Broadwind(BWEN) - 2021 Q4 - Annual Report

PART I Cautionary Note Regarding Forward-Looking Statements This section provides a standard disclaimer about forward-looking statements, highlighting various risks and uncertainties that could cause actual results to differ from expectations - Forward-looking statements are subject to various risks and uncertainties, many of which are amplified by the COVID-19 pandemic, including impacts on demand, regulatory frameworks, customer relationships, and supply chains[8] ITEM 1. BUSINESS Broadwind, Inc. is a precision manufacturer specializing in structures, equipment, and components for clean tech and specialized applications, primarily serving energy, mining, and infrastructure sectors in the U.S - Broadwind is a precision manufacturer for clean tech and specialized applications in energy, mining, and infrastructure sectors, primarily in the U.S[11][265] - The company rebranded to Broadwind, Inc. in 2020, reflecting diversification efforts and renaming segments (Towers and Heavy Fabrications to Heavy Fabrications, Process Systems to Industrial Solutions)[12] - Strategic objectives include diversifying customer and product line concentrations, improving capacity utilization, pursuing opportunistic acquisitions and organic investments, and streamlining front-end processes[18][20][21][22] Business Overview Broadwind, Inc. is a Delaware corporation headquartered in Cicero, Illinois, providing high-value products to complex systems and stringent quality standards in key sectors - Broadwind, Inc. is a Delaware corporation headquartered in Cicero, Illinois, and its wholly-owned subsidiaries[10] - The company provides technologically advanced high-value products to customers with complex systems and stringent quality standards in energy, mining, and infrastructure sectors, primarily in the U.S[11] Heavy Fabrications This segment provides large, complex, and precision fabrications, primarily for the U.S. wind energy industry, and has diversified into other industrial markets - Provides large, complex, and precision fabrications, with a significant presence in the U.S. wind energy industry (steel towers, repowering adapters)[13][266] - Diversified into aftermarket and OEM components for surface and underground mining, construction, material handling, oil and gas (O&G), and other infrastructure markets[13][266] - Combined annual tower production capacity of up to approximately 550 towers (1650 tower sections), sufficient to support turbines generating more than 1,100 MW of power[13][266] Gearing This segment supplies gearing and gearboxes to diverse markets, including oil and gas, mining, wind energy, and steel, offering both aftermarket and OEM solutions - Supplies gearing and gearboxes to diverse markets including onshore and offshore O&G fracking and drilling, surface and underground mining, wind energy, steel, and material handling[14][268] - Offers loose gearing, gearboxes, systems, and heat treat services for aftermarket and OEM applications, leveraging design and metallurgical engineers[14][268] Industrial Solutions This segment provides supply chain solutions, light fabrication, inventory management, kitting, and assembly services, primarily for natural gas and solar power markets - Provides supply chain solutions, light fabrication, inventory management, kitting, and assembly services, primarily for the combined cycle natural gas turbine market[15][269] - Recently expanded market reach into the solar power generation market[15] Key Markets Served and Product Offerings by Segment This section outlines the primary markets and product categories for each of Broadwind's operating segments, including Heavy Fabrications, Gearing, and Industrial Solutions | Segment | Key Markets Served | Products | | :--- | :--- | :--- | | Heavy Fabrications | -Wind Power Generation
-Surface and Underground Mining
-Construction
-Material Handling
-Oil and Gas
-Infrastructure | -Wind Towers
-Industrial Fabrications
-Mining Components
-Crane Components
-Pressure Vessels
-Other Frames/Structures
-Pressure Reducing Systems | | Gearing | -Onshore & Offshore Oil and Gas Fracking/Drilling
-Surface and Underground Mining
-Wind Power Generation
-Steel Production
-Pulp and Paper
-Waste Processing
-Material Handling
-Infrastructure | -Custom Gearboxes
-Loose Gearing
-Heat Treat Services
-Gearbox Repair | | Industrial Solutions | -Combined Cycle Natural Gas Power Generation
-Solar Power Generation
-Wind Power Generation | -Supply Chain Solutions
-Inventory Management
-Kitting and Assembly | Business and Operating Strategy The company's strategy focuses on diversifying customer and product lines, improving capacity utilization, pursuing acquisitions, and enhancing operational efficiency - Strategic objectives include diversifying customer and product line concentrations, improving capacity utilization, pursuing opportunistic acquisitions and organic investments, and streamlining front-end processes for operational efficiency[18][20][21][22] - Sales from top five customers decreased from 91% of total sales in 2016 to 71% in 2021, and sales into the wind energy industry decreased from 92% to 61% in the same period, indicating progress in diversification[18] - The company holds over $277 million in net operating losses (NOLs) as of December 31, 2021, which can be used to cover future tax liabilities[21][368] SALES AND MARKETING The company employs a direct sales force and independent agents, focusing on long-term customer relationships and expanding across business units - Utilizes a direct sales force supplemented by independent sales agents in certain markets[23] - Strategy focuses on developing and maintaining long-term relationships with existing customers and expanding these relationships