the long-term effects of COVID-19 remain unknown, the availability of vaccines and reopening of state and local economies have improved the outlook for recovery from COVID-19 impacts.  However, we continue to monitor closely the Company’s financial health and liquidity and the impact of the pandemic on the Company, including emerging variants. We have been able to serve the needs of our customers while taking steps to protect the health and safety of our employees, customers, partners, and communities. Among these steps, we follow the guidance provided by the U.S. Centers for Disease Control and Prevention.

KEY METRICS USED BY MANAGEMENT TO MEASURE PERFORMANCE

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 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

  

Year Ended

 
  

December 31,

 
  

2022

  

2021

 

Net revenues

 $176,759  $145,619 

Net (loss) income

 $(9,730) $2,847 

Adjusted EBITDA (1)

 $2,444  $13,209 

Capital expenditures

 $3,098  $1,707 

Free cash flow (2)

 $17,506  $(2,038)

Operating working capital (3)

 $475  $18,635 

Total debt

 $8,311  $6,827 

Total orders

 $368,027  $159,025 

Backlog at end of period (4)

 $297,200  $106,383 

Book-to-bill (5)

  2.1   1.1 


 

(1)

We provide non-GAAP adjusted EBITDA (earnings before interest, income taxes, depreciation, amortization, share-based compensation, and other stock payments, restructuring costs, impairment charges, and other non-cash gains and losses) as supplemental information regarding our business performance. Our management uses adjusted EBITDA when they internally evaluate the performance of our business, review financial trends and make operating and strategic decisions. 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.


(2)

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 business acquisitions.

(3)

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

(4)

Our backlog at December 31, 2022 and 2021 is net of revenue recognized over time.

(5)

We define 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:

  

Year Ended

 
  

December 31,

 
  

2022

  

2021

 

Net (loss) income from continuing operations

 $(9,730) $2,847 

Interest expense

  3,218   1,129 

Income tax provision

  35   25 

Depreciation and amortization

  6,060   6,336 

Share-based compensation and other stock payments

  2,861   2,872 

Adjusted EBITDA

  2,444   13,209 

Changes in operating working capital

  18,160   (13,573)

Capital expenditures

  (3,098)  (1,707)

Proceeds from disposal of property and equipment

     33 

Free Cash Flow

 $17,506  $(2,038)

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RESULTS OF OPERATIONS

Year Ended December 31, 20172022 Compared to Year Ended December 31, 20162021

The summary of selected financial data table below should be referenced in connection with a review of the following discussion of our results of operations for the year ended December 31, 20172022 compared to the year ended December 31, 2016.2021.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Year Ended December 31,

 

2017 vs. 2016

 

 

 

 

 

 

% of Total

 

 

 

 

% of Total

 

 

 

 

 

 

 

 

2017

 

Revenue

 

2016

 

Revenue

 

$ Change

 

% Change

 

Revenues

 

$

146,785

    

100

%

$

180,840

    

100

%

$

(34,055)

    

(18.8)

%

Cost of sales

 

 

138,626

 

94.4

%

 

162,701

 

90.0

%

 

(24,075)

    

(14.8)

%

Gross profit

 

 

8,159

 

5.6

%

 

18,139

 

10.0

%

 

(9,980)

    

(55.0)

%

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

 

Selling, general and administrative expenses

 

 

13,828

 

9.4

%

 

15,786

 

8.7

%

 

(1,958)

    

(12.4)

%

Intangible amortization

 

 

1,764

 

1.2

%

 

444

 

0.2

%

 

1,320

    

297.3

%

Total operating expenses

 

 

15,592

 

10.6

%

 

16,230

 

9.0

%

 

(638)

    

(3.9)

%

Operating (loss) income

 

 

(7,433)

 

(5.1)

%

 

1,909

 

1.1

%

 

(9,342)

    

(489.4)

%

Other expense

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

 

Interest expense, net

 

 

(798)

 

(0.5)

%

 

(625)

 

(0.3)

%

 

(173)

    

(27.7)

%

Other, net

 

 

 3

 

 0

%

 

49

 

 —

%

 

(46)

    

(93.9)

%

Total other expense, net

 

 

(795)

 

(0.5)

%

 

(576)

 

(0.3)

%

 

(219)

    

(38.0)

%

Net (loss) income before benefit for income taxes

 

 

(8,228)

 

(5.6)

%

 

1,333

 

0.7

%

 

(9,561)

    

(717.3)

%

Benefit for income taxes

 

 

(5,045)

 

(3.4)

%

 

(2)

 

 —

%

 

(5,043)

    

(252,150.0)

%

(Loss) income from continuing operations

 

 

(3,183)

 

(2.2)

%

 

1,335

 

0.7

%

 

(4,518)

    

(338.4)

%

Loss from discontinued operations

 

 

(458)

 

(0.3)

%

 

(1,016)

 

(0.6)

%

 

558

    

54.9

%

Net (loss) income

 

$

(3,641)

 

(2.5)

%

$

319

 

0.2

%

$

(3,960)

    

(1,241.4)

%

  

Year Ended December 31,

  

2022 vs. 2021

 
      

% of Total

      

% of Total

         
  

2022

  

Revenue

  

2021

  

Revenue

  

$ Change

  

% Change

 

Revenues

 $176,759   100.0% $145,619   100.0% $31,140   21.4%

Cost of sales

  166,049   93.9%  140,108   96.2%  25,941   18.5%

Gross profit

  10,710   6.1%  5,511   3.8%  5,199   94.3%

Operating expenses

                        

Selling, general and administrative expenses

  16,592   9.4%  17,372   11.9%  (780)  (4.5)%

Intangible amortization

  725   0.4%  733   0.5%  (8)  (1.1)%

Total operating expenses

  17,317   9.8%  18,105   12.4%  (788)  (4.4)%

Operating loss

  (6,607)  (3.7)%  (12,594)  (8.6)%  5,987   47.5%

Other income (expense), net

                        

Paycheck Protection Program loan forgiveness

     %  9,151   6.3%  (9,151)  (100.0)%

Interest expense, net

  (3,218)  (1.8)%  (1,129)  (0.8)%  (2,089)  (185.0)%

Other, net

  130   0.1%  7,444   5.1%  (7,314)  (98.3)%

Total other income (expense), net

  (3,088)  (1.7)%  15,466   10.6%  (18,554)  (120.0)%

Net (loss) income before provision for income taxes

  (9,695)  (5.5)%  2,872   2.0%  (12,567)  (437.6)%

Provision for income taxes

  35   0.0%  25   0.0%  10   40.0%

Net (loss) income

 $(9,730)  (5.5)% $2,847   2.0% $(12,577)  (441.8)%

Consolidated

Revenues decreased increasedby $34,055$31,140 during the year ended December 31, 2022 primarily due to a 92% increase in industrial fabrications product line revenue within the Heavy Fabrications segment compared to the prior year. This was primarily due to higher recent order intake from $180,840industrial customers and revenue recognized from our PRS units in the current year. Gearing segment revenue increased by 49% compared to the prior year primarily due to higher order intake in recent quarters from customers in most end markets, particularly O&G, partially offset by a decrease in aftermarket wind revenue. Industrial Solutions segment revenue increased 16% primarily due to the timing of aftermarket installations.

Gross profit improved by $5,199 during the year ended December 31, 2022 primarily due to higher sales volumes in the Gearing and the Heavy Fabrications segments, partially offset by higher material costs and ramp-up costs. As a result, our gross margin increased from 3.8% for the year ended December 31, 2016,2021, to $146,7856.1% for the year ended December 31, 2017. The decrease primarily reflects lower sales in our Towers and Heavy Fabrications segment of $56,821, partially offset by higher sales in the Gearing segment of $5,358, and the addition of sales from the acquisition of Red Wolf in February 2017. The Towers and Heavy Fabrications segment revenue decrease was due to a 41% decrease in towers sold, partially offset by the impact of higher steel content related to the mix of tower designs produced. The Gearing segment revenue increase was due primarily to the recovery of the market for O&G gearing.2022.

Gross profit decreased by $9,980, from $18,139 for the year ended December 31, 2016, to $8,159, for the year ended December 31, 2017. The decrease in gross profit was primarily attributable to the decrease in the production volumes in the Towers and Heavy Fabrications segment, partially offset by the benefit of increased production volumes in the Gearing segment and additional gross profit due to the acquisition of Red Wolf. As a result, our gross margin decreased from 10.0% for the year ended December 31, 2016, to 5.6% for the year ended December 31, 2017.

Operating expenses decreased from $16,230 during the year ended December 31, 2016, to $15,592 during the year ended December 31, 2017. Compensation costs decreased by $894 as a result of lower incentive compensation and staffing reductions primarily in response to lower tower production volumes, but were offset by $2,791 of operating and intangible amortization expenses associated with the acquisition of Red Wolf. Also impacting operating expenses in the current year was the reversal of the current portion of the Red Wolf earn-out payment of $1,394 and the release of a $727 environmental reserve due to completing remediation of a vacated gearing facility. Operating expenses as a percentage of sales increaseddecreased to 9.8% in 2022 from 9.0%12.4% in the prior-year to 10.6% in the current year2021 primarily due to lower revenues.higher revenue levels, reduced salaries and benefits and reduced legal fees.

23

Income from continuing operationsNet income decreased from income of $1,335$2,847 for the year ended December 31, 20162021 to a net loss of $3,183$9,730 for the year ended December 31, 2017,2022.The decrease in net income was primarily as a result of the factors described above, partly offset by a $5,060 tax benefit due to the release of a portionabsence of the valuation allowance related to$9,151 benefit recognized from the acquisitionPPP loan forgiveness and the $6,965 ERC benefit, both of Red Wolf.

Profitability decreased from net incomewhich were recognized in “Other Income (expense), net” in our consolidated statement of $319operations for the year ended December 31, 2016, to a net loss of $3,641, for the year ended December 31, 2017, primarily as a result of the factors described above, partly2021. This decrease was partially offset by a reduction in the net loss from discontinued operations due to a reduction in wind down expenses in our Services business.volume related increases discussed above. 

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Table of Contents

Towers and Heavy Fabrications Segment

The following table summarizes the Towers and Heavy Fabrications segment operating results for the yearstwelve months ended December 31, 20172022 and 2016:2021:

 

 

 

 

 

 

 

 

 

 

Twelve Months Ended

 

 

 

December 31,

 

 

 

2017

 

2016

 

Orders

 

$

34,873

    

$

260,790

 

Revenues

 

 

103,389

 

 

160,210

 

Operating income

 

 

2,667

 

 

12,788

 

Operating margin

 

 

2.6

%  

 

8.0

%  

The significant reduction in orders is due primarily to the absence of the $137,000 multi-year tower order received in 2016, which supports deliveries through 2019, and an inventory correction by our largest customer in the second half of 2017. Towers and

  

Year Ended

 
  

December 31,

 
  

2022

  

2021

 

Orders

 $294,097  $93,246 

Tower sections sold

  570   747 

Revenues

  117,206   101,994 

Operating loss

  (1,044)  (3,214)

Operating margin

  (0.9)%  (3.2)%

Heavy Fabrications segmentorders increased by 215% versus the prior year as a result of increased demand for our capacity as tower customers secured production capacity through 2024 for ongoing wind turbine tower installation projects. Segment revenues decreasedincreased by $56,821, from $160,21015% during the year ended December 31, 2016,2022 primarily due to $103,389a 92% increase in industrial fabrication revenue due to higher recent order intake from industrial customers and revenue recognized from our PRS units in the current year. 

Heavy Fabrications segment operating results improved by $2,170 as compared to the prior year. The improvement in operating performance was primarily a result of higher sales in the current year and the absence of one-time events that occurred during the prior year period including a weather-related event and a customer driven project delay, partially offset by costs associated with transitioning a portion of the workforce to support growth in the industrial fabrications product line and inefficiencies associated with a change to a new tower design in the fourth quarter. Operating profit margin was (0.9%) during the year ended December 31, 2017. The Towers and Heavy Fabrications segment revenue decrease was primarily due2022 compared to a 41% decrease in towers sold, partially offset by higher prices due to a more complex tower design and higher material costs, which are generally passed through to customers.

Towers and Heavy Fabrications segment operating income decreased by $10,121, from $12,788 for the year ended December 31, 2016, to $2,667 for the year ended December 31, 2017. The decrease was primarily attributable to lower production volumes and the corresponding underutilization of plant capacity, offset in part by significant cost reduction actions including a $1,510 decrease in incentive compensation, and staffing reductions. Operating margin decreased from 8.0%(3.2%) during the year ended December 31, 2016, to 2.6% during the year ended December 31, 2017.2021.

Gearing Segment

The following table summarizes the Gearing segment operating results for the yearstwelve months ended December 31, 20172022 and 2016:2021:

The following table summarizes the Gearing segment operating results for the years ended December 31, 2017 and 2016:

 

 

 

 

 

 

 

 

 

Twelve Months Ended

 

 

 

December 31,

 

 

 

2017

 

2016

 

Orders

 

$

36,928

    

$

14,220

 

Revenues

 

 

26,006

 

 

20,648

 

Operating loss

 

 

(2,632)

 

 

(3,244)

 

Operating margin

 

 

(10.1)

%  

 

(15.7)

%  

  

Year Ended

 
  

December 31,

 
  

2022

  

2021

 

Orders

 $53,597  $46,081 

Revenues

  42,588   28,583 

Operating income (loss)

  43   (2,593)

Operating margin

  0.1%  (9.1)%

Gearing segment orders more than doubled in 2017, primarily due to the recovery in demand from O&G customers. Revenues rose more gradually, up 26% from the prior year, as the business ramped up production in the second half of the current year to support the higher demand.    

Gearing segment operating loss improved by $612 from $3,244 for the year ended December 31, 2016,2022 increased 16% compared to $2,632the year ended December 31, 2021 primarily due to increased demand from customers in all end markets. Revenues increased 49% during the year ended December 31, 2022 primarily due to higher order intake in recent quarters from customers in most end markets, particularly O&G, partially offset by a decrease in aftermarket wind revenue.

24

The Gearing segment's operating income improved by $2,636during the year ended December 31, 2022 from the year ended December 31, 2021 primarily due to higher sales,partially offset by higher material costs, ramp-up costs, and increased fixed costs to support higher volumes. Operating margin was 0.1% for the year ended December 31, 2017.  The improvement was primarily due2022 compared to the $1,886 impact of higher sales volumes and the $727 release of an environmental reserve following the successful completion of remediation activities on a facility that is now held for sale. Partially offsetting these factors were higher maintenance and tooling expense associated with supporting the volume increases, and higher commission expenses of $288. The operating margin improved based on the above items from (15.7%)(9.1)% during the year ended December 31, 2016,2021.

Industrial Solutions Segment

The following table summarizes the Industrial Solutions segment operating results for the twelve months ended December 31, 2022 and 2021.

  

Year Ended

 
  

December 31,

 
  

2022

  

2021

 

Orders

 $20,333  $19,698 

Revenues

  17,804   15,402 

Operating income (loss)

  120   (386)

Operating margin

  0.7%  (2.5)%

Industrial Solutions segment orders increased by 3% for the year ended December 31, 2022 primarily due to (10.1%) an increase in new gas turbine orders. Segment revenue increased 16% from the prior year primarily due tothe timing of aftermarket installations. The improvement in operating incomeduring the year ended December 31, 2017.

Process Systems Segment

2022 was a result of the revenue increase, partially offset by increased labor and freight costs. The following table summarizes the Process Systems segment operating results formargin improved from (2.5)% during the year ended December 31, 2017.

 

 

 

 

 

Twelve Months Ended

 

December 31,

 

2017

 

Orders

$

15,761

    

Revenues

 

17,390

 

Operating loss

 

(2,269)

 

Operating margin

 

(13.0)

%  

We acquired Red Wolf on February 1, 2017 and as a result, aggregated our Abilene CNG with Red Wolf2021, to form the Process Systems reportable segment. The current year loss reflects low capacity utilization in the Abilene facility, due

20


Table of Contents

to weak CNG equipment demand, a one-time charge of $350 for the write-down of CNG inventory and fixed assets due to market conditions and the impact of $1,320 of intangible amortization associated with the Red Wolf transaction.

Corporate and Other

Corporate and Other expenses improved by $2,436, from $7,635 for0.7% during the year ended December 31, 2016, to $5,199 for2022.

Corporate and Other

Corporate and Other expensesdecreased by $679 during the year ended December 31, 2017.2022. The decrease was primarily dueattributable to the reversal into income of the current portion of the accrued Red Wolf earn-out payment of $1,394lower salaries and a reduction of incentive compensation expenses of $934.benefits. 

SUMMARY OF CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The methods, estimates and judgments that we use in applying our critical accounting policies have a significant impact on the results that we report in our financial statements. Some of our accounting policies require us to make difficult and subjective judgments, often as a result of the need to make estimates regarding matters that are inherently uncertain.

We have identified the accounting policies listed below to be critical to obtain an understanding of our consolidated financial statements. This section should also be read in conjunction with Note 1, “Description of Business and Summary of Significant Accounting Policies” in the notes to our consolidated financial statements for further discussion of these and other significant accounting policies.

25

Revenue Recognition

We recognize revenue when control of the earnings process is complete and when persuasive evidence of an arrangement exists, transfer of title has occurredpromised goods or services have been rendered,is transferred to customers, in an amount that reflects the selling price is fixedconsideration the Company expects to be entitled to in exchange for those goods or determinable, collectability is reasonably assured and delivery has occurred per the terms of the contract.services. Customer deposits and other receipts are deferred and recognized when the revenue is realized and earned. Cash payments to customers, like those made for liquidated damages, are presumed to be classified as reductions of revenue in our statement of operations.

In mostmany instances within our Towers and Heavy Fabrications segment, productswind towers are sold under terms included in bill and hold sales arrangements that result in different timing for revenue recognition versus shipment, due to our customers’ preference to ship towersproducts in batches to support efficient construction of wind farms. We recognize revenue under these arrangements only when there is a substantive reason for the arrangement (i.e., the buyer requests the arrangement, title and risk of ownership has passed to the buyer, a fixed schedule for delivery exists,arrangement), the ordered goods are segregated from inventory and not available to fill other orders, and the goods are complete andcurrently ready for shipment.physical transfer to the customer, and we do 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.

We will adopt

During 2022 and 2021, we also recognized revenue over time, versus point in time, when products in the provisionsGearing and Heavy Fabrications segments had no alternative use to us and we had an enforceable right to payment, including profit, upon termination of Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers,the contract by the customer. Since the projects are labor intensive, we use labor hours as the input measure of progress for the fiscal year beginning January 1, 2018 and will be electingcontract. Contract assets are recorded when performance obligations are satisfied but we are not yet entitled to payment. We recognize contract assets associated with this revenue which represents our rights to consideration for work completed but not billed at the modified retrospective approach. Through our assessmentend of the ASC 606, we have determined there are minimal changes to the assumptions currently utilized for the year ending December 31, 2017 and the adoption of the guidance will not result in a material impact on our consolidated financial statements.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

Inventories consist of raw materials, work-in-process and finished goods. Raw materials consist of components and parts for general production use. Work-in-process consists of labor and overhead, processing costs, purchased subcomponents, and materials purchased for specific customer orders. Finished goods consist of components purchased from third parties as well as components manufactured by us.

Inventories are stated at the lower of cost or market and net realizable value. WeWhere necessary, we have recorded a reserve for the excess of cost over marketnet realizable value in our inventory allowance. MarketNet realizable value of inventory, and management’s judgment concerning the need for reserves, encompasses consideration of othermany business factors including physical condition, inventory holding period, contract terms and usefulness. Inventories are valued based either on actual cost or using a first‑in,first-in, first out method.

21

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Table of Contents

Long-Lived Assets

We review property and equipment and other long-lived assets (“long-lived assets”) for impairment whenever events or circumstances indicate that their carrying amounts may not be recoverable. In evaluating the recoverability of long-lived assets, we utilize a fair value technique accepted by ASC 820, Fair Value Measurement, which is the asset accumulation approach.  If the fair value of the asset group is less than the carrying amount, we recognize an impairment loss.

Due to triggering events identified within our segments at various times in the Gearing segment’s operating losses in 2017 and 2016 combined with its history of continued operating losses,past, we continue to evaluate the recoverability of certain of the long-lived assetsassets. During November 2022, we identified a triggering event associated with the GearingHeavy Fabrications segment. Based on third-party appraisals and other estimates ofIn accordance with GAAP, we compared the faircarrying value of the Gearingsegment asset group we determinedto the fair value offorecast undiscounted cash flows associated with the asset group is in excess of carrying amounts under ASC 360 testing, and no impairment was indicated as of December 31, 2017 or 2016. The appraised value of the assets was determined primarily through the use of market value third-party appraisals. To the extent assumptions used in our evaluations are not achieved, there may be a negative effectgroup. Based on the valuation of these assets.

Goodwill

We review goodwill for impairment on an annual basis is accordance with ASC 350, Intangibles- Goodwill and Other. In evaluatinganalysis performed, the goodwill, we must make assumptions regarding the discounted futureforecast undiscounted cash flows of the acquired company. If the discounted cash flows are less thanexceeded the carrying value we then determine if anresulting in no recorded impairment loss is recognized by evaluating the fair value of the goodwill. We utilize fair value techniques accepted by ASC 820, which include the income, market and cost approach.  If the fair value of the goodwill is less than the carrying amount, we recognize an impairment loss.this group. 

With the Red Wolf acquisition, we recorded goodwill associated with the transaction. In accordance with ASC 350, we have elected to perform the review of goodwill for impairment on an annual basis during the fourth quarter of our fiscal year. Based on the discounted cash flows calculation utilizing three weighted average scenarios and a 19.5% discount rate, we determined the fair value of the goodwill is in excess of carrying value, and no impairment was indicated. 

Income Taxes

We account for income taxes based upon an asset and liability approach. Deferred tax assets and liabilities represent the future tax consequences of the differences between the financial statement carrying amounts of assets and liabilities versus the tax basis of assets and liabilities. Under this method, deferred tax assets are recognized for deductible temporary differences, and operating loss and tax credit carryforwards. Deferred tax liabilities are recognized for taxable temporary differences. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The impact of tax rate changes on deferred tax assets and liabilities is recognized in the year that the change is enacted.

In connection with the preparation of our consolidated financial statements, we are required to estimate our income tax liability for each of the tax jurisdictions in which we operate. This process involves estimating our actual current income tax expense and assessing temporary differences resulting from differing treatment of certain income or expense items for income tax reporting and financial reporting purposes. We also recognize the expected future income tax benefits of NOL carryforwards as deferred income tax assets. In evaluating the realizability of deferred income tax assets associated with NOL carryforwards, we consider, among other things, expected future taxable income, the expected timing of the reversals of existing temporary reporting differences, and the expected impact of tax planning strategies that may be implemented to prevent the potential loss of future income tax benefits. Changes in, among other things, income tax legislation, statutory income tax rates or future taxable income levels could materially impact our valuation of income tax assets and liabilities and could cause our income tax provision to vary significantly among financial reporting periods.

On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act makes broad and complex changes to the U.S. tax code, including, but not limited to, (1) reducing the U.S. federal corporate tax rate; (2) eliminating the corporate alternative minimum tax; (3) creating a new limitation on deductible interest expense; and (4) changing rules related to uses and limitations of net operating loss carryforwards created in tax years beginning after December 31, 2017.

 

We also account for the uncertainty in income taxes related to the recognition and measurement of a tax position taken or expected to be taken in an income tax return. We follow the applicable pronouncement guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition related to the uncertainty in these income tax positions.

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Table of Contents

Workers’ Compensation Reserves

At the beginning of the third quarter of 2013, we began to self‑insure for our workers’ compensation liability, and began establishing reserves for self‑retained losses. Historical loss experience combined with actuarial evaluation methods and the application of risk transfer programs are used to determine required workers’ compensation reserves. We take into account claims incurred but not reported when determining our workers’ compensation reserves. Workers’ compensation reserves are included in accrued liabilities. While we believe that we have adequately reserved for these claims, the ultimate outcome of these matters may exceed the amounts recorded and additional losses may be incurred. Although we entered into a guaranteed cost program at the beginning of the third quarter of 2016, we maintain a liability for the trailing claims from the self-insured policies.

Health Insurance Reserves

At the beginning of the first quarter of 2014, we began to self‑insure for our health insurance liabilities, including reserves for self‑retained losses. Historical loss experience combined with actuarial evaluation methods and the application of risk transfer programs are used to determine required health insurance reserves. We take into account claims incurred but not reported when determining our health insurance reserves. Health insurance reserves are included in accrued liabilities. While we believe that we have adequately reserved for these claims, the ultimate outcome of these matters may exceed the amounts recorded and additional losses may be incurred.

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 December 31, 2017,2022, cash and cash equivalents and short-term investments totaled $78, a decrease$12,732, an increase of $21,792 $11,880from December 31, 2016.2021. Debt and capitalfinance lease obligations at December 31, 20172022 totaled $16,752,$14,545, and we had the ability to borrow up to $11,796$27,351 under ourthe 2022 Credit Facility.

