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What changed in BROADWIND, INC.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of BROADWIND, INC.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+168 added−174 removedSource: 10-K (2024-03-05) vs 10-K (2023-03-09)

Top changes in BROADWIND, INC.'s 2023 10-K

168 paragraphs added · 174 removed · 125 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

33 edited+5 added−5 removed54 unchanged
Biggest changeSubject to labor availability, we have manufacturing capacity available that