across business units[23] CUSTOMERS Broadwind's customer base is concentrated, with Siemens Gamesa and GE Renewable Energy each representing over 10% of consolidated revenues in 2021 - Customer base is concentrated; in 2021, Siemens Gamesa Renewable Energy (SGRE) and GE Renewable Energy each represented greater than 10% of consolidated revenues[25] - The loss of one of these significant customers could have a material adverse effect on the business, leading to an ongoing initiative to diversify the customer base[25] COMPETITION The company faces intense competition from domestic and international players across all segments, with antidumping duties imposed on wind tower imports to mitigate foreign competition - Faces competition from both domestic and international companies across all business segments[26] - In the wind tower market, key competitors include Arcosa Inc., Vestas Wind Systems, Marmen Industries, and GRI Renewable Industries, alongside imported towers[27] - Antidumping and countervailing duties have been imposed on wind tower imports from various countries (China, Vietnam, Canada, Indonesia, Korea, India, Malaysia, and Spain) to reduce foreign competition[28][120] REGULATION The company's operations are influenced by federal tax incentives for wind and offshore wind energy, the Infrastructure Investment and Jobs Act, and various environmental and safety regulations - The Production Tax Credit (PTC) for wind energy projects was extended for projects commencing by the end of 2021 (60% credit), subsidizing projects completed by 2025 or later[34][115] - A new 30% Investment Tax Credit (ITC) was created for offshore wind projects starting construction by the end of 2025, retroactively applied to projects from 2016[35][115] - The federal Infrastructure Investment and Jobs Act (IIJA) provides $62 billion for clean energy resources, but the timing of its impact on the company is uncertain[36] - Operations are subject to U.S. Occupational Safety and Health Administration (OSHA) and numerous federal, state, and local environmental laws and regulations[38][40] BACKLOG Broadwind's backlog increased by 15% to $106,383 thousand at the end of 2021, primarily driven by increased orders in the Gearing and industrial fabrication product lines | Date | Backlog (in thousands) | Change YoY | | :--- | :--- | :--- | | Dec 31, 2021 | $106,383 | +15% | | Dec 31, 2020 | $92,854 | - | - The increase in backlog was primarily due to increased orders in the Gearing and industrial fabrication product lines[41][145] SEASONALITY The majority of the company's business is not significantly affected by seasonality, ensuring relatively stable operations throughout the year - The majority of the company's business is not affected by seasonality[46] RAW MATERIALS The primary raw material is steel, with costs generally passed through to customers, though global supply chain issues have led to shortages and delays - Primary raw material is steel (plate, bar stock, forgings, castings); raw material costs are generally passed through to end customers plus a conversion margin[43] - Global supply chain issues, partly due to the COVID-19 pandemic, have led to shortages of specific steel grades, internal packages, and delays from foreign sources[49] EMPLOYEES As of December 31, 2021, Broadwind had 493 employees, with approximately 18% covered by collective bargaining agreements, including a new four-year agreement for Cicero | Segment | Employees (as of Dec 31, 2021) | | :--- | :--- | | Heavy Fabrications | 317 | | Gearing | 131 | | Industrial Solutions | 33 | | Corporate | 12 | | Total | 493 | - Approximately 18% of employees were covered by collective bargaining agreements as of December 31, 2021, with a new four-year agreement for Cicero, Illinois, through February 2026 and renegotiations for Neville Island, Pennsylvania, expected in late 2022[42][72][357] QUALITY CONTROL The company maintains a strong focus on quality control processes and inspections throughout production, with all core operating facilities ISO 9001:2015 certified - Maintains a long-standing focus on processes for ensuring high-quality products, with strict and extensive quality control and inspections throughout production[50] - All core operating facilities are ISO 9001:2015 certified[50] INFORMATION SYSTEMS Broadwind utilizes standardized and integrated information technology systems across all operations, including ERP, MRP, capacity planning, and financial controls - Utilizes standardized information technology systems across all areas, including quoting, enterprise resource planning (ERP), materials resource planning (MRP), capacity planning, and financial controls[51] - Operational information systems are integrated with ERP to deliver relevant and real-time operational data[51] WORKING CAPITAL Operating working capital significantly increased from $5,062 thousand in 2020 to $18,635 thousand in 2021, primarily due to higher inventory levels and customer deposit timing - Operating working capital (OWC) increased from $5,062 thousand (3% of trailing three months of sales annualized) at December 31, 2020, to $18,635 thousand (18% of trailing three months of sales annualized) at December 31, 2021[53][156] - The increase in OWC was primarily driven by higher inventory levels due to supply chain challenges and the timing and level of customer deposits[53] CORPORATE INFORMATION Broadwind's principal executive office is located in Cicero, Illinois, and its official website is www.bwen.com - The principal executive office is located at 3240 South Central Avenue, Cicero, IL 60804, and the website is www.bwen.com[55](index=55&type=chunk) OTHER INFORMATION Annual, Quarterly, and Current Reports, along with amendments, are available free of charge on the company's