UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

⌧

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

For the quarterly period ended ~~June~~September 30, 2020

◻☐

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

BROADWIND, INC.

(Exact name of registrant as specified in its charter)

Delaware		88-0409160
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

3240 S. Central Avenue,, Cicero, IL 60804

(Address of principal executive offices)

(708) 780-4800

(Registrant’s telephone number, including area code)

Not applicable

(Former name, former address and former fiscal year, if changed since last report)

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


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, $0.001 par value	BWEN	The NASDAQ Capital Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve 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 every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding twelve months (or for such shorter period that the registrant was required to submit such files). Yes ⌧ No ◻

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

Large accelerated filer ◻		Accelerated filer ◻

Non-accelerated filer ⌧ ~~Emerging growth 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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ◻ No ⌧

Number of shares of registrant’s common stock, par value $0.001, outstanding as of ~~July 31,~~October 30, 2020: ~~16,839,679.~~16,937,561.

Table of Contents

BROADWIND, INC. AND SUBSIDIARIES

INDEX

Table of Contents

PART I. FINANCIAL ~~INFORMATIO~~N

~~Item 1.~~~~Financial Statement~~sINFORMATION

Item 1.Financial Statements

BROADWIND, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE ~~SHEET~~SSHEETS

(UNAUDITED)

(in thousands, except share and per share data)


	June 30,		December 31,
	2020		2019

					September 30,			December 31,
					2020			2019

ASSETS
CURRENT ASSETS:
Cash	$	2,119	$	2,416	$	2,541		$	2,416	��
Accounts receivable, net		26,119		18,310		24,161			18,310
Contract assets						1,475			—
Inventories, net		37,611		31,863		25,480			31,863
Prepaid expenses and other current assets		1,739		2,124		2,463			2,124
Total current assets		67,588		54,713		56,120			54,713
LONG-TERM ASSETS:
Property and equipment, net		46,382		46,940		46,101			46,940
Operating lease right-of-use assets		19,490		15,980		19,067			15,980
Intangible assets, net		4,553		4,919		4,369			4,919
Other assets		439		314		399			314
TOTAL ASSETS	$	138,452	$	122,866	$	126,056		$	122,866
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Line of credit and other notes payable	$	13,046	$	12,917	$	8,176		$	12,917
Current portion of finance lease obligations		1,032		546		1,174			546
Current portion of operating lease obligations		1,582		1,326		1,588			1,326
Accounts payable		21,901		21,876		17,631			21,876
Accrued liabilities		5,096		4,911		5,750			4,911
Customer deposits		21,716		22,717		18,524			22,717
Total current liabilities		64,373		64,293		52,843			64,293
LONG-TERM LIABILITIES:
Long-term debt, net of current maturities		9,500		505		9,497			505
Long-term finance lease obligations, net of current portion		1,769		673		1,856			673
Long-term operating lease obligations, net of current portion		19,931		16,591		19,529			16,591
Other		80		44		96			44
Total long-term liabilities		31,280		17,813		30,978			17,813
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; 17,113,616 and 16,830,930 shares issued as of June 30, 2020, and December 31, 2019, respectively		17		17
Treasury stock, at cost, 273,937 shares as of June 30, 2020 and December 31, 2019		(1,842)		(1,842)
Common stock, $0.001 par value; 30,000,000 shares authorized; 17,211,498 and 16,830,930 shares issued as of September 30, 2020, and December 31, 2019, respectively						17			17
Treasury stock, at cost, 273,937 shares as of September 30, 2020 and December 31, 2019						(1,842	)		(1,842	)
Additional paid-in capital		383,917		383,361		384,356			383,361
Accumulated deficit		(339,293)		(340,776)		(340,296	)		(340,776	)
Total stockholders’ equity		42,799		40,760		42,235			40,760
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	138,452	$	122,866	$	126,056		$	122,866

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

Table of Contents

BROADWIND, INC. AND SUBSIDIARIES

~~CONDENSED CONSOLIDATED STATEMENTS OF OPERATION~~S

~~(UNAUDITED)~~

~~(in thousands, except per share data)~~

Three Months Ended June 30,

Six Months Ended June 30,

2020

2019

2020

2019

Revenues

$
54,926

$
41,169

$
103,560

$
82,829

Cost of sales

49,509

37,277

91,971

75,388

Restructuring

—

—

—

12

Gross profit

5,417

3,892

11,589

7,429

OPERATING EXPENSES:

Selling, general and administrative

4,198

3,895

8,507

7,723

Intangible amortization

184

203

367

406

Total operating expenses

4,382

4,098

8,874

8,129

Operating income (loss)

1,035

(206)

2,715

(700)

OTHER EXPENSE, net:

Interest expense, net

(474)

(773)

(1,147)

(1,309)

Other, net

(1)

(16)

(3)

(17)

Total other expense, net

(475)

(789)

(1,150)

(1,326)

Net income (loss) before provision for income taxes

560

(995)

1,565

(2,026)

Provision for income taxes

31

23

83

34

NET INCOME (LOSS)

$
529

$
(1,018)

$
1,482

$
(2,060)

NET INCOME (LOSS) PER COMMON SHARE—BASIC:

Net income (loss)

$
0.03

$
(0.06)

$
0.09

$
(0.13)

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING—BASIC

16,761

16,046

16,678

15,917

NET INCOME (LOSS) PER COMMON SHARE—DILUTED:

Net income (loss)

$
0.03

$
(0.06)

$
0.09

$
(0.13)

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING—DILUTED

17,125

16,046

16,934

15,917

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

~~Table of Contents~~

~~BROADWIND, INC. AND SUBSIDIARIES~~

~~CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUIT~~Y

~~(UNAUDITED)~~

~~(in thousands, except share data)~~

Common Stock

Treasury Stock

Additional

Shares

Issued

Issued

Paid-in

Accumulated

Issued

Amount

Shares

Amount

Capital

Deficit

Total

BALANCE, December 31, 2018

15,982,622

$
16

(273,937)

$
(1,842)

$
381,441

$
(336,253)

$
43,362

Stock issued for restricted stock

141,384

—

—

—

—

—

—

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

135,636

—

—

—

187

—

187

Share-based compensation

—

—

—

—

255

—

255

Net loss

—

—

—

—

—

(1,042)

(1,042)

BALANCE, March 31, 2019

16,259,642

$
16

(273,937)

$
(1,842)

$
381,883

$
(337,295)

$
42,762

Stock issued for restricted stock

53,740

—

—

—

—

—

—

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

123,727

—

—

—

205

—

205

Share-based compensation

—

—

—

—

255

—

255

Net loss

—

—

—

—

—

(1,018)

(1,018)

BALANCE, June 30, 2019

16,437,109

$
16

(273,937)

$
(1,842)

$
382,343

$
(338,313)

$
42,204

BALANCE, December 31, 2019

16,830,930

$
17

(273,937)

$
(1,842)

$
383,361

$
(340,776)

$
40,760

Stock issued for restricted stock

83,050

—

—

—

—

—

—

Share-based compensation

—

—

—

—

308

—

308

Net income

—

—

—

—

—

954

954

BALANCE, March 31, 2020

16,913,980

$
17

(273,937)

$
(1,842)

$
383,669

$
(339,822)

$
42,022

Stock issued for restricted stock

199,636

—

—

—

—

—

—

Share-based compensation

—

—

—

—

248

—

248

Net income

—

—

—

—

—

529

529

BALANCE, June 30, 2020

17,113,616

$
17

(273,937)

$
(1,842)

$
383,917

$
(339,293)

$
42,799

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

~~Table of Contents~~

~~BROADWIND, INC. AND SUBSIDIARIES~~

~~CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW~~S

~~(UNAUDITED)~~

~~(in thousands)~~

Six Months Ended June 30,

2020

2019

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income (loss)

$
1,482

$
(2,060)

Adjustments to reconcile net cash used in operating activities:

Depreciation and amortization expense

3,194

3,390

Deferred income taxes

21

(5)

Change in fair value of interest rate swap agreements

157

26

Stock-based compensation

556

510

Allowance for doubtful accounts

34

(12)

Common stock issued under defined contribution 401(k) plan

—

392

Gain on disposal of assets

—

(1)

Changes in operating assets and liabilities, net of acquisition:

Accounts receivable

(7,843)

(2,806)

Inventories

(5,748)

(13,088)

Prepaid expenses and other current assets

385

16

Accounts payable

520

3,306

Accrued liabilities

28

540

Customer deposits

(1,001)

(4,946)

Other non-current assets and liabilities

(23)

127

Net cash used in operating activities

(8,238)

(14,611)

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchases of property and equipment

(929)

(1,183)

Proceeds from disposals of property and equipment

—

1

Net cash used in investing activities

(929)

(1,182)

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from line of credit

93,358

91,007

Payments on line of credit

(92,768)

(75,370)

Proceeds from long-term debt

9,530

—

Payments on long-term debt

(822)

(462)

Principal payments on finance leases

(428)

(485)

Net cash provided by financing activities

8,870

14,690

NET DECREASE IN CASH

(297)

(1,103)

CASH beginning of the period

2,416

1,177

CASH end of the period

$
2,119

$
74

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

~~Table of Contents~~

~~BROADWIND, INC. AND SUBSIDIARIES~~

NOTES TO CONDENSED CONSOLIDATED FINANCIAL ~~STATEMENT~~SSTATEMENTS

(UNAUDITED)

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

NOTE 1 — BASIS OF PRESENTATION

The unaudited condensed consolidated financial statements presented herein include the accounts of Broadwind, Inc. (the “Company”) and its wholly-owned subsidiaries Broadwind Heavy Fabrications, Inc. (“Broadwind Heavy Fabrications”), Brad Foote Gear Works, Inc. (“Brad Foote”) and Broadwind Industrial Solutions, LLC (“Broadwind Industrial Solutions”). All intercompany transactions and balances have been eliminated. The financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, the financial statements do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, all adjustments, including normal recurring accruals, considered necessary for a fair presentation have been included.