In addition to the 2022 Credit Facility, (as definedwe 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 Note 10, “Debtthe 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.

On August 18, 2020, we filed a “shelf” registration statement on Form S-3, which was declared effective by the Securities and CreditExchange Commission (the “SEC”) on October 13, 2020 (the “Form S-3”) and expires on October 12, 2023. This shelf registration statement, which includes a base prospectus, allows us at any time 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 March 9, 2021, we entered into a $10,000 Equity Distribution Agreement (the “Equity Distribution Agreement”) with Craig-Hallum Capital Group, LLC. Pursuant to the terms of the Equity Distribution Agreement, we issued 1,897,697 shares of the Company's common stock thereunder during the first two quarters of 2021. The net proceeds (before upfront costs) to the Company from the sales of such shares were approximately $9,725 after deducting commissions paid of approximately $275 and before deducting other expense of $411. 

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 the Company’s common stock, par value $0.001 per share with an aggregate sales price of up to $12,000. 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, we issued 100,379 shares of the Company’s common stock under the Sales Agreement and the net proceeds (before upfront costs) from the sale of the Company’s common stock were approximately $323 after deducting commissions paid of approximately $9 and before deducting other expenses of $93. As of December 31, 2022, shares of the Company’s common stock having a value of approximately $11,667 remained available for issuance under the Sales Agreement.

On March 27, 2020, the CARES Act was signed into law providing numerous tax provisions and other stimulus measures, including the Employee Retention Credit (“ERC”), which is a refundable tax credit against certain employment taxes. The Taxpayer Certainty and Disaster Tax Relief Act of 2020 and the American Rescue Plan Act of 2021 extended and expanded the availability of the ERC. As amended, the ERC was available for wages paid through September 30, 2021 and was equal to 70% of qualified wages (which included employer qualified health plan expenses) paid to employees. During each quarter of 2021, a maximum of $10,000 in qualified wages for each employee was eligible for the ERC. Therefore, the maximum tax credit that could be claimed by an eligible employer in 2021 was $7,000 per employee per calendar quarter. We qualified for the ERC in the first quarter of the year because we experienced a reduction in gross receipts of more than 20% for the first quarter of 2021 compared to the first quarter of 2019, the relevant criteria for the ERC. Since we qualified for the ERC in the first quarter of 2021, we automatically qualified for the ERC in the second quarter of 2021. In the first and second quarters of 2021, we received ERC benefits of $3,372 and $3,593, respectively, and under analogy to IAS 20 “Accounting for Government Grants and Disclosure of Government Assistance” were recorded in “Other income (expense), net” in our consolidated financial statements). statement of operations. During the third quarter of 2021 due to relatively higher revenues in 2021 as compared to the third quarter of 2019, we did not qualify for the ERC benefit. The receivable for the remaining uncollected ERC benefit was $497 as of December 31, 2021 and was included in the “Employee retention credit receivable” line item in our consolidated balance sheet at December 31, 2021. The $497 receivable balance was collected during January 2022.  

We anticipate that we will be able to satisfy the cash requirements associated with, among other things, working capital needs, capital expenditures and lease commitments through at least the next twelve months primarily through cash generated from operations, available cash balances, our Credit Facility, sales of shares under the Sales Agreement, additional equipment financing, and access to the public or private debt and/or equity markets, including the option to raise additional capital from the sale of our securities under the Broadwinda “shelf” registration statement on Form S-3.

On January 29, 2018, we executed the Third Amendment to Loan and Security Agreement (the “Third Amendment”), which waived the Fixed Charge Coverage Ratio Covenant as of December 31, 2017 and added new minimum EBITDA and capital expenditure covenants through June 30, 2018. Among other changes, the amendment also revised the Fixed Charge Coverage Ratio Covenant to be recalculated for future periods commencing with the quarter ending June 30, 2018.

While we believe that we will continue to have sufficient cash available to operate our businesses and to meet our financial obligations and amended debt covenants, there can be no assurance that our operations will generate sufficient cash, that we will be able to comply with applicable loan covenants or that credit facilities will be available in an amount sufficient to enable us to pay our indebtedness or to fund our other liquidity needs.

Sources and Uses of Cash

Operating Cash Flows

During the year ended December 31, 2017 net cash used in operations was $9,350 compared to net cash provided by operating activities of $17,300 for the year ended December 31, 2016. The decrease in net cash provided by operating activities was primarily attributable to reduced customer deposits, accrued liabilities, and accounts payable based primarily on lower scheduled tower production.

Investing Cash Flows

During the year ended December 31, 2017, net cash used in investing activities was $19,894 compared to net cash used in investing activities of $3,164 for the year ended December 31, 2016. The increase in net cash used in investing activities as compared to the prior-year period was primarily attributable to the $16,449 cash paid for the Red Wolf acquisition in February 2017.

23


Table of Contents

Financing Cash Flows

During the year ended December 31, 2017, net cash provided by financing activities totaled $10,660 compared to net cash used in financing activities of $3,319 for the year ended December 31, 2016. The increase in net cash provided by financing activities as compared to the prior‑year period was due primarily to drawing proceeds of $158,856 from the Credit Facility partially offset by repayments of $148,009 on the Credit Facility during the year ended December 31, 2017.

Other

Included in Line of Credit, NMTC and other notes payable line item of our consolidated financial statements is $2,600 associated with the New Markets Tax Credit transaction described further in Note 18, “New Markets Tax Credit Transaction” in the notes to our consolidated financial statements. We have

In 2016, we entered into a $570 unsecured loan agreement with the Development Corporation of Abilene of which $114 is included in Current maturities, long-term debt in the consolidated financial statements and $456 is included in Long-term debt, less current maturities. The loan is forgivable upon us meeting and maintaining specific employment thresholds. During each of the years ended December 31, 2022 and 2021, $114 of the loan was forgiven. As of December 31, 2022, the loan balance was $0. In addition, we have outstanding notes payable for capital expenditures in the amount of $1,146,$1,094 and $363 as of December 31, 2022 and 2021, respectively, with $804$88 and $186 included in the Line“Line of Credit, NMTCcredit and othercurrent portion of long-term debt” line item of our consolidated financial statements as of December 31, 2022 and 2021, respectively. The notes payable line item.have monthly payments that range from $3 to $16 and an interest rate of 4%. The equipment purchased is utilized as collateral for the notes payable. Of theThe outstanding notes payable one matures on Marchhave maturity dates that range from July2023toSeptember 2028.

Sources and Uses of Cash

The following table summarizes our cash flows from operating, investing, and financing activities for the years ended December 31, 20182022 and 2021:

  

Year Ended

 
  

December 31,

 
  

2022

  

2021

 

Total cash provided by (used in):

        

Operating activities

 $16,643  $(12,826)

Investing activities

  (3,098)  (1,674)

Financing activities

  (1,665)  11,980 

Net increase (decrease) in cash

 $11,880  $(2,520)

28

Operating Cash Flows

During the other matures on April 25, 2020.year ended December 31, 2022, net cash provided by operations was $16,643 compared to net cash used in operating activities of $12,826 for the year ended December 31, 2021. The increase in net cash provided by operating activities was primarily due to an increase in customer deposits for future scheduled production during the current year period and an increase in accounts payable as compared to the prior year. 

Investing Cash Flows

During the year ended December 31, 2022, net cash used in investing activities was $3,098 compared to net cash used in investing activities of $1,674 for the year ended December 31, 2021. The increase was primarily due to an increase in net purchases of property and equipment.

Financing Cash Flows

During the year ended December 31, 2022, net cash used in financing activities totaled $1,665 compared to net cash provided by financing activities of $11,980 for the year ended December 31, 2021. The decrease was primarily due to greater proceeds from the sale of securities under the Equity Distribution Agreement received in the prior year and increased net repayments under our 2022 Credit Facility during the current year. This was partially offset by an increase in proceeds from long term debt primarily related to the senior secured term loan under our 2022 Credit Facility. 

Contractual Obligations

We enter into a variety of contractual obligations as part of our normal operations in addition to capital expenditures. As of December 31, 2022, we have (i) debt obligations related to our Credit Facility and other notes payable as described in Note 9, “Debt and Credit Agreements” of our consolidated financial statements (ii) cash payments for operating and finance lease obligations that are described in Note 10, “Leases” of our consolidated financial statements and (iii) purchase obligations made in the normal course of business. We expect to fund these cash requirements primarily through cash generated from operations, available cash balances, our 2022 Credit Facility, additional equipment financing, and access to the public or private debt and/or equity markets, including the option to raise additional capital from the sale of our securities under a “shelf” registration statement on Form S-3.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and as such are not required to provide information under this item.

 

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and as such are not required to provide information under this item.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The financial information required by Item 8 is contained in Part IV, Item 15 “EXHIBITS AND FINANCIAL STATEMENT SCHEDULES” of this Annual Report.

29

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

(a)Evaluation of Disclosure Controls and Procedures

(a)

Evaluation of Disclosure Controls and Procedures

We seek to maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) 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 year reported on herein. Based on that evaluation, our CEO and CFO concluded that our disclosure controls and procedures are effective as of December 31, 2017.2022.

(b)Changes in Internal Control over Financial Reporting

(b)

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during our last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

24


(c)

Report of Management on Internal Control Over Financial Reporting

 

Table of Contents

(c)Report of Management on Internal Control Over Financial Reporting

Our management, including our CEO and CFO, is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act).

Our management, including our CEO and CFO, assessed the effectiveness of our internal control over financial reporting as of December 31, 2017.2022. Management based this assessment on criteria for effective internal control over financial reporting described in “Internal Control—Integrated Framework (2013)” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management determined that our internal control over financial reporting was effective as of December 31, 2017.2022.

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

None.

ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

None.

25

30


 

Table of Contents

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

With the exception of the description of our Code of Ethics and Business Conduct below, the information required by this item is incorporated herein by reference from the discussion under the headings “Directors and Director Compensation,” “Corporate Governance,” and “Executive Officers and Executive Compensation” and “Other Matters—Section 16(a) Beneficial Ownership Reporting Compliance”Officers” in our definitive Proxy Statement to be filed in connection with our 20182023 Annual Meeting of Stockholders (the “2018“2023 Proxy Statement”).

Code of Ethics and Business Conduct

We have adopted a Code of Ethics and Business Conduct (the “Code”) that applies to all of our directors, executive officers and senior financial officers (including our principal executive officer, principal financial officer, principal accounting officer, controller, and any person performing similar functions). The Code is available on our website at www.bwen.com under the caption “Investors” and is available in print, free of charge, to any stockholder who sends a request for a paper copy to Broadwind, Energy, Inc., Attn: Investor Relations, 3240 South Central Avenue, Cicero, IL 60804. We intend to include on our website any amendment to, or waiver from, a provision of the Code that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, that relates to any element of the code of ethics definition enumerated in Item 406(b) of Regulation S‑K.S-K.

ITEM 11. EXECUTIVE COMPENSATION

Information regarding director and executive compensation is incorporated by reference from the discussion under the headings “Directors and Director Compensation”Compensation,” “Executive Officers” and “Executive Officers“Compensation Discussion and Executive Compensation”Analysis” in the 20182023 Proxy Statement.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Certain of the information required by this item is incorporated herein by reference from the discussion under the heading “Security Ownership of Certain Beneficial Holders and Management” in the 20182023 Proxy Statement.

31

The following table provides information as of December 31, 2017,2022, with respect to shares of our common stock that may be issued under our existing equity compensation plans:

EQUITY COMPENSATION PLAN INFORMATION

 

 

 

 

 

 

 

 

 

 

    

(a)

    

(b)

    

(c)

 

 

 

 

 

 

 

 

Number of securities

 

 

 

 

 

 

 

 

remaining available for

 

 

 

Number of securities

 

 

 

 

future issuances under

 

 

 

to be issued upon

 

Weighted‑average

 

equity compensation

 

 

 

exercise of

 

exercise price of

 

plans (excluding

 

 

 

outstanding options,

 

outstanding options,

 

securities reflected in

 

Plan Category

 

warrants, and rights

 

warrants, and rights

 

column (a))

 

Equity compensation plans approved by stockholders

 

579,330

(1)

$

6.90

 

621,281

 

Total

 

579,330

 

$

6.90

 

621,281

 

  

(a)

   

(b)

  

(c)

 
           

Number of securities

 
           

remaining available for

 
  

Number of securities

       

future issuances under

 
  

to be issued upon

   

Weighted‑average

  

equity compensation

 
  

exercise of

   

exercise price of

  

plans (excluding

 
  

outstanding options,

   

outstanding options,

  

securities reflected in

 

Plan Category

 

warrants, and rights

   

warrants, and rights

  

column (a))

 

Equity compensation plans approved by stockholders

  822,737 

(1)

 $2.37   130,201 

Total

  822,737   $2.37   130,201 


(1)

Includes outstanding stock options to purchase shares of our common stock and outstanding restricted stock awards pursuant to the Amended and Restated Broadwind Energy, Inc. 2007 Equity Incentive Plan, the Broadwind Energy, Inc. 2012 Equity Incentive Plan, and the Broadwind Energy, Inc. 2015 Equity Incentive Plan. Each of these plansPlan, as amended. This plan has been approved by our stockholders.

 

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information required by this item is incorporated herein by reference from the discussion under the headings “Certain Transactions and Business Relationships” and “Corporate Governance” in the 20182023 Proxy Statement.

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Table of Contents

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by this item is incorporated herein by reference from the discussion under the heading “Ratification of Appointment of Independent Registered Public Accounting Firm” in the 20182023 Proxy Statement.

 

32

 

27


Table of Contents

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

1. Financial Statements

The financial statements listed on the Index to Financial Statements (page 29)34) are filed as part of this Annual Report.

2. Financial Statement Schedules

These schedules have been omitted because the required information is included in the consolidated financial statements or notes thereto or because they are not applicable or not required.

3. Exhibits

The exhibits listed on the Index to Exhibits (pages 65 through 67) are filed as part of this Annual Report.

ITEM 16. FORM 10-K SUMMARY

None.

28


 

None.

33

INDEX TO FINANCIAL STATEMENTS

 

    

Page

 

Report of Independent Registered Public Accounting Firm (PCAOB ID 49)

30

35

Consolidated Balance Sheets as of December 31, 20172022 and 2016 2021

31

37

Consolidated Statements of Operations for the Years Ended December 31, 20172022 and 2016 2021

32

38

Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 20172022 and 2016 2021

33

39

Consolidated Statements of Cash Flows for the Years Ended December 31, 20172022 and 2016 2021

34

40

Notes to Consolidated Financial Statements

35

41

 

 

29

34


 

Report of Independent Registered Public Accounting Firm

 

To the Stockholders and the Board of Directors of Broadwind, Energy, Inc.

 

Opinion on the Financial Statements

 

We have audited the accompanying consolidated balance sheets of Broadwind, Energy, Inc. and its subsidiaries (the Company) as of December 31, 20172022 and 2016,2021, the related consolidated statements of operations, stockholders'stockholders’ equity and cash flows for the years then ended, and the related notes to the consolidated financial statements (collectively, the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 20172022 and 2016,2021, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

 

Basis for Opinion

 

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”)(PCAOB) and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company'sCompany’s internal control over financial reporting. Accordingly, we express no such opinion.

 

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

 

Critical AuditMatter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which is relates.

35

Long-Lived Assets

As described in Note 7 of the financial statements, the Company’s evaluation of long-lived asset impairment involves the comparison of the undiscounted future cash flows of a respective asset group to its corresponding carrying value. This requires management to make significant qualitative and quantitative estimates and assumptions including estimates of future revenue growth rates, operating cash flow margins, and capital expenditures. Changes in these assumptions could have a significant impact on the amount of undiscounted cash flows, which could have an impact on the impairment charge, if any.

The Company’s Heavy Fabrications asset group has experienced recurring operating losses in consecutive years ending December 31, 2022. Company management determined that the carrying amount of the Heavy Fabrications asset group may not be recoverable based on the operating performance of the asset group. Accordingly, the Company performed an impairment assessment of the asset group as of November 30, 2022. As part of the impairment assessment, it was determined that the asset group had undiscounted future cash flows that exceeded its estimated carrying value. Additionally, there were no changes in facts or circumstances following the November 30, 2022 assessment through December 31, 2022, which would alter the asset group’s initial undiscounted future cash flows or carrying value estimates. As a result, no impairment charge was recorded in the consolidated statement of operations for the year ended December 31, 2022, for the Heavy Fabrications asset group. Key financial assumptions used to determine the undiscounted cash flows of the asset group were developed by management.

We identified the long-lived asset impairment assessment of the Heavy Fabrications asset group as a critical audit matter because of the high degree of judgement and subjectivity involved in auditing management’s assumptions regarding their asset group determination, the asset group’s primary asset determination, and projected revenue growth rates, operating cash flow margins and capital expenditures utilized to determine the recoverability of the asset group’s long-lived assets.

How the Critical Audit Matter Was Addressed in the Audit

The audit procedures performed related to the evaluation of Company management’s assumptions and estimates relating to their determination of recoverability of the Heavy Fabrications asset group included the following, among others:

Evaluated the reasonableness of management’s determination that each asset group represented the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities by comparing the inputs and processes utilized within each asset group to each other to ensure the inputs and processes were not comingled and were independent of each other.

Evaluated the reasonableness of management’s determination of the primary asset for the asset group which included comparing the estimated future cash flows derived from the primary asset compared to other assets within the asset grouping.

Evaluated the reasonableness of management’s forecasted revenue, operating cash flow margins, and capital expenditures for the asset group by comparing the projections to historical results and industry expectations.

/s/S/ RSM US LLP

We have served as the Company's auditor since 2016.

 

Chicago, Illinois

February 27, 2018

March 9, 2023

30


 

BROADWIND ENERGY,, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

 

 

 

 

 

 

 

 

 

As of December 31,

 

 

As of December 31,

 

    

 

2017

    

2016

 

 

2022

  

2021

 

 

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

      

CURRENT ASSETS:

 

 

 

 

 

 

 

      

Cash and cash equivalents

 

 

$

78

 

$

18,699

 

Short-term investments

 

 

 

 —

 

 

3,171

 

Restricted cash

 

 

 

 —

 

 

39

 

Cash

 $12,732  $852 

Accounts receivable, net

 

 

 

13,644

 

 

11,865

 

 17,018  13,802 

Employee retention credit receivable

  497 

Contract assets

 1,955 1,136 

Inventories, net

 

 

 

19,279

 

 

21,159

 

 44,262  33,377 

Prepaid expenses and other current assets

 

 

 

1,798

 

 

2,449

 

  3,291   2,661 

Current assets held for sale

 

 

 

580

 

 

808

 

Total current assets

 

 

 

35,379

 

 

58,190

 

  79,258   52,325 

LONG-TERM ASSETS:

 

 

 

 

 

 

 

      

Property and equipment, net

 

 

 

55,693

 

 

54,606

 

 45,319  43,655 

Goodwill

 

 

 

4,993

 

 

 —

 

Other intangible assets, net

 

 

 

16,078

 

 

4,572

 

Operating lease right-of-use assets

 16,396  18,029 

Intangible assets, net

 2,728  3,453 

Other assets

 

 

 

207

 

 

294

 

  839   585 

TOTAL ASSETS

 

 

$

112,350

 

$

117,662

 

 $144,540  $118,047 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

      

CURRENT LIABILITIES:

 

 

 

 

 

 

 

      

Line of credit, NMTC and other notes payable

 

 

$

14,138

 

$

 —

 

Current maturities of long-term debt

 

 

 

114

 

 

 —

 

Current portions of capital lease obligations

 

 

 

762

 

 

465

 

Line of credit and current portion of long-term debt

 $1,170  $6,650 

Current portion of finance lease obligations

 2,008  2,060 

Current portion of operating lease obligations

 1,882  1,775 

Accounts payable

 

 

 

11,756

 

 

15,852

 

 26,255  16,462 

Accrued liabilities

 

 

 

4,393

 

 

8,430

 

 4,313  3,654 

Customer deposits

 

 

 

9,791

 

 

18,011

 

  34,550   12,082 

Current liabilities held for sale

 

 

 

30

 

 

493

 

Total current liabilities

 

 

 

40,984

 

 

43,251

 

  70,178   42,683 

LONG-TERM LIABILITIES:

 

 

 

 

 

 

 

      

Long-term debt, net of current maturities

 

 

 

797

 

 

2,600

 

 7,141  177 

Long-term capital lease obligations, net of current portions

 

 

 

941

 

 

1,038

 

Long-term finance lease obligations, net of current portion

 4,226  2,481 

Long-term operating lease obligations, net of current portion

 16,696  18,405 

Other

 

 

 

3,557

 

 

2,190

 

  26   167 

Total long-term liabilities

 

 

 

5,295

 

 

5,828

 

 28,089  21,230 

COMMITMENTS AND CONTINGENCIES

 

 

 

 

 

 

 

        

STOCKHOLDERS’ EQUITY:

 

 

 

 

 

 

 

      

Preferred stock, $0.001 par value; 10,000,000 shares authorized; no shares issued or outstanding

 

 

 

 —

 

 

 —

 

Common stock, $0.001 par value; 30,000,000 shares authorized; 15,480,299 and 15,175,767 shares issued as of December 31, 2017, and December 31, 2016, respectively

 

 

 

15

 

 

15

 

Treasury stock, at cost, 273,937 shares as of December 31, 2017 and December 31, 2016

 

 

 

(1,842)

 

 

(1,842)

 

Preferred stock, $0.001 par value; 10,000,000 shares authorized; no shares issued or outstanding

    

Common stock, $0.001 par value; 30,000,000 shares authorized; 21,127,130 and 19,859,650 shares issued as of December 31, 2022, and December 31, 2021, respectively

 21  20 

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

 (1,842) (1,842)

Additional paid-in capital

 

 

 

380,005

 

 

378,876

 

 397,240  395,372 

Accumulated deficit

 

 

 

(312,107)

 

 

(308,466)

 

  (349,146)  (339,416)

Total stockholders’ equity

 

 

 

66,071

 

 

68,583

 

  46,273   54,134 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

$

112,350

 

$

117,662

 

 $144,540  $118,047 

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

31

37


 

BROADWIND ENERGY,, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

 

 

 

 

 

 

 

 

 

 

For the Years Ended December 31,

 

 

For the Years Ended December 31,

 

 

 

2017

    

2016

    

 

 

2022

  

2021

 

Revenues

 

$

146,785

 

$

180,840

 

 

 $176,759 $145,619 

Cost of sales

 

 

138,626

 

 

162,701

 

 

  166,049  140,108 

Gross profit

 

 

8,159

 

 

18,139

 

 

 10,710  5,511 

OPERATING EXPENSES:

 

 

 

 

 

 

 

 

      

Selling, general and administrative

 

 

 

13,828

 

 

15,786

 

 

 16,592 17,372 

Intangible amortization

 

 

 

1,764

 

 

444

 

 

  725  733 

Total operating expenses

 

 

 

15,592

 

 

16,230

 

 

  17,317   18,105 

Operating (loss) income

 

 

(7,433)

 

 

1,909

 

 

OTHER (EXPENSE) INCOME, net:

 

 

 

 

 

 

 

 

Operating loss

  (6,607)  (12,594)

OTHER INCOME (EXPENSE), net:

      

Paycheck Protection Program loan forgiveness

  9,151 

Interest expense, net

 

 

 

(798)

 

 

(625)

 

 

 (3,218) (1,129)

Other, net

 

 

 

 3

 

 

49

 

 

  130  7,444 

Total other expense, net

 

 

 

(795)

 

 

(576)

 

 

Net (loss) income before benefit for income taxes

 

 

(8,228)

 

 

1,333

 

 

Benefit for income taxes

 

 

(5,045)

 

 

(2)

 

 

(LOSS) INCOME FROM CONTINUING OPERATIONS

 

 

(3,183)

 

 

1,335

 

 

LOSS FROM DISCONTINUED OPERATIONS

 

 

(458)

 

 

(1,016)

 

 

Total other (expense) income, net

  (3,088)  15,466 

Net (loss) income before provision for income taxes

 (9,695) 2,872 

Provision for income taxes

  35  25 

NET (LOSS) INCOME

 

$

(3,641)

 

$

319

 

 

  (9,730)  2,847 

NET (LOSS) INCOME PER COMMON SHARE—BASIC:

 

 

 

 

 

 

 

 

      

(Loss) income from continuing operations

 

$

(0.21)

 

$

0.09

 

 

Loss from discontinued operations

 

 

(0.03)

 

 

(0.07)

 

 

Net (loss) income

 

$

(0.24)

 

$

0.02

 

 

 $(0.48) $0.15 

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING—BASIC

 

 

15,053

 

 

14,843

 

 

 20,299  18,726 

NET (LOSS) INCOME PER COMMON SHARE—DILUTED:

 

 

 

 

 

 

 

 

 

      

(Loss) income from continuing operations

 

 

$

(0.21)

 

$

0.09

 

 