and the SEC's websites - Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments are available free of charge on the company's website (www.bwen.com) and the SEC's website (www.sec.gov)[56](index=56&type=chunk) ITEM 1A. RISK FACTORS This section outlines significant risks across various aspects of Broadwind's business, including market volatility, customer concentration, operational challenges, financial limitations, and regulatory compliance - The company's financial and operating performance is highly dependent on the state of the North American wind energy market and general economic conditions[57][58] - High customer concentration (71% of 2021 revenues from top five customers) makes the company vulnerable to changes in customer needs or relationships[64] - Diversification efforts into natural gas turbine, O&G, and mining industries may not be successful, especially if growth rates are insufficient to compensate for a potentially weaker wind energy market[87][89][90] - The company has experienced operating losses since inception, except for 2016 and 2021, with no assurance of sustained future profitability[96][97] - Limitations on the utilization of Net Operating Losses (NOLs) due to Section 382 ownership changes could negatively affect financial results by accelerating tax liabilities[103][373] RISKS RELATED TO OUR INDUSTRIES Broadwind's performance is subject to external factors like the North American wind energy market, economic conditions, and increased competition from new or existing players - Financial and operating performance is subject to factors out of the company's control, including the state of the wind energy market in North America and general economic conditions[57][58] - Consolidation among wind turbine manufacturers could increase customer concentration and disrupt supply chain relationships, leading to pricing pressures[59][60] - The company faces competition from new or existing industry participants who may have greater resources and better access to capital[61] OPERATIONAL RISKS Operational risks include substantial dependency on key customers, policy changes, supply chain disruptions, labor issues, COVID-19 impacts, and cybersecurity incidents - Substantial dependency on a few significant customers; in 2021, the five largest customers accounted for 71% of consolidated revenues[63][64] - Changes in U.S. federal government policies and laws, as well as changes in relationships with significant customers, pose significant risks[66][67][68] - Disruptions in the supply of parts and raw materials (especially steel), price fluctuations, reliance on unionized labor, and challenges in hiring qualified personnel may negatively impact operating results[70][71][72][74] - The COVID-19 pandemic has caused adverse impacts, including declining order activity, manufacturing inefficiencies due to supply chain disruptions, and employee staffing constraints[82][83][84] - Cybersecurity incidents could disrupt business operations and result in the compromise of confidential information[85] RISKS RELATED TO OUR CORPORATE STRATEGY Strategic risks involve the potential failure of diversification efforts, inaccurate market demand projections leading to underutilization, and challenges associated with growth through acquisitions - Plans for growth and diversification into natural gas turbine, O&G, and mining industries may not be successful, especially if market penetration is insufficient to offset a weaker wind energy market[87][89][90] - Inaccurate projections regarding future market demand for products could lead to underutilization of capital-intensive manufacturing capacity, high fixed costs, and reduced profitability[92][93][94] - Growth efforts through acquisitions carry risks such as difficulties in integration, diversion of management attention, potential loss of key employees and customers, and failure to realize expected synergies[95] FINANCIAL RISKS Financial risks include historical net losses, potential repayment of PPP Loans, and limitations on utilizing Net Operating Losses (NOLs) due to ownership changes - The company has substantially generated net losses since its inception, with profitability only in 2016 and 2021, and there is no assurance of sustained future profitability[96][97] - PPP Loans were forgiven, but the company may still be subject to audit, and any adverse findings could result in repayment and restrict operational flexibility[98][101] - Limitations on the ability to utilize Net Operating Losses (NOLs) due to Section 382 ownership changes could negatively affect financial results by accelerating tax liabilities[103][373] RISKS RELATED TO OWNING OUR COMMON STOCK The company's common stock has a limited trading market and is subject to significant price volatility, as evidenced by its 2021 high and low prices - There is a limited trading market for the company's securities, and the market price is subject to significant volatility (e.g., $11.55 high to $1.88 low in 2021)[102] INTELLECTUAL PROPERTY RISKS Risks include failure to protect customer and company intellectual property, potential infringement claims, and the inability to maintain the proprietary nature of its technology - Failure to protect customers' intellectual property used in manufactured products could harm customer relationships and subject the company to liability[104][105] - The company's ability to compete effectively depends on protecting its proprietary system level technologies, systems designs, and manufacturing processes[107] - Risks include competitors independently developing or patenting superior technologies, potential infringement claims, and the inability to maintain the proprietary nature of its technology[108][111] LEGAL, TAX, REGULATORY AND COMPLIANCE RISKS This section covers