Operating results for the three and ~~six~~nine months ended ~~June~~September 30, 2020 are not necessarily indicative of the results that may be expected for the twelve months ending December 31, 2020, or any other interim period, which may differ materially due to, among other things, the risk factors set forth in our Annual Report on Form 10-K for the year ended December 31, 2019, as supplemented by the risk factor set forth on our Current Report on Form 8-K filed April 17, 2020 and the risk factors set forth in Part II, Item 1A, “Risk Factors,” of this Quarterly Report, particularly in light of the novel coronavirus (COVID-19) pandemic and its effects on domestic and global economies. To limit the spread of COVID-19, governments have imposed, and may continue to impose, among other things, travel and business operation restrictions and stay-at-home orders and social distancing guidelines, causing some businesses to adjust, reduce or suspend operating activities. These disruptions and restrictions have, and may continue in the future to, adversely affect our operating results due to, among other things, reduced demand as a result of our customers having to adjust, reduce or suspend operating activities. For more information, refer to the statements included in Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” of this Quarterly Report under the caption “COVID-19 Pandemic.”

The December 31, 2019 condensed consolidated balance sheet was derived from audited financial statements, but does not include all disclosures required by GAAP. This financial information should be read in conjunction with the consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2019.~~2019.

There have been no material changes in the Company’s significant accounting policies during the ~~six~~nine months ended ~~June~~September 30, 2020 as compared to the significant accounting policies described in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2019.~~2019.

Company Description

Through its subsidiaries, the Company is a precision manufacturer of structures, equipment and components for clean technology and other specialized applications. The Company provides technologically advanced high value products to customers with complex systems and stringent quality standards that operate in energy, mining and infrastructure sectors, primarily in the United States of America (the “U.S.”). The Company’s capabilities include, but are not limited to the following: heavy fabrications, welding, metal rolling, coatings, gear cutting and shaping, heat treatment, assembly, engineering and packaging solutions. The Company’s most significant presence is within the U.S. wind energy industry, which accounted for 72% of the Company’s revenue during the first ~~six~~nine months of ~~2020.~~2020.

~~Liquidity~~

Liquidity

The Company meets its short term liquidity needs through cash generated from operations, its available cash balances, the Credit Facility (as defined below), equipment financing, and access to the public or private debt and equity markets and has the option to raise capital under the Company’s Form S-3 (as discussed below).

See Note 7, “Debt and Credit Agreements,” of these condensed consolidated financial statements for a complete description of the Credit Facility and the Company’s other debt.

Total debt and finance lease obligations at ~~June~~September 30, 2020 totaled ~~$25,347,~~$20,703, which includes current outstanding debt and finance leases totaling ~~$14,078.~~$9,350. The current outstanding debt includes ~~$12,107~~$7,649 outstanding under the Company’s revolving line of credit.

Table of Contents

On August ~~11, 2017,~~18, 2020, the Company filed a “shelf” registration statement on Form S-3, which was declared effective by the Securities and Exchange Commission (the “SEC”) on October ~~10, 2017~~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 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. The Company's registration statement on Form S-3 ~~will expire~~filed on August 11, 2017, which was declared effective by the SEC on October 10, 2017 expired on October 10, 2020.

On July 31, 2018, the Company entered into an At Market Issuance Sales Agreement (the “ATM Agreement”) with Roth Capital Partners, LLC (the “Agent”). Pursuant to the terms of the ATM Agreement, the Company may sell from time to time through the Agent shares of the Company’s common stock, par value $0.001 per share with an aggregate sales price of up to $10,000. The Company will pay a commission to the Agent of 3% of the gross proceeds of the sale of the shares sold under the ATM Agreement and reimburse the Agent for the expenses of ~~their~~its counsel. AsThe Company did not issue any shares of ~~June~~its common stock under the ATM Agreement in 2019. During the quarter ended September 30, 2020, the Company reinstated the ATM Agreement and issued 91,481 shares of the Company’s common stock ~~having a value~~thereunder. The net proceeds (before upfront costs) to the Company from the sale of such shares were approximately $321 after deducting commissions paid of approximately ~~$9,967 remained available for issuance with respect to the ATM Agreement.~~$10. The ~~Company has not used the~~ ATM Agreement was terminated in ~~2019 or~~accordance with its terms on October 12, 2020.

In April 2020, the Company received $9,530 in funds under the U.S. Paycheck Protection Program (“PPP”) and made repayments of $379 on May 13, 2020. Refer to Note 7, “Debt and Credit Agreements,” of these condensed consolidated financial statements for more ~~information.~~information, including information regarding potential forgiveness of the PPP Loans.

The Company anticipates that current cash resources (which includes proceeds from the PPP Loans), amounts available under the Credit Facility, cash to be generated from operations and any potential proceeds from the sale of further Company securities under the Form S-3 will be adequate to meet the Company’s liquidity needs for at least the next twelve months.

If assumptions regarding the Company’s production, sales and subsequent collections from certain of the Company’s large customers, as well as customer deposits and revenues generated from new customer orders, are materially inconsistent with management’s expectations, particularly in light of the COVID-19 pandemic and its effects on domestic and global economies, the Company may in the future encounter cash flow and liquidity issues. If the Company’s operational performance deteriorates significantly, it may be unable to comply with existing financial covenants, and could lose access to the Credit Facility. This could limit the Company’s operational flexibility, require a delay in making planned investments and/or require the Company to seek additional equity or debt financing. Any additional equity financing, if available, may be dilutive to stockholders, and additional debt financing, if available, would likely require new financial covenants or impose other restrictions on the Company. While the Company believes that it will continue to have sufficient cash available to operate its businesses and to meet its financial obligations and debt covenants, there can be no assurances that its operations will generate sufficient cash, or that credit facilities will be available in an amount sufficient to enable the Company to meet these financial obligations.

Management’s Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities as of the date of the financial statements and reported amounts of revenues and expenses during the reported period. Significant estimates, among others, include revenue recognition, future cash flows, inventory reserves, warranty reserves, impairment of long-lived assets, allowance for doubtful accounts and health insurance reserves. 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, particularly in light of the COVID-19 pandemic.

NOTE 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 three and ~~six~~nine months ended ~~June~~September 30, 2020 and ~~2019:~~2019:


		Three Months Ended June 30,				Six Months Ended June 30,
		2020		2019		2020		2019
									Three Months Ended September 30,						Nine Months Ended September 30,
									2020			2019			2020			2019
Heavy Fabrications	$	43,614	$	28,970	$	81,983	$	57,264	$	43,440		$	33,834		$	125,424		$	91,098
Gearing		6,922		9,266		13,149		19,293		7,125			7,989			20,273			27,282
Industrial Solutions		4,397		2,933		8,435		6,272		4,081			4,317			12,516			10,589
Eliminations										(32	)		(2	)		(39	)		(2	)
Consolidated									$	54,614		$	46,138		$	158,174		$	128,967

NOTE 3 — EARNINGS PER SHARE

The following table presents a reconciliation of basic and diluted earnings per share for the three and ~~six~~nine months ended ~~June~~September 30, 2020 and 2019, as follows:

Three Months Ended

Six Months Ended

June 30,

June 30,


2020

2019

2020

2019

Basic earnings per share calculation:

Net income (loss)

$
529

$
(1,018)

$
1,482

$
(2,060)

Weighted average number of common shares outstanding

16,760,702

16,045,790

16,678,469

15,916,590

Basic net income (loss) per share

$
0.03

$
(0.06)

$
0.09

$
(0.13)

Diluted earnings per share calculation:

Net income (loss)

$
529

$
(1,018)

$
1,482

$
(2,060)

Weighted average number of common shares outstanding

16,760,702

16,045,790

16,678,469

15,916,590

Common stock equivalents:

Non-vested stock awards ⁽¹⁾

363,917

—

255,336

—

Weighted average number of common shares outstanding

17,124,619

16,045,790

16,933,805

15,916,590

Diluted net income (loss) per share

$
0.03

$
(0.06)

$
0.09

$
(0.13)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2020			2019			2020		2019
Basic earnings per share calculation:
Net (loss) income	$	(1,003	)	$	(898	)	$	480	$	(2,958	)
Weighted average number of common shares outstanding		16,866,134			16,235,961			16,741,481		16,024,217
Basic net (loss) income per share	$	(0.06	)	$	(0.06	)	$	0.03	$	(0.18	)
Diluted earnings per share calculation:
Net (loss) income	$	(1,003	)	$	(898	)	$	480	$	(2,958	)
Weighted average number of common shares outstanding		16,866,134			16,235,961			16,741,481		16,024,217
Common stock equivalents:
Non-vested stock awards (1)		—			—			536,920		—
Weighted average number of common shares outstanding		16,866,134			16,235,961			17,278,401		16,024,217
Diluted net (loss) income per share	$	(0.06	)	$	(0.06	)	$	0.03	$	(0.18	)

(1)

Stock options and restricted stock units granted and outstanding of ~~1,489,660~~1,323,217 and 1,502,196 as of ~~June~~September 30, 2020 and September 30, 2019, respectively, are excluded from the computation of diluted earnings due to the anti-dilutive effect as a result of the Company’s net loss for the three months ended September 30, 2020 and the three and ~~six~~nine months ended ~~June~~September 30, 2019.

NOTE 5 — INTANGIBLE ASSETS

Intangible assets represent the fair value assigned to definite-lived assets such as trade names and customer relationships as part of the Company’s acquisition of Brad Foote completed in 2007 as well as the noncompetition agreements, trade names and customer relationships that were part of the Company’s acquisition of Red Wolf Company, ~~LLC.~~LLC completed in 2017. Intangible assets are amortized on a straight-line basis over their estimated useful lives, with a remaining life range from 32 to 7 years.