Loss from discontinued operations

 

 

 

(0.03)

 

 

(0.07)

 

 

Net (loss) income

 

 

$

(0.24)

 

$

0.02

 

 

 $(0.48) $0.15 

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING—DILUTED

 

 

 

15,053

 

 

15,081

 

 

 20,299  19,388 

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

32

38


 

BROADWIND ENERGY,, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands, except share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

Treasury Stock

         

 

 

Common Stock

 

Treasury Stock

 

 

 

 

 

 

 

 

 

 

 

Shares

 

Issued

    

Issued

 

Additional

 

Accumulated

   

 

 

Shares

 

Issued

 

 

 

Issued

 

Additional

 

Accumulated

 

 

 

 

 

Issued

  

Amount

  

Shares

  

Amount

  

Paid-in Capital

  

Deficit

  

Total

 

 

 

Issued

 

Amount

 

Shares

 

Amount

 

Paid-in Capital

 

Deficit

 

Total

 

BALANCE, December 31, 2015

  

 

15,012,789

 

$

15

 

(273,937)

 

$

(1,842)

 

$

378,104

 

$

(308,785)

 

$

67,492

 

Stock issued for restricted stock

 

 

157,331

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

Stock issued under stock option plans

 

 

5,647

 

 

 —

 

 —

 

 

 —

 

 

19

 

 

 —

 

 

19

 

Share-based compensation

 

 

 —

 

 

 —

 

 —

 

 

 —

 

 

753

 

 

 —

 

 

753

 

Net income

 

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

319

 

 

319

 

BALANCE, December 31, 2016

 

 

15,175,767

 

$

15

 

(273,937)

 

$

(1,842)

 

$

378,876

 

$

(308,466)

 

$

68,583

 

BALANCE, December 31, 2020

 17,211,498  $17  (273,937) $(1,842) $384,749  $(342,263) $40,661 

Stock issued for restricted stock

 

 

190,482

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 695,216  1          1 

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

 

 

114,050

 

 

 —

 

 —

 

 

 —

 

 

316

 

 

 —

 

 

316

 

 289,519    1,193  1,193 

Share-based compensation

 

 

 —

 

 

 —

 

 —

 

 

 —

 

 

813

 

 

 —

 

 

813

 

         1,541    1,541 

Shares withheld for taxes in connection with issuance of restricted stock

 (234,280)    (1,423)  (1,423)

Sale of common stock, net

 1,897,697 2   9,312  9,314 

Net income

 

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

(3,641)

 

 

(3,641)

 

                 2,847   2,847 

BALANCE, December 31, 2017

 

 

15,480,299

 

$

15

 

(273,937)

 

$

(1,842)

 

$

380,005

 

$

(312,107)

 

$

66,071

 

BALANCE, December 31, 2021

  19,859,650  $20   (273,937) $(1,842) $395,372  $(339,416) $54,134 

Stock issued for restricted stock

 818,956             

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

 629,213    1,244  1,244 

Share-based compensation

         944    944 

Shares withheld for taxes in connection with issuance of restricted stock

 (281,068)       (549)   (549)

Sale of common stock, net

 100,379 1   229  230 

Net loss

                 (9,730)  (9,730)

BALANCE, December 31, 2022

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

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

33

39


 

BROADWIND ENERGY,, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31,

 

 

 

 

 

2017

    

2016

    

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

 

 

 

Net (loss) income

 

 

 

$

(3,641)

 

$

319

 

 

Loss from discontinued operations

 

 

 

 

(458)

 

 

(1,016)

 

 

(Loss) income from continuing operations

 

 

 

 

(3,183)

 

 

1,335

 

 

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

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization expense

 

 

 

 

8,999

 

 

6,914

 

 

Deferred income taxes

 

 

 

 

(5,045)

 

 

 —

 

 

Impairment charges

 

 

 

 

80

 

 

 —

 

 

Remeasurement of contingent consideration

 

 

 

 

(1,394)

 

 

 —

 

 

Stock-based compensation

 

 

 

 

813

 

 

753

 

 

Allowance for doubtful accounts

 

 

 

 

37

 

 

61

 

 

Common stock issued under defined contribution 401(k) plan

 

 

 

 

316

 

 

 —

 

 

Gain on disposal of assets

 

 

 

 

(12)

 

 

(217)

 

 

Changes in operating assets and liabilities, net of acquisition:

 

 

 

 

 

 

 

 

 

 

Accounts receivable

 

 

 

 

884

 

 

(2,141)

 

 

Inventories

 

 

 

 

7,057

 

 

3,060

 

 

Prepaid expenses and other current assets

 

 

 

 

651

 

 

(933)

 

 

Accounts payable

 

 

 

 

(5,287)

 

 

989

 

 

Accrued liabilities

 

 

 

 

(4,921)

 

 

297

 

 

Customer deposits

 

 

 

 

(8,219)

 

 

8,057

 

 

Other non-current assets and liabilities

 

 

 

 

(126)

 

 

(875)

 

 

Net cash (used in) provided by operating activities of continuing operations

 

 

 

 

(9,350)

 

 

17,300

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

 

 

Cash paid in acquisition

 

 

 

 

(16,449)

 

 

 —

 

 

Purchases of available for sale securities

 

 

 

 

 —

 

 

(19,223)

 

 

Sales of available for sale securities

 

 

 

 

2,221

 

 

13,061

 

 

Maturities of available for sale securities

 

 

 

 

950

 

 

9,170

 

 

Purchases of property and equipment

 

 

 

 

(6,688)

 

 

(6,624)

 

 

Proceeds from disposals of property and equipment

 

 

 

 

72

 

 

452

 

 

Net cash used in investing activities of continuing operations

 

 

 

 

(19,894)

 

 

(3,164)

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

 

 

Net proceeds from issuance of stock

 

 

 

 

 —

 

 

19

 

 

Proceeds from line of credit

 

 

 

 

158,856

 

 

 —

 

 

Payments on line of credit

 

 

 

 

(148,009)

 

 

 —

 

 

Net proceeds on long-term debt

 

 

 

 

457

 

 

(2,799)

 

 

Principal payments on capital leases

 

 

 

 

(644)

 

 

(539)

 

 

Net cash provided by (used in) financing activities of continuing operations

 

 

 

 

10,660

 

 

(3,319)

 

 

DISCONTINUED OPERATIONS:

 

 

 

 

 

 

 

 

 

 

Operating cash flows

 

 

 

 

(78)

 

 

731

 

 

Investing cash flows

 

 

 

 

 —

 

 

615

 

 

Financing cash flows

 

 

 

 

 —

 

 

58

 

 

Net cash (used in) provided by discontinued operations

 

 

 

 

(78)

 

 

1,404

 

 

Add: Cash balance of discontinued operations, beginning of period

 

 

 

 

 2

 

 

 —

 

 

Less: Cash balance of discontinued operations, end of period

 

 

 

 

 —

 

 

 2

 

 

NET (DECREASE) INCREASE  IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH

 

 

 

 

(18,660)

 

 

12,219

 

 

CASH, CASH EQUIVALENTS, AND RESTRICTED CASH beginning of the period

 

 

 

 

18,738

 

 

6,519

 

 

CASH, CASH EQUIVALENTS, AND RESTRICTED CASH end of the period

 

 

 

$

78

 

$

18,738

 

 

Supplemental cash flow information:

 

 

 

 

 

 

 

 

 

 

Interest paid

 

 

 

$

585

 

$

494

 

 

Income taxes paid

 

 

 

$

44

 

$

23

 

 

Non-cash activities:

 

 

 

 

 

 

 

 

 

 

Issuance of restricted stock grants

 

 

 

$

813

 

$

753

 

 

Equipment additions via capital lease

 

 

 

$

844

 

$

1,616

 

 

Contingent consideration related to business acquisition

 

 

 

$

2,534

 

$

 —

 

 

Red Wolf acquisition:

 

 

 

 

 

 

 

 

 

 

Assets acquired

 

 

 

$

26,602

 

$

 —

 

 

Liabilities assumed

 

 

 

$

7,619

 

$

 —

 

 

  

Year Ended December 31,

 
  

2022

  

2021

 

CASH FLOWS FROM OPERATING ACTIVITIES:

        

Net (loss) income

 $(9,730) $2,847 

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

        

Depreciation and amortization expense

  6,060   6,336 

Paycheck Protection Program loan forgiveness

     (9,151)

Deferred income taxes

  (13)  (2)

Change in fair value of interest rate swap agreements

  (27)  23 

Stock-based compensation

  944   1,541 

Allowance for doubtful accounts

  (30)  (426)

Common stock issued under defined contribution 401(k) plan

  1,244   1,193 

Loss (gain) on disposal of assets

  3   (33)

Changes in operating assets and liabilities:

        

Accounts receivable

  (3,186)  1,961 

Employee retention credit receivable

  497   (497)

Contract assets

  (820)  1,117 

Inventories

  (10,885)  (6,653)

Prepaid expenses and other current assets

  (629)  133 

Accounts payable

  9,926   (1,736)

Accrued liabilities

  686   (2,676)

Customer deposits

  22,468   (6,737)

Other non-current assets and liabilities

  135   (66)

Net cash provided by (used in) provided by operating activities

  16,643   (12,826)

CASH FLOWS FROM INVESTING ACTIVITIES:

        

Purchases of property and equipment

  (3,098)  (1,707)

Proceeds from disposals of property and equipment

     33 

Net cash used in investing activities

  (3,098)  (1,674)

CASH FLOWS FROM FINANCING ACTIVITIES:

        

(Payments on) proceeds from line of credit, net

  (6,350)  5,105 

Payments for deferred financing costs

  (470)   

Proceeds from long-term debt

  8,113   817 

Payments on long-term debt

  (863)  (161)

Principal payments on finance leases

  (1,776)  (1,672)

Shares withheld for taxes in connection with issuance of restricted stock

  (549)  (1,423)

Proceeds from sale of common stock, net

  230   9,314 

Net cash (used in) provided by financing activities

  (1,665)  11,980 

NET INCREASE (DECREASE) IN CASH

  11,880   (2,520)

CASH beginning of the period

  852   3,372 

CASH end of the period

 $12,732  $852 

Supplemental cash flow information:

        

Interest paid

 $1,638  $741 

Income taxes paid

 $23  $102 

Non-cash investing and financing activities:

        

Equipment additions via finance lease

 $3,882  $2,757 

Non-cash purchases of property and equipment

 $134  $18 

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

 

34

40


 

Table of Contents

BROADWIND, ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 20172022 and 20162021

(in thousands, except share and per share data)

 

1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of Business

Broadwind, Energy, Inc. (the “Company”) is a precision manufacturer of structures, equipment and components for clean tech and other specialized applications. The Company provides technologically advanced high‑high value products to customers with complex systems and stringent quality standards that operate in energy, mining and infrastructure sector customers,sectors, primarily in the United States of America (the “U.S.”). The Company’s most significant presence is within the U.S. wind energy industry, although the Company has increasingly diversified into other industrial markets. Within the U.S. wind energy industry, the Company provides products primarily to turbine manufacturers. The Company also provides precision gearing and specialty weldmentsheavy fabrications to a broad range of industrial customers for oil and gas (“O&G”), mining, steel and other industrial applications.applications, in addition to supplying components for natural gas turbines. The Company has three reportable operating segments: Towers and Heavy Fabrications, Gearing, and Process Systems.Industrial Solutions.

Towers and

Heavy Fabrications

The Company manufacturesprovides 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 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 forand adapters primarily to wind turbines, specifically the large and heavier wind towers that are designed for multiple megawatt (“MW”) wind turbines.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 (1650 tower sections), sufficient to support turbines generating more than 1,100 MW of power. This product segment also encompasses the manufacture of specialty fabricationsThe Company has expanded its production capabilities and specialty weldments forleveraged manufacturing competencies, including welding, lifting capacity and stringent quality practices, into aftermarket and OEM components utilized in surface and underground mining, construction, material handling, O&G and other industrial customers. In the fourth quarter 2017, the segment changed its name from Towers infrastructure markets.

41

BROADWIND, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2022 and Weldments to Towers2021

(in thousands, except share and Heavy Fabrications to more accurately reflect the nature of the business’ activities.per share data)

Gearing

The Company engineers, buildsprovides gearing and remanufactures precision gearsgearboxes to a broad set of customers in diverse markets including; onshore and gearing systems foroffshore O&G fracking and drilling, surface and underground mining, wind energy, mining, steel, material handling and other industrial applications.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 addition to gearbox repair in Cicero, Illinois, and heat treatment and gearbox repair in Neville Island, Pennsylvania.

Process Systems

On February 1, 2017,Industrial Solutions

The Company provides supply chain solutions, light fabrication, inventory management, kitting and assembly services, primarily serving the Company acquired Red Wolf Company, LLC (“Red Wolf”), a Sanford, North Carolina-based, privately held fabricator, kitter and assembler of industrial systems primarily supporting the globalcombined cycle natural gas turbine (“NGT”) market, and as a result, aggregated its Abilene compressed natural gas (“CNG”) and fabrication business with Red Wolf to form the Process Systems reportable segment. This segment provides contract manufacturing services that include build-to-spec, kitting, fabrication and inventory management for customers throughout the U.S. and in foreign countries, primarily supporting the natural gas turbine power generation market.

Liquidity

The Company meets its short term liquidity needs through cash generated from operations, through its available cash balances, through its 2022 Credit Facility (as defined and throughfurther discussed in Note 9 “Debt and Credit Agreements” of these consolidated financial statements), equipment financing, access to the public and private debt and/or equity markets, and has the option to raise capital under the Company’s $25,000 three-year secured revolving line of credit (the “Credit Facility”) with CIBC Bank USA (“CIBC”), formally known as The PrivateBank and Trust Company.registration statement on Form S-3 (as discussed below). The Company uses the 2022Credit Facility from time to time to fund working capital requirements, and believes the Credit Facility, together with the operating cash generated by the business, will be sufficient to meet its cash obligations for the next twelve months.

On October 26, 2016, the Company established the Credit Facility.requirements. Under the terms of the Credit Facility, CIBC will advance funds when requested against a borrowing base consisting of up to 85% of the face value of the Company’s eligible accounts receivable (“A/R”), up to 50% of the book value of the Company’s eligible inventory and up to 50% of the appraised value of the Company’s eligible machinery, equipment and certain real property up to $10,000. Under the2022 Credit Facility, borrowings are continuous and all cash receipts are automaticallyusually applied to the outstanding borrowed balance. As of December 31, 2017,2022, cash and cash equivalents and short-term investments totaled $78, a decrease$12,732, an increase of $21,792$11,880 from December 31, 2016, and $10,733 was outstanding under the Credit Facility.2021. The Company had the ability to borrow up to $11,796$27,351 under the2022 Credit Facility as of December 31, 2017.2022.

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. 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 Company's consolidated statements of cash flows. Fees incurred in connection with the agreements are recorded as interest expense by the Company.

During the years ended December 31,2022 and December 31, 2021, the Company sold account receivables totaling $93,245 and $99,130, respectively, related to supply chain financing arrangements, of which customers’ financial institutions applied discount fees totaling $1,431 and $251, respectively. 

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BROADWIND, ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2017 2022 and 20162021

(in thousands, except share and per share data)

On January 29, 2018, the Company executed the Third Amendment to Loan and Security Agreement (the “Third Amendment”), which waived the Fixed Charge Coverage Ratio Covenant as of December 31, 2017 and, among other changes, added new minimum EBITDA and capital expenditure covenants through June 30, 2018. The amendment also revised the Fixed Charge Coverage Ratio Covenant to be recalculated for future periods commencing with the quarter ending June 30, 2018.

The decrease in cash and cash equivalents as of December 31, 2017, when compared to levels at December 31, 2016, was primarily due to the Red Wolf acquisition which is discussed in Note 21 “Business Combinations”.

Debt and capitalfinance lease obligations at December 31, 20172022 totaled $16,752,$14,545, which includes current outstanding debt and finance lease obligations totaling $15,014$3,178, due over the next twelve months. The currentCompany's outstanding debt includes $10,733 $7,217outstanding from the senior secured term loan under the 2022Credit Facility and $2,600 related toFacility. The Company had $0 drawn on the New Market Tax Credit Transaction (the “NMTC Transaction”). See Note 18 “New Markets Tax Credit Transaction”senior secured revolving credit facility as of these consolidated financial statements for a complete description of the NMTC Transaction.December 31, 2022. 

On August 11, 2017, 18, 2020, the Company filed a “shelf” registration statement on Form S-3,S-3, which was declared effective by the SECSecurities and Exchange Commission (the “SEC”) on October 10, 2017 (the “Broadwind Form S-3”13, 2020 (the “Form S-3”). and expires on October 12, 2023. This shelf registration statement, which includes a base prospectus, allows the Company at any time to offer any combination of securities described in the prospectus in one or more offerings. Unless otherwise specified in the prospectus supplement accompanying the Company’s 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 March 9, 2021, the Company entered into a $10,000 Equity Distribution Agreement (the “Equity Distribution Agreement”) with Craig-Hallum Capital Group, LLC. Pursuant to the terms of the Equity Distribution Agreement, the Company issued 1,897,697 shares of the Company’s common stock thereunder during the firsttwo quarters of 2021. The net proceeds (before upfront costs) to the Company from the sale of such shares were approximately $9,725 after deducting commissions paid of approximately $275 and before deducting other expenses of $411. 

On September 12, 2022, the Company entered into a Sales Agreement (the “Sales Agreement”) with Roth Capital Partners, LLC and HC Wainwright & Co., LLC (collectively, the “Agents”). Pursuant to the terms of the Sales Agreement, the Company may sell from time to time through the Agents shares of the Company’s common stock, par value $0.001 per share with an aggregate sales price of up to $12,000. Any shares offered and sold under the Sales Agreement are to be issued pursuant to the Form S-3 and the 424(b) prospectus supplement relating to the offering dated September 12, 2022. The Company will pay a commission to the Agents of 2.75% of the gross proceeds of the sale of the shares sold under the Sales Agreement and reimburse the Agents for the expenses incident to the performance of their obligations under the Sales Agreement. During the 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. As of December 31, 2022, shares of the Company’s common stock having a value of approximately $11,667 remained available for issuance under the Sales Agreement.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was signed into law providing numerous tax provisions and other stimulus measures, including an employee retention credit (“ERC”), which is a refundable tax credit against certain employment taxes. The Taxpayer Certainty and Disaster Tax Relief Act of 2020 and the American Rescue Plan Act of 2021 extended and expanded the availability of the ERC. As amended, the ERC is available for wages paid through September 30,2021 and is equal to 70% of qualified wages (which includes employer qualified health plan expenses) paid to employees. During each quarter of 2021, a maximum of $10,000 in qualified wages for each employee is eligible for the ERC. Therefore, the maximum tax credit that can be claimed by an eligible employer in 2021 is $7,000 per employee per calendar quarter. In the first and second quarters of 2021, the Company received ERC benefits of $3,372 and $3,593, respectively, and under analogy to IAS 20 “Accounting for Government Grants and Disclosure of Government Assistance” were recorded in “Other income (expense), net” in our consolidated statement of operations. The Company qualified for the ERC in the first quarter of 2021 because it experienced a reduction in gross receipts of more than 20% for the first quarter of 2021 compared to the first quarter of 2019, the relevant criteria for the ERC. Since the Company qualified for the ERC in the first quarter of 2021, it automatically qualified for the ERC in the second quarter of 2021. As a result of the Company averaging 500 or fewer full-time employees in 2019, all wages paid to employees were eligible for the ERC (rather than only wages paid to employees not providing services). During the third quarter of 2021 due to relatively higher revenues in 2021 as compared to the third quarter of 2019, the Company did not qualify for the ERC benefit. The receivable for the remaining uncollected ERC benefit is $497 as of December 31,2021 and is included in the “Employee retention credit receivable” line item in the Company’s consolidated balance sheet at December 31,2021. The $497 receivable balance was collected during January 2022.  

The Company anticipates that current cash resources, amounts available under the 2022Credit Facility, cash to be generated from operations additionaland equipment financing, and any potential proceeds from access to the public or private debt or equity markets, including the option to raise capitalsale of further Company securities under the Broadwind Form S-3,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 several of the Company’s large customers, as well as customer deposits and revenues generated from new customer orders,

Reclassifications

Certain prior year amounts, which are materially inconsistent with management’s expectations, the Company maynot material, have been reclassified to conform to current year presentation in the future encounter cash flowconsolidated financial statements and liquidity issues. If the Company’s operational performance deteriorates significantly, it may be unable to comply with existing financial covenants, and could lose accessnotes to the Credit Facility. This could limit the Company’s operational flexibility or require a delay in making planned investments. Any additional equity financing, if available, may be dilutive to stockholders, and additional debt financing, if available, would likely require newconsolidated 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.statements.  

 

Summary of Significant Accounting Policies

Principles of Consolidation and Basis of Presentation

These consolidated financial statements include the accounts of the Company and entities in which it has a controlling financial interest. All significant intercompany transactions and balances have been eliminated in consolidation. The Company determines whether it has a controlling financial interest in an entity by first evaluating whether the entity is a voting interest entity or a variable interest entity (“VIE”).

When the Company obtains an economic interest in an entity, the Company evaluates the entity to determine if the entity is deemed a VIE, and if the Company is deemed to be the primary beneficiary, in accordance with the accounting standard for the consolidation of VIE’s. The accounting standard for the consolidation of VIE’s requires the Company to qualitatively assess if the Company was the primary beneficiary of the VIE based on whether the Company had (i) the power to direct those matters that most significantly impacted the activities of the VIE and (ii) the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant. Refer to Note 18, “New Markets Tax

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BROADWIND ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2017 and 2016

(in thousands, except share and per share data)

Credit Transaction” of these consolidated financial statements for a description of two VIE’s included in the Company’s consolidated financial statements.

Management’s Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. (“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 tax rates, inventory reserves, warranty reserves, impairment of long-lived assets, allowance for doubtful accounts, workers’ compensation reserves, health insurance reserves, and environmental reserves.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.

The Company changed an accounting estimate as of the beginning of 2016 to increase the salvage value of selected large machinery and equipment in the Gearing segment to reflect the estimated sale value of the used machinery market. The impact during the year-ended

43

BROADWIND, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2016 was a reduction of depreciation expense of $2,481.2022 and 2021

(in thousands, except share and per share data)

Cash and Cash Equivalents and Short‑Term Investments

Cash and cash equivalents typically comprise cash balances and readily marketable investments with original maturities of three months or less, such as money market funds, short‑term government bonds, Treasury bills, marketable securities and commercial paper. Marketable investments with original maturities between three and twelve months are recorded as short‑term investments. The Company’s treasury policy is to invest excess cash in money market funds or other investments, which are generally of a short‑term duration based upon operating requirements. Income earned on these investments is recorded to interest income in the Company’s consolidated statements of operations.

As of December 31, 20172022 and December 31, 2016,2021, cash totaled $12,732 and cash equivalents totaled $78 and $18,699, respectively, and short‑term investments totaled $0 and $3,171,$852, respectively. For the years ended December 31, 2017 2022 and 2016,2021, interest income was $5 $0and $48,$1, respectively.

Revenue Recognition

The Company recognizes revenue

Revenues are recognized when control of the earnings process is complete and when persuasive evidence of an arrangement exists, transfer of title has occurredpromised goods or services have been rendered,is transferred to customers, in an amount that reflects the selling price is fixedconsideration the Company expects to be entitled to in exchange for those goods or determinable, collectability is reasonably assured and delivery has occurred per the terms of the contract.services. Customer deposits, deferred revenue and other receipts are deferred and recognized when the revenue is realized and earned. Cash payments to customers are presumed to be classified as reductions of revenue in the Company’s statement of operations.

In most instances

For many tower sales within the Company’s Towers and Heavy Fabrications segment, products are sold under terms included in bill and hold sales arrangements that result in different timing for revenue recognition.recognition versus shipment. The Company recognizes revenue under these arrangements only when there is a substantive reason for the buyer requests the arrangement, a fixed schedule for delivery exists,agreement, the ordered goods are segregated from inventoryidentified separately as belonging to the customer and not available to fill other orders, and the goods are complete andcurrently ready for shipment.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.

During2022 and 2021, the Company also recognized revenue over time, versus point in time, when products in the Gearing and Heavy Fabrications segments had no alternative use to the Company and the Company had an enforceable right to payment, including profit, upon termination of the contract by the customer. Since the projects are labor intensive, the Company uses labor hours as the input measure of progress for the contract. Contract assets are recorded when performance obligations are satisfied but the Company is not yet entitled to payment. The Company will adoptrecognizes contract assets associated with this revenue which represents its rights to consideration for work completed but not billed at the provisions of Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers, for the fiscal year beginning January 1, 2018 and will be electing the modified retrospective approach. Through the Company’s assessmentend of the ASC 606, the Company has determined there are minimal changes to the assumptions currently utilized for the year ending December 31, 2017 and the adoption of the guidance will not result in a material impact on the Company’s consolidated financial statements.period. 