risks from changes in federal tax incentives, trade regulations, environmental laws, and the need to comply with evolving ESG standards - The U.S. wind energy industry is significantly impacted by federal tax incentives (PTC, ITC) and state Renewable Portfolio Standards (RPSs); changes to these incentives could materially impact demand and growth[112][113][116] - Changes to trade regulation, quotas, duties, or tariffs (e.g., steel tariffs, antidumping duties on wind towers) may impact the company's competitive position or adversely affect margins[117][118][120] - The company could incur substantial costs to comply with environmental, health, and safety (EHS) laws and regulations, or to address violations and liabilities, including for historical contamination[122][123][124] - Compliance with regulatory requirements and potential environmental, social, and governance (ESG) regulations and trends is critical, with non-compliance potentially leading to sanctions or reputational damage[125][126][127] ITEM 1B. UNRESOLVED STAFF COMMENTS This section confirms that there are no unresolved staff comments regarding the company's financial disclosures or other filings - There are no unresolved staff comments[128] ITEM 2. PROPERTIES Broadwind's corporate headquarters is in Cicero, Illinois, with several owned or leased manufacturing facilities across its segments, all deemed adequate for current and future needs | Operating Segment and Facility Type | Location | Owned / Leased | Approximate Square Footage | | :--- | :--- | :--- | :--- | | Heavy Fabrications (Tower Manufacturing) | Manitowoc, WI | Leased | 213,000 | | Heavy Fabrications (Tower Manufacturing) | Abilene, TX | Owned | 175,000 | | Heavy Fabrications (Industrial Fabrications Manufacturing) | Manitowoc, WI | Leased | 103,000 | | Gearing and Corporate (Gearing System Manufacturing—Machining and Corporate Administration) | Cicero, IL | Leased | 301,000 | | Gearing and Corporate (Gearing System Manufacturing—Heat Treatment and Gearbox Repair) | Neville Island, PA | Owned | 52,000 | | Industrial Solutions (Industrial Solutions Manufacturing) | Sanford, NC | Leased | 105,000 | - The company considers its active facilities to be in good condition and adequate for its present and future needs[132] ITEM 3. LEGAL PROCEEDINGS Broadwind is involved in various legal proceedings in the ordinary course of business, with management believing outcomes will not materially affect financial results, despite inherent litigation uncertainty - The company is party to a variety of legal proceedings that arise in the ordinary course of business[133][348] - Management believes the final outcome of these proceedings will not have a material adverse effect on results of operations, financial condition, or cash flows, but acknowledges the inherent uncertainty of litigation[133][348] ITEM 4. MINE SAFETY DISCLOSURES This section confirms that the disclosure requirements for mine safety are not applicable to Broadwind, Inc. due to the nature of its operations - This item is not applicable[134] PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Broadwind's common stock trades on NASDAQ under 'BWEN' with significant 2021 volatility; the company has never paid dividends and plans to reinvest cash for growth - Common stock trades on the NASDAQ Capital Market under 'BWEN' and experienced significant volatility in 2021, with a high of $11.55 and a low of $1.88[137][138][102] - The company has never paid cash dividends and plans to reinvest cash generated from operations to promote future growth and fund potential investments[139] - No repurchases of equity securities or unregistered sales of equity securities were made during the years ended December 31, 2021 and 2020[140][141] Common Stock Market Information Broadwind's common stock experienced significant price volatility in 2021, with a high of $11.55 and a low of $1.88, and had 43 holders of record as of February 2022 | Period | High | Low | | :--- | :--- | :--- | | 2021 | | | | First quarter | $11.55 | $4.84 | | Second quarter | $6.41 | $3.97 | | Third quarter | $4.55 | $2.46 | | Fourth quarter | $3.51 | $1.88 | | 2020 | | | | First quarter | $2.35 | $1.19 | | Second quarter | $4.00 | $1.31 | | Third quarter | $5.68 | $2.77 | | Fourth quarter | $8.75 | $2.73 | - The closing price for common stock as of February 22, 2022, was $1.76, with 43 holders of record[138] Dividends The company has never paid cash dividends on its common stock and plans to reinvest all generated cash to promote future growth and fund potential investments - The company has never paid cash dividends on its common stock and has no current plan to do so in the foreseeable future[139] - The current policy is to reinvest cash generated in operations to promote future growth and fund potential investments[139] Repurchases There were no repurchases of equity securities made by the company during the years ended December 31, 2021 and 2020 - There were no repurchases of equity securities made during the years ended December 31, 2021 and 2020[140] Unregistered Sales of Equity Securities The company did not engage in any unregistered sales of equity securities during the years ended December 31, 2021 or 2020 - There were no unregistered sales of equity securities for the years ended December 31, 2021 or 2020[141] Securities Authorized for Issuance Under Equity Compensation Plans Information regarding shares issuable under existing share-based compensation plans is incorporated by reference from Part III, Item 12 of this report - Information regarding shares of common stock that may be issued under existing share-based compensation plans is incorporated by reference from Part III, Item 12[142] ITEM 6. [RESERVED] This item is reserved and contains no