As of ~~June~~September 30, 2020 and December 31, 2019, the cost basis, accumulated amortization and net book value of intangible assets were as follows:

June 30, 2020

December 31, 2019

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

$
(97)

$
—

$
73

2.6

$
170

$
(83)

$
—

$
87

3.1
Customer relationships

15,979

(6,826)

(7,592)

1,561

5.4

15,979

(6,674)

(7,592)

1,713

5.8
Trade names

9,099

(6,180)

—

2,919

7.3

9,099

(5,980)

—

3,119

7.8
Intangible assets

$
25,248

$
(13,103)

$
(7,592)

$
4,553

6.0

$
25,248

$
(12,737)

$
(7,592)

$
4,919

6.5

	September 30, 2020												December 31, 2019
											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	$	(104	)	$	—		$	66		2.3	$	170	$	(83	)	$	—		$	87		3.1
Customer relationships		15,979		(6,903	)		(7,592	)		1,484		5.1		15,979		(6,674	)		(7,592	)		1,713		5.8
Trade names		9,099		(6,280	)		—			2,819		7.0		9,099		(5,980	)		—			3,119		7.8
Intangible assets	$	25,248	$	(13,287	)	$	(7,592	)	$	4,369		5.8	$	25,248	$	(12,737	)	$	(7,592	)	$	4,919		6.5

As of ~~June~~September 30, 2020, estimated future amortization expense is as follows:


2020	$	367	$	183
2021		733		733
2022		725		725
2023		664		664
2024		661		661
2025 and thereafter		1,403		1,403
Total	$	4,553	$	4,369

On October 26, 2016, the Company established a three-year secured revolving line of credit with CIBC Bank USA (“CIBC”). This line of credit has been amended from time to time. On February 25, 2019, the line of credit was expanded and extended for three years when the Company and its subsidiaries entered into an Amended and Restated Loan and Security Agreement (the ~~“Amended~~“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 $35,000 secured credit facility (the “Credit Facility”). The obligations under the Credit Facility are secured by, subject to certain exclusions, (i) a first priority security interest in all accounts receivable, inventory, equipment, cash and investment property, and (ii) a mortgage on the Abilene, Texas tower and Pittsburgh, Pennsylvania gearing facilities.

The Credit Facility is an asset-based revolving credit facility, pursuant to which the Lenders advance funds against a borrowing base consisting of approximately (a) 85% of the face value of eligible receivables of the Company and its subsidiaries, plus (b) the lesser of (i) 50% of the lower of cost or market value of eligible inventory of the Company, (ii) 85% of the orderly liquidation value of eligible inventory and (iii) $12.5 million, plus (c) the lesser of (i) the sum of (A) 75% of the appraised net orderly liquidation value of the Company’s eligible machinery and equipment plus (B) 50% of the fair market value of the Company’s mortgaged property and (ii) $12 million. Subject to certain borrowing base conditions, the aggregate Credit Facility limit under the 2016 Amended and Restated Loan Agreement is $35 million with a sublimit for letters of credit of $10 million. Borrowings under the Credit Facility bear interest at a per annum rate equal to, at the option of the Company, the one, two or three-month LIBOR rate or the base rate, plus a margin. The initial applicable margin iswas 5.50% for LIBOR rate loans and 3.50% for base rates loans. Upon certain pay downs, a pricing grid based on the Company’s trailing twelve month fixed charge coverage ratio ~~may~~has become effective under which applicable margins would now range from 2.25% to 2.75% for LIBOR rate loans and 0.00% to 0.75% for base rate loans. The Company must also pay an unused facility fee equal to 0.50% per annum on the unused portion of the Credit Facility along with other standard fees. The initial term of the 2016 Amended and Restated Loan Agreement ends on February 25, 2022. With the exception of the balance impacted by the interest rate swap (as defined below), the Company is allowed to prepay in whole or in part advances under the Credit Facility without penalty or premium other than customary “breakage” costs with respect to LIBOR loans.

The 2016 Amended and Restated Loan Agreement contains customary representations and warranties applicable to the Company and its subsidiaries. It also contains a requirement that the Company, on a consolidated basis, maintain a minimum quarterly fixed charge coverage ratio along with other customary restrictive covenants, certain of which are subject to materiality thresholds, baskets and customary exceptions and qualifications. The Company was in compliance with all financial covenants as of ~~June~~September 30, 2020.

The obligations under the Credit Facility are secured by, subject to certain exclusions, (i) a first priority security interest in all accounts receivable, inventory, equipment, cash and investment property, and (ii) a mortgage on the Abilene, Texas tower and Pittsburgh, Pennsylvania gearing facilities. The Company was in compliance with all financial covenants as of September 30, 2020.

In June 2019, in conjunction with the 2016 Amended and Restated Loan Agreement, 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 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 condensed consolidated financial statements as of ~~June~~September 30, 2020 and December 31, ~~2019.~~2019.

As of ~~June~~September 30, 2020, there was ~~$12,107~~$7,649 of outstanding indebtedness under the Credit Facility, with the ability to borrow an additional ~~$19,826,~~$19,214, under the Credit Facility.

On October 29, 2020, the Company executed the First Amendment to the 2016 Amended and Restated Loan Agreement (the “First Amendment”), implementing a payoff of a syndicated lender and a pricing grid based on the Company'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 the Credit Facility to July 31, 2023.

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


	Three Months Ended June 30,		Six Months Ended June 30,
	2020	2019	2020	2019
					Three Months Ended September 30,						Nine Months Ended September 30,
					2020			2019			2020			2019
Components of lease cost
Finance lease cost components:
Amortization of finance lease assets	$ 156	$ 136	$ 285	$ 272	$	150		$	139		$	435		$	411
Interest on finance lease liabilities	48	25	74	54		64			27			139			81
Total finance lease costs	204	161	359	326		214			166			574			492
Operating lease cost components:
Operating lease cost	811	755	1,576	1,541		764			724			2,340			2,265
Short-term lease cost	155	158	287	304		196			166			483			470
Variable lease cost⁽¹⁾	193	207	388	385		198			185			586			570
Sublease income	(45)	(44)	(90)	(88)		(45	)		(32	)		(136	)		(120	)
Total operating lease costs	1,114	1,076	2,161	2,142		1,113			1,043			3,273			3,185


Total lease cost	$ 1,318	$ 1,237	$ 2,520	$ 2,468	$	1,327		$	1,209		$	3,847		$	3,677

Supplemental cash flow information related to our operating leases is
as follows for the six months ended June 30, 2020 and 2019:

Supplemental cash flow information related to our operating leases is as follows for the nine months ended September 30, 2020 and 2019:
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from finance leases
Operating cash outflow from operating leases			$ 1,764	$ 1,750							$	2,638		$	2,626


Weighted-average remaining lease term-finance leases at end of period (in years)			1.8	1.4								1.7			1.1
Weighted-average remaining lease term-operating leases at end of period (in years)			10.4	10.8								10.2			10.8
Weighted-average discount rate-finance leases at end of period			9.0%	8.6%								8.9	%		8.7	%
Weighted-average discount rate-operating leases at end of period			8.8%	9.0%								8.9	%		9.0	%

As of ~~June~~September 30, 2020, future minimum lease payments under finance leases and operating leases were as follows:

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losses available for utilization, thereby currently limiting annual NOL usage to $14,284 per year. Further limitations may occur, depending on additional future changes in stock ownership. To the extent the Company’s use of NOL carryforwards and associated built-in losses is significantly limited in the future, the Company’s income could be subject to U.S. corporate income tax earlier than it would be if the Company were able to use NOL carryforwards and built-in losses without such limitation, which could result in lower profits and the loss of benefits from these attributes.

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In February 2013, the Company adopted a Stockholder Rights Plan, which was amended and extended in February 2016 and again in February 2019 (as amended, the “Rights Plan”). The Rights Plan is designed to preserve the Company’s substantial tax assets associated with NOL carryforwards under IRC Section 382. The amendment to the Rights Plan was most recently approved by the Company’s stockholders at the Company’s 2019 Annual Meeting of Stockholders and has a term of three years.

The Rights Plan is intended to act as a deterrent to any person or group, together with its affiliates and associates, becoming the beneficial owner of 4.9% or more of the Company’s common stock and thereby triggering a further limitation of the Company’s available NOL carryforwards. In connection with the adoption of the Rights Plan, the Board declared a non-taxable dividend of one preferred share purchase right (a “Right”) for each outstanding share of the Company’s common stock to the Company’s stockholders of record as of the close of business on February 22, 2013. Each Right entitles its holder to purchase from the Company one one-thousandth of a share of the Company’s Series A Junior Participating Preferred Stock at an exercise price of $4.25 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 ~~June~~September 30, 2020, the Company had no unrecognized tax benefits. The Company recognizes interest and penalties related to uncertain tax positions as income tax expense. The Company had no accrued interest and penalties as of ~~June~~September 30, ~~2020.~~2020.

NOTE 11 — SHARE-BASED COMPENSATION

The following table summarizes stock option activity during the ~~six~~nine months ended ~~June~~September 30, ~~2020:~~2020:

Weighted Average


Options

Exercise Price

Outstanding as of December 31, 2019

54,362

$
11.16

Forfeited

(54,362)

$
11.16

Outstanding as of June 30, 2020

—

$
—

Exercisable as of June 30, 2020

—

$
—

				Weighted Average
	Options			Exercise Price
Outstanding as of December 31, 2019		54,362		$	11.16
Forfeited		(54,362	)	$	11.16
Outstanding as of September 30, 2020		—		$	—
Exercisable as of September 30, 2020		—		$	—

The following table summarizes the Company’s restricted stock unit and performance award activity during the ~~six~~nine months ended ~~June~~September 30, ~~2020:~~2020:

Weighted Average

Number of

Grant-Date Fair Value

Shares

Per Share

Unvested as of December 31, 2019

1,356,915

$
2.39

Granted

507,513

$
1.63

Vested

(350,778)

$
2.43

Forfeited

(161,447)

$
4.39

Unvested as of June 30, 2020

1,352,203

$
1.90

				Weighted Average
	Number of			Grant-Date Fair Value
	Shares			Per Share
Unvested as of December 31, 2019		1,356,915		$	2.39
Granted		507,416		$	1.55
Vested		(360,359	)	$	2.42
Forfeited		(180,755	)	$	3.84
Unvested as of September 30, 2020		1,323,217		$	1.85

The following table summarizes share-based compensation expense included in the Company’s condensed consolidated statements of operations for the ~~six~~nine months ended ~~June~~September 30, 2020 and 2019, as follows:

Six Months Ended June 30,

2020

2019

Share-based compensation expense:

Cost of sales

$
54

$
60

Selling, general and administrative

502

450

	Nine Months Ended September 30,
	2020		2019
Share-based compensation expense:
Cost of sales	$	74	$	91
Selling, general and administrative		689		674
Net effect of share-based compensation expense on net income	$	763	$	765
Reduction in earnings per share:
Basic earnings per share	$	0.05	$	0.05
Diluted earnings per share	$	0.04	$	0.05

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The Company is party to a variety of legal proceedings that arise in the normal course of its business. While the results of these legal proceedings cannot be predicted with certainty, management believes that the final outcome of these proceedings will not have a material adverse effect, individually or in the aggregate, on the Company’s results of operations, financial condition or cash flows. Due to the inherent uncertainty of litigation, there can be no assurance that the resolution of any particular claim or proceeding would not have a material adverse effect on the Company’s results of operations, financial condition or cash flows. It is possible that if one or more of such matters were decided against the Company, the effects could be material to the Company’s results of operations in the period in which the Company would be required to record or adjust the related liability and could also be material to the Company’s financial condition and cash flows in the periods the Company would be required to pay such liability.