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BROADWIND ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2017 and 2016

(in thousands, except share and per share data)

 

Cost of Sales

Cost of sales represents all direct and indirect costs associated with the production of products for sale to customers. These costs include operation, repair and maintenance of equipment, materials, direct and indirect labor and benefit costs, rent and utilities, maintenance, insurance, equipment rentals, freight, in and depreciation.

Selling, General and Administrative Expenses

Selling, general and administrative (“SG&A”) expenses include all corporate and administrative functions such as sales and marketing, legal, human resource management, finance, investor and public relations, information technology and senior management. These functions serve to support the Company’s current and future operations and provide an infrastructure to support future growth. Major expense items in this category include management and staff wages and benefits, share‑basedshare-based compensation and professional services.

44

BROADWIND, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2022 and 2021

(in thousands, except share and per share data)

Accounts Receivable (A/R)

The Company generally grants uncollateralized credit to customers on an individual basis based upon the customer’s financial condition and credit history. Credit is typically on net 30 day terms and customer deposits are frequently required at various stages of the production process to finance customized products and minimize credit risk.

Historically, the Company’s A/R is highly concentrated with a select number of customers. During the year ended December 31, 2017,2022, the Company’s five largest customers accounted for 85%69% of its consolidated revenues and 57%43% of outstanding A/R balances, compared to the year ended December 31, 20162021 when the Company’s five largest customers accounted for 91%71% of its consolidated revenues and 86%25% of its outstanding A/R balances.

Allowance for Doubtful Accounts

Based upon past experience and judgment, the Company establishes an allowance for doubtful accounts with respect to A/R. The Company’s standard allowance estimation methodology considers a number of factors that, based on its collections experience, the Company believes will have an impact on its credit risk and the realizability of its A/R. These factors include individual customer circumstances, history with the Company and other relevant criteria. A/R balances that remain outstanding after the Company has exhausted reasonable collection efforts are written off through a charge to the valuation allowance and a credit to A/R.

The Company monitors its collections and write‑offwrite-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 realizability of its A/R, as noted above, or modifications to the Company’s credit standards, collection practices and other related policies may impact its allowance for doubtful accounts and its financial results. Bad debt expense for the years ended December 31, 2017 and 2016 was $80  and $65, respectively.

Inventories

Inventories

Inventories are stated at the lower of cost or market and net realizable value. Net realizable value is the value that can be realized upon the sale of the inventory less a reasonable estimate of selling costs. Cost is determined either based on the first‑in, first‑outfirst-in, first-out (“FIFO”) method, or on a standard cost basis that approximates the FIFO method. Market is determined based on net realizable value. Any excess of cost over marketnet realizable value is included in the Company’s inventory allowance. MarketNet realizable value of inventory, and management’s judgment of the need for reserves, encompasses consideration of other business factors including physical condition, inventory holding period, contract terms and usefulness.

Inventories consist of raw materials, work‑in‑processwork-in-process and finished goods. Raw materials consist of components and parts for general production use. Work‑in‑processWork-in-process consists of labor and overhead, processing costs, purchased subcomponents and materials purchased for specific customer orders. Finished goods consist of components purchased from third parties as well as components manufactured by the Company that will be used to produce final customer products.

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BROADWIND, ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2017 2022 and 20162021

(in thousands, except share and per share data)

Long-Lived Assets

Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation and amortization of property and equipment is recognized using the straight‑linestraight-line method over the estimated useful lives of the related assets for financial reporting purposes, and generally using an accelerated method for income tax reporting purposes. Depreciation expense related to property and equipment for the years ended December 31, 2017 2022 and 20162021 was $7,235$5,335 and $6,471,$5,603, respectively. Expenditures for additions and improvements are capitalized, while replacements, maintenance and repairs that do not improve or extend the useful lives of the respective assets are expensed as incurred. The Company has in the past capitalized interest costs incurred on indebtedness used to construct property and equipment. Capitalized interest is recorded as part of the asset to which it relates and is amortized over the asset’s estimated useful life. There was no interest cost capitalized during the years ended December 31, 2017 or 2016.  Property or equipment sold or disposed of is removed from the respective property accounts, with any corresponding gains and losses recorded within the operating income (loss) inresults of the Company’s consolidated statement of operations.

The Company reviews property and equipment and other long‑livedlong-lived assets (“long-lived assets”) for impairment whenever events or circumstances indicate that carrying amounts may not be recoverable. In evaluatingAsset recoverability is first measured by comparing the recoverability of long-livedassets’ carrying amounts to their expected future undiscounted net cash flows to determine if the assets the Company utilizes a fair value technique accepted by ASC 820, Fair Value Measurement, which is the asset accumulation approach. If the fair value of the asset group is less than the carrying amount, the Company recognizes an impairment loss.are impaired.

In evaluating the recoverability of long‑livedlong-lived assets, the Company must make assumptions regarding estimated future cash flows and other factors to determine the fair value of such assets. If the Company’s fair value estimates or related assumptions change in the future, the Company may be required to record impairment charges related to property and equipment and other long‑livedlong-lived assets. Asset recoverability is first measured by comparing the assets’ carrying amounts to their expected future undiscounted net cash flows to determine if the assets are impaired. If such assets are considered to be impaired, the impairment recognized is measured based on the amount by which the carrying amount of the assets exceeds the fair value. To the extent the assumptions used in the Company’s analysis are not achieved, there may be a negative effect on the valuationSee Note 7, “Long-Lived Assets” of these consolidated financial statements for further discussion of long-lived assets.

 

Goodwill

Leases

The Company reviews goodwill for impairment on an annual basis in accordance with ASC 350, Intangibles- Goodwillleases various property and Other. In evaluating the goodwill, equipment under operating lease arrangements. On January 1, 2019, the Company must make assumptions regardingadopted Accounting Standards Update (“ASU”) 2016-02, Leases (“Topic 842”) and ASU 2018-11 using the discounted future cash flows ofcumulative effect method. Adopting the acquired company. If the discounted cash flows are less than the carrying value,standard resulted in the Company then determines if an impairment lossrecognizing operating lease assets and liabilities on the balance sheet. Rent expense for these types of leases is recognized by comparingon a straight-line basis over the fair valuelease term. In addition, the Company has entered into finance lease arrangements to finance property and equipment and assumed finance lease obligations in connection with certain acquisitions. The cost basis and accumulated amortization of assets recorded under finance leases are included in property and equipment, while the carrying value of the acquired company.liabilities are included in finance lease obligations.

 

39

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BROADWIND, ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2017 2022 and 20162021

(in thousands, except share and per share data)

Warranty Liability

The Company provides warranty terms that generally range from one to five years for various products and services relating to workmanship and materials supplied by the Company. In certain contracts, the Company has recourse provisions for items that would enable the Company to pursue recovery from third parties for amounts paid to customers under warranty provisions. Warranty liability is recorded in accrued liabilities within the consolidated balance sheet. The Company estimates the warranty accrual based on various factors, including historical warranty costs, current trends, product mix and sales. The changes in the carrying amount of the Company’s total product warranty liability for the years ended December 31, 2017 2022 and 20162021 were as follows, excluding activity related to the discontinued Services segment:follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

As of December 31,

 

 

 

 

2017

    

2016

    

 

Balance, beginning of period

 

 

$

671

 

$

601

 

 

Addition to (reduction of) warranty reserve

 

 

 

(28)

 

 

83

 

 

Warranty claims

 

 

 

(62)

 

 

(13)

 

 

Balance, end of period

 

 

$

581

 

$

671

 

 

  

As of December 31,

 
  

2022

  

2021

 

Balance, beginning of period

 $125  $33 

Increase of warranty reserve

  23   70 

Warranty claims

  3   22 

Other adjustments

  (2)   

Balance, end of period

 $149  $125 

Income Taxes

The Company accounts for income taxes based upon an asset and liability approach. Deferred tax assets and liabilities represent the future tax consequences of the differences between the financial statement carrying amounts of assets and liabilities versus the tax basis of assets and liabilities. Under this method, deferred tax assets are recognized for deductible temporary differences, and operating loss and tax credit carryforwards. Deferred tax liabilities are recognized for taxable temporary differences. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The impact of tax rate changes on deferred tax assets and liabilities is recognized in the year that the change is enacted.

In connection with the preparation of its consolidated financial statements, the Company is required to estimate its income tax liability for each of the tax jurisdictions in which the Company operates. This process involves estimating the Company’s actual current income tax expense and assessing temporary differences resulting from differing treatment of certain income or expense items for income tax reporting and financial reporting purposes. The Company also recognizes as deferred income tax assets the expected future income tax benefits of net operating loss (“NOL”) carryforwards. In evaluating the realizability of deferred income tax assets associated with NOL carryforwards, the Company considers, among other things, expected future taxable income, the expected timing of the reversals of existing temporary reporting differences and the expected impact of tax planning strategies that may be implemented to prevent the potential loss of future income tax benefits. Changes in, among other things, income tax legislation, statutory income tax rates or future taxable income levels could materially impact the Company’s valuation of income tax assets and liabilities and could cause its income tax provision to vary significantly among financial reporting periods.

On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act makes broad and complex changes to the U.S. tax code, including, but not limited to, (1) reducing the U.S. federal corporate tax rate; (2) eliminating the corporate alternative minimum tax; (3) creating a new limitation on deductible interest expense; and (4) changing rules related to uses and limitations of net operating loss carryforwards created in tax years beginning after December 31, 2017.

47

BROADWIND, INC. AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2022 and 2021

(in thousands, except share and per share data)

The Company also accounts for the uncertainty in income taxes related to the recognition and measurement of a tax position taken or expected to be taken in an income tax return. The Company follows the applicable pronouncement guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition related to the uncertainty in these income tax positions.

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BROADWIND ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2017 and 2016

(in thousands, except share and per share data)

 

Share‑BasedShare-Based Compensation

The Company grants incentive stock options, restricted stock units (“RSUs”) and/or performance awards (“PSUs”) to certain officers, directors, and employees. The Company accounts for share‑basedshare-based compensation related to these awards based on the estimated fair value of the equity award and recognizes expense ratably over the required vesting term of the award. The expense associated with PSUs is also based on the probability of achieving embedded targets. Awards that are based on a fixed number of shares are treated as equity while awards that are based on a fixed amount of dollars are treated as liabilities. See Note 15 “Share‑Based14 “Share-Based Compensation” of these consolidated financial statements for further discussion of the Company’s share‑basedshare-based compensation plans, the nature of share‑basedshare-based awards issued and the Company’s accounting for share‑basedshare-based compensation.

Net Income (Loss) Per Share

The Company presents both basic and diluted net income (loss) per share. Basic net income (loss) per share is based solely upon the weighted average number of common shares outstanding and excludes any dilutive effects of restricted stock, options, warrants and convertible securities. Diluted net income (loss) per share is based upon the weighted average number of common shares and common‑sharecommon-share equivalents outstanding during the year excluding those common‑sharecommon-share equivalents where the impact to basic net income (loss) per share would be anti‑dilutive.anti-dilutive.

2. REVENUES

Revenues are recognized when control of the promised goods or services is 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 years ended December 31, 2022 and 2021:

  

Year Ended December 31,

 
  

2022

  

2021

 

Heavy Fabrications

 $117,206  $101,994 

Gearing

  42,588   28,583 

Industrial Solutions

  17,804   15,402 

Eliminations

  (839)  (360)

Consolidated

 $176,759  $145,619 

The Company’s revenue is generally recognized at a point in time, typically when control of the promised goods or services is transferred to its customers in an amount that reflects the consideration it expects to be entitled to in exchange for those goods or services. A performance obligation is a promise in a contract to transfer a distinct product or service to the customer. The Company measures revenue based on the consideration specified in the purchase order and revenue is recognized when the performance obligations are satisfied. 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.

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BROADWIND, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2022 and 2021

(in thousands, except share and per share data)

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 versus shipment. The Company recognizes revenue under these arrangements only when there is a substantive reason for the arrangement, 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 years ended December 31,2022 and 2021, the Company recognized a portion of revenue within the Gearing and Heavy Fabrications segments over time, as the products had no alternative use to the Company and the Company had an enforceable right to payment, including profit, upon termination of the contracts. Since the projects are labor intensive, the Company uses labor hours as the input measure of progress for the applicable contracts. Within the Heavy Fabrications segment, the Company recognized revenue over time of $14,298 and $5,665 for the years ended December 30,2022 and 2021, respectively. Within the Gearing segment, the Company recognized revenue over time of $2,444 for the year ended December 31,2021. During the fourth quarter of 2021, the Company ceased recording revenue over time within the Gearing segment due to a change in contract terms with a customer. 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. These costs are recorded within selling, general and administrative expenses. 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.

3. EARNINGS PER SHARE

The following table presents a reconciliation of basic and diluted earnings per share for the years ended December 31, 2017 2022 and 20162021 as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Years Ended December 31,

 

 

 

 

 

2017

    

2016

    

 

Basic earnings per share calculation:

 

 

 

 

 

 

 

 

 

 

Net (loss) income

 

 

 

$

(3,641)

 

$

319

 

 

Weighted average number of common shares outstanding

 

 

 

 

15,053

 

 

14,843

 

 

Basic net (loss) income per share

 

 

 

$

(0.24)

 

$

0.02

 

 

Diluted earnings per share calculation:

 

 

 

 

 

 

 

 

 

 

Net (loss) income

 

 

 

$

(3,641)

 

$

319

 

 

Weighted average number of common shares outstanding

 

 

 

 

15,053

 

 

14,843

 

 

Common stock equivalents:

 

 

 

 

 

 

 

 

 

 

Stock options and non-vested stock awards (1)

 

 

 

 

 —

 

 

238

 

 

Weighted average number of common shares outstanding

 

 

 

 

15,053

 

 

15,081

 

 

Diluted net (loss) income per share

 

 

 

$

(0.24)

 

$

0.02

 

 


(1)   Stock options and RSUs

  

For the Years Ended December 31,

 
  

2022

  

2021

 

Basic earnings per share calculation:

        

Net (loss) income

 $(9,730) $2,847 

Weighted average number of common shares outstanding

  20,298,641   18,726,459 

Basic net (loss) income per share

 $(0.48) $0.15 

Diluted earnings per share calculation:

        

Net (loss) income

 $(9,730) $2,847 

Weighted average number of common shares outstanding

  20,298,641   18,726,459 

Common stock equivalents:

        

Non-vested stock awards (1)

     662,030 

Weighted average number of common shares outstanding

  20,298,641   19,388,489 

Diluted net (loss) income per share

 $(0.48) $0.15 

(1)   Restricted stock units granted and outstanding of 579,330 as of December 31, 2017 822,737are excluded from the computation of diluted earnings for the year ended December 31, 2022 due to the anti‑dilutiveanti-dilutive effect as a result of the Company’s net loss for the year ended December 31, 2017.that period.

3. DISCONTINUED OPERATIONS

The Company’s former Services segment had substantial continued operating losses for several years, due to low capacity utilization in our gearbox remanufacturing facility and an increasingly competitive environment for field services due in part to increased in-sourcing of service functions by customers. In July, 2015 the Company’s Board of Directors (the “Board”) directed management to evaluate potential strategic alternatives with respect to the Services segment. In September 2015 the Board authorized management to sell substantially all of the assets of the Services segment to one or more third-party purchasers, and thereafter to liquidate or otherwise dispose of any such assets remaining unsold. The Company began negotiations to sell substantially all the assets of the Services segment in the third quarter of 2015. The exit of this business was a strategic shift that had a major effect on the Company; therefore, the Company reclassified the related assets and liabilities of the Services segment as held for sale,  which the divestiture was substantially completed in December 2015. In addition, the Company recorded an asset impairment charges to reduce the carrying value of the net

41

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BROADWIND, ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2017 2022 and 20162021

(in thousands, except share and per share data)

 

assets held for sale to their estimated fair value. The impairment charge and loss on sale is included in “Loss before benefit for income taxes” in “Results of Discontinued Operations.”

Results of Discontinued Operations

Results of operations associated with the Services segment, which are reflected as discontinued operations in the Company’s consolidated statements of income for the twelve months ended December 31, 2017 and 2016, were as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year Ended December 31,

 

    

 

    

 

2017

    

2016

Revenues

 

 

 

 

$

151

 

$

109

Cost of sales

 

 

 

 

 

(391)

 

 

(1,006)

Selling, general and administrative

 

 

 

 

 

(57)

 

 

(69)

Interest expense, net

 

 

 

 

 

 —

 

 

(5)

Impairment of held for sale assets and liabilities and gain on sale of assets

 

 

 

 

 

(161)

 

 

(45)

Loss from discontinued operations

 

 

 

 

$

(458)

 

$

(1,016)

The Company was notified of one warranty claim in 2017, which resulted in an additional $139 of warranty expense; the warranty claim was resolved prior to the end of 2017. In 2016, the Company was also notified of two warranty claims, which resulted in an additional $427 of warranty expense recorded; both of the warranty claims were resolved prior to the end of 2016. The Company’s residual warranty exposure will expire by October 2019.

Assets and Liabilities Held for Sale

Assets and liabilities classified as held for sale in the Company’s consolidated balance sheets as of December 31, 2017 and 2016 include the following:

 

 

 

 

 

 

 

 

 

December 31,

 

December 31,

 

    

2017

    

2016

Assets:

 

 

 

 

 

 

Accounts receivable, net

 

$

11

 

$

172

Inventories, net

 

 

 9

 

 

807

Prepaid expenses and other current assets

 

 

 —

 

 

55

Assets Held For Sale Related To Discontinued Operations

 

 

20

 

 

1,034

Impairment of discontinued assets held for sale

 

 

 —

 

 

(579)

Total Assets Held For Sale Related To Discontinued Operations

 

$

20

 

$

455

Liabilities:

 

 

 

 

 

 

Accounts payable

 

$

 —

 

$

22

Accrued liabilities

 

 

27

 

 

121

Customer deposits and other current obligations

 

 

 3

 

 

 3

Other long-term liabilities

 

 

 —

 

 

 3

Total Liabilities Held For Sale Related To Discontinued Operations

 

$

30

 

$

149

4. 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 consolidated financial statements, except as discussed below.statements.

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers, which amends the guidance in former Accounting Standards Codification Topic 605, Revenue Recognition, and provides a single, comprehensive revenue recognition model for all contracts with customers. This standard contains principles that an entity will apply to determine the measurement of revenue and timing of when it is recognized. The entity will recognize revenue to reflect the transfer of goods or services to

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BROADWIND ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2017 andJune 2016,

(in thousands, except share and per share data)

customers at an amount that the entity expects to be entitled to in exchange for those goods or services. This ASU permits companies to either apply the requirements retrospectively to all prior periods presented, or apply the requirement in the year of adoption, through a cumulative adjustment. In August 2015, the FASB issued ASU 2015-14, Revenue from ContractsNo.2016-13, “Financial Instruments-Credit Losses (Topic 326),” which replaces the current incurred loss impairment methodology for most financial assets with Customers (Topic 606) Deferralthe current expected credit loss, or CECL, methodology. The series of the Effective Date, whichnew guidance amends the previously issued ASUimpairment model by requiring entities to provide foruse a one year deferral fromforward-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 original effective date. This ASUsubtopic. The guidance is effective for public business entities for annual reporting periods beginning after December 15, 2017, 2022, including interim periods within those reporting periods. Early adoption is permitted for annual reporting periods beginning on or after December 15, 2016, including interim periods within that annual period. The Company adopted the provisions of ASU 2014-09 and ASU 2015-14 for the fiscal year beginning January 1, 2018 and has elected the modified retrospective approach. The Company has assessed the impact of adoption on its material revenue streams, evaluated the new disclosure requirements, and identified and implemented appropriate changes to its business processes, systems and controls to support recognition and disclosure under the new guidance. Based on completing the assessment, the Company has determined that the adoption of the guidance will not result in a material impact on its consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which is intended to improve financial reporting about leasing transactions. This ASU will require organizations (“lessees”) that lease assets with lease terms of more than twelve months to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases. Organizations that own the assets leased by lessees (“lessors”) will remain largely unchanged from current guidance. In addition, this ASU will require disclosures to help investors and other financial statement users better understand the amount, timing and uncertainty of cash flows arising from leases. This ASU will be effective for annual reporting periods beginning after December 15, 2018 and interim periods within those fiscal years, with early adoption permitted. The Company is currently evaluating the impact of this ASU on its consolidated financial statements through creating a multi-phase plan to assess the Company’s leases based on the modified definitions within this ASU, evaluatethat the new disclosure requirements, and identify and implement appropriate changes to its business processes, systems and controls to support the accounting and disclosure requirements under the new guidance.

In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805), which clarifies the definition of a business. The amendments in this ASU provide a screen to determine when a set (group of assets and activities) is not a business. The screen requires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not a business. This screen reduces the number of transactions that need to be further evaluated. If the screen is not met, the amendments in this ASU (1) require that to be considered a business, a set must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create output and (2) remove the evaluation of whether a market participant could replace missing elements. This ASUguidance will be effective for annual reporting periods beginning after December 15, 2017 and interim periods within those fiscal years, with early adoption permitted under special circumstances. The Company is currently evaluating the impact of this ASUhave on its consolidated financial statements.

In January 2017,5. ALLOWANCE FOR DOUBTFUL ACCOUNTS

The activity in the FASB issued ASU 2017-04, Intangibles – Goodwill and Other (Topic 350), which simplifies the test for goodwill impairment. To simplify the subsequent measurement of goodwill, the FASB eliminated Step 2, which compares the implied fair value of reporting unit goodwill with the carrying amount of that goodwill,accounts receivable allowance from the goodwill impairment test. Under the amendments in this ASU, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment chargeoperations for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. The FASB also eliminated the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment years ended December 31, 2022 and if it fails that qualitative test, to perform Step 22021 consists of the goodwill impairment test. This ASU will be effective for annual reporting periods beginning after following:

  

For the Year Ended December 31,

 
  

2022

  

2021

 

Balance at beginning of period

 $47  $473 

Bad debt expense

     9 

Write-offs

     (229)

Other adjustments

  (30)  (206)

Balance at end of period

 $17  $47 

6. INVENTORIES

The components of inventories as of December 15, 2019 31, 2022 and interim periods within those fiscal years, with early adoption permitted. The Company is currently evaluating the impact of this ASU on its consolidated financial statements.2021 are summarized as follows:

  

As of December 31,

 
  

2022

  

2021

 

Raw materials

 $27,644  $16,148 

Work-in-process

  13,843   13,639 

Finished goods

  4,916   6,575 
   46,403   36,362 

Less: Reserve

  (2,141)  (2,985)

Net inventories

 $44,262  $33,377 

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BROADWIND, ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2017 2022 and 20162021

(in thousands, except share and per share data)

 

5. CASH AND CASH EQUIVALENTS AND SHORT‑TERM INVESTMENTS

The components of cash and cash equivalents and short‑term investments as of December 31, 2017 and 2016 are summarized as follows:

 

 

 

 

 

 

 

 

 

 

As of

 

 

 

December 31,

 

 

 

2017

    

2016

 

Cash and cash equivalents:

 

 

 

 

 

 

 

Cash

 

$

78

 

$

16,821

 

Money market funds

 

 

 —

 

 

1,878

 

Total cash and cash equivalents

 

 

78

 

 

18,699

 

Short-term investments (available-for-sale):

 

 

 

 

 

 

 

Corporate & municipal bonds

 

 

 —

 

 

3,171

 

Total cash and cash equivalents and short-term investments

 

$

78

 

$

21,870

 

Due to the acquisition of Red Wolf during 2017, the Company moved into a net debt position. Under the structure of the Credit Facility, all cash proceeds are applied routinely to pay down the credit line, which has minimized the Company’s cash balance.7. LONG-LIVED ASSETS

 

6. ALLOWANCE FOR DOUBTFUL ACCOUNTS

The activity in the A/R allowance from operations for the years ended December 31, 2017 and 2016 consists of the following:

 

 

 

 

 

 

 

 

 

 

 

 

For the Years Ended

 

 

 

 

December 31,

 

 

 

 

2017

    

2016

 

Balance at beginning of period

 

 

$

145

 

$

84

 

Bad debt expense

 

 

 

80

 

 

65

 

Other adjustments

 

 

 

 —

 

 

(4)

 

Balance at end of period

 

 

$

225

 

$

145

 

7. INVENTORIES

The components of inventories from operations as of December 31, 2017 and 2016 are summarized as follows:

 

 

 

 

 

 

 

 

 

 

As of December 31,

 

 

 

2017

    

2016

 

Raw materials

 

$

11,945

 

$

14,174

 

Work-in-process

 

 

6,305

 

 

5,321

 

Finished goods

 

 

3,538

 

 

3,342

 

 

 

 

21,788

 

 

22,837

 

Less: Reserve for excess and obsolete inventory

 

 

(2,509)

 

 

(1,678)

 

Net inventories

 

$

19,279

 

$

21,159

 

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BROADWIND ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2017 and 2016

(in thousands, except share and per share data)

8. LONG-LIVED ASSETS

The cost basis and estimated lives of property and equipment from continuing operations as of December 31, 2017 2022 and 20162021 are as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of December 31,

 

 

 

 

 

 

 

    

2017

    

2016

    

Life

 

Land

 

$

1,423

 

$

1,982

 

 

 

 

 

 

Buildings

 

 

22,998

 

 

20,874

 

39

 years

 

 

 

Machinery and equipment

 

 

103,878

 

 

98,656

 

2

-

10

 years

 

Office furniture and equipment

 

 

4,202

 

 

3,648

 

3

-

7

 years

 

Leasehold improvements

 

 

9,095

 

 

8,720

 

Asset life or life of lease

 

 

 

 

Construction in progress

 

 

4,138

 

 

6,089

 

 

 

 

 

 

 

 

 

145,734

 

 

139,969

 

 

 

 

 

 

Less accumulated depreciation and amortization

 

 

(90,041)

 

 

(85,363)

 

 

 

 

 

 

Total property and equipment

 

$

55,693

 

$

54,606

 

 

 

 

 

 

  

As of December 31,

     
  

2022

  

2021

  

Life (in years)

 

Land

 $1,423  $1,423     

Buildings

  20,792   20,778   39 

Machinery and equipment

  120,893   116,725   2 - 10 

Office furniture and equipment

  5,705   5,480   3 - 7 

Leasehold improvements

  9,040   8,937  

Shorter of asset life or life of lease

 

Construction in progress

  2,360   677     
   160,213   154,020     

Less accumulated depreciation and amortization

  (114,894)  (110,365)    

Total property and equipment

 $45,319  $43,655     

 

As of December 31, 2017 and December 31, 2016,2022, the Company had commitments of $132 and $1,220, respectively,$1,942 related to the completion of projects within construction in progress.