information, indicating that there are no disclosures required under this section - This item is reserved[144] ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Broadwind's 2021 financial performance improved net income due to PPP loan forgiveness and ERC benefits, despite a 27% revenue decrease from lower wind tower sales | Metric | 2021 (in thousands) | 2020 (in thousands) | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Net New Orders | $159,025 | $148,882 | $10,143 | +6.8% | | Total Backlog (Dec 31) | $106,383 | $92,854 | $13,529 | +14.6% | | Revenue | $145,619 | $198,496 | $(52,877) | -26.6% | | Net Income (Loss) | $2,847 | $(1,487) | $4,334 | +291.5% | | EPS (Basic) | $0.15 | $(0.09) | $0.24 | +266.7% | - Net income improvement in 2021 was primarily due to $9,151 thousand from PPP loan forgiveness and $6,965 thousand from Employee Retention Credit (ERC) benefits[147][148][170] - The COVID-19 pandemic adversely impacted business through declining order activity, manufacturing inefficiencies due to supply chain disruptions, and employee staffing constraints[151][152] Overview In 2021, net new orders increased, driven by Gearing and industrial fabrications, while revenue decreased 27% due to lower wind tower sales, yet net income improved significantly - Net new orders increased to $159,025 thousand in 2021 from $148,882 thousand in 2020, driven by an 83% increase in Gearing segment orders and a 72% increase in industrial fabrication orders, partially offset by a 27% decrease in wind tower orders[145] - Revenue decreased 27% to $145,619 thousand in 2021 from $198,496 thousand in 2020, primarily due to a 35% decrease in tower sections sold[146] - Reported net income of $2,847 thousand ($0.15 per share) in 2021, compared to a net loss of $1,487 thousand ($0.09 per share) in 2020, largely due to PPP loan forgiveness ($9,151 thousand) and ERC benefits ($6,965 thousand)[147][148] COVID-19 Pandemic Impact The COVID-19 pandemic adversely impacted operations through declining orders, manufacturing inefficiencies, and staffing constraints, leading to workforce adjustments and capital expenditure delays - Experienced adverse impacts from the COVID-19 pandemic, including a decline in order activity, manufacturing inefficiencies due to supply chain disruptions, and employee staffing constraints[151][152] - In response, the company right-sized its workforce and delayed certain capital expenditures[152] - Future impacts remain uncertain, with potential for weaker customer demand, extended payment terms, customer bankruptcies, and additional supply chain disruptions[152] KEY METRICS USED BY MANAGEMENT TO MEASURE PERFORMANCE Management utilizes non-GAAP adjusted EBITDA and free cash flow to evaluate growth trends, operational efficiencies, and liquidity, with Adjusted EBITDA increasing in 2021 while Free Cash Flow decreased - Management uses non-GAAP adjusted EBITDA and free cash flow to evaluate growth trends, assess operational efficiencies, and oversee liquidity[154] | Metric | 2021 (in thousands) | 2020 (in thousands) | | :--- | :--- | :--- | | Net revenues | $145,619 | $198,496 | | Net income (loss) | $2,847 | $(1,487) | | Adjusted EBITDA | $13,209 | $7,985 | | Capital expenditures | $1,707 | $1,547 | | Free cash flow | $(2,038) | $6,956 | | Operating working capital | $18,635 | $5,062 | | Total debt | $6,827 | $10,787 | | Total orders | $159,025 | $148,882 | | Backlog at end of period | $106,383 | $92,854 | | Book-to-bill | 1.1 | 0.8 | - Adjusted EBITDA increased to $13,209 thousand in 2021 from $7,985 thousand in 2020, while Free Cash Flow decreased to $(2,038) thousand in 2021 from $6,956 thousand in 2020[156][164] RESULTS OF OPERATIONS This section details the consolidated and segment-specific financial performance, highlighting revenue, gross profit, and operating income changes for Heavy Fabrications, Gearing, and Industrial Solutions Consolidated Results Consolidated revenues decreased by $52,877 thousand (26.6%) in 2021, primarily due to lower wind tower sales, leading to a significant decline in gross profit and operating income | Metric | 2021 (in thousands) | 2020 (in thousands) | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Revenues | $145,619 | $198,496 | $(52,877) | (26.6)% | | Cost of sales | $140,108 | $180,495 | $(40,387) | (22.4)% | | Gross profit | $5,511 | $18,001 | $(12,490) | (69.4)% | | Gross margin | 3.8% | 9.1% | -5.3% | - | | Operating expenses | $18,105 | $17,579 | $526 | 3.0% | | Operating (loss) income | $(12,594) | $422 | $(13,016) | (3084.4)% | | Net income (loss) | $2,847 | $(1,487) | $4,334 | 291.5% | - Revenues decreased by $52,877 thousand (26.6%) in 2021, primarily due to a 35% decrease in tower sections sold[167] - Gross profit decreased by $12,490 thousand (69.4%), with gross margin falling from 9.1% in 2020 to 3.8% in 2021, reflecting lower sales volumes, manufacturing inefficiencies, and a temporary plant shutdown[168] Heavy Fabrications Segment The Heavy Fabrications segment experienced a 34% revenue decrease and an operating loss in 2021, primarily due to delayed wind tower orders, plant underutilization, and manufacturing inefficiencies | Metric | 2021 (in thousands) | 2020 (in thousands) | Change (%) | | :--- | :--- | :--- | :--- | | Orders | $93,246 | $105,843 | (12)% | | Tower sections sold | 747 | 1,150 | (35)% | | Revenues | $101,994 | $155,198 | (34)% | | Operating (loss) income | $(3,214) | $10,385 | (131)% | | Operating margin | (3.2)% | 6.7% | -9.9% | - Orders decreased 12% due to delayed wind tower orders, partially offset by a 72% increase in industrial fabrication product line orders[171] - Operating results decreased by $13,599 thousand, reflecting adverse volume impacts, plant underutilization, manufacturing inefficiencies, and a temporary