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Corporate

“Corporate” includes the assets and selling, general and administrative expenses of the Company’s corporate office. “Eliminations” comprises adjustments to reconcile segment results to consolidated results.

The accounting policies of the reportable segments are the same as those referenced in Note 1, “Basis of Presentation” of these condensed consolidated financial statements. Summary financial information by reportable segment for the three and ~~six~~nine months ended ~~June~~September 30, 2020 and 2019 is as follows:




	Heavy Fabrications		Gearing		Industrial Solutions		Corporate		Eliminations		Consolidated
For the Three Months Ended June 30, 2020
													Heavy Fabrications		Gearing			Industrial Solutions		Corporate			Eliminations			Consolidated
For the Three Months Ended September 30, 2020
Revenues from external customers	$	43,614		6,915		4,397		—		—	$	54,926	$	43,434		7,100			4,080		—			—		$	54,614
Intersegment revenues		—		7		—		—		(7)		—		6		25			1		—			(32	)		—
Net revenues		43,614		6,922		4,397		—		(7)		54,926		43,440		7,125			4,081		—			(32	)		54,614
Operating profit (loss)		3,199		(651)		217		(1,730)		—		1,035		2,020		(1,023	)		87		(1,559	)		—			(475	)
Depreciation and amortization		939		503		106		34		—		1,582		928		488			109		42			—			1,567
Capital expenditures		217		1		7		34		—		259		601		42			7		18			—			668

Heavy Fabrications

Gearing

Industrial Solutions

Corporate

Eliminations

Consolidated

For the Three Months Ended June 30, 2019

Revenues from external customers

$
28,970

9,266

2,933

—

—

$
41,169

Operating profit (loss)

318

913

28

(1,465)

—

(206)

Depreciation and amortization

978

483

122

45

—

1,628

Capital expenditures

308

273

14

11

—

606

	Heavy Fabrications		Gearing		Industrial Solutions		Corporate			Eliminations			Consolidated
For the Three Months Ended September 30, 2019
Revenues from external customers	$	33,834		7,989		4,315		—			—		$	46,138
Intersegment revenues		—		—		2		—			(2	)		—
Net revenues		33,834		7,989		4,317		—			(2	)		46,138
Operating profit (loss)		693		496		141		(1,588	)		—			(258	)
Depreciation and amortization		951		508		123		34			—			1,616
Capital expenditures		346		235		8		4			—			593



	Heavy Fabrications		Gearing		Industrial Solutions		Corporate		Eliminations		Consolidated
For the Six Ended June 30, 2020
													Heavy Fabrications		Gearing			Industrial Solutions		Corporate			Eliminations			Consolidated
For the Nine Months Ended September 30, 2020
Revenues from external customers	$	81,983		13,142		8,435		—		—	$	103,560	$	125,418		20,241			12,515		—			—		$	158,174
Intersegment revenues		—		7		—		—		(7)		—		6		32			1		—			(39	)		—
Net revenues		81,983		13,149		8,435		—		(7)		103,560		125,424		20,273			12,516		—			(39	)		158,174
Operating profit (loss)		6,740		(912)		410		(3,523)		—		2,715		8,760		(1,935	)		496		(5,081	)		—			2,240
Depreciation and amortization		1,903		1,015		210		66		—		3,194		2,831		1,503			319		108			—			4,761
Capital expenditures		598		169		127		35		—		929		1,199		211			134		53			—			1,597

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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. Certain environmental laws may impose the entire cost or a portion of the cost of investigating and cleaning up a contaminated site, regardless of fault, upon any one or more of a number of parties, including the current or previous owners or operators of the site. These environmental laws also impose liability on any person who arranges for the disposal or treatment of hazardous substances at a contaminated site. Third parties may also make claims against owners or operators of sites and users of disposal sites for personal injuries and property damage associated with releases of hazardous substances from those sites.

The Company warrants its products for terms that range from one to five years. In certain contracts, the Company has recourse provisions for items that would enable recovery from third parties for amounts paid to customers under warranty provisions. As of ~~June~~September 30, 2020 and 2019, estimated product warranty liability was ~~$62~~$42 and ~~$214,~~$183, respectively, and is recorded within accrued liabilities in the Company’s condensed consolidated balance sheets.

Based upon past experience and judgment, the Company establishes an allowance for doubtful accounts with respect to accounts receivable. 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 collectability of its accounts receivable. These factors include individual customer circumstances, history with the Company, the length of the time period during which the account receivable has been past due and other relevant criteria.

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

In certain customer contracts, the Company has agreed to pay liquidated damages in the event of qualifying delivery or production delays. These damages are typically limited to a specific percentage of the value of the product in question and/or are dependent on actual losses sustained by the customer. The Company does not believe that this potential exposure will have a material adverse effect on the Company’s consolidated financial position or results of operations. There was no reserve for liquidated damages as of ~~June~~September 30, 2020 or December 31, ~~2019.~~2019

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Item 2.Management’s Discussion and Analysis of Financial Condition and Results of ~~Operation~~Operationss

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes thereto in Item 1, “Financial Statements,” of this Quarterly Report and the audited consolidated financial statements and related notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the year ended December 31, ~~2019.~~2019. The discussion below contains forward-looking statements that are based upon our current expectations and are subject to uncertainty and changes in circumstances including, but not limited to, those identified in “Cautionary Note Regarding Forward-Looking Statements” at the end of Item 2. Actual results may differ materially from these expectations due to inaccurate assumptions and known or unknown risks and uncertainties including those arising as a result of, or amplified by, the COVID-19 pandemic. As used in this Quarterly Report on Form 10-Q, the terms “we,” “us,” “our,” and the “Company” refer to Broadwind, Inc., a Delaware corporation headquartered in Cicero, Illinois, and its subsidiaries.

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

In addition to measures of financial performance presented in our consolidated financial statements in accordance with GAAP, we use certain other financial measures to analyze our performance. These non-GAAP financial measures primarily consist of adjusted EBITDA 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.

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2020			2019			2020			2019
Net revenues	$	54,614		$	46,138		$	158,174		$	128,967
Net (loss) income	$	(1,003	)	$	(898	)	$	480		$	(2,958	)
Adjusted EBITDA (1)	$	1,297		$	1,851		$	7,766		$	5,465
Capital expenditures	$	668		$	593		$	1,597		$	1,776
Free cash flow (2)	$	7,256		$	18,060		$	(1,737	)	$	3,506
Operating working capital (3)	$	13,486		$	5,184		$	13,486		$	5,184
Total debt	$	17,673		$	10,394		$	17,673		$	10,394
Total orders	$	39,555		$	76,517		$	112,922		$	205,135
Backlog at end of period	$	98,621		$	174,654		$	98,621		$	174,654
Book-to-bill (4)		0.7			1.7			0.7			1.6

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Net income (loss)

$
529

$
(1,018)

$
1,482

$
(2,060)
Adjusted EBITDA (1)

$
2,863

$
1,899

$
6,468

$
3,614
Capital expenditures

$
259

$
606

$
929

$
1,183
Free cash flow (2)

$
(8,665)

$
(3,086)

$
(8,994)

$
(14,554)
Operating working capital (3)

$
20,113

$
21,986

$
20,113

$
21,986
Total debt

$
22,546

$
28,553

$
22,546

$
28,553
Total orders

$
39,558

$
104,612

$
73,367

$
128,618
Backlog at end of period

$
112,062

$
144,661

$
112,062

$
144,661
Book-to-bill (4)

0.7

2.5

0.7

1.6

(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.

~~(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 future investments.

~~(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 future investments.

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

~~(3)We define operating working capital as accounts receivable and inventory net of accounts payable and customer deposits.~~

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

~~(4)We define the book-to-bill as the ratio of new orders we received to units shipped and billed during a period.~~

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

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2020			2019			2020			2019
Net (loss) income	$	(1,003	)	$	(898	)	$	480		$	(2,958	)
Interest expense		507			609			1,654			1,919
Income tax provision		20			28			103			62
Depreciation and amortization		1,567			1,616			4,761			5,006
Share-based compensation and other stock payments		206			496			768			1,424
Restructuring costs		—			—			—			12
Adjusted EBITDA		1,297			1,851			7,766			5,465
Changes in operating working capital		6,627			16,802			(7,906	)		(184	)
Capital expenditures		(668	)		(593	)		(1,597	)		(1,776	)
Proceeds from disposal of property and equipment		—			—			—			1
Free Cash Flow	$	7,256		$	18,060		$	(1,737	)	$	3,506

Three Months Ended

Six Months Ended

June 30,

June 30,

2020

2019

2020

2019
Net income (loss)

$
529

$
(1,018)

$
1,482

$
(2,060)
Interest expense

474

773

1,147

1,309
Income tax provision (benefit)

31

23

83

34
Depreciation and amortization

1,582

1,628

3,194

3,390
Share-based compensation and other stock payments

247

493

562

929
Restructuring costs

—

—

—

12
Adjusted EBITDA

2,863

1,899

6,468

3,614
Changes in operating working capital

(11,269)

(4,379)

(14,533)

(16,986)
Capital expenditures

(259)

(606)

(929)

(1,183)
Proceeds from disposal of property and equipment

—

—

—

1
Free Cash Flow

$
(8,665)

$
(3,086)

$
(8,994)

$
(14,554)