 

As a result of the Red Wolf acquisition, the Company added $4,993 of goodwill, which is included in the Process Systems segment. See Note 16, “Segment Reporting” for further discussion of the Company’s segments. Goodwill represents the excess of the purchase price over the fair value of assets acquired, including identifiable intangibles and liabilities as part of the Company’s acquisition of Red Wolf. Goodwill is not amortized but is tested annually for impairment.

Other intangibleIntangible 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. See Note 21, “Business Combinations” of these consolidated financial statements for further discussion of the Red Wolf acquisition. Other intangiblerelationships. Intangible assets are amortized on a straight-line basis over their estimated useful lives, with a remaining life range from 51 to 115 years.

During November 2022, the Company identified a triggering event associated withan expected operating loss within the Heavy Fabrications segment during the year ended December 31, 2022. Accordingly, the Company performed an undiscounted cash flow analysis as of November 30, 2022 and determined that the undiscounted future cash flows exceeded the asset group's carrying value. Additionally, there were no changes in facts or circumstances following the November 30, 2022 assessment through December 31, 2022, which would alter the asset group’s initial undiscounted future cash flows or carrying value estimates. As a result, no impairment charge was recorded for the Heavy Fabrications asset group for the year ended December 31, 2022. 

During November 2021, the Company identified triggering events associated with operating losses within the Gearing segment and a decline in revenue and operating margin within the Heavy Fabrications segment during the year ended December 31, 2021. Accordingly, the Company performed undiscounted cash flow analyses as of November 30, 2021 and determined that the undiscounted future cash flows exceeded the asset groups' carrying values. Additionally, there were no changes in facts or circumstances following the November 30, 2021 assessments through December 31, 2021, which would alter the asset groups initial undiscounted future cash flows or carrying value estimates. As a result, no impairment charges were recorded for the Heavy Fabrications and Gearing asset groups for the year ended December 31, 2021.

51

BROADWIND, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2022 and 2021

(in thousands, except share and per share data)

 

As of December 31, 2017 2022 and 2016,2021, the cost basis, accumulated amortization and net book value of intangible assets were as follows:

  

December 31, 2022

  

December 31, 2021

 
                  

Remaining

                  

Remaining

 
                  

Weighted

                  

Weighted

 
          

Accumulated

  

Net

  

Average

          

Accumulated

  

Net

  

Average

 
  

Cost

  

Accumulated

  

Impairment

  

Book

  

Amortization

      

Accumulated

  

Impairment

  

Book

  

Amortization

 
  

Basis

  

Amortization

  

Charges

  

Value

  

Period

  

Cost

  

Amortization

  

Charges

  

Value

  

Period

 

Intangible assets:

                                        

Noncompete agreements

 $170  $(167) $  $3   0.1  $170  $(139) $  $31   1.1 

Customer relationships

  15,979   (7,581)  (7,592)  806   3.1   15,979   (7,284)  (7,592)  1,103   4.0 

Trade names

  9,099   (7,180)     1,919   4.8   9,099   (6,780)     2,319   5.8 

Intangible assets

 $25,248  $(14,928) $(7,592) $2,728   4.3  $25,248  $(14,203) $(7,592) $3,453   5.2 

Intangible assets are amortized on a straight-line basis over their estimated useful lives, which range from 6 to 20 years. Amortization expense was $725 for the years ended December 31, 2022 and 2021. As of December 31, 2022, estimated future amortization expense is as follows:

2023

 $664 

2024

  661 

2025

  661 

2026

  422 

2027

  320 

Total

 $2,728 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2017

 

December 31, 2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Remaining

 

 

 

 

 

 

 

 

 

 

Remaining

 

    

    

 

 

 

 

    

 

 

    

 

 

    

Weighted

    

 

 

    

 

 

    

 

 

    

Weighted

 

 

 

 

 

 

 

 

 

 

 

Net

 

Average

 

 

 

 

 

 

 

Net

 

Average

 

 

 

 

 

 

 

 

Accumulated

 

Book

 

Amortization

 

 

 

 

Accumulated

 

Book

 

Amortization

 

 

 

 

 

Cost

 

Amortization

 

Value

 

Period

 

Cost

 

Amortization

 

Value

 

Period

Goodwill and other intangible assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Goodwill

 

 

 

 

$

4,993

 

$

 —

 

$

4,993

 

 

 

$

 —

 

$

 —

 

$

 —

 

 

Noncompete agreements

 

 

 

 

 

170

 

 

(26)

 

 

144

 

5.1

 

 

 —

 

 

 —

 

 

 —

 

 

Customer relationships

 

 

 

 

 

15,979

 

 

(4,992)

 

 

10,987

 

8.0

 

 

3,979

 

 

(3,726)

 

 

253

 

5.8

Trade names

 

 

 

 

 

9,099

 

 

(4,152)

 

 

4,947

 

10.5

 

 

7,999

 

 

(3,680)

 

 

4,319

 

10.8

Other intangible assets

 

 

 

 

$

25,248

 

$

(9,170)

 

$

16,078

 

8.8

 

$

11,978

 

$

(7,406)

 

$

4,572

 

10.5

8. ACCRUED LIABILITIES

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

  

December 31,

  

December 31,

 
  

2022

  

2021

 

Accrued payroll and benefits

 $3,110  $2,992 

Fair value of interest rate swap

     27 

Accrued property taxes

  17    

Income taxes payable

  26   1 

Accrued professional fees

  118   129 

Accrued warranty liability

  149   125 

Self-insured workers compensation reserve

  30   166 

Long term incentive plan accrual

  619    

Accrued other

  244   214 

Total accrued liabilities

 $4,313  $3,654 

 

 

45

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Table of Contents

BROADWIND, ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2017 2022 and 20162021

(in thousands, except share and per share data)

 

Intangible assets are amortized on a straight‑line basis over their estimated useful lives, which range from 6 to 20 years. Amortization expense was $1,764 and $444 for the years ended December 31, 2017 and 2016, respectively. As of December 31, 2017, estimated future amortization expense is as follows:

 

 

 

 

2018

 

$

1,884

2019

 

 

1,884

2020

 

 

1,884

2021

 

 

1,884

2022

 

 

1,884

2023 and thereafter

 

 

6,658

Total

 

$

16,078

During 2017 and 2016, the Company continued to experience triggering events associated with the Gearing segment’s current period operating losses combined with its history of continued operating losses. As a result, the Company evaluated the recoverability of certain of its long‑lived assets associated with the Gearing segment. Based upon the Company’s December 31, 2017 and 2016 impairment assessment, the Company utilized third-party appraisals and other estimates of the fair value of the Gearing asset group. The Company assumed that the assets would be exchanged in an orderly transaction between market participants and would represent the highest and best use of these assets. Based on the analysis, the Company determined that no impairment to the asset group was indicated as of December 31, 2017 or 2016.

With the Red Wolf acquisition, the Company recorded goodwill associated with the transaction. In accordance with ASC 350, the Company elected to perform the review of goodwill for impairment on an annual basis during the fourth quarter of the Company’s fiscal year. Based on the discounted cash flows calculation utilizing three weighted average scenarios and a 19.5% discount rate, the Company determined the fair value of the goodwill is in excess of carrying value, and no impairment was indicated as of December 31, 2017.

9. ACCRUED LIABILITIES

Accrued liabilities as of December 31, 2017 and 2016 consisted of the following:

 

 

 

 

 

 

 

 

 

 

December 31,

 

 

 

2017

    

2016

 

Accrued payroll and benefits

 

$

1,797

 

$

4,422

 

Accrued property taxes

 

 

144

 

 

99

 

Income taxes payable

 

 

77

 

 

127

 

Accrued professional fees

 

 

40

 

 

236

 

Accrued warranty liability

 

 

581

 

 

671

 

Accrued regulatory settlement

 

 

 —

 

 

500

 

Accrued environmental reserve

 

 

 —

 

 

1,241

 

Accrued self-insurance reserve

 

 

812

 

 

909

 

Accrued other

 

 

942

 

 

225

 

Total accrued liabilities

 

$

4,393

 

$

8,430

 

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BROADWIND ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2017 and 2016

(in thousands, except share and per share data)

10.9. DEBT AND CREDIT AGREEMENTS

The Company’s outstanding debt balances as of December 31, 2017 2022 and 20162021 consisted of the following:

 

 

 

 

 

 

 

 

 

 

December 31,

 

 

 

2017

    

2016

 

Line of credit and other notes payable

 

$

11,879

 

$

 —

 

NMTC note payable

 

 

2,600

 

 

2,600

 

Long-term debt

 

 

570

 

 

 —

 

Less: Current portion

 

 

(14,252)

 

 

 —

 

Long-term debt, net of current maturities

 

$

797

 

$

2,600

 

  

December 31,

 
  

2022

  

2021

 

Line of credit

 $  $6,350 

Other notes payable

  1,094   477 

Long-term debt

  7,217    

Less: current portion

  (1,170)  (6,650)

Long-term debt, net of current maturities

 $7,141  $177 

As of December 31, 2017,2022, future annual principal payments on the Company’s outstanding debt obligations were as follows:

 

 

 

 

 

2018

    

$

14,252

 

2019

 

 

367

 

2020

 

 

202

 

2021

 

 

114

 

2022

 

 

114

 

Total

 

$

15,049

 

2023

 $1,170 

2024

  1,969 

2025

  1,113 

2026

  1,114 

2027

  1,115 

2028 and thereafter

  1,830 

Total

 $8,311 

Credit Facilities

On October 26, 2016, the Company established the Credit Facilitya three-year secured revolving line of credit with CIBC Bank USA (“CIBC”), formerly known as The PrivateBank. This line of credit has been amended from time to time. On February 25, 2019, the line of credit was expanded and Trust Company. Under the Credit Facility, CIBC advances fundsextended for three years when requested against a borrowing base consisting of up to 85% of the face value of the Company’s eligible A/R, up to 50% of the book value of eligible inventory and up to 50% of the appraised value of eligible machinery, equipment and certain real property up to $10,000. Borrowings under the Credit Facility bear interest at a per annum rate equal to the applicable LIBOR plus a margin ranging from 2.25% to 3.00%, or the applicable base rate plus a margin ranging from 0.00% to 1.00%, both of which are based on the trailing twelve-month EBITDA. The Company also pays an unused facility fee to CIBC equal to 0.50% per annum on the unused portion of the Credit Facility, along with other standard fees. The Credit Facility contains customary representations and warranties. It also contains a requirement that the Company onand its subsidiaries entered into an Amended and Restated Loan and Security Agreement (the “2016 Amended and Restated Loan Agreement”), with CIBC as administrative agent and sole lead arranger and the other financial institutions party thereto (the “Lenders”), providing the Company and its subsidiaries with a consolidated basis, maintain a Fixed Charge Coverage Ratio Covenant, along with other customary restrictive covenants.$35,000 secured credit facility (as amended to date, the “2016 Credit Facility”). The obligations under the 2016Credit Facility arewere secured by, subject to certain exclusions, (i) a first priority security interest in all accounts receivable, inventory, equipment, cash and investment property, and (ii) a mortgage on the Abilene, Texas tower facility. On February 10, 2017, a First Amendment to Loan and Security Agreement and Joinder to Loan and Security Agreement were executed to add Red Wolf as a borrower under the Credit Facility. On March 27, 2017, the parties executed a Second Amendment to Loan and Security Agreement and an Amended and Restated Revolving Note to increase the amount of the Credit Facility to $25,000.Pittsburgh, Pennsylvania gearing facilities.

On January October 29, 2018,2020, the Company executed the ThirdFirst Amendment to Loanthe 2016 Amended and SecurityRestated Loan Agreement (the “Third“First Amendment”), waiving our non-compliance withimplementing a payoff of a syndicated lender and a pricing grid based on the Fixed Charge Coverage Ratio Covenant asCompany's trailing twelve month EBITDA under which applicable margins range from 2.25% to 2.75% for LIBOR rate loans and 0.00% and 0.75% for base rate loans, and extending the term of December 31, 2017 and, among other changes, added new minimum EBITDA and capital expenditure covenants through June 30, 2018. The amendment also revised the Fixed Charge Coverage Ratio Covenant to be recalculated for future periods commencing with the quarter ending June 30, 2018.

As of December 31, 2017, there was $10,733 outstanding under the Credit Facility. The Company had the ability to borrow up to $11,796 under the2016 Credit Facility as of December to July 31, 2017.2023.

Other

Included in Line of Credit, NMTC and other notes payable line item of the Company’s consolidated financial statements is $2,600 associated with the NMTC transaction described further in Note 18, “New Markets Tax Credit Transaction” of these consolidated financial statements. As of December, 31, 2016, this was included in Long-Term Debt,

47


 

53

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BROADWIND, ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2017 2022 and 20162021

(in thousands, except share and per share data)

Net

On February 23, 2021, the Company executed the Second Amendment to the Amended and Restated Loan Agreement, which waived testing of Current Maturities. Thethe fixed charge coverage covenant for the quarters ended March 31, 2021 and June 20, 2021, added a new liquidity covenant applicable to the quarter ended March 31, 2021 and new minimum EBITDA covenants applicable to the quarters ended March 31, 2021 and June 30, 2021. As of September 30, 2021, the Company hastransitioned back to a fixed charge coverage covenant.

On November 8, 2021, the Company executed the Third Amendment to the Amended and Restated Loan Agreement (the “Third Amendment”) which waived the fixed charge coverage ratio default for the quarter ended September 30, 2021, suspended testing of the fixed charge coverage ratio covenant through September 30, 2022, added a minimum EBITDA covenant applicable to the three-month period ending December 31, 2021, the six-month period ending March 31, 2022, the nine-month period ending June 30, 2022 and the twelve-month period ending September 30, 2022 and added a reserve of $5,000 to the Revolving Loan Availability through December 31, 2022. 

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

In conjunction with the 2016 Amended and Restated Loan Agreement, during June 2019, the Company entered into a floating to fixed interest rate swap with CIBC. The swap agreement has a notional amount of $6,000 and a schedule matching that of the underlying loan that synthetically fixes the interest rate on LIBOR borrowings for the entire term of the 2016 Credit Facility at 2.13%, before considering the Company’s risk premium. The interest rate swap is accounted for using mark-to-market accounting. Accordingly, changes in the fair value of the swap each reporting period are adjusted through earnings, which may subject the Company’s results of operations to non-cash volatility. The interest rate swap liability is included in the “Accrued liabilities” line item of the Company’s consolidated financial statements as of December 31, 2021. The interest rate swap expired in February 2022. 

All obligations outstanding under the 2016 Credit Facility were refinanced by the 2022 Credit Facility on August 5, 2022. On August 4, 2022, the Company entered into a credit agreement (the “2022 Credit Agreement”) with Wells Fargo Bank, National Association, as lender (“Wells Fargo”), providing the Company and its subsidiaries with a $35,000 senior secured revolving credit facility (which may be further increased by up to an additional $10,000 upon the request of the Company and at the sole discretion of Wells Fargo) and a $7,578 senior secured term loan (collectively, the “2022 Credit Facility”). The proceeds of the 2022 Credit Facility are available for general corporate purposes, including strategic growth opportunities. The 2022 Credit Facility replaced the 2016 Credit Facility. In connection with the 2022 Credit Facility, the Company incurred deferred financing costs in the amount of $470 primarily related to the revolving credit loan. These costs are included in the “Other assets” line item of the Company's consolidated financial statements as of December 31, 2022. 

The 2022 Credit Facility, 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.  In addition, the 2022 Credit Facility contains financial covenants requiring the Company to have a Fixed Charge Coverage Ratio (i) as of the twelve-month period ending January 31, 2024 through and including June 30, 2024 of 1.0 to 1.0, and (ii) as of each twelve-month period thereafter to be greater than 1.1 to 1.0 and minimum EBITDA (as defined in the 2022 Credit Facility) on a month-end basis of $1,921,000 for the twelve-month period ending March 31, 2023, $3,661,000 for the twelve-month period ending June 30, 2023, $5,876,000 for the twelve-month period ending September 30, 2023, and $9,929,000 for the twelve-month period ending December 31, 2023. 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. 

On February 8, 2023, the Company executed Amendment No.1 to Credit Agreement and Limited Waiver (the “First Amendment to 2022 Credit Agreement”),whichwaived the Company's fourth quarter minimum EBITDA (as defined in the 2022 Credit Facility) requirement for the period ended December 31, 2022, amended the Fixed Charge Coverage Ratio (as defined in the 2022 Credit Facility) 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.

As of December 31, 2022, only $7,217from the senior secured term loan was outstanding under the 2022 Credit Facility. The Company had $0 drawn on the senior secured revolving credit facility and had the ability to borrow up to $27,351 under the 2022 Credit Facility as of December 31, 2022. 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%. As of December 31, 2021, the effective interest rate of the 2016 Credit Facility was4.0%. 

Other

In 2016, the Company entered into a $570 unsecured loan agreement with the Development Corporation of Abilene of which $114 is included in Current maturities, long-term debt in the consolidated financial statements and $456 is included in Long-term debt, less current maturities. The loan is forgivable upon the Company meeting and maintaining specific employment thresholds. During each of the years ended December 31, 2022 and 2021, $114 of the loan was forgiven. As of December 31, 2022 and December 31, 2021, the loan balance was $0and $114, respectively. In addition, the Company has outstanding notes payable for capital expenditures in the amount of $1,146,$1,094 and $363 as of December 31, 2022 and 2021, respectively, with $804$88 and $186 included in the Line“Line of Credit, NMTCcredit and othercurrent portion of long-term debt” line item of the Company’s consolidated financial statements as of December 31, 2022 and 2021, respectively. The notes payable line item.have monthly payments that range from $3to $16 and an interest rate of 4%. The equipment purchased is utilized as collateral for the notes payable. Of theThe outstanding notes payable one matureshave maturity dates that range from July2023 to September 2028.

On April 15, 2020, the Company received funds under notes and related documents (“PPP Loans”) with CIBC, under the Paycheck Protection Program (the “PPP”) which was established under the CARES Act enacted on March 31, 201827, 2020 in response to the COVID-19 pandemic and is administered by the U.S. Small Business Administration (“SBA”). The Company received total proceeds of $9,530 from the PPP Loans and made repayments of $379 on May 13, 2020. Under the terms of the CARES Act, as amended by the Paycheck Protection Program Flexibility Act of 2020 enacted on June 5, 2020, the PPP Loans, and accrued interest and fees are eligible to be forgiven following a period of twenty-four weeks after PPP Loan proceeds are received (the “covered period”) if they are used for qualifying expenses as described in the CARES Act including payroll costs and certain employee benefits (which must equal or exceed 60% of the amount requested to be forgiven), rent, mortgage interest, and utilities.The amount of loan forgiveness is reduced if the borrower terminates employees or significantly reduces salaries during such period, subject to certain exceptions. The Company used at least 60% of the amount of the PPP Loans proceeds to pay for payroll costs and the balance on other matures on April 25, 2020.eligible qualifying expenses consistent with the terms of the PPP and submitted its forgiveness applications to CIBC during the first quarter of 2021. During the quarter ended June 30,2021, all loans were forgiven by the SBA and a gain of $9,151 was recorded in “Other income (expense), net” in the Company's condensed consolidated statements of operations. 

11.

54

BROADWIND, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2022 and 2021

(in thousands, except share and per share data)

10. LEASES

The Company leases various property and equipment under operating lease arrangements. On January 1, 2019, the Company adopted Topic 842 and ASU 2018-11 using the cumulative effect method and has elected to apply each available practical expedient. The standard requires companies to recognize operating lease assets and liabilities on the balance sheet and to disclose key information regarding leasing arrangements. The Company has elected to apply the short-term lease exception to all leases of one year or less.

 As of December 31, 2022, the right-of-use (“ROU”) asset had a balance of $16,396which is included in the “Operating lease right-of-use assets” line item of these consolidated financial statements and current and non-current lease liabilities relating to the ROU asset of $1,882and $16,696, respectively, and are included in the “Current portion of operating lease obligations” and “Long-term operating lease obligations, net of current portion” line items of these consolidated financial statements. As of December 31, 2021, the ROU asset had a balance of $18,029 and current and non-current lease liabilities relating to the ROU asset of $1,775and $18,405, respectively. The discount rates used for leases accounted for under Topic 842 are based on an interest rate yield curve developed for the leases in the Company’s lease portfolio. 

Lease terms generally range from 3 to 15years with renewal options for extended terms. Some of the Company’s facility leases include options to renew. The exercise of the renewal options is at the Company’s discretion. Therefore, the majority of renewals to extend the lease terms are not included in ROU assets and lease liabilities as they are not reasonably certain of exercise. The Company regularly evaluates the renewal options and includes them in the lease term when the Company is reasonably certain to exercise them. Certain leases contain rent escalation clauses that require additional rental payments in the later years of the term. Rent expense for these types of leases is recognized on a straight‑linestraight-line basis over the minimum lease term. Any lease concessions received by the Company are deferred and recognized as an adjustment to rent expense ratably over the minimum lease term. The Company is required to make additional payments under certain property leases for taxes, insurance and other operating expenses incurred during the operating lease period. RentalOperating rental expense for the years ended December 31, 2017 2022 and 20162021 was $3,378$4,253 and $2,996,$4,302, respectively.

In addition, the Company has entered into capitalfinance lease arrangements to finance property and equipment and assumed capitalfinance lease obligations in connection with certain acquisitions. The cost basis and accumulated depreciation of assets recorded under capital leases, which are included in property and equipment, are as follows as of Finance rental expense for the years ended December 31, 2017 2022 and 2016:2021 was $1,639 and $1,379, respectively.

 

 

 

 

 

 

 

 

 

 

December 31,

 

 

    

2017

    

2016

 

Cost

 

$

2,460

 

$

1,616

 

Accumulated depreciation

 

 

(424)

 

 

(129)

 

Net book value

 

$

2,036

 

$

1,487

 

Depreciation

Amortization expense recorded in connection with assets recorded under capitalfinance leases was $295$1,172 and $273$984 for the years ended December 31, 2017 2022 and 2016,2021, respectively.

55

BROADWIND, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2022 and 2021

(in thousands, except share and per share data

)

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

  

Year Ended December 31,

 
  

2022

  

2021

 

Components of lease cost

        

Finance lease cost components:

        

Amortization of finance lease assets

 $1,172  $984 

Interest on finance lease liabilities

  467   395 

Total finance lease costs

  1,639   1,379 

Operating lease cost components:

        

Operating lease cost

  2,839   2,965 

Short-term lease cost

  707   654 

Variable lease cost (1)

  898   870 

Sublease income

  (191)  (187)

Total operating lease costs

  4,253   4,302 
         

Total lease cost

 $5,892  $5,681 
         

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

        

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

        

Operating cash outflow from operating leases

 $3,496  $3,581 

Right-of-use assets obtained in exchange for new

        

operating lease liabilities

 $187  $907 
         

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

  3.3   1.9 

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

  8.1   8.9 

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

  6.0%  6.3%

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

  8.7%  8.6%

(1)

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

Amortization associated with new right-of-use assets obtained in exchange for new operating lease liabilities is $20 and $270 for the years ended December 31, 2022 and 2021, respectively. 