plant shutdown[172] Gearing Segment The Gearing segment saw an 83% increase in orders and a 14% revenue increase in 2021, driven by demand from O&G and mining customers, leading to a narrowed operating loss | Metric | 2021 (in thousands) | 2020 (in thousands) | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Orders | $46,081 | $25,117 | $20,964 | 83% | | Revenues | $28,583 | $25,136 | $3,447 | 14% | | Operating loss | $(2,593) | $(3,883) | $1,290 | (33.2)% | | Operating margin | (9.1)% | (15.4)% | +6.3% | - | - Orders increased 83% and revenues increased 14%, primarily driven by increased demand from O&G and mining customers[173] - Operating loss narrowed by $1,290 thousand due to increased sales volume and improved manufacturing efficiencies[175] Industrial Solutions Segment The Industrial Solutions segment experienced a 10% increase in orders but a 16% revenue decrease in 2021, resulting in an operating loss due to lower revenue and a less favorable sales mix | Metric | 2021 (in thousands) | 2020 (in thousands) | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Orders | $19,698 | $17,922 | $1,776 | 10% | | Revenues | $15,402 | $18,299 | $(2,897) | (16)% | | Operating (loss) income | $(386) | $881 | $(1,267) | (143.8)% | | Operating margin | (2.5)% | 4.8% | -7.3% | - | - Orders increased 10% primarily due to new gas turbine projects, but revenue decreased 16% due to timing of installations and supply chain constraints[177] - Operating income declined to a loss of $(386) thousand from a profit of $881 thousand, with operating margin falling to (2.5%) from 4.8%, due to lower revenue and a lower margin sales mix[177] Corporate and Other Corporate and Other expenses decreased by $552 thousand in 2021, primarily due to reduced incentive compensation and marketing expenses - Corporate and Other expenses decreased by $552 thousand during 2021, primarily attributable to reduced incentive compensation and marketing expenses[178] SUMMARY OF CRITICAL ACCOUNTING POLICIES AND ESTIMATES This section highlights management's significant estimates and assumptions in financial reporting, including inventory, warranty, long-lived assets, doubtful accounts, and deferred tax valuation allowances - The preparation of financial statements requires management to make significant estimates and assumptions, including inventory reserves, warranty reserves, impairment of long-lived assets, allowance for doubtful accounts, and valuation allowances on deferred taxes[179][279] Revenue Recognition Revenue is recognized when control of goods or services transfers to customers, including bill-and-hold arrangements, and over time for certain products with no alternative use and enforceable payment rights - Revenue is recognized when control of promised goods or services is transferred to customers, including under bill-and-hold sales arrangements for wind towers when specific criteria are met[182][183][282][283] - Revenue is also recognized over time for certain Gearing and Heavy Fabrications products that have no alternative use and an enforceable right to payment, using labor hours as the input measure of progress[184][284] Warranty Liability Warranty terms typically range from one to five years, with accruals estimated based on historical costs, current trends, product mix, and sales, considering recourse provisions - Warranty terms generally range from one to five years for various products and services[185][300] - The warranty accrual is estimated based on factors such as historical warranty costs, current trends, product mix, and sales, with recourse provisions in certain contracts[185][300] Inventories Inventories, comprising raw materials, work-in-process, and finished goods, are valued at the lower of cost or net realizable value, with cost determined by FIFO or standard cost approximating FIFO - Inventories consist of raw materials, work-in-process, and finished goods, stated at the lower of cost or net realizable value[186][187][292][293] - Cost is determined using either the first-in, first-out (FIFO) method or a standard cost basis that approximates FIFO[187][292] Long-Lived Assets Long-lived assets are reviewed for impairment when circumstances indicate potential non-recoverability; despite triggering events in 2021, no impairment was recorded as future cash flows exceeded carrying values - Property and equipment and other long-lived assets are reviewed for impairment whenever events or circumstances indicate that their carrying amounts may not be recoverable[189][296] - Despite identified triggering events (operating losses in Gearing, revenue/margin decline in Heavy Fabrications) in November 2021, no impairment was recorded as undiscounted future cash flows exceeded carrying values[189][247][318] Income Taxes Income taxes are accounted for using an asset and liability approach, recognizing deferred tax assets and liabilities for temporary differences and carryforwards, with a valuation allowance applied when realization is uncertain - Income taxes are accounted for based on an asset and liability approach, recognizing deferred tax assets and liabilities for temporary differences and operating loss/tax credit carryforwards[190][301] - Deferred tax assets are reduced by a valuation allowance when it is more likely than not that some portion or all will not be realized[190][301] LIQUIDITY, FINANCIAL POSITION AND CAPITAL RESOURCES Broadwind's liquidity is supported by its credit facility, cash, and capital market access, with PPP loan forgiveness and ERC benefits significantly impacting 2021 financial position | Metric | 2021 (in thousands) | 2020 (in thousands) | Change ($) | | :--- | :--- | :--- | :--- | | Cash | $852 | $3,372 | $(2,520) | | Line of credit drawn | $6,350 | $1,245 | $5,105 | | Available liquidity (Credit Facility) | $14,037 | N/A | N/A | | Total debt and finance lease obligations | $11,368 | N/A | N/A | - The Credit Facility was reduced from $35,000 thousand to $30,000 thousand and its maturity date extended to January 31, 2024, via the Fourth Amendment on February 28, 2022[197][330] - In 2021, the company issued 1,897,697 shares of common stock for net proceeds of approximately $9,725 thousand[195][275] - PPP Loans totaling $9,151 thousand were forgiven by the SBA in Q2 2021, and $6,965 thousand in Employee Retention Credit (ERC) benefits were received in Q1 and Q2 2021[198][276][336] Sources and Uses of Cash Net cash used in operations significantly increased in 2021 due to operating performance and higher working capital, while financing activities provided cash from stock sales and increased borrowings | Cash Flow Activity | 2021 (in thousands) | 2020 (in thousands) | Change ($) | | :--- | :--- | :--- | :--- | | Operating activities | $(12,826) | $5,330 | $(18,156) | | Investing activities | $(1,674) | $(1,547) | $(127) | | Financing activities | $11,980 | $(2,827) | $14,807 | | Net (decrease) increase in cash | $(2,520) | $956 | $(3,476) | - Net cash used in operations was $12,826 thousand in 2021, a significant decrease from $5,330 thousand provided in 2020, primarily due to operating performance (excluding PPP loan forgiveness) and an increase in operating working capital[203] - Net cash provided by financing activities totaled $11,980 thousand in 2021, compared to $2,827 thousand used in 2020, driven by proceeds from stock sales and increased net borrowings under the Credit Facility[205] Contractual Obligations The company's contractual obligations include debt and lease payments, which it plans to fund through operations, available cash, its credit facility, and capital market access | Year | Amount (in thousands) | | :--- | :--- | | 2022 | $6,650 | | 2023 | $28 | | 2024 | $29 | | 2025 | $30 | | 2026 | $32 | | 2027 and thereafter | $58 | | Total | $6,827 | | Year | Finance Leases (in thousands) | Operating Leases (in thousands) | Total (in thousands) | | :--- | :--- | :--- | :--- | | 2022 | $2,322 | $3,475 | $5,797 | | 2023 | $1,576 | $3,388 | $4,964 | | 2024 | $693 | $2,933 | $3,626 | | 2025 | $289 | $3,015 | $3,304 | | 2026 | $101 | $3,059 | $3,160 | | 2027 and thereafter | $0 | $14,045 | $14,045 | | Total Lease Payments | $4,981 | $29,915 | $34,896 | - The company expects to fund these cash requirements primarily through cash generated from operations, available cash balances, its Credit Facility, additional equipment financing, and access to public or private debt and/or equity markets[206] ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK As a smaller reporting company, Broadwind, Inc. is not required to provide quantitative and qualitative disclosures about market risk - The company is a smaller reporting company and is not required to provide information under this item[207] ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA This section indicates that the financial information required by Item 8 is contained in Part IV, Item 15 of this Annual Report - The financial information required by Item 8 is contained in Part IV, Item 15 'EXHIBITS AND FINANCIAL STATEMENT SCHEDULES' of this Annual Report[208] ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE This section confirms that there have been no changes in or disagreements with accountants regarding accounting and financial disclosure - There have been no changes in and disagreements with accountants on accounting and financial disclosure[210] ITEM 9A. CONTROLS AND PROCEDURES Broadwind's management, including the CEO and CFO, concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2021 - Management, including the CEO and CFO, evaluated and concluded that disclosure controls and procedures were effective as of December 31, 2021[211] - No material changes in internal control over financial reporting occurred during the last fiscal quarter[212] - Management assessed and determined that internal control over financial reporting was effective as of December 31, 2021, based on the COSO framework[214] - As a smaller reporting company, an attestation report from the independent registered public accounting firm regarding internal control over financial reporting is not required[215] Evaluation of Disclosure Controls and Procedures Management, with CEO and CFO participation, evaluated and concluded that disclosure controls and procedures were effective as of December 31, 2021 - Management, under the supervision and with the participation of the CEO and CFO, evaluated the effectiveness of disclosure controls and procedures as of December 31, 2021[211] - Based on the evaluation, disclosure controls and procedures were concluded to be effective as of December 31, 2021[211] Changes in Internal Control over Financial Reporting No material changes in internal control over financial reporting occurred during the last fiscal quarter that would materially affect the controls - There were no changes in internal control over financial reporting that occurred during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, internal control over financial reporting[212] Report of Management on Internal Control Over Financial Reporting Management assessed and determined that internal control over financial reporting was effective as of December 31, 2021, based on the COSO framework, and no attestation report is required - Management, including the CEO and CFO, assessed the effectiveness of internal control over financial reporting as of December 31, 2021, based on criteria described in 'Internal Control—Integrated Framework (2013)' issued by COSO[213][214] - Based on this assessment, management determined that internal control over financial reporting was effective as of December 31, 2021[214] - As a smaller reporting company, the company is not required to include an attestation report of its independent registered public accounting firm regarding internal control over financial reporting[215] ITEM 9B. OTHER INFORMATION On February 28, 2022, Broadwind executed the Fourth Amendment to its Loan Agreement, reducing the line of credit, extending maturity, waiving covenants, and transitioning to Term SOFR - On February 28, 2022, the Fourth Amendment to the Loan Agreement was executed, reducing the line of credit from $35,000 thousand to $30,000 thousand[216][330] - The amendment extended the maturity date until January 31, 2024, and waived the minimum EBITDA covenant for the three-month period ended December 31, 2021[216][330] - It also amended provisions in connection with the discontinuation of LIBOR and its replacement with the forward-looking term Secured Overnight Financing Rate (Term SOFR)[216][330] ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS This section states that there are no disclosures regarding foreign jurisdictions that prevent inspections of the company's financial records - There are no disclosures regarding foreign jurisdictions that prevent inspections[218] PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE Information on directors, executive officers, and corporate governance is incorporated by reference from the 2022 Proxy Statement, including the company's Code of Ethics - Information required by this item is incorporated by reference from the 2022 Proxy Statement[220] - A Code of Ethics and Business Conduct, applicable to all directors, executive officers, and senior financial officers, has been adopted and is available on the company's website[221] ITEM 11. EXECUTIVE COMPENSATION Information regarding director and executive compensation is incorporated by reference from the relevant sections of the 2022 Proxy Statement - Information regarding director and executive compensation is incorporated by reference from the discussion under the headings 'Directors and Director Compensation' and 'Executive Officers and Executive Compensation' in the 2022 Proxy Statement[222] ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS Information on security ownership and equity compensation plans is incorporated by reference from the 2022 Proxy Statement, detailing outstanding securities and those available for future issuance - Information regarding security ownership of certain beneficial owners and management is incorporated by reference from the 2022 Proxy Statement[223] | Metric | Number of Securities | Weighted-Average Exercise Price | | :--- | :--- | :--- | | To be issued upon exercise of outstanding options, warrants, and rights | 918,448 | $2.73 | | Remaining available for future issuances | 853,446 | N/A | Security Ownership Information regarding security ownership of certain beneficial holders and management is incorporated by reference from the 2022 Proxy Statement - Certain information required by this item is incorporated by reference from the discussion under the heading 'Security Ownership of Certain Beneficial Holders and Management' in the 2022 Proxy Statement[223] Equity Compensation Plan Information As of December 31, 2021, 918,448 securities were issuable under equity compensation plans with a weighted-average exercise price of $2.73, and 853,446 shares remained available for future issuances | Metric | Number of securities to be issued upon exercise of outstanding options, warrants, and rights | Weighted-average exercise price of outstanding options, warrants, and rights | Number of securities remaining available for future issuances under equity compensation plans | | :--- | :--- | :--- | :--- | | Equity compensation plans approved by stockholders | 918,448 (1) | $2.73 | 853,446 | | Total | 918,448 | $2.73 | 853,446 | - Includes outstanding restricted stock awards pursuant to the Broadwind Energy, Inc. 2015 Equity Incentive Plan, as amended[226] ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE Information regarding certain relationships, related transactions, and director independence is incorporated by reference from the 2022 Proxy Statement - Information required by this item is incorporated by reference from the discussion under the headings 'Certain Transactions and Business Relationships' and 'Corporate Governance' in the 2022 Proxy Statement[227] ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES Information regarding principal accountant fees and services is incorporated by reference from the 'Ratification of Appointment of Independent Registered Public Accounting Firm' section in the 2022 Proxy Statement - Information required by this item is incorporated by reference from the discussion under the heading 'Ratification of Appointment of Independent Registered Public Accounting Firm' in the 2022 Proxy Statement[228] PART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES This section details the financial statements and exhibits filed as part of the Annual Report, noting that schedules are omitted if information is already included or not applicable - The financial statements listed on the Index to Financial Statements (page 34) are filed as part of this Annual Report[231][237] - Financial statement schedules have been omitted because the required information is included in the consolidated financial statements or notes thereto, or because they are not applicable or not required[232] - The exhibits listed on the Index to Exhibits are filed as part of this Annual Report[233] ITEM 16. FORM 10-K SUMMARY This item indicates that no Form 10-K Summary is provided within this Annual Report, as per the company's filing status - No Form 10-K Summary is provided[234]