Table of Contents

OUR BUSINESS

~~Second~~

Third Quarter Overview

We booked ~~$39,558~~$39,555 in new orders in the ~~second~~third quarter of 2020, down from ~~$104,612~~$76,517 in the ~~second~~third quarter of 2019 driven primarily by a ~~$64,927~~$34,168 decrease in Heavy Fabrication orders as certain tower customers secured production capacity in the prior year in advance of historical lead times due to surging wind tower installation expectations in 2020. Industrial fabrication product line orders within the Heavy Fabrication segment decreased quarter-over-quarter primarily due to weaker mining and construction demand as customers deferred or reduced inventory purchases due to economic uncertainty stemming from the COVID-19 pandemic. Gearing segment orders decreased ~~33%~~45% from the ~~second~~third quarter of 2019 primarily due to reduced global demand for oil and gas (“O~~&G driven by the negative demand effects~~&G”) caused by the COVID-19 ~~pandemic and oil price declines resulting from the Saudi-Russian conflict in early 2020.~~pandemic. Other markets within the Gearing segment, primarily mining, realized lower new order demand in the ~~second~~third quarter of 2020 compared to the ~~second~~third quarter of 2019 as customers delayed or reduced capital purchases ~~as the~~

~~Table of Contents~~


	Three Months Ended June 30,								2020 vs. 2019
			% of Total				% of Total
	2020		Revenue		2019		Revenue		$ Change		% Change
													Three Months Ended September 30,												2020 vs. 2019
																% of Total						% of Total
													2020			Revenue			2019			Revenue			$ Change			% Change
Revenues	$	54,926	100.0	%	$	41,169	100.0	%	$	13,757	33.4	%	$	54,614			100.0	%	$	46,138			100.0	%	$	8,476			18.4	%
Cost of sales		49,509	90.1	%		37,277	90.5	%		12,232	32.8	%		50,876			93.2	%		42,144			91.3	%		8,732			20.7	%
Gross profit		5,417	9.9	%		3,892	9.5	%		1,525	39.2	%		3,738			6.8	%		3,994			8.7	%		(256	)		(6.4	)%
Operating expenses
Selling, general and administrative expenses		4,198	7.6	%		3,895	9.5	%		303	7.8	%		4,030			7.4	%		4,049			8.8	%		(19	)		(0.5	)%
Intangible amortization		184	0.3	%		203	0.5	%		(19)	(9.4)	%		183			0.3	%		203			0.4	%		(20	)		(9.9	)%
Total operating expenses		4,382	8.0	%		4,098	10.0	%		284	6.9	%		4,213			7.7	%		4,252			9.2	%		(39	)		(0.9	)%
Operating income (loss)		1,035	1.9	%		(206)	(0.5)	%		1,241	602.4	%
Operating loss														(475	)		(0.9	)%		(258	)		(0.6	)%		(217	)		(84.1	)%
Other expense, net
Interest expense, net		(474)	(0.9)	%		(773)	(1.9)	%		299	38.7	%		(507	)		(0.9	)%		(610	)		(1.3	)%		103			16.9	%
Other, net		(1)	(0.0)	%		(16)	(0.0)	%		15	93.8	%		(1	)		(0.0	)%		(2	)		(0.0	)%		1			50.0	%
Total other expense, net		(475)	(0.9)	%		(789)	(1.9)	%		314	39.8	%		(508	)		(0.9	)%		(612	)		(1.3	)%		104			17.0	%
Net income (loss) before provision for income taxes		560	1.0	%		(995)	(2.4)	%		1,555	156.3	%
Net loss before provision for income taxes														(983	)		(1.8	)%		(870	)		(1.9	)%		(113	)		(13.0	)%
Provision for income taxes		31	0.1	%		23	0.1	%		8	34.8	%		20			0.0	%		28			0.1	%		(8	)		(28.6	)%
Net income (loss)	$	529	1.0	%	$	(1,018)	(2.5)	%	$	1,547	152.0	%
Net loss													$	(1,003	)		(1.8	)%	$	(898	)		(1.9	)%	$	(105	)		(11.7	)%

Consolidated

Revenues increased by ~~$13,757,~~$8,476, primarily due to higher capacity utilization levels in the Heavy Fabrications segment as tower sections sold increased ~~59% from~~28% compared to the ~~second~~third quarter of ~~2019.~~2019 and a higher average sales price on the product mix sold. Industrial fabrication product line revenues within the Heavy Fabrication segment ~~increased~~decreased from the prior year quarter primarily due to ~~the continued traction of our diversification efforts and substantial backlog entering the second quarter of 2020. Industrial Solutions revenue was up $1,464~~decreased demand from ~~the first quarter of 2019, primarily due to activity levels associated with an increase in global new gas turbine content. Partially offsetting these improvements was a decrease in~~construction customers. Gearing segment revenue ~~of $2,344~~decreased by $864 from the prior year quarter due primarily to lower order intake in recent quarters primarily within the O&G and mining markets. ~~Gearing customers delayed almost $2,000~~Customer purchasing levels continue to be impacted by the level of oil prices and delaying capital purchases ~~into future periods~~ in response to the COVID-19 ~~pandemic~~pandemic. Industrial Solutions revenue was down $236 compared to the third quarter of 2019, primarily due to a delay of customer projects and ~~deteriorating oil prices.~~supply chain disruptions associated with the COVID-19 pandemic.

Gross profit ~~increased~~decreased by ~~$1,525~~$256 due primarily to ~~higher capacity utilization within our Heavy Fabrication segment. This benefit was partially offset by utilizing~~ the ~~PPP Loans proceeds to retain personnel and the impacts~~impact of decreased sales, a lower margin sales mix and increased manufacturing inefficiencies ~~associated with lower sales in~~within our Gearing segment. This decrease was partially offset by higher capacity utilization and an increase in average selling prices within our Heavy Fabrication segment. Gross margins were negatively impacted by a more complex tower product mix sold and new product introductions during the current year quarter. Additionally, supply chain constraints and other impacts associated with the COVID-19 pandemic led to higher manufacturing variances. As a result, gross margin ~~increased~~decreased to ~~9.9%~~6.8% during the three months ended ~~June~~September 30, 2020, from ~~9.5%~~8.7% during the three months ended ~~June~~September 30, ~~2019.~~2019.

Due to higher revenue levels, operating expenses as a percentage of sales improved to ~~8.0%~~7.7% in the current-year quarter from ~~10.0%~~9.2% in the prior year quarter.

Net ~~income~~loss increased to ~~$529~~$1,003 during the three months ended ~~June~~September 30, 2020 ~~from~~ compared a net loss of ~~$1,018~~$898 during the three months ended ~~June~~September 30, 2019 due to the factors described above and lower interest expense associated with reduced ~~debt levels.~~usage of our revolving credit line.

Heavy Fabrications Segment

Three Months Ended

June 30,

2020

2019

Orders

$
31,401

$
96,328

Tower sections sold

320

201

Revenues

43,614

28,970

Operating income

3,199

318

Operating margin

7.3
%

1.1
%

	Three Months Ended
	September 30,
	2020			2019
Orders	$	31,391		$	65,559
Tower sections sold		312			243
Revenues		43,440			33,834
Operating income		2,020			693
Operating margin		4.7	%		2.0	%

The decrease in Heavy Fabrications segment orders was primarily ~~due~~attributable to certain tower customers securing production capacity in the prior year in advance of historical lead times ~~in the prior year~~due to ~~account for~~ surging wind tower installation expectations in 2020. Industrial fabrication product line orders within the Heavy Fabrication segment decreased primarily due to weaker mining and construction demand as customers ~~deferred or~~ reduced inventory purchases in response to economic uncertainty stemming from the COVID-19 pandemic. Segment revenues increased by ~~$14,644~~$9,606 due to a ~~59%~~28% increase in tower sections sold and higher average selling prices on the product mix sold compared to the prior year quarter. Industrial fabrication revenues ~~increased~~decreased by 19% from the prior year quarter to ~~$3,120, a 111% increase,~~$4,143, primarily as a result of ~~our commercial diversification efforts~~decreased construction revenues and several large product deliveries scheduled to occur early in ~~recent quarters.~~the fourth quarter.

Table of Contents

Heavy Fabrications segment operating results improved by ~~$2,881~~$1,327 compared to the prior year. The quarter-over-quarter improvement reflected the higher capacity utilization associated with increased tower production and ~~industrial fabrications production.~~higher average selling prices on the product mix sold. Operating income was negatively impacted by a more complex product mix sold and new product introductions during the current-year quarter. Additionally, supply chain constraints and other impacts associated with the COVID-19 pandemic led to higher manufacturing variances. Operating margin was ~~7.3%~~4.7% during the three months ended ~~June~~September 30, 2020, an increase from ~~1.1%~~2.0% during the three months ended ~~June~~September 30, ~~2019.~~2019.

Gearing Segment

Three Months Ended

June 30,

2020

2019

Orders

$
3,731

$
5,572

Revenues

6,922

9,266

Operating (loss) income

(651)

913

Operating margin

(9.4)
%

9.9
%

	Three Months Ended
	September 30,
	2020			2019
Orders	$	3,225		$	5,877
Revenues		7,125			7,989
Operating (loss) income		(1,023	)		496
Operating margin		(14.4	)%		6.2	%

Gearing segment orders decreased ~~33%~~45% primarily due to reduced demand for O&G driven by ~~the negative effects~~reduced global demand for oil and gas caused by the COVID-19 ~~pandemic and oil price declines resulting from the Saudi-Russian conflict in early 2020.~~pandemic. Other markets within the Gearing segment, ~~also~~particularly mining, realized lower new order demand as customers delayed or reduced capital purchases as the COVID-19 pandemic led to economic uncertainty. Gearing revenue was down ~~25%~~11% driven primarily ~~due to~~by lower order intake in recent quarters, primarily in O&G and mining end markets partially offset by increased order intake in industrial markets. ~~Additionally, Gearing customers postponed almost $2,000 of scheduled purchases into future periods due to the prevailing market uncertainty in the O&G market.~~

Gearing segment operating results decreased ~~$1,564~~$1,519 from the prior year period. The decrease was primarily attributable to decreased plant utilization, a lower margin sales mix and manufacturing inefficiencies associated with the lower activity levels. Operating margin was ~~(9.4%~~(14.4%) during the three months ended ~~June~~September 30, 2020, down from ~~9.9%~~6.2% during the three months ended ~~June~~September 30, 2019, driven primarily by the items ~~listed~~identified above.

Industrial Solutions Segment

Three Months Ended

June 30,

2020

2019
Orders
$
4,426

$
2,712

Revenues

4,397

2,933

Operating income

217

28

Operating margin

4.9
%

1.0
%

	Three Months Ended
	September 30,
	2020			2019
Orders	$	4,939		$	5,081
Revenues		4,081			4,317
Operating income		87			141
Operating margin		2.1	%		3.3	%

Industrial Solutions segment orders ~~and revenues increased~~decreased by 3% from the prior year period primarily due to ~~stronger near-term demand~~lower orders for new gas turbine ~~content as global new gas turbine activity levels increased.~~content. Segment revenue declined by 5%, primarily due to customer project delays and supply chain delays associated with the COVID-19 pandemic. The decrease in operating income ~~improvement~~versus the prior-year quarter was primarily a result of the revenue ~~growth and general operating efficiencies. The operating margin improved to 4.9% during the three months ended June 30, 2020 from 1.0% during the three months ended June 30, 2019.~~decrease, partially offset by cost reductions.

Corporate and Other

Corporate and Other expenses ~~increased by $265~~ during the three months ended ~~June~~September 30, 2020 were in line with the expenses from the prior year ~~period primarily due to higher self-insured expenses in the current year quarter.~~period.

~~Six~~Nine months ended ~~June~~September 30, 2020, Compared to ~~Six~~Nine months ended ~~June~~September 30, 2019

The condensed consolidated statement of operations table below should be read in connection with a review of the following discussion of our results of operations for the ~~six~~nine months ended ~~June~~September 30, 2020, compared to the ~~six~~nine months ended ~~June~~September 30, ~~2019.~~2019.

Six Months Ended June 30,

2020 vs. 2019

% of Total

% of Total

2020

Revenue

2019

Revenue

$ Change

% Change

Revenues

$
103,560

100.0
%
$
82,829

100.0
%
$
20,731

25.0
%
Cost of sales

91,971

88.8
%

75,388

91.0
%

16,583

22.0
%
Restructuring

—

—
%

12

0.0
%

(12)

(100.0)
%
Gross profit

11,589

11.2
%

7,429

9.0
%

4,160

56.0
%
Operating expenses

Selling, general and administrative expenses

8,507

8.2
%

7,723

9.3
%

784

10.2
%

Table of Contents

Intangible amortization

367

0.4
%

406

0.5
%

(39)

(9.6)
%
Total operating expenses

8,874

8.6
%

8,129

9.8
%

745

9.2
%
Operating income (loss)

2,715

2.6
%

(700)

(0.8)
%

3,415

487.9
%
Other expense, net

Interest expense, net

(1,147)

(1.1)
%

(1,309)

(1.6)
%

162

12.4
%
Other, net

(3)

(0.0)
%

(17)

(0.0)
%

14

82.4
%
Total other expense, net

(1,150)

(1.1)
%

(1,326)

(1.6)
%

176

13.3
%
Net income (loss) before provision (benefit) for income taxes

1,565

1.5
%

(2,026)

(2.4)
%

3,591

177.2
%
Provision (benefit) for income taxes

83

0.1
%

34

0.0
%

49

144.1
%
Net income (loss) before provision (benefit) for income taxes

$
1,482

1.4
%
$
(2,060)

(2.5)
%
$
3,542

171.9
%

Consolidated

Revenues increased by ~~$20,731~~$29,207 from the prior year period, primarily due to higher production levels in the Heavy Fabrications segment as towers sections sold increased ~~62% from~~49% compared to the first ~~half~~nine months of 2019 and an increase in industrial fabrications revenue ~~increased~~ primarily as a result of our ongoing diversification efforts. ~~Partially offsetting this increase was a lower average sales price on towers sold primarily due to a higher level of customer supplied materials in the current year.~~ Gearing segment revenue decreased ~~$6,144~~$7,009 due primarily to lower order intake in recent quarters primarily within the O&G and mining markets driven by reduced global demand for oil and ~~as customers postponed approximately $2,400 of scheduled purchases into future periods due to~~gas and general market uncertainty caused by the COVID-19 ~~pandemic and oil price declines resulting from the Saudi-Russian conflict in early 2020.~~pandemic. Industrial Solutions revenue ~~was up $2,163~~increased by $1,927 from the first ~~half~~nine months of 2019, primarily due to stronger near-term demand for new gas turbine content.

Gross profit increased by ~~$4,160~~$3,904 primarily due to higher capacity utilization within our Heavy Fabrication segment. ~~This benefit was partially offset by utilizing~~Partially offsetting this were the negative impacts of a more complex tower product mix sold and new product introductions during the current year quarter. Additionally, supply chain constraints and other impacts associated with the COVID-19 pandemic led to higher manufacturing variances. Utilizing the PPP Loans proceeds to retain personnel, ~~the impacts of~~ decreased sales, a lower margin sales mix and increased manufacturing inefficiencies associated with lower sales in our Gearing ~~segment.~~segment all further impacted our gross margins negatively. As a result, gross margin increased to ~~11.2%~~9.7% during the ~~six~~nine months ended ~~June~~September 30, 2020, from ~~9.0%~~8.9% during the ~~six~~nine months ended ~~June~~September 30, ~~2019.~~2019.

Due to higher revenue levels, operating expenses as a percentage of sales ~~improved~~decreased to ~~8.6%~~8.3% compared to ~~9.8% in~~9.6% during the first ~~half~~nine months of the prior year.

~~Net~~

Profitability improved as we reported net income ~~increased to $1,482~~of $480 during the ~~six~~nine months ended ~~June~~September 30, 2020 ~~from~~ compared to a net loss of ~~$2,060~~$2,958 during the ~~six~~nine months ended ~~June~~September 30, 2019 due to the factors described above.

Heavy Fabrications Segment

Six Months Ended

June 30,

2020

2019

Orders

$
46,916

$
108,839

Tower sections sold

632

389

Revenues

81,983

57,264

Operating income

6,740

96

Operating margin

8.2
%

0.2
%

	Nine Months Ended
	September 30,
	2020			2019
Orders	$	78,306		$	174,398
Tower sections sold		944			632
Revenues		125,424			91,098
Operating income		8,760			789
Operating margin		7.0	%		0.9	%

Table of Contents

The decrease in Heavy Fabrications segment orders was primarily driven by certain tower customers securing production capacity in advance of historical lead times in the prior year due to surging wind tower installation expectations in 2020. Industrial fabrication orders ~~were up $1,543, an 18% improvement~~decreased by $5,018, a 29% reduction from the prior year period, primarily due to ~~ongoing diversification efforts into~~decreases in mining and ~~material handling markets.~~construction demand. Segment revenues increased by ~~$24,719~~$34,326 primarily due toto a ~~62%~~49% increase in tower sections sold compared to the prior year ~~period. This was partially offset by~~period and a ~~lower~~higher average ~~sales~~selling price on ~~towers sold due primarily to increased customer supplied materials in~~ the ~~current year.~~product mix sold.

Heavy Fabrications segment operating results improved by ~~$6,644~~$7,971 compared to the prior year period. The year-over-year improvement primarily reflected the higher segment capacity ~~utilization.~~utilization and a higher average selling price on the product mix sold. Operating results were negatively impacted by a more complex product mix sold and new product introductions during the current-year quarter. Additionally, supply chain constraints and other impacts associated with the COVID-19 pandemic led to higher manufacturing variances. Operating margin was ~~8.2%~~7.0% during the ~~six~~nine months ended ~~June~~September 30, 2020, an increase from ~~0.2%~~0.9% during the ~~six~~nine months ended ~~June~~September 30, ~~2019.~~2019.

Gearing Segment

Six Months Ended

June 30,

2020

2019

Orders

$
16,151

$
12,707

Revenues

13,149

19,293

Operating (loss) income

(912)

2,300

Operating margin

(6.9)
%

11.9
%

	Nine Months Ended
	September 30,
	2020			2019
Orders	$	19,376		$	18,584
Revenues		20,273			27,282
Operating (loss) income		(1,935	)		2,797
Operating margin		(9.5	)%		10.3	%

Gearing segment orders increased ~~27%~~4% compared to the prior year period primarily due to an increase in aftermarket wind gearing, steel and other industrial customer orders, partially offset by a decrease in O&G and mining demand. Revenue decreased ~~32%~~26% from the prior year period due primarily to lower order intake in ~~recent~~the past two quarters ~~within O&G and mining. In addition,~~ due to ~~declining~~low oil prices and general market uncertainty ~~customers delayed approximately $2,400 purchases into future periods.~~stemming from the COVID-19 pandemic.

Gearing segment operating results decreased ~~$3,212~~$4,732 from the prior year period. The decrease was primarily attributable to a decrease in sales across ~~most~~a majority of our core markets, a lower margin sales mix and manufacturing inefficiencies associated with lower activity levels. Operating margin was ~~(6.9%~~(9.5%) during the ~~six~~nine months ended ~~June~~September 30, 2020, down from ~~11.9%~~10.3% during the ~~six~~nine months ended ~~June~~September 30, ~~2019.~~2019.

Industrial Solutions Segment

Six Months Ended

June 30,

2020

2019

Orders

$
10,300

$
7,072

Revenues

8,435

6,272

Operating income (loss)

410

(256)

Operating margin

4.9
%

(4.1)
%

	Nine Months Ended
	September 30,
	2020			2019
Orders	$	15,240		$	12,153
Revenues		12,516			10,589
Operating income (loss)		496			(116	)
Operating margin		4.0	%		(1.1	)%

Industrial Solutions segment orders and revenues increased from the prior year period primarily due to stronger near-term demand for new gas turbine content. The operating income improvement of $612 was a result of the revenue growth and general operating efficiencies. The operating margin improved to ~~4.9%~~4.0% during the ~~six~~nine months ended ~~June~~September 30, 2020 from ~~(4.1%~~(1.1%) during the ~~six~~nine months ended ~~June~~September 30, ~~2019.~~2019.

Corporate and Other

Corporate and Other expenses increased by ~~$683~~$653 during the ~~six~~nine months ended ~~June~~September 30, 2020 primarily due to increased ~~salary and benefit related~~professional service expenses in the current ~~year quarter.~~year.

Table of Contents

LIQUIDITY, FINANCIAL POSITION AND CAPITAL RESOURCES

As of ~~June~~September 30, 2020, cash and cash equivalents totaled ~~$2,119 a decrease~~$2,541 an increase of ~~$297~~$125 from December 31, ~~2019.~~2019. Cash balances remain limited as operating receipts and disbursements flow through our Credit Facility (as defined in Note 7, “Debt and Credit Agreements,” in the notes to our condensed consolidated financial statements), which is in a drawn position. Debt and finance lease obligations at ~~June~~September 30, 2020 totaled ~~$25,347.~~$20,703. As of ~~June~~September 30, 2020, we had the ability to borrow up to an additional ~~$19,826 under~~ $19,214 under the Credit Facility. On July 31, 2018, we entered into an At Market Issuance Sales Agreement (the “ATM Agreement”) with Roth Capital Partners, LLC (the “Agent”). Pursuant to the terms of the ATM Agreement, we may sell from time to time through the Agent shares of the Company's common stock, par value $0.001 per share with an aggregate sales price of up to $10,000. The Company will pay a commission to the Agent of 3% of the gross proceeds of the sale of the shares sold under the ATM Agreement and reimburse the Agent for the expenses of their counsel. We did not issue any shares of our common stock under the ATM Agreement in 2019. During the quarter ended September 30, 2020, we reinstated the ATM agreement and issued 91,481 shares of the Company's common stock thereunder. The net proceeds (before upfront costs) to such shares were approximately $321 after deducting commissions paid of approximately $10. The ATM Agreement was terminated in accordance with its terms on October 12, 2020. 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, the Credit Facility, additional equipment financing, and access to the public or private debt equity markets, including the option to raise capital from the sale of our securities under the Form S-3. ~~The Form S-3 will expire~~

On October 29, 2020, we executed the First Amendment to the Amended and Restated Loan Agreement, implementing a payoff of a syndicated lender and a pricing grid based on ~~October 10, 2020.~~our 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 the Credit Facility to July 31, 2023.

In April 2020, the Company received funds under the U.S. Paycheck Protection Program. Refer to the discussion below under the heading “Sources and Uses of Cash - Other” for more information.

If assumptions regarding our production, sales and subsequent collections from certain of our large customers, as well as customer deposits and revenues generated from new customer orders, are materially inconsistent with management’s expectations, particularly in light of the COVID-19 pandemic and its effects on domestic and global economies, we may encounter cash flow and liquidity issues.

If our operational performance deteriorates, we may be unable to comply with existing financial covenants, and could lose access to the Credit Facility. This could limit our operational flexibility, require a delay in making planned investments and/or require us to seek additional equity or debt financing. Any attempt to raise equity through the public markets could have a negative effect on our stock price, making an equity raise more difficult or more dilutive. Any additional equity financing or equity linked financing, if available, will be dilutive to stockholders, and additional debt financing, if available, would likely require new financial covenants or impose other operating and financial restrictions on us. While we believe that we will continue to have sufficient cash available to operate our businesses and to meet our financial obligations and debt covenants, there can be no assurances that our operations will generate sufficient cash or that existing or new credit facilities or equity or equity linked financings will be available in an amount sufficient to enable us to meet these financial obligations.

Sources and Uses of Cash

The following table summarizes our cash flows from operating, investing, and financing activities for the ~~six~~nine months ended ~~June~~September 30, 2020 and ~~2019:~~2019:

	Nine Months Ended
	September 30,
	2020			2019
Total cash (used in) provided by:
Operating activities	$	(2,475	)	$	4,334
Investing activities		(1,597	)		(1,775	)
Financing activities		4,197			(3,721	)
Net increase (decrease) in cash	$	125		$	(1,162	)

Six Months Ended

June 30,

2020

2019
Total cash (used in) provided by:

Operating activities

$
(8,238)

$
(14,611)
Investing activities

(929)

(1,182)
Financing activities

8,870

14,690
Net decrease in cash

$
(297)

$
(1,103)

During the ~~six~~nine months ended ~~June~~September 30, 2020, net cash used in operating activities ~~totaled $8,238, compared~~totaled $2,475, compared to net cash ~~used in~~provided by operating activities of ~~$14,611~~$4,334 for the ~~six~~nine months ended ~~June~~September 30, ~~2019.~~2019. This ~~decrease~~increase in net cash used was primarily due to ~~improved operating performance and~~ a ~~lower working capital build~~reduction in customer deposits, which was driven by a surge in deposits in orders placed in the prior year, partially offset by a decrease in inventory levels in the current ~~year period, largely as a result of a lower inventory build.~~year.

During the ~~six~~nine months ended ~~June~~September 30, 2020, net cash used in investing activities ~~totaled $929, compared~~totaled $1,597, compared to net cash used in investing activities of ~~$1,182~~$1,775 during the ~~six~~nine months ended ~~June~~September 30, ~~2019.~~2019. The decrease in net cash used in investing activities as compared to the prior-year period was due to a decrease in net purchases of property and ~~equipment.~~equipment, as we deferred purchases to subsequent periods.

During the ~~six~~nine months ended ~~June~~September 30, 2020, net cash provided by financing activities ~~totaled $8,870, compared~~totaled $4,197, compared to net cash ~~provided by~~used in financing activities of ~~$14,690~~$3,721 for the ~~six~~nine months ended ~~June~~September 30, ~~2019.~~2019. The ~~decrease~~increase versus the prior-year period was primarily due to ~~lower usage of our Credit Facility~~PPP Loans proceeds received in the current year, partially offset by ~~PPP Loans proceeds received~~increased net repayments on our Credit Facility in the current year.

In 2016, we entered into a $570 loan agreement with the Development Corporation of Abilene which is included in the “Long-term debt, less current maturities” line item of our condensed consolidated financial statements as of ~~June~~September 30, 2020 and December 31, ~~2019.~~2019. The loan is forgivable upon the Company meeting and maintaining specific employment thresholds. During each of the years 2019 and 2018, $114 of the loan was forgiven. As of ~~June~~September 30, 2020, the loan balance was $342. In addition, we have outstanding notes payable for capital expenditures in the amount of ~~$946~~$531 and $1,563 as of ~~June~~September 30, 2020 and December 31, 2019, respectively, with ~~$940~~$527 and $1,400 included in the “Line of Credit and other notes payable” line item of our condensed consolidated financial statements as of ~~June~~September 30, 2020 and December 31, 2019, respectively. The notes payable have monthly payments that range from $1 to $36 and an interest rate of approximately 5%. The equipment purchased is utilized as collateral for the notes payable. The outstanding notes payable have maturity dates that range from February 2021 to August 2022.

		Page No.

PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements	1
	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statements of Operations	2
	Condensed Consolidated Statements of Stockholders’ Equity	3
	Condensed Consolidated Statements of Cash Flows	4
	Notes to Condensed Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1718
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	27
Item 4.	Controls and Procedures	27
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	28
Item 1A.	Risk Factors	28
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	29
Item 3.	Defaults Upon Senior Securities	29
Item 4.	Mine Safety Disclosures	29
Item 5.	Other Information	29
Item 6.	Exhibits	29
Signatures		31


	June 30,		December 31,
	2020		2019
					September 30,			December 31,
					2020			2019
Raw materials	$	24,001	$	22,759	$	15,547		$	22,759
Work-in-process		9,956		8,366		9,787			8,366
Finished goods		5,666		2,915		2,621			2,915
		39,623		34,040
						27,955			34,040
Less: Reserve for excess and obsolete inventory		(2,012)		(2,177)		(2,475	)		(2,177	)
Net inventories	$	37,611	$	31,863	$	25,480		$	31,863


	Finance		Operating
	Leases		Leases		Total
							Finance			Operating
							Leases			Leases			Total
2020	$	619	$	1,751	$	2,370	$	359		$	877		$	1,236
2021		1,250		3,387		4,637		1,424			3,387			4,811
2022		926		2,902		3,828		1,100			2,902			4,002
2023		309		2,884		3,193		451			2,883			3,334
2024		31		2,906		2,937		31			2,906			2,937
2025 and thereafter		4		20,118		20,122		4			20,119			20,123
Total lease payments		3,139		33,948		37,087		3,369			33,074			36,443
Less—portion representing interest		(338)		(12,435)		(12,773)		(339	)		(11,957	)		(12,296	)
Present value of lease obligations		2,801		21,513		24,314		3,030			21,117			24,147
Less—current portion of lease obligations		(1,032)		(1,582)		(2,614)		(1,174	)		(1,588	)		(2,762	)
Long-term portion of lease obligations	$	1,769	$	19,931	$	21,700	$	1,856		$	19,529		$	21,385

	Total Assets as of
	September 30,			December 31,
Segments:	2020			2019
Heavy Fabrications	$	43,256		$	41,432
Gearing		45,742			47,022
Industrial Solutions		10,563			8,893
Corporate		230,680			239,629
Eliminations		(204,185	)		(214,110	)
	$	126,056		$	122,866

	Common Stock				Treasury Stock						Additional
	Shares		Issued					Issued			Paid-in		Accumulated
	Issued		Amount		Shares			Amount			Capital		Deficit			Total
BALANCE, Balance at December 31, 2018		15,982,622	$	16		(273,937	)	$	(1,842	)	$	381,441	$	(336,253	)	$	43,362
Stock issued for restricted stock		141,384		—		—			—			—		—			—
Stock issued under defined contribution 401(k) retirement savings plan		135,636		—		—			—			187		—			187
Share-based compensation		—		—		—			—			255		—			255
Net loss		—		—		—			—			—		(1,042	)		(1,042	)
BALANCE, March 31, 2019		16,259,642	$	16		(273,937	)	$	(1,842	)	$	381,883	$	(337,295	)	$	42,762
Stock issued for restricted stock		53,740		—		—			—			—		—			—
Stock issued under defined contribution 401(k) retirement savings plan		123,727		—		—			—			205		—			205
Share-based compensation		—		—		—			—			255		—			255
Net loss		—		—		—			—			—		(1,018	)		(1,018	)
BALANCE, June 30, 2019		16,437,109	$	16		(273,937	)	$	(1,842	)	$	382,343	$	(338,313	)	$	42,204
Stock issued for restricted stock		19,436		—		—			—			—					—
Stock issued under defined contribution 401(k) retirement savings plan		169,944		—		—			—			277					277
Share-based compensation		—		—		—			—			255					255
Net loss		—		—		—			—			—		(898	)		(898	)
BALANCE, September 30, 2019		16,626,489	$	16		(273,937	)	$	(1,842	)	$	382,875	$	(339,211	)	$	41,838

BALANCE, December 31, 2019		16,830,930	$	17		(273,937	)	$	(1,842	)	$	383,361	$	(340,776	)	$	40,760
Stock issued for restricted stock		83,050		—		—			—			—		—			—
Share-based compensation		—		—		—			—			308		—			308
Net income		—		—		—			—			—		954			954
BALANCE, March 31, 2020		16,913,980	$	17		(273,937	)	$	(1,842	)	$	383,669	$	(339,822	)	$	42,022
Stock issued for restricted stock		199,636		—		—			—			—		—			—
Share-based compensation		—		—		—			—			248		—			248
Net income		—		—		—			—			—		529			529
BALANCE, June 30, 2020		17,113,616	$	17		(273,937	)	$	(1,842	)	$	383,917	$	(339,293	)	$	42,799
Stock issued for restricted stock		6,401		—		—			—			—		—			—
Share-based compensation		—		—		—			—			207		—			207
Sale of common stock, net		91,481		—		—			—			232		—			232
Net loss		—		—		—			—			—		(1,003	)		(1,003	)
BALANCE, September 30, 2020		17,211,498	$	17		(273,937	)	$	(1,842	)	$	384,356	$	(340,296	)	$	42,235


	Common Stock			Treasury Stock			Additional
	Shares	Issued			Issued		Paid-in		Accumulated
	Issued	Amount		Shares	Amount		Capital		Deficit		Total
BALANCE, December 31, 2018	15,982,622	$	16	(273,937)	$	(1,842)	$	381,441	$	(336,253)	$	43,362
Stock issued for restricted stock	141,384		—	—		—		—		—		—
Stock issued under defined contribution 401(k) retirement savings plan	135,636		—	—		—		187		—		187
Share-based compensation	—		—	—		—		255		—		255
Net loss	—		—	—		—		—		(1,042)		(1,042)
BALANCE, March 31, 2019	16,259,642	$	16	(273,937)	$	(1,842)	$	381,883	$	(337,295)	$	42,762
Stock issued for restricted stock	53,740		—	—		—		—		—		—
Stock issued under defined contribution 401(k) retirement savings plan	123,727		—	—		—		205		—		205
Share-based compensation	—		—	—		—		255		—		255
Net loss	—		—	—		—		—		(1,018)		(1,018)
BALANCE, June 30, 2019	16,437,109	$	16	(273,937)	$	(1,842)	$	382,343	$	(338,313)	$	42,204

BALANCE, December 31, 2019	16,830,930	$	17	(273,937)	$	(1,842)	$	383,361	$	(340,776)	$	40,760
Stock issued for restricted stock	83,050		—	—		—		—		—		—
Share-based compensation	—		—	—		—		308		—		308
Net income	—		—	—		—		—		954		954
BALANCE, March 31, 2020	16,913,980	$	17	(273,937)	$	(1,842)	$	383,669	$	(339,822)	$	42,022
Stock issued for restricted stock	199,636		—	—		—		—		—		—
Share-based compensation	—		—	—		—		248		—		248
Net income	—		—	—		—		—		529		529
BALANCE, June 30, 2020	17,113,616	$	17	(273,937)	$	(1,842)	$	383,917	$	(339,293)	$	42,799


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Basic earnings per share calculation:
Net income (loss)	$	529	$	(1,018)	$	1,482	$	(2,060)
Weighted average number of common shares outstanding		16,760,702		16,045,790		16,678,469		15,916,590
Basic net income (loss) per share	$	0.03	$	(0.06)	$	0.09	$	(0.13)
Diluted earnings per share calculation:
Net income (loss)	$	529	$	(1,018)	$	1,482	$	(2,060)
Weighted average number of common shares outstanding		16,760,702		16,045,790		16,678,469		15,916,590
Common stock equivalents:
Non-vested stock awards ⁽¹⁾		363,917		—		255,336		—
Weighted average number of common shares outstanding		17,124,619		16,045,790		16,933,805		15,916,590
Diluted net income (loss) per share	$	0.03	$	(0.06)	$	0.09	$	(0.13)


	June 30, 2020									December 31, 2019
									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	$	(97)	$	—	$	73	2.6	$	170	$	(83)	$	—	$	87	3.1
Customer relationships		15,979		(6,826)		(7,592)		1,561	5.4		15,979		(6,674)		(7,592)		1,713	5.8
Trade names		9,099		(6,180)		—		2,919	7.3		9,099		(5,980)		—		3,119	7.8
Intangible assets	$	25,248	$	(13,103)	$	(7,592)	$	4,553	6.0	$	25,248	$	(12,737)	$	(7,592)	$	4,919	6.5


	June 30, 2020
	Level 1		Level 2		Level 3		Total
									September 30, 2020
									Level 1		Level 2		Level 3		Total
Liabilities measured on a recurring basis:
Interest rate swap	$	—	$	209	$	—	$	209	$	—	$	177	$	—	$	177
Total liabilities at fair value	$	—	$	209	$	—	$	209	$	—	$	177	$	—	$	177



		Weighted Average
	Options	Exercise Price
Outstanding as of December 31, 2019	54,362	$	11.16
Forfeited	(54,362)	$	11.16
Outstanding as of June 30, 2020	—	$	—
Exercisable as of June 30, 2020	—	$	—


		Weighted Average
	Number of	Grant-Date Fair Value
	Shares	Per Share
Unvested as of December 31, 2019	1,356,915	$	2.39
Granted	507,513	$	1.63
Vested	(350,778)	$	2.43
Forfeited	(161,447)	$	4.39
Unvested as of June 30, 2020	1,352,203	$	1.90

Net effect of share-based compensation expense on net income	$	556	$	510
Reduction in earnings per share:
Basic earnings per share	$	0.03	$	0.03
Diluted earnings per share	$	0.03	$	0.03


	Total Assets as of
	June 30,		December 31,
Segments:	2020		2019
Heavy Fabrications	$	58,651	$	41,432
Gearing		46,307		47,022
Industrial Solutions		9,295		8,893
Corporate		236,137		239,629
Eliminations		(211,938)		(214,110)
	$	138,452	$	122,866	��


	For the Six Months Ended June 30,
	2020		2019
					For the Nine Months Ended September 30,
					2020			2019
Balance, beginning of period	$	163	$	226	$	163		$	226
Reduction of warranty reserve		(82)		(4)		(96	)		(11	)
Warranty claims		—		(19)		(6	)		(22	)
Other adjustments		(19)		11		(19	)		(10	)
Balance, end of period	$	62	$	214	$	42		$	183

Intangible amortization		367	0.4	%		406	0.5	%		(39)	(9.6)	%
Total operating expenses		8,874	8.6	%		8,129	9.8	%		745	9.2	%
Operating income (loss)		2,715	2.6	%		(700)	(0.8)	%		3,415	487.9	%
Other expense, net
Interest expense, net		(1,147)	(1.1)	%		(1,309)	(1.6)	%		162	12.4	%
Other, net		(3)	(0.0)	%		(17)	(0.0)	%		14	82.4	%
Total other expense, net		(1,150)	(1.1)	%		(1,326)	(1.6)	%		176	13.3	%
Net income (loss) before provision (benefit) for income taxes		1,565	1.5	%		(2,026)	(2.4)	%		3,591	177.2	%
Provision (benefit) for income taxes		83	0.1	%		34	0.0	%		49	144.1	%
Net income (loss) before provision (benefit) for income taxes	$	1,482	1.4	%	$	(2,060)	(2.5)	%	$	3,542	171.9	%


Exhibit Number	Exhibit
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	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-K filed May 6, 2020)
3.4	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)
~~10.1~~10.1†	~~Note dated April 5, 2020 by~~Form of Performance Award Agreement (Amended and ~~between Brad Foote Gear Works,~~Restated Broadwind, Inc. ~~and CIBC Bank~~2015 Equity Incentive Plan)* ~~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)~~
~~10.2~~10.2†	~~Note dated April 5, 2020 by~~First Amendment to Amended 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)~~
~~10.3~~	~~Note dated April 5, 2020 by and between Broadwind Industrial Services, 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)~~
~~10.4~~	~~Note dated April 8, 2020 by and between~~Restated Broadwind Energy, Inc. ~~n/k/a~~2015 Equity Incentive Plan*
10.3	First 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. ~~and~~ , Broadwind Industrial Solutions, LLC, CIBC Bank USA, ~~(incorporated by reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10~~‑Qas Administrative Agent for ~~the quarterly period ended March 31, 2020)~~itself and all Lenders and Siena Lending Group
~~31.1~~	Rule 13a-14(a) Certification of Chief Executive Officer*
31.2	Rule 13a-14(a) Certification of Chief Financial Officer*
32.1	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, of Chief Executive Officer*
32.2	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, of Chief Financial Officer*
101	The following financial information from this Form 10-Q of Broadwind, Inc. for the quarter ended ~~June~~September 30, 2020, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Operations, (iii) Condensed Consolidated Statements of Stockholders’ Equity, (iv) Condensed Consolidated Statements of Cash Flows, and (v) Notes to the Condensed Consolidated Financial Statements, tagged as blocks of text.

†	Indicates management contract or compensation plan or arrangement.
*	Filed herewith.

	BROADWIND, INC.


~~August 5,~~November 4, 2020	By:	/s/ Eric B. Blashford
		Eric B. Blashford
		President, Chief Executive Officer
		(Principal Executive Officer)
~~August 5,~~November 4, 2020	By:	/s/ Jason L. Bonfigt
		Jason L. Bonfigt
		Vice President, Chief Financial Officer (Principal Financial Officer)