As of December 31, 2017,2022, future minimum lease payments under capitalfinance leases and operating leases were as follows:

  

Finance

  

Operating

     
  

Leases

  

Leases

  

Total

 

2023

 $2,372  $3,453  $5,825 

2024

  1,392   2,998   4,390 

2025

  986   3,064   4,050 

2026

  774   3,059   3,833 

2027

  671   3,098   3,769 

2028 and thereafter

  1,015   10,948   11,963 

Total lease payments

  7,210   26,620   33,830 

Less—portion representing interest

  (976)  (8,042)  (9,018)

Present value of lease obligations

  6,234   18,578   24,812 

Less—current portion of lease obligations

  (2,008)  (1,882)  (3,890)

Long-term portion of lease obligations

 $4,226  $16,696  $20,922 

 

 

 

 

 

 

 

 

 

 

 

 

    

Capital

    

Operating

    

 

 

 

 

 

Leases

 

Leases

 

Total

 

2018

 

$

826

 

$

3,438

 

$

4,264

 

2019

 

 

825

 

 

3,368

 

 

4,193

 

2020

 

 

144

 

 

2,695

 

 

2,839

 

2021

 

 

 —

 

 

2,267

 

 

2,267

 

2022

 

 

 —

 

 

2,270

 

 

2,270

 

2023 and thereafter

 

 

 —

 

 

8,460

 

 

8,460

 

Total

 

$

1,795

 

$

22,498

 

$

24,293

 

Less—portion representing interest at a weighted average annual rate of 5.0% 

 

 

(92)

 

 

 

 

 

 

 

Principal

 

 

1,703

 

 

 

 

 

 

 

Less—current portion

 

 

(762)

 

 

 

 

 

 

 

Capital lease obligations, noncurrent portion

 

$

941

 

 

 

 

 

 

 

56

 

48


Table of Contents

BROADWIND, ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2017 2022 and 20162021

(in thousands, except share and per share data)

 

12.11. COMMITMENTS AND CONTINGENCIES

Legal Proceedings

From time to time, the Company is subject to legal proceedings or claims that arise in the ordinary course of its business. The Company accrues for costs related to loss contingencies when such costs are probable and reasonably estimable. As of December 31, 2017,2022, the Company is not aware of any material pending legal proceedings or threatened litigation that would have a material adverse effect on the Company’s results of operations, financial condition or cash flows, although no assurance can be given with respect to the ultimate outcome of pending actions. Refer to Note 20,18, “Legal Proceedings” of these consolidated financial statements for further discussion of legal proceedings.

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. Also, certain environmental laws can 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.

In connection with the Company’s restructuring initiatives, during the third quarter of 2012, the Company identified a liability associated with the planned sale of one of the Company’s facilities located in Cicero, Illinois (the “Cicero Avenue Facility”). The liability is associated with environmental remediation costs that were identified while preparing the site for sale. During 2013, the Company applied for and was accepted into the Illinois Environmental Protection Agency (“IEPA”) voluntary site remediation program. In the first quarter of 2014, the Company completed a comprehensive review of remedial options for the Cicero Avenue Facility and selected a preferred remediation technology. As part of the voluntary site remediation program, the Company submitted a plan to the IEPA for approval to conduct a pilot study to test the effectiveness of the selected remediation technology. In the third quarter of 2015, the Company obtained additional information regarding potential remediation options and modified the remediation plan, which caused an increase in the estimated cost of remediation and resulted in the Company increasing its reserve associated with this matter by $874.  In the fourth quarter of 2017, the Company remediated the Cicero Avenue Facility to a point that requires the known future use to complete the final remediation steps and is currently in active negotiations to dispose of the property. As of

57

BROADWIND, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2017, the accrual balance associated with this matter totaled $0.2022 and 2021

(in thousands, except share and per share data)

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.

Warranty Liability

The Company provides warranty terms that generally range from one to five years for various products and services relating to workmanship and materials supplied by the Company. In certain contracts, the Company has recourse provisions for items that would enable the Company to pursue recovery from third parties for amounts paid to customers under warranty provisions.

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 dependent on actual losses sustained by the customer. When the damages are determined to be probable and

49


Table of Contents

BROADWIND ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2017 and 2016

(in thousands, except share and per share data)

estimable, the damages are recorded as a reduction to revenue. During 2017,2022 and 2021, the Company incurred no liquidated damages and there was no reserve for liquidated damages as of December 31, 2017.2022 or December 31, 2021.

Workers’ Compensation Reserves

As of December 31, 2017 2022 and 2016, respectively,2021, the Company had $812 $30and $909$166, respectively, accrued for self‑insuredself-insured workers’ compensation liabilities. At the beginning of the third quarter of 2013, the Company began to self‑insureself-insure for its workers’ compensation liabilities, including reserves for self‑retainedself-retained losses. The Company entered into a guaranteed workers’ compensation cost program at the beginning of the third quarter of 2016, but still maintains a liability for the trailing claims for the self-insured policy periods. Although the ultimate outcome of these matters may exceed the amounts recorded and additional losses may be incurred, the Company does not believe that any additional potential exposure for such liabilities will have a material adverse effect on the Company’s consolidated financial position or results of operations.

Other

Health Insurance Reserves

As of December 31, 2017,2022 and 2021, the Company had $360 and $416, respectively, accrued for health insurance liabilities. The Company self-insures for its health insurance liabilities, including establishing reserves for self-retained losses. Historical loss experience combined with actuarial evaluation methods and the application of risk transfer programs are used to determine required health insurance reserves. The Company takes into account claims incurred but not reported when determining its health insurance reserves. Health insurance reserves are included in accrued liabilities. While the Company’s management believes that it has adequately reserved for these claims, the ultimate outcome of these matters may exceed the amounts recorded and additional losses may be incurred.

58

BROADWIND, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2022 and 2021

(in thousands, except share and per share data)

Other

As of December 31, 2022, approximately 24%19% of the Company’s employees were covered by two collective bargaining agreements with local unions at the Company’s Cicero, Illinois and Neville Island, Pennsylvania locations. The current three-yearDuring November 2022, the Company negotiated a four-year collective bargaining agreement with the Neville Island union and it is expected to remain in effect through October 2022. The2026. four-year collective bargaining agreement within regards to the Cicero, union expiredIllinois facility was negotiated in February 2018; the parties are currently negotiating a new collective bargaining agreement.

See Note 18, “New Markets Tax Credit Transaction” of these consolidated financial statements for a discussion of a strategic financing transaction (the “NMTC Transaction”) which originally related to the Company’s drivetrain service center in in Abilene, Texas (the “Abilene Gearbox Facility”), 2022 and was amended in August 2015 to also include the activities of the Company’s heavy industries business conducted in the same building in Abilene, Texas (the “Abilene Heavy Industries Facility”). The Abilene Heavy Industries Facility focuses on Heavy Fabrications for industries including those related to compressed natural gas distribution. Pursuant to the NMTC Transaction, the gross loan and investment in the Abilene Heavy Industries Facility and the Abilene Gearbox Facility of $10,000 is expected to generate $3,900remain in tax credits over a period of seven years, which the NMTC Transaction makes available to Capital One, National Association (“Capital One”)effect through February 2026.

12. The Abilene Heavy Industries Facility and/or the Abilene Gearbox Facility must operate and be in compliance with the terms and conditions of the NMTC Transaction during the seven year compliance period, or the Company may be liable for the recapture of $3,900 in tax credits to which Capital One is otherwise entitled. The Company does not anticipate any credit recaptures will be required in connection with the NMTC Transaction.

13. FAIR VALUE MEASUREMENTS

The Company measures its financial assets and liabilities at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., exit price) in an orderly transaction between market participants at the measurement date. Additionally, 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. Level 1 provides the most reliable measure of fair value while Level 3 generally requires significant management judgment. Financial assets and liabilities are classified in their entirety based on the lowest level of input significant to the fair value measurement. Financial instruments are assessed quarterly to determine the appropriate classification within the fair value hierarchy. Transfers between fair value classifications are made based upon the nature and type of the observable inputs. 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. For the Company’s corporate and municipal bonds, although quoted prices are available and used to value said assets, they are traded less frequently.

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

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BROADWIND ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2017 and 2016

(in thousands, except share and per share data)

would use in valuing the asset or liability at the measurement date. The Company used market negotiations to value the Gearing segments assets.

The following tables represent the fair values of the Company’s financial assets measured as of December 31, 2017 and 2016:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2017

 

 

 

 

Level 1

    

Level 2

    

Level 3

    

Total

 

Assets measured on a nonrecurring basis:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gearing Cicero Ave. facility

 

 

$

 —

 

$

 —

 

$

560

 

$

560

 

Services assets

 

 

 

 —

 

 

 —

 

 

20

 

 

20

 

Total assets at fair value

 

 

$

 —

 

$

 —

 

$

580

 

$

580

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2016

 

 

 

Level 1

    

Level 2

    

Level 3

    

Total

 

Assets measured on a recurring basis:

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate & municipal bonds and money market funds

 

$

 —

 

$

5,049

 

$

 —

 

$

5,049

 

Assets measured on a nonrecurring basis:

 

 

 

 

 

 

 

 

 

 

 

 

 

Gearing equipment

 

 

 —

 

 

 —

 

 

353

 

 

353

 

Gearing Cicero Ave. facility

 

 

 —

 

 

 —

 

 

560

 

 

560

 

Services assets

 

 

 —

 

 

 —

 

 

455

 

 

455

 

Total assets at fair value

 

$

 —

 

$

5,049

 

$

1,368

 

$

6,417

 

Fair value of financial instruments

The carrying amounts of the Company’s financial instruments, which include cash and cash equivalents, restricted cash, A/R, 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.

Assets measured at fair value on a nonrecurring basis

The fair value measurement approach for long lived assets utilizes a number of significant unobservable inputs or Level 3 assumptions. To the extent assumptions used in the Company’s evaluations are not achieved, there may be a negative effect on the valuation of these assets.

The investment in select Gearing segment equipment, shown as $353 at December 31, 2016, is associated with the Company’s activities to update and consolidate the Gearing segment asset base. The reduction in the carrying value to $0 at December 31, 2017, reflects the sale of the surplus assets.

The carrying value of the land and building comprising the Cicero Avenue Facility of $560 reflects the expected proceeds associated with selling this facility. During 2017, the Company reclassified the Cicero Avenue Facility as Assets Held for Sale upon completion of general site remediation activities. See Note 12, “Commitments and Contingencies” of these consolidated financial statements for additional detail of the Cicero Avenue Facility.

Following the Board’s approval of a plan to divest the Company’s Services segment, the Company has been able to evaluate the value of the segment’s assets on the open market; therefore, the Company has utilized this measurement to determine the fair value of the Services segment assets.

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BROADWIND, ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2017 2022 and 20162021

(in thousands, except share and per share data)

The Company entered into an interest rate swap in June 2019 to mitigate the exposure to the variability of LIBOR for its floating rate debt described in Note 9, “Debt and Credit Agreements,” of these consolidated financial statements. The fair value of the interest rate swap is reported in “Accrued liabilities” and the change in fair value is reported in “Interest expense, net” of these consolidated financial statements. The fair value of the interest rate swap is estimated as the net present value of projected cash flows based on forward interest rates at the balance sheet date. The interest rate swap expired in February 2022. 

The following table represents the fair value of the Company’s financial assets measured as of December 31, 2022 and 2021:

  

December 31, 2021

 
  

Level 1

  

Level 2

  

Level 3

  

Total

 

Liabilities measured on a recurring basis:

                

Interest rate swap

 $  $27  $  $27 

Total liabilities at fair value

 $  $27  $  $27 

13. INCOME TAXES

The provision for income taxes for the years ended December 31, 2022 and 2021 consists of the following:

  

For the Years Ended Year Ended December 31,

 
  

2022

  

2021

 

Current provision

        

Federal

 $  $ 

State

  48   21 

Total current provision

  48   21 

Deferred provision

        

Federal

  (2,102)  (1,636)

State

  (460)  (304)

Total deferred provision

  (2,562)  (1,940)

Increase in deferred tax valuation allowance

  2,549   1,944 

Total provision for income taxes

 $35  $25 

During the year ended December 31, 2022, the Company recorded an expense for income taxes of $35, compared to an expense for income taxes of $25 during the year ended December 31, 2021. On August 16, 2022, Congress enacted the Inflation Reduction Act which includes advanced manufacturing tax credits for manufacturers of eligible components, including wind and solar components produced and sold in the US from 2023 through 2032.No rulings have been made on the taxability of these credits. 

The total change in the deferred tax valuation allowance was $2,549and $1,944 for the years ended December 31, 2022 and 2021, respectively. The changes in the deferred tax valuation allowance in 2022 and 2021 were primarily the result of increases to the deferred tax assets pertaining to federal and state NOLs. Management believes that significant uncertainty exists surrounding the recoverability of deferred tax assets. As a result, the Company recorded a valuation allowance against the remaining deferred tax assets.

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BROADWIND, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2022 and 2021

(in thousands, except share and per share data)

 

14. INCOME TAXES

The provision for income taxes for the years ended December 31, 2017 and 2016 consists of the following:

 

 

 

 

 

 

 

 

 

 

 

For the Years Ended December 31,

 

 

    

2017

    

2016

    

 

Current provision

 

 

 

 

 

 

 

 

Federal

 

$

 —

 

$

 —

 

 

Foreign

 

 

 —

 

 

 —

 

 

State

 

 

 5

 

 

(2)

 

 

Total current benefit

 

 

 5

 

 

(2)

 

 

Deferred credit

 

 

 

 

 

 

 

 

Federal

 

 

31,614

 

 

487

 

 

State

 

 

468

 

 

5,226

 

 

Total deferred credit

 

 

32,082

 

 

5,713

 

 

Decrease in deferred tax valuation allowance

 

 

(37,132)

 

 

(5,713)

 

 

Total benefit for income taxes

 

$

(5,045)

 

$

(2)

 

 

On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act makes broad and complex changes to the U.S. tax code, including, but not limited to, (1) reducing the U.S. federal corporate tax rate; (2) eliminating the corporate alternative minimum tax; (3) creating a new limitation on deductible interest expense; and (4) changing rules related to uses and limitations of net operating loss carryforwards created in tax years beginning after December 31, 2017. With the Tax Act, the Securities and Exchange Commission issued guidance under Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (“SAB 118”) directing taxpayers to consider the impact of the U.S. legislation as “provisional” when it does not have the necessary information, prepared or analyzed in reasonable detail to complete its accounting for the change in tax law.

The Tax Act reduces the corporate tax rate to 21 percent, effective January 1, 2018. Consequently, we have recorded a decrease related to net deferred tax assets for this federal rate change of $34,372. This decrease to the deferred tax assets was fully offset by the same decrease to the valuation allowance. There is no impact on the current year income tax expense for the federal corporate tax rate change due to the Company’s current year taxable loss and the calculation related to the change is complete. 

During the year ended December 31, 2017, the Company recorded a benefit for income taxes of $5,045, compared to a benefit for income taxes of $2 during the year ended December 31, 2016. The income tax benefit during the year ended December 31, 2017 included an income tax benefit of $5,060 from the partial release of the valuation allowance, net of Red Wolf’s current state taxes, resulting from the consolidation of the Company’s deferred tax assets with Red Wolf’s deferred tax liabilities upon acquisition.

The total decrease in the deferred tax valuation allowance was $37,132 and $5,713 for the years ended December 31, 2017 and 2016, respectively. The changes in the deferred tax valuation allowances in 2017 and 2016 were primarily the result of decreases to the deferred tax assets pertaining to federal and state NOLs. Beginning on January 1, 2018, NOLs have unlimited life carryforward.

The tax effects of the temporary differences and NOLs that give rise to significant portions of deferred tax assets and liabilities are as follows:

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BROADWIND ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2017 and 2016

(in thousands, except share and per share data)

 

 

 

 

 

 

As of December 31,

 

 

As of Year Ended December 31,

 

    

2017

    

2016

 

 

2022

  

2021

 

Noncurrent deferred income tax assets:

 

 

 

 

 

     

Net operating loss carryforwards

 

$

56,619

 

$

79,966

 

 $74,807  $71,967 

Intangible assets

 

 

6,889

 

 

19,021

 

   453 

Accrual and reserves

 

 

2,402

 

 

5,201

 

 3,531  2,946 

Leases

 3,834 4,428 

Other

 

 

88

 

 

52

 

  4   8 

Total noncurrent deferred tax assets

 

 

65,998

 

 

104,240

 

 82,176  79,802 

Valuation allowance

 

 

(66,491)

 

 

(103,623)

 

  (74,559)  (72,010)

Noncurrent deferred tax assets, net of valuation allowance

 

 

(493)

 

 

617

 

 7,617  7,792 

Noncurrent deferred income tax liabilities:

 

 

 

 

 

     

Fixed assets

 

(152)

 

(617)

 

 2,584  2,834 

Intangible assets

 

 

 —

 

 

 —

 

 674  

Leases

  4,344  4,956 

Total noncurrent deferred tax liabilities

 

 

(152)

 

 

(617)

 

  7,602   7,790 

Net deferred income tax liability

 

$

(341)

 

$

 —

 

Net deferred income tax asset

 $15  $2 

 

Certain prior year amounts have been reclassified to conform to current year presentation. Valuation allowances of $66,491$74,559 and $103,623$72,010 have been provided for deferred income tax assets for which realization is uncertain as of December 31, 2017 2022 and 2016,2021, respectively. A reconciliation of the beginning and ending amounts of the valuation is as follows:

Valuation allowance as of December 31, 2021

 $(72,010)

Gross increase for current year activity

  (2,549)

Valuation allowance as of Balance at December 31, 2022

 $(74,559)

 

Valuation allowance as of December 31, 2016

$

(103,623)

Gross decrease for current year activity

37,132

Valuation allowance as of December 31, 2017

$

(66,491)

As of December 31, 2017,2022, the Company had federal and unapportioned state NOL carryforwards of approximately $227,871 expiring$288,462 of which $227,781 will begin to expire in various years through 2037.2026. The majority of the NOL carryforwards will expire in various years from 2028 through 2037. NOLs generated after January 1, 2018 will not expire.

As of December 31, 2017, the Company had unapportioned state NOLs in the aggregate of approximately $227,871, expiring in various years from 2021 through 2037, based upon various NOL carryforward periods as designated by the different taxing jurisdictions.

The reconciliation between the statutory U.S. federal income tax rate and the Company’s effective income tax rate is as follows:

  

For the Year Ended

 
  

December 31,

 
  

2022

  

2021

 

Statutory U.S. federal income tax rate

  21.0%  21.0%

State and local income taxes, net of federal income tax benefit

  3.3   (6.6)

Permanent differences

  (0.6)  1.9 

Change in valuation allowance

  (26.3)  29.2 

Equity compensation

  0.0   14.5 

Other

  (2.1)  0.2 

State NOL deferred adjustment

  4.3   - 

PPP loan forgiveness

  0.0   (59.6)

Effective income tax rate

  (0.4)%  0.6%

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BROADWIND, ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2017 2022 and 20162021

(in thousands, except share and per share data)

 

 

 

 

 

 

 

 

For the Year Ended

 

 

December 31,

 

    

2017

    

2016

    

Statutory U.S. federal income tax rate

 

34.0

%  

34.0

%  

State and local income taxes, net of federal income tax benefit

 

3.4

 

34.4

 

Permanent differences

 

(1.2)

 

12.7

 

Change in valuation allowance

 

446.7

 

(68.8)

 

Change in uncertain tax positions

 

0.5

 

(14.8)

 

Other

 

0.1

 

1.8

 

Effect of U.S. tax rate change

 

(422.6)

 

 —

 

Effective income tax rate

 

60.9

%  

(0.7)

%  

The Company accounts for the uncertainty in income taxes by prescribing a minimum recognition threshold for a tax position taken, or expected to be taken, in a tax return that is required to be met before being recognized in the financial statements. The changes in the Company’sCompany recognizes interest and penalties related to uncertain tax positions as income tax positions for the years ended expense. As of December 31, 2017 and 2016 consisted of2022, the following:

 

 

 

 

 

 

 

 

 

 

For the Year

 

 

 

Ended

 

 

 

December 31,

 

 

    

2017

    

2016

 

Beginning balance

 

$

27

 

$

56

 

Tax positions related to current year:

 

 

 

 

 

 

 

Additions

 

 

 —

 

 

 —

 

Reductions

 

 

 —

 

 

 —

 

 

 

 

 —

 

 

 —

 

Tax positions related to prior years:

 

 

 

 

 

 

 

Additions

 

 

 —

 

 

 —

 

Reductions

 

 

 —

 

 

 —

 

Settlements

 

 

 —

 

 

 —

 

Lapses in statutes of limitations

 

 

(26)

 

 

(29)

 

Additions from current year acquisitions

 

 

 —

 

 

 —

 

 

 

 

(26)

 

 

(29)

 

Ending balance

 

$

 1

 

$

27

 

The amount ofCompany had no unrecognized tax benefits at December 31, 2017 that would affectcould impact the effective tax rate if the tax benefits were recognized was $1.

It is the Company’s policy to include interest and penalties inincome tax expense. During the years ended December 31, 2017 and 2016, the Company recognized and accrued approximately $0 and $6, respectively, of interest and penalties.

The Company files income tax returns in the U.S. federal and state jurisdictions. As of December 31, 2017, open2022, with few exceptions, the Company is no longer subject to federal or state income tax examinations by taxing authorities for years inbefore December 31, 2018; however, taxing authorities have the federal and some state jurisdictions date back to 1996 due to the taxing authorities’ ability to adjust NOL carryforwards.carryforwards in open tax years that may have been carried forward from closed years.   The Company’s 2008 and 2009 federal tax returns were examined in 2011 and no material adjustments were identified related to any of the Company’s tax positions. Although these periods have been audited, they continue to remain open until all NOLs generated in those tax years have either been utilized or expire.

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‑inbuilt-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‑inbuilt-in losses may be limited, under this section or otherwise, by the Company’s issuance of common stock or by other changes in stock ownership. Upon completion of the Company’s analysis of IRC Section 382, the Company has determined

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BROADWIND ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2017 and 2016

(in thousands, except share and per share data)

that aggregate changes in stock ownership have resulted in an annual limitation of $14,284 on NOLs and built‑inbuilt-in losses available for utilization based on the triggering event in 2010. To the extent the Company’s use of NOL carryforwards and associated built‑inbuilt-in losses is significantly limited in the future due to additional changes in stock ownership, the Company’s income could be subject to U.S. corporate income tax earlier than it would if the Company were able to use NOL carryforwards and built‑inbuilt-in losses without such annual limitation, which could result in lower profits and the loss of the majority of the benefits from these attributes.

In February 2013, the Company adopted a Stockholder Rights Plan, which was amended in February 2016 and approved by our stockholders (as amended, the “Rights Plan”), designed to preserve the Company’s substantial tax assets associated with NOL carryforwards under IRC Section 382.382 of the IRC. On February 7, 2019, the Board of Directors (the “Board”) approved an amendment extending the Rights Plan for an additional three years, which was subsequently approved by the Company’s stockholders at the 2019 Annual Meeting of Stockholders held on April 23, 2019 (the “2019 Annual Meeting of Stockholders”). On February 3, 2022, the Board approved an amendment which included an extension of the Rights Plan for an additional three years, which was subsequently approved by the Company's stockholders at the 2022 Annual Meeting of Stockholders.

The Rights Plan is intended to act as a deterrent to any person or group, together with its affiliates and associates, being or 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‑taxablenon-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 22,2013. Since the record date, the Company has issued one Right with each newly issued share of its common stock. Until the distribution date (unless earlier redeemed or exchanged or upon expiration of the Rights, as applicable), the Rights will be evidenced by certificates of the Company's common stock and will be transferred only with such certificates. Each Right entitles its holder to purchase from the Company one one‑thousandthone-thousandth of a share of the Company’s Series A Junior Participating Preferred Stock at an exercise price of $9.81$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

62

BROADWIND, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2017, the Company had $1 of unrecognized tax benefits, which would have a favorable impact on income tax expense. It is reasonably possible that unrecognized tax benefits will decrease by that amount as a result of the expiration of the applicable statutes of limitations within the next twelve months. The Company recognizes interest 2022 and penalties related to uncertain tax positions as income tax expense. The Company had accrued interest2021

(in thousands, except share and penalties of $1 as of December 31, 2017. As of December 31, 2016, the Company had unrecognized tax benefits of $69, of which $42 represented accrued interest and penalties.per share data)

15. SHARE‑BASED

14. SHARE-BASED COMPENSATION

Overview of Share‑BasedShare-Based Compensation Plan

2007 Equity Incentive Plan

The Company has granted incentive stock options and other equity awards pursuant to the Amended and Restated Broadwind Energy, Inc. 2007 Equity Incentive Plan (the “2007 EIP”), which waspreviously Board approved byequity incentive plans. Most recently, the Board in October 2007 and by the Company’s stockholders in June 2008. The 2007 EIP has been amended periodically since its original approval.

The 2007 EIP reserved 691,051 shares of the Company’s common stock for grants to officers, directors, employees, consultants and advisors upon whose efforts the success of the Company and its affiliates depends to a large degree. As of December 31, 2017, the Company had reserved 29,983 shares for issuance upon the exercise of stock options outstanding and no shares for issuance upon the vesting of RSU awards outstanding. As of December 31, 2017, 253,659 shares of common stock reserved for stock options and RSU awards under the 2007 EIP have been issued in the form of common stock.

2012 Equity Incentive Plan

The Company has granted incentive stock options and other equity awards pursuant to the Broadwind Energy, Inc. 2012 Equity Incentive Plan (the “2012 EIP”), which was approved by the Board in March 2012 and by the Company’s stockholders in May 2012.

The 2012 EIP reserved 1,200,000 shares of the Company’s common stock for grants to officers, directors, employees, consultants and advisors upon whose efforts the success of the Company and its affiliates will depend to a large

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BROADWIND ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2017 and 2016

(in thousands, except share and per share data)

degree. As of December 31, 2017, the Company had reserved 37,205 shares for issuance upon the exercise of stock options outstanding and 18,393 shares for issuance upon the vesting of RSU awards outstanding. As of December 31, 2017, 619,608 shares of common stock reserved for stock options and RSU awards under the 2012 EIP have been issued in the form of common stock.

2015Equity Incentive Plan

The Company has granted equity awards pursuant to the Broadwind Energy, Inc. 2015 Equity Incentive Plan, (the “2015 EIP;” together with the 2007 EIP and the 2012 EIP, the “Equity Incentive Plans”), which was approved by the Board in February 2015 and by the Company’s stockholders in April 2015. On February 19, 2019, the Board approved an Amended and Restated 2015 Equity Incentive Plan (as amended, the “2015 EIP,”), which, among other things, increased the number of shares of our common stock authorized for issuance under the 2015 EIP from 1,100,000 to 2,200,000. The amendment and restatement of the 2015 EIP was approved by the Company’s stockholders at the 2019 Annual Meeting of Stockholders. On February 7, 2021, the Board approved the Second Amendment to the Amended and Restated 2015 Equity Incentive Plan which, among other things, increased the number of shares of our common stock authorized for issuance under the 2015 EIP from 2,200,000 to 3,200,000. The Second Amendment to the amendment and restatement of the 2015 EIP was approved by the Company’s stockholders at the 2021 Annual Meeting of Stockholders.

The purposes of the 2015 EIPCompany’s equity incentive plans are (i)(a) to align the interests of the Company’s stockholders and recipients of awards under the 2015 EIP by increasing the proprietary interest of such recipients in the Company’s growth and success; (ii)(b) to advance the interests of the Company by attracting and retaining officers, other employees, non-employee directors and independent contractors; and (iii)(c) to motivate such persons to act in the long-term best interests of the Company and its stockholders. Under the 2015 EIP, the Company may grant (i) non-qualified stock options; (ii) “incentive stock options” (within the meaning of IRC Section 422)422 of the IRC); (iii) stock appreciation rights; (iv) restricted stock and RSUs;restrictive stock units; and (v) PSUs.  performance awards.

The 2015 EIP reserves 1,100,000 shares of the Company’s common stock for grants to officers, directors, employees, consultants and advisors upon whose efforts the success of the Company and its affiliates will depend to a large degree. As of December 31, 2017, the Company had reserved 493,749 shares for issuance upon the vesting of RSU awards outstanding. As of December 31, 2017, a total of 202,438 shares of common stock reserved for RSU awards under the 2015 EIP had been issued in the form of common stock.

Stock Options. The exercise price of stock options granted under the Equity Incentive Plans2015 EIP is equal to the closing price of the Company’s common stock on the date of grant. Stock options generally become exercisable on the anniversary of the grant date, with vesting terms that may range from one to five years from the date of grant. Additionally, stock options expire ten years after the date of grant. The fair value of stock options granted is expensed ratably over their vesting term.

Restricted Stock Units (RSUs). The granting of RSUs is provided for under the Equity Incentive Plans.2015 EIP. RSUs generally vest on the anniversarycontain a vesting period of the grant date, with vesting terms that may range from one to five years from the date of grant. The fair value of each RSU granted is equal to the closing price of the Company’s common stock on the date of grant and is generally expensed ratably over the vesting term of the RSU award.

Performance Awards (PSUs). The granting of PSUs is provided for under the Equity Incentive Plans.2015 EIP. Vesting of PSUs generally vestis conditioned upon the Company meeting applicable performance measures as of the vesting date over the period of the plan.performance period. The fair value of each PSU granted is equal to the closing price of the Company’s common stock on the date of grant and is generally expensed ratably over the term of the PSU award plan.

 

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BROADWIND, ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2017 2022 and 20162021

(in thousands, except share and per share data)

Stock

The 2015 EIP reserves 3,200,000shares of the Company’s common stock. As of December 31, 2022, 1,854,919shares of common stock reserved for issuance pursuant to stock options and RSU awards granted under the 2015 EIP had been issued in the form of common stock and 822,737shares of common stock are issued and unvested.

There was no stock option activity during the yearyears ended December 31, 2017 under the Equity Incentive Plans was as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

 

    

 

 

    

Weighted Average

    

Aggregate Intrinsic

 

 

 

 

 

 

Weighted Average

 

Remaining

 

Value

 

 

 

 

Options

 

Exercise Price

 

Contractual Term

 

(in thousands)

 

Outstanding as of December 31, 2016

 

 

67,438

 

$

24.96

 

 

 

 

 

 

Expired

 

 

(250)

 

 

107.00

 

 

 

 

 

 

Outstanding as of December 31, 2017

 

 

67,188

 

$

24.65

 

3.39

 

$

 —

 

Exercisable as of December 31, 2017

 

 

67,188

 

$

24.65

 

3.39

 

$

 —

 

The following table summarizes information with respect to all outstanding2022 and exercisable2021 and no stock options under the Equity Incentive Planswere outstanding as of December 31, 2017:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Options Outstanding

 

 

Options Exercisable

 

 

 

 

    

 

    

 

 

    

Weighted Average

 

    

 

    

 

 

 

 

 

 

 

Number of options

 

Weighted Average

 

Remaining

 

 

Number

 

Weighted Average

 

Exercise Price or Range

 

outstanding

 

Exercise Price

 

Contractual Term

 

 

Exercisable

 

Exercise Price

 

$3.39

 - 

$13.50

 

52,115

 

$

6.29

 

4.01

 years

 

52,115

 

$

6.29

 

$54.40

 - 

$92.50

 

5,823

 

 

57.67

 

2.07

 years

 

5,823

 

 

57.67

 

$99.90

 - 

$128.50

 

9,250

 

 

107.35

 

0.75

 years

 

9,250

 

 

107.35

 

 

 

 

 

67,188

 

$

24.65

 

3.39

 years

 

67,188

 

$

24.65

 

2022 and 2021.The fair value of each stock option award is estimated on the date of grant using the Black‑ScholesBlack-Scholes option pricing model. The determination of the fair value of each stock option is affected by the Company’s stock price on the date of grant, as well as assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to, the Company’s expected stock price volatility over the expected life of the awards and actual and projected stock option exercise behavior. There were no stock options granted during the twelve months ended

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BROADWIND, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2017.2022 and 2021

(in thousands, except share and per share data)

The following table summarizes information with respect to outstanding RSU’sRSUs and PSU’sPSUs accounted for as equity awards as of December 31, 2017 2022 and 2016:2021:

 

 

 

 

 

 

 

 

 

 

 

 

    

Weighted Average

 

 

 

 

 

 

Grant-Date Fair Value

 

 

 

 

Number of Shares

 

Per Share

 

Unvested as of December 31, 2016

 

 

492,176

 

$

3.56

 

Granted

 

 

288,866

 

$

5.69

 

Vested

 

 

(231,521)

 

$

3.93

 

Forfeited

 

 

(37,379)

 

$

3.95

 

Unvested as of December 31, 2017

 

 

512,142

 

$

4.57

 

      

Weighted Average

 
      

Grant-Date Fair Value

 
  

Number of Shares

  

Per Share

 

Unvested as of December 31, 2021

  918,448  $2.73 

Granted

  748,694  $1.75 

Vested

  (818,956) $2.23 

Forfeited

  (25,449) $2.60 

Unvested as of December 31, 2022

  822,737  $2.37 

RSUs and PSUs are generally subject to ratable vesting over a three-year period. Compensation expense related to these service and performance based awards is generally recognized on a straight-line basis over the vesting period. During the years ended December 31, 2017 2022 and 2016,2021, the Company utilized a forfeiture rate of 25% for estimating the forfeitures of stock compensation granted.

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BROADWIND ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

During the year ended December 31, 20172022, the Company recorded share-based compensation expense in the amount of $619 for PSUs treated as liability awards that will be settled in shares in 2023. The liability is recognized in the “Accrued liabilities” line item of the Company’s condensed consolidated balance sheet and 2016

(in thousands, except share and per share data)

has a balance of $619 as of December 31, 2022. The following table summarizes share‑basedshare-based compensation expense, net of taxes withheld, included in the Company’s consolidated statements of operations for the years ended December 31, 2017 2022 and 20162021 as follows:

 

 

 

 

 

 

 

 

 

 

 

 

For the Years Ended

 

 

 

 

December 31,

 

 

 

 

2017

    

2016

 

Share-based compensation expense:

 

 

 

 

 

 

 

 

Cost of sales

 

 

$

101

 

$

90

 

Selling, general and administrative

 

 

 

712

 

 

663

 

Income tax benefit (1)

 

 

 

 —

 

 

 —

 

Net effect of share-based compensation expense on net income

 

 

$

813

 

$

753

 

Reduction in earnings per share:

 

 

 

 

 

 

 

 

Basic earnings per share

 

 

$

0.05

 

$

0.05

 

 

 

 

 

 

 

 

 

 

Diluted earnings per share

 

 

$

0.05

 

$

0.05

 

  

For the Years Ended

 
  

December 31,

 
  

2022

  

2021

 

Share-based compensation expense:

        

Cost of sales

 $129  $130 

Selling, general and administrative

  1,434   1,411 

Net effect of share-based compensation expense on net income

 $1,563  $1,541 

Reduction in earnings per share:

        

Basic earnings per share

 $0.08  $0.08 

Diluted earnings per share

 $0.08  $0.08 


(1)

(1)

Income tax benefit is not illustrated because the Company is currently in a full tax valuation allowance position and an actual income tax benefit was not realized for the years ended December 31, 2017 2022 and 2016.2021. The result of the income (loss) situation creates a timing difference, resulting in a deferred tax asset, which is fully reserved for in the income (loss) situation creates a timing difference, resulting in a deferred tax asset, which is fully reserved for in the Company’s valuation allowance.

As of December 31, 2017,2022, the Company estimates that pre‑taxpre-tax compensation expense for all unvested share‑based awards, including both stock optionsshare-based RSUs and RSUs,PSUs in the amount of approximately $1,211 $1,162will be recognized through the year 2020.2024. The Company expects to satisfy the exercise of stock options and future distribution of shares of restricted stock by issuing new shares of common stock.

16.

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. On February 1, 2017, the Company acquired Red Wolf,

65

BROADWIND, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2022 and Red Wolf is being operated as a wholly-owned subsidiary, as more fully described 2021

(in Note 21, “Business Combinations” in the notes to the Company’s consolidated financial statements.  The Red Wolf acquisition aligns with the Company’s growth strategy approved by our Board in late 2016 to expandthousands, except share and diversify our business through organic growth and strategic bolt-on acquisitions.  Red Wolf’s operations is being reported in the “Process Systems” segment.    per share data)

As a result of the 2017 Red Wolf acquisition, the Company has revised its segment presentation to include three reportable operating segments: Towers and Weldments, Gearing and Process Systems. All current and prior period financial results have been revised to reflect these changes. In the fourth quarter 2017, the segment changed its name from Towers and Weldments to Towers and Heavy Fabrications to more accurately reflect the nature of the business’ activities.

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

Towers and

Heavy Fabrications

The Company manufacturesprovides 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 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 forand adapters primarily to wind turbines, specifically the large and heavier wind towers that are designed for multiple MW wind turbines.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 (1650 tower sections), sufficient to support turbines generating more than 1,100 MW of power. This product segment also encompasses the fabrication of heavy weldments forThe Company has expanded production capabilities and leveraged manufacturing competencies, including welding, lifting capacity and stringent quality practices, into aftermarket and OEM components utilized in surface and underground mining, construction, material handling, O&G and other industrial customers.

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BROADWIND ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2017 and 2016

(in thousands, except share and per share data)infrastructure markets.

 

Gearing

Gearing

The Company engineers, buildsprovides gearing and remanufactures precision gearsgearboxes to a broad set of customers in diverse markets including; onshore and gearing systems for oiloffshore O&G fracking and gas,drilling, surface and underground mining, wind mining,energy, steel, material handling and other industrial applications.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.

Process Systems

Industrial Solutions

The Company acquired Red Wolf on February 1, 2017provides supply chain solutions, light fabrication, inventory management, kitting and as a result, aggregated its Abilene compressedassembly services, primarily serving the combined cycle natural gas (“CNG”) turbine market.

66

BROADWIND, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2022 and fabrication business with Red Wolf to form the Process Systems reportable segment. This segment provides contract manufacturing services that include build-to-spec, kitting, fabrication2021

(in thousands, except share and inventory management for customers throughout the U.S. and in foreign countries, primarily supporting the natural gas electrical generation market.per share data)

Corporate and Other

“Corporate” includes the assets and SG&A 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, “Description of Business and Summary of Significant Accounting Policies” of these consolidated financial statements. Summary financial information by reportable segment is as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Towers and

 

 

 

 

Process

    

 

 

 

    

 

    

 

 

 

 

 

 

Heavy Fabrications

 

Gearing

 

Systems

 

Corporate

 

Eliminations

 

Consolidated

 

For the Year Ended December 31, 2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues from external customers

 

 

$

103,389

 

$

26,006

 

$

17,390

 

$

 —

 

$

 —

 

$

146,785

 

Operating (loss) profit

 

 

 

2,667

 

 

(2,632)

 

 

(2,269)

 

 

(5,199)

 

 

 —

 

 

(7,433)

 

Depreciation and amortization

 

 

 

4,638

 

 

2,430

 

 

1,706

 

 

225

 

 

 —

 

 

8,999

 

Capital expenditures

 

 

 

5,355

 

 

726

 

 

426

 

 

181

 

 

 —

 

 

6,688

 

Assets held for sale

 

 

 

 —

 

 

560

 

 

 —

 

 

20

 

 

 —

 

 

580

 

Total assets

 

 

 

27,958

 

 

38,016

 

 

26,442

 

 

249,346

 

 

(229,412)

 

 

112,350

 

 

  

Heavy Fabrications

  

Gearing

  

Industrial Solutions

  

Corporate

  

Eliminations

  

Consolidated

 

For the Year Ended December 31, 2022

                        

Revenues from external customers

 $117,194   42,572   16,993        $176,759 

Intersegment revenues

  12   16   811      (839)   

Net revenues

  117,206   42,588   17,804      (839)  176,759 

Operating (loss) income

  (1,044)  43   120   (5,722)  (4)  (6,607)

Depreciation and amortization

  3,446   1,978   397   239      6,060 

Capital expenditures

  2,601   446   48   3      3,098 

Total assets

  45,475   51,944   12,775   224,856   (190,510)  144,540 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Heavy Fabrications

  

Gearing

  

Industrial Solutions

  

Corporate

  

Eliminations

  

Consolidated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Towers and

    

 

 

    

 

 

    

 

 

    

 

 

 

 

Heavy Fabrications

 

Gearing

 

Corporate

 

Eliminations

 

Consolidated

 

For the Year Ended December 31, 2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Year Ended December 31, 2021

                  

Revenues from external customers

 

$

160,210

 

$

20,630

 

$

 —

 

$

 —

 

$

180,840

 

 $101,989   28,583   15,047        $145,619 

Intersegment revenues

 

 

 —

 

 

18

 

 

 —

 

 

(18)

 

 

 —

 

 5    355    (360)  

Net revenues

 

 

160,210

 

 

20,648

 

 

 —

 

 

(18)

 

 

180,840

 

 101,994  28,583  15,402    (360) 145,619 

Operating profit (loss)

 

 

12,788

 

 

(3,244)

 

 

(7,636)

 

 

 1

 

 

1,909

 

Operating loss

 (3,214) (2,593) (386) (6,401)   (12,594)

Depreciation and amortization

 

 

4,166

 

 

2,545

 

 

203

 

 

 —

 

 

6,914

 

 3,844  1,855  425  212    6,336 

Capital expenditures

 

 

6,161

 

 

386

 

 

77

 

 

 —

 

 

6,624

 

 1,038  328  261  80    1,707 

Assets held for sale

 

 

 —

 

 

353

 

 

455

 

 

 —

 

 

808

 

Total assets

 

 

45,367

 

 

30,415

 

 

244,639

 

 

(202,759)

 

 

117,662

 

 37,131  46,219  10,825  228,219  (204,347) 118,047 

 

The Company generates revenues entirely from transactions completed in the U.S. and its long‑livedlong-lived assets are all located in the U.S. All intercompany revenue is eliminated in consolidation. During 2017, one customer2022, twocustomers accounted for more than 10% of total net revenues. The customercustomers, reported within the Heavy Fabricationssegment, accounted for revenues of $100,413  for fiscal year 2017$64,625 and was reported within the Towers and Heavy Fabrications segment.$20,336, respectively. During 2016, three2021, two customers accounted for more than 10% of total net revenues. These threeThe customers, reported within the Heavy Fabrications segment, accounted for revenues of $111,480,  $23,018,$59,278 and $21,237  for fiscal year 2016 and were reported within the Towers and Heavy Fabrications segment.$25,946 respectively. During the years ended December 31, 2017 2022 and 2016,2021, five customers accounted for 85%69% and 91%71%, respectively, of total net revenues.

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BROADWIND, ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2017 2022 and 20162021

(in thousands, except share and per share data)

17.16. EMPLOYEE BENEFIT PLANS

Retirement Savings and Profit Sharing Plans

Retirement Savings and Profit Sharing Plans

The Company offers a 401(k)401(k) retirement savings plan to all eligible employees who may elect to contribute a portion of their salary on a pre‑taxpre-tax basis, subject to applicable statutory limitations. Participating non‑unionAs of December 31, 2022, all employees arewere eligible to receive safe harbor matching contributions equal to 100% of the first 3% of the participant’s elective deferral contributions and 50% of the next 2% of the participant’s elective deferral contributions. In accordance with the collective bargaining agreements in place at its two union locations, the Company’s Illinois‑based union employees are eligible to receive a discretionary match in an amount up to 50% of each participant’s first 4% of elective deferral contributions, and the Company’s Pennsylvania‑based union employees are eligible to receive a discretionary match in an amount up to 100% of each participant’s first 3% and 50% of the next 2% of elective deferral contributions. The Company has the discretion, subject to applicable statutory requirements, to fund any matching contribution with a contribution to the plan of the Company’s common stock. Beginning with the first quarter of 2012, theThe Company fundedperiodically evaluates whether to fund the matching contributionscontribution in the form of the Company’s common stock. Startingcash or in the first quarter of 2014, the Company resumed funding the matching contributions in cash. Beginning in the third quarter of 2017, the Company resumed funding the matching contributions in the form of the Company’s common stock. Under the plan, elective deferrals and basic Company matching is 100% vested at all times.

For the years ended December 31, 2017 2022 and 2016,2021, the Company recorded expense under these plans of approximately $765$1,247 and $823,$1,195, respectively.

Deferred Compensation Plan

The Company maintains a deferred compensation plan for certain key employees and nonemployee directors, whereby certain wages earned, compensation for services rendered, and discretionary company‑matchingcompany-matching contributions may be deferred and deemed to be invested in the Company’s common stock. Changes in the fair value of the plan liability are recorded as charges or credits to compensation expense. Compensation expenseincome associated with the deferred compensation plan recorded during the years ended December 31, 2017 2022 and 20162021 was $(12) $(1)and $24, respectively.$(55). The fair value of the plan liability to the Company is included in accrued liabilities in the Company’s consolidated balance sheets. As of December 31, 2017 2022 and 2016,2021, the fair value of plan liability to the Company was $24$15 and $36,$16, respectively.

In addition to the employee benefit plans described above, the Company participates in certain customary employee benefits plans, including those which provide health and life insurance benefits to employees.

18. NEW MARKETS TAX CREDIT TRANSACTION

On July 20, 2011, the Company executed the NMTC Transaction, which was amended on August 24, 2015, involving the following third parties: AMCREF Fund VII, LLC (“AMCREF”), a registered community development entity; COCRF Investor VIII, LLC (“COCRF”); and Capital One. The NMTC Transaction allows the Company to receive below market interest rate funds through the federal New Markets Tax Credit (“NMTC”) program. The Company received $2,280 in proceeds via the NMTC Transaction. The NMTC Transaction qualifies under the NMTC program and includes a gross loan from AMCREF to the Company's wholly-owned subsidiary Broadwind Services, LLC, a Delaware limited liability company, in the principal amount of $10,000, with a term of fifteen years and interest payable at the rate of 1.4% per annum, largely offset by a gross loan in the principal amount of $7,720 from the Company to COCRF, with a term of fifteen years and interest payable at the rate of 2.5% per annum. The August 2015 amendment did not change the financial terms of the NMTC Transaction, but did add the activities and assets of the Abilene Heavy Industries Facility to the NMTC Transaction and allow for the sale of the Abilene Gearbox Facility assets provided that the proceeds of such sale be re-invested in the Abilene Heavy Industries Facility.

The NMTC regulations permit taxpayers to claim credits against their federal income taxes for up to 39% of qualified investments in the equity of community development entities. The NMTC Transaction could generate $3,900 in

60

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BROADWIND, ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2017 2022 and 20162021

(in thousands, except share and per share data)

tax credits, which the Company has made available under the structure by passing them through to Capital One. The proceeds have been applied to the Company’s investment in the Abilene Gearbox Facility assets and associated operating costs and in the assets of the Abilene Heavy Industries Facility, as permitted under the amended NMTC Transaction.

The Abilene Heavy Industries Facility and the Abilene Gearbox Facility must operate and remain in compliance with various regulations and restrictions through September 2018, the end of the seven year compliance period, to comply with the terms of the NMTC Transaction, or the Company may be liable under its indemnification agreement with Capital One for the recapture of tax credits. In the event the Company does not comply with these regulations and restrictions, the NMTC program tax credits may be subject to 100% recapture for a period of seven years as provided in the IRC. The Company does not anticipate that any tax credit recapture events will occur or that it will be required to make any payments to Capital One under the indemnification agreement.

The Capital One contribution, including a loan origination payment of $320, has been included as other assets in the Company’s consolidated balance sheet as of December 31, 2017. The NMTC Transaction includes a put/call provision whereby the Company may be obligated or entitled to repurchase Capital One’s interest in the third quarter of 2018. Capital One may exercise an option to put its investment to the Company and receive $130 from the Company at that time. If Capital One does not exercise its put option, the Company can exercise a call option at the then fair market value of the call. The Company expects that Capital One will exercise the put option at the end of the tax credit recapture period. The Capital One contribution other than the amount allocated to the put obligation will be recognized as income only after the put/call is exercised and when Capital One has no ongoing interest. However, there is no legal obligation for Capital One to exercise the put, and the Company has attributed only an insignificant value to the put option included in this transaction structure. 

The Company has determined that two pass‑through financing entities created under NMTC Transaction structure are VIEs. The ongoing activities of the VIEs—collecting and remitting interest and fees and complying with NMTC program requirements—were considered in the initial design of the NMTC Transaction and are not expected to significantly affect economic performance throughout the life of the VIEs. In making this determination, management also considered the contractual arrangements that obligate the Company to deliver tax benefits and provide various other guarantees under the NMTC Transaction structure, Capital One’s lack of a material interest in the underlying economics of the project, and the fact that the Company is obligated to absorb losses of the VIEs. The Company has concluded that it is required to consolidate the VIEs because the Company has both (i) the power to direct those matters that most significantly impact the activities of each VIE, and (ii) the obligation to absorb losses or the right to receive benefits of each VIE.

The $262 of issue costs paid to third parties in connection with the NMTC Transaction are recorded as prepaid expenses, and are being amortized over the expected seven-year term of the NMTC arrangement. Capital One’s net contribution of $2,600 is included in Line of Credit and NMTC Note Payable in the consolidated balance sheet. Incremental costs to maintain the transaction structure during the compliance period will be recognized as they are incurred.

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BROADWIND ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2017 and 2016

(in thousands, except share and per share data)

19.17. QUARTERLY FINANCIAL SUMMARY (UNAUDITED)

The following table provides a summary of selected financial results of operations by quarter for the years ended December 31, 2017 2022 and 20162021 as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2017

    

First

    

Second

    

Third

    

Fourth

 

Revenues

 

$

56,060

 

$

43,362

 

$

29,595

 

$

17,768

 

Gross profit (loss)

 

 

6,374

 

 

3,872

 

 

1,014

 

 

(3,101)

 

Operating profit (loss)

 

 

1,603

 

 

(516)

 

 

(1,831)

 

 

(6,689)

 

Income (loss) from continuing operations, net of tax

 

 

6,482

 

 

(688)

 

 

(2,049)

 

 

(6,928)

 

Net income (loss)

 

 

6,327

 

 

(780)

 

 

(2,207)

 

 

(6,981)

 

Income (loss) from continuing operations per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.43

 

$

(0.05)

 

$

(0.14)

 

$

(0.45)

 

Diluted

 

$

0.43

 

$

(0.05)

 

$

(0.14)

 

$

(0.45)

 

Net income (loss) per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.42

 

$

(0.05)

 

$

(0.15)

 

$

(0.46)

 

Diluted

 

$

0.42

 

$

(0.05)

 

$

(0.15)

 

$

(0.46)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2016

    

First

    

Second

    

Third

    

Fourth

 

Revenues

 

$

46,757

 

$

43,380

 

$

42,552

 

$

48,151

 

Gross profit (loss)

 

 

3,962

 

 

4,142

 

 

5,331

 

 

4,704

 

Operating (loss) profit

 

 

(224)

 

 

181

 

 

1,360

 

 

592

 

(Loss) income from continuing operations, net of tax

 

 

(358)

 

 

42

 

 

1,245

 

 

406

 

Net (loss) income

 

 

(377)

 

 

(474)

 

 

872

 

 

298

 

(Loss) income from continuing operations per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.02)

 

$

0.00

 

$

0.08

 

$

0.03

 

Diluted

 

$

(0.02)

 

$

0.00

 

$

0.08

 

$

0.03

 

Net (loss) income per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.03)

 

$

(0.03)

 

$

0.06

 

$

0.02

 

Diluted

 

$

(0.03)

 

$

(0.03)

 

$

0.06

 

$

0.02

 

2022

 

First

  

Second

  

Third

  

Fourth

 

Revenues

 $41,844  $50,012  $44,843  $40,060 

Gross profit

  2,012   2,394   3,748   2,556 

Operating loss

  (2,073)  (1,912)  (520)  (2,102)

Net loss

  (2,404)  (2,703)  (1,772)  (2,851)

Net loss per share:

                

Basic

 $(0.12) $(0.13) $(0.09) $(0.14)

Diluted

 $(0.12) $(0.13) $(0.09) $(0.14)

2021

 

First

  

Second

  

Third

  

Fourth

 

Revenues

 $32,728  $46,491  $40,389  $26,011 

Gross profit

  282   2,198   2,074   957 

Operating loss

  (4,311)  (2,311)  (1,997)  (3,975)

Net (loss) income

  (1,210)  10,252   (2,105)  (4,090)

Net (loss) income per share:

                

Basic

 $(0.07) $0.55  $(0.11) $(0.21)

Diluted

 $(0.07) $0.53  $(0.11) $(0.21)

 

 

69

 

BROADWIND, INC. AND SUBSIDIARIES

 

20.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2022 and 2021

(in thousands, except share and per share data)

18. 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 suchlitigation 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.

 

21. BUSINESS COMBINATIONS

Overview

On The Company received a notice dated January 30, 2017, the Company announced that it had agreed upon the material terms to acquire Red Wolf, a Sanford, North Carolina-based, privately held fabricator, kitter and assembler of industrial systems primarily supporting the global gas turbine market, for18, 2023 from WM Argyle Fund, LLC, which allegedly owned approximately $18,983, subject to certain adjustments. The transaction closed on February 1, 2017, and Red Wolf is being operated as a wholly-owned subsidiary1.0% of the Company.

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BROADWIND ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2017 and 2016

(in thousands, except share and per share data)

Accounting for the Transaction

The Company accounts for acquisitions in accordance with guidance found in ASC 805, Business Combinations. The guidance requires consideration given, including contingent consideration, assets acquired and liabilities assumed to be valued at their fair market values at the acquisition date. The guidance further provides that: (1) in-process research and development will be recorded at fair value as an indefinite-lived intangible asset; (2) acquisition costs will generally be expensed as incurred, (3) restructuring costs associated with a business combination will generally be expensed subsequent to the acquisition date; and (4) changes in deferred tax asset valuation allowances and income tax uncertainties after the acquisition date generally will affect income tax expense. ASC 805 requires that any excess of purchase price over fair value of assets acquired, including identifiable intangibles and liabilities assumed, be recognized as goodwill. Red Wolf’s results are included in the Company’s results from the acquisition date of February 1, 2017.

The purchase price of the transaction totaled $18,983, of which $16,449 was paid in cash and $2,534 was the expected value of contingent future earn-out payments. The contingent consideration arrangement requires the Company to pay the former owners of Red Wolf a payout if Red Wolf achieves a targeted profitability benchmark. The potential undiscounted amount of all future payments that the Company could be required to make under the contingent consideration arrangement is between $0 and $9,900. Annual earn-out payments may not exceed $4,950. The fair value of the contingent consideration arrangement of $2,534 was estimated by using a Monte Carlo simulation. Key assumptions include a short-term weighted average cost of capital of 15% and historical volatility of public company comparables.

During the third quarter of 2017, the Company released $1,394 of this contingency into operating income because management determined that Red Wolf’s full-year financial performance during the first year of ownership by the Company was unlikely to meet the threshold required to pay the first installment of the contingent earn-out. The release of the first installment of the contingent earn-out is reflected in the selling, general, and administrative line item in the consolidated statements of operations. Following the release of this portion of the contingency, $1,140 remains in other long-term liabilities, relating to the potential final contingent earn-out that depends on financial performance during the second year of ownership of Red Wolf. Based on information currently known, the Company believes that the long-term contingency is still applicable. 

The Company’s allocation of the $18,983 purchase price to Red Wolf’s tangible and identifiable intangible assets acquired and liabilities assumed, based on their fair values as of February 1, 2017, is included in the table below. Goodwill is recorded based on the amount by which the purchase price exceeds the fair value of the net assets acquired and is not deductible for tax purposes. The measurement period adjustments were a result of changes in the fair value of the contingent consideration arrangement and adjustments to working capital accounts. The decrease in goodwill from March 31, 2017 is due to opening balance sheet changes noted in the table below. 

The purchase price allocation as of March 31 and December 31, 2017 is as follows (in thousands):

 

 

 

 

 

 

 

 

 

Allocation as of 3/31/2017

 

Measurement Period Adjustments

 

Allocation as of 12/31/2017

Assets acquired and liabilities assumed:

 

 

 

 

 

 

Cash and cash equivalents

$

63

$

(63)

$

 -

Receivables

 

2,796

 

(96)

 

2,700

Inventories

 

4,998

 

179

 

5,177

Property and equipment

 

462

 

 -

 

462

Noncompete agreements

 

170

 

 -

 

170

Customer relationships

 

12,000

 

 -

 

12,000

Trade names

 

1,100

 

 -

 

1,100

Goodwill

 

5,568

 

(575)

 

4,993

Accounts payable

 

(1,354)

 

 2

 

(1,352)

Accrued expenses

 

(809)

 

(67)

 

(876)

Deferred tax liabilities

 

(5,391)

 

 -

 

(5,391)

Total purchase price

$

19,603

$

(620)

$

18,983

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BROADWIND ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2017 and 2016

(in thousands, except share and per share data)

The allocation of the purchase price is based on valuations performed to determine the fair value of such assets and liabilities as of the acquisition date. The acquired noncompete agreements, customer relationships, and trade names have weighted average amortization periods of 6.0 years, 9.0 years, and 14.0 years, respectively and the total weighted average life of the acquired intangible assets is 9.4 years. Goodwill from this transaction has been allocated to the Company’s Process Systems segment and is not deductible for tax purposes.

The Company incurred transaction costs of $182 for the year ended December 31, 2017 related to the acquisition. These costs were expensed as incurred and were primarily recorded as selling, general, and administrative expenses on the Company’s consolidated statements of operations. Red Wolf recorded revenues of $15,868 and a net loss of $146 for the period beginning from the acquisition date of February 1, 2017 and ending on December 31, 2017.

Pro Forma Results

The Company’s unaudited pro forma results of operations for the years ended December 31, 2017 and 2016 assuming the Red Wolf acquisition had occurred as of January 1, 2016 are presented for comparative purposes below. These amounts are based on available information of the results of operations of Red Wolf prior to the acquisition date and are not necessarily indicative of what the results of operations would have been had the acquisition been completed on January 1, 2016.

This unaudited pro forma information is as follows (in thousands, except per share amounts):

 

 

 

 

 

 

 

      Year Ended December 31, 

 

2017

 

2016

Total revenues

$

149,418

 

$

213,218

Net (loss) income*

$

(3,410)

 

$

9,814

 

 

 

 

 

 

Pro forma (loss) income per common share - basic

$

(0.23)

 

$

0.66

Pro forma (loss) income per common share - diluted

$

(0.23)

 

$

0.65

*The release of a portion of the tax provision related to the acquisition is presented within the year ended December 31, 2016 net income for pro forma as the release is considered to occuroutstanding shares at the time of submission, purporting to nominate a slate of six candidates for election as directors at the acquisition.Company's 2023 Annual Meeting of Stockholders. The Company remains open to ongoing engagement with WM Argyle. However, if the Company and WM Argyle cannot reach an agreement in connection with its nomination, there will be a contested election at the Company’s 2023 Annual Meeting of Stockholders.

 

64

70

INDEX TO EXHIBITS

Exhibit
Number

Exhibit
Number

Description

2.1

3.1

Membership Interest Purchase Agreement dated as of February 1, 2017, by and among the Company, Christopher J. Brice , Lewis J. Hendrix and Kimberley M. Sutton (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed February 1, 2017)

3.1

Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form 10‑Q10-Q for the quarterly period ended June 30, 2008)

3.2

Certificate of Amendment to the Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8‑K8-K filed August 23, 2012)

3.3

Second Amended and Restated BylawsCertificate of Amendment to the Certificate of Incorporation of the Company adopted as of May 20, 2014 (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8‑K8-K filed May 23, 2014)6, 2020)

4.13.4
Third Amended and Restated Bylaws of the Company, adopted as of May 4, 2020 (incorporated by reference to Exhibit 3.2 to the Company's Current Report on Form 8-K filed May 6, 2020)

4.1

Section 382 Rights Agreement dated as of February 12, 2013 between the Company and Wells Fargo Bank, National Association,Equiniti Trust Company, as rights agent, which includes the Form of Rights Certificate as Exhibit B thereto (incorporated by reference to Exhibit 1 to the Company’s Registration Statement on Form 8‑A8-A filed February 13, 2013)

4.2

Certificate of Designation of Series A Junior Participating Preferred Stock of the Company (incorporated by reference to Exhibit 2 to the Company’s Registration Statement on Form 8‑A8-A filed February 13, 2013)

4.3

First Amendment to Section 382 Rights Agreement dated as of February 2, 2016 between the Company and Wells Fargo Bank, National Association,Equiniti Trust Company, as rights agent (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed February 8, 2016)

10.1

4.4

Second Amendment to Section 382 Rights Agreement dated as of February 7, 2019 between the Company and Equiniti Trust Company, as rights agent (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed February 12, 2019)

4.5Third Amendment to Section 382 Rights Agreement dated as of February 3, 2022 between the Company and Equiniti Trust Company, as rights agent (incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K filed February 3, 2022

4.6

Description of Securities (incorporated by reference to Exhibit 4.5 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2019)

10.1

Lease Agreement dated December 26, 2007 between Tower Tech Systems Inc. and City Centre, LLC (incorporated by reference to Exhibit 10.3 to the Company’s Annual Report on Form 10‑KSB10-KSB for the fiscal year ended December 31, 2007)

10.2

Amended and Restated Lease for Industrial/Manufacturing Space dated as of May 1, 2010 between Tower Tech Systems Inc. and City Centre, LLC (incorporated by reference to Exhibit 10.5 to the Company’s Quarterly Report on Form 10‑Q10-Q for the quarterly period ended March 31, 2010)

10.3†

Amended and Restated Employment Agreement dated as of December 17, 2012 between the Company and Stephanie K. Kushner (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8‑K filed December 21, 2012)

10.4†

Severance and Non‑Competition Agreement, dated as of February 21, 2014 between the Company and David W. Fell (incorporated by reference to Exhibit 10.25 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014)

10.5†

Severance and Non‑Competition Agreement, dated as of December 15, 2011 between the Company and Robert R. Rogowski (incorporated by reference to Exhibit 10.26 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014)

10.6†

Severance and Non‑Competition Agreement, dated as of July 8, 2014 between the Company and Erik W. Jensen (incorporated by reference to Exhibit 10.27 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014)

10.7†

Separation Agreement dated as of November 30, 2015 between the Company and Peter C. Duprey (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8‑K filed December 1, 2015)

10.8†

Form of Indemnification Agreement (incorporated by reference to Exhibit 10.6 to the Company’s Quarterly Report on Form 10‑Q10-Q for the quarterly period ended March 31, 2010)

10.9†10.4†

Deferred Compensation Plan (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8‑K filed October 26, 2007)

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Table of Contents

10.10†

Amended and Restated Broadwind Energy, Inc. 2007 Equity Incentive Plan (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10‑Q for the quarterly period ended September 30, 2012)

10.11†

Broadwind Energy, Inc. 2012 Equity Incentive Plan (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10‑Q for the quarterly period ended September 30, 2012)

10.12†

Broadwind Energy, Inc. 2015 Equity Incentive Plan (incorporated by reference to Exhibit A to the Company’s Schedule 14A filed on March 12, 2015)

10.13†10.5†

Form of Executive Incentive Stock Option Agreement (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10‑Q10-Q for the quarterly period ended June 30, 2010)

10.14†

10.6†

Form of Restricted Stock Unit Award Agreement  (incorporated by reference to Exhibit 10.2 to the Company’sCompany's Quarterly Report on Form 10‑Q10-Q for the quarterly period ended March 31, 2012)

10.15†

10.7†

Form of Restricted Stock Unit Award Agreement (incorporated by reference to Exhibit 10.3 to the Company’sCompany's Quarterly Report on Form 10‑Q10-Q for the quarterly period ended March 31, 2012)

10.16†10.8†

Form of Stock Option Agreement (incorporated by reference to Exhibit 10.4 to the Company’sCompany's Quarterly Report on Form 10‑Q10-Q for the quarterly period ended March 31, 2012)

10.17†10.9†

Form of Restricted Stock Unit Award Agreement (Non-Employee Directors) (incorporated by reference to Exhibit 10.35 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015)

10.18†10.10†

Form of Restricted Stock Unit Award Agreement (Extended Executive Team) (incorporated by reference to Exhibit 10.36 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015)

10.19†10.11†

Form of Restricted Stock Unit Award Agreement (incorporated by reference to Exhibit 10.37 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015)

10.20†10.12†

Second Amended and Restated Employment Agreement, dated May 20, 2016, between the Company and Stephanie K. KushnerBroadwind Energy, Inc. 2015 Equity Incentive Plan Restricted Stock Unit Award Notice (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed May 24, 2016)

10.21†

Severance and Non-Competition Agreement, dated August 9, 2016, between the Company and Jason L. Bonfigt (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed August 9, 2016)

10.22

Loan and Security Agreement, dated October 26, 2016, among the Company, Brad Foote Gear Works, Inc., Broadwind Services, LLC, and Broadwind Towers, Inc. and The PrivateBank and Trust Company (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10 Q for the quarterly period ended September 30, 2016)

10.23

First Amendment to Loan and Security Agreement, dated February 10, 2017, among the Company, Brad Foote Gear Works, Inc., Broadwind Services, LLC, Broadwind Towers, Inc. and The PrivateBank and Trust Company (incorporated by reference to Exhibit 10.36 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016)

10.24

Joinder to Loan and Security Agreement, dated February 10, 2017, executed by Red Wolf Company, LLC (incorporated by reference to Exhibit 10.37 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016)

10.25

Second Amendment to Loan and Security Agreement and Waiver, dated March 27, 2017, among the Company, Brad Foote Gearworks, Inc., Broadwind Services, LLC, Broadwind Towers, Inc. and The PrivateBank and Trust Company (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2017)June 30, 2018)

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Table of Contents

10.26

10.13

Amended and Restated Revolving Note, dated March 27, 2017 among the Company, Brad Foote Gearworks, Inc., Broadwind Services, LLC, Broadwind Towers, Inc. and The PrivateBank and Trust Company (incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2017)

10.27

Third Amendment to Loan and Security Agreement, dated January 29, 2018,February 25, 2019, among the Company, Brad Foote Gearworks, Inc., Broadwind Services, LLC, Broadwind Towers, Inc., Red Wolf Company, LLC, the other Loan Parties and Lenders party thereto, and CIBC Bank USA, as Administrative Agent and Sole Lead Arranger (incorporated by reference to Exhibit 10.25 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018)

10.14†

Severance and Non-Competition Agreement, dated as of May 4, 2018, between the Company and Eric Blashford (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed February 2,May 3, 2018)

10.28†10.15†

SeparationForm of Performance Award Agreement dated as of April 28, 2017 between the Company and David W. Fell(Broadwind Energy, Inc. 2015 Equity Incentive Plan) (incorporated by reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2017)2019)

10.29†10.16†

ConsultingForm of Performance Award Agreement dated as of May 2, 2017 between the Company(Amended and David W. FellRestated Broadwind Energy, Inc. 2015 Equity Incentive Plan) (incorporated by reference to Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2017)2019)

21

10.17†

Form of Performance Award Agreement dated April 23, 2019 between the Company and Stephanie K. Kushner (incorporated by reference to Exhibit 10.6 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2019)

10.18†

Restricted Stock Award Agreement dated April 23, 2019 between the Company and Stephanie K. Kushner (incorporated by reference to Exhibit 10.7 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2019)

10.19†

Amended and Restated Broadwind Energy, Inc. 2015 Equity Incentive Plan (incorporated by reference to Exhibit D to the Company’s Schedule 14A filed on March 11, 2019)

10.20Note dated April 5, 2020 by and between Brad Foote Gear Works, Inc. and CIBC Bank USA (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2020)
10.21Note dated April 5, 2020 by and between Broadwind Heavy Fabricators, Inc. and CIBC Bank USA (incorporated by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2020)
10.22Note dated April 5, 2020 by and between Broadwind Industrial Solutions, Inc. and CIBC Bank USA (incorporated by reference to Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2020)
10.23Note dated April 8, 2020 by and between Broadwind Energy, Inc. n/k/a Broadwind, Inc. and CIBC Bank USA (incorporated by reference to Exhibit 10.4 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2020)
10.24†Form of Performance Award  Agreement (Amended and Restated Broadwind, Inc. 2015 Equity Incentive Plan) (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2020)
10.25†First Amendment to Amended and Restated Broadwind Energy, Inc. 2015 Equity Incentive Plan (incorporated by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2020)
10.26First Amendment to the Amended and Restated Loan and Security Agreement and Other Loan Documents, dated October 29, 2020, among the Company, Brad Foote Gearworks, Inc, Broadwind Services, LLC, Broadwind Heavy Fabrications, Inc., Broadwind Industrial Solutions, LLC, CIBC Bank USA, as Administrative Agent for itself and all Lenders and Siena Lending Group (incorporated by reference to Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2020)
10.27Second Amendment to the Amended and Restated Loan and Security Agreement, dated February 23, 2021, among the Company, Brad Foote Gearworks, Inc, Broadwind Services, LLC, Broadwind Heavy Fabrications, Inc., Broadwind Industrial Solutions, LLC, and CIBC Bank USA, as Administrative Agent for itself and all Lenders (incorporated by reference to Exhibit 10.33 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2020)
10.28Second Amendment to Amended and Restated Broadwind, Inc. 2015 Equity Incentive Plan (incorporated by reference to Appendix B to Amendment No. 1 to the Company's Schedule 14A filed April 5, 2021)
10.29Third Amendment to Amended and Restated Loan and Security Agreement, dated November 8, 2021, among the Company, Brad Foote Gearworks, Inc., Broadwind Services, LLC, Broadwind Heavy Fabrications, Inc., Broadwind Industrial Solutions, LLC and CIBC Bank USA, as Administrative Agent for itself and all Lenders (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2021) 
10.30Equity Distribution Agreement, dated March 9, 2021, by and between the Company and Craig-Hallum Capital Group LLC (incorporated by reference to Exhibit 1.1 to the Company's Current Report on Form 8-K filed March 9, 2021)
10.31Fourth Amendment to Amended and Restated Loan and Security Agreement, dated February 28, 2022, among the Company, Brad Foote Gearworks, Inc., Broadwind Services, LLC, Broadwind Heavy Fabrications, Inc., Broadwind Industrial Solutions, LLC and CIBC Bank USA, as Administrative Agent for itself and all Lenders (incorporated by reference to Exhibit 10.30 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2021)
10.32Credit Agreement, dated as of August 4, 2022, by and among Broadwind, Inc., Brad Foote Gear Works, Inc., Broadwind Industrial Solutions, LLC, Broadwind Heavy Fabrications, Inc., 5100 Neville Road, LLC and Wells Fargo Bank, National Association (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed August 8, 2022)  
10.33Guaranty, dated as of August 4, 2022, by Broadwind, Inc., Brad Foote Gear Works, Inc., Broadwind Industrial Solutions, LLC, Broadwind Heavy Fabrications, Inc. and 5100 Neville Road, LLC in favor of Wells Fargo Bank, National Association (incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed August 8, 2022)
10.34Severance and Non-Competition Agreement dated as of August 10, 2022, between Broadwind, Inc. and Thomas A. Ciccone (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed August 12, 2022)
10.35Sales Agreement, dated September 12, 2022, by and among Broadwind, Inc., Roth Capital Partners, LLC and H.C. Wainwright & Co. (incorporated by reference to Exhibit 1.1 to the Company's Current Report on Form 8-K filed September 12, 2022)
10.36Amendment No. 1 to Credit Agreement and Limited Waiver, dated as of February 8, 2023, by and among Broadwind Inc., Brad Foote Gear Works, Inc., Broadwind Industrial Solutions, LLC, Broadwind Heavy Fabrications, Inc., 5100 Neville Island, LLC and Wells Fargo Bank, National Association (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed February 14, 2023)

21

Subsidiaries of the Registrant (filed herewith)

23

Consent of RSM LLP (filed herewithherewith))

31.1

Rule 13a‑14(a)13a-14(a) Certification of Chief Executive Officer (filed herewith)

31.2

Rule 13a‑14(a)13a-14(a) Certification of Chief Financial Officer (filed herewith)

32.1

Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes‑OxleySarbanes-Oxley Act of 2002 (filed herewith)

32.2

Certification of Chief ExecutiveFinancial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes‑OxleySarbanes-Oxley Act of 2002 (filed herewith)

101

The following financial information from this Form 10-K of Broadwind, Inc. for the year ended December 31, 2022, formatted in Inline XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets as of December 31, 2022 and 2021, (ii) Consolidated Statements of Operations for the years ended December 31, 2022 and 2021, (iii) Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2022 and 2021, (iv) Consolidated Statements of Cash Flows for the years ended December 31, 2022 and 2021, and (v) Notes to Consolidated Financial Statements, tagged as blocks of text.

104Cover Page Interactive Data File (embedded within the Inline XBRL and contained in Exhibit 101)

†Indicates management contract or compensation plan or arrangement.

67


 

Indicates management contract or compensation plan or arrangement.

Table of Contents

71

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on the 27thninth day of February, 2018.March, 2023.

 

BROADWIND, ENERGY, INC.

By:

/s/ Stephanie K. KushnerEric B. Blashford

Stephanie K. KushnerEric B. Blashford
President and Chief Executive Officer
(Principal Executive Officer)

 

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons (including a majority of the board of directors) on behalf of the registrant and in the capacities and on the dates indicated.

SIGNATURE

 TITLE 

DATE

/s/ Stephanie K. KushnerEric B. Blashford

President, Chief Executive Officer, and Director (Principal Executive Officer)

 

February 27, 2018March 9, 2023

Stephanie K. KushnerEric B. Blashford

/s/ Jason L. Bonfigt

Thomas A. Ciccone

Vice President and Chief Financial Officer
(Principal
(Principal Financial Officer)

February 27, 2018

March 9, 2023

Jason L. Bonfigt

Thomas A. Ciccone

/s/ David P. Reiland

Director and Chairman of the Board

February 27, 2018

March 9, 2023

David P. Reiland

/s/ Terence P. FoxPhilip J. Christman

Director

February 27, 2018

March 9, 2023

Terence P. FoxPhilip J. Christman

/s/  Persio V. Lisboa

Director

February 27, 2018

Persio V. Lisboa

/s/ Thomas A. Wagner

Director

February 27, 2018

March 9, 2023

Thomas A. Wagner

/s/ Cary B. Wood

Director

February 27, 2018

March 9, 2023

Cary B. Wood

/s/ Sachin ShivaramDirectorMarch 9, 2023
Sachin Shivaram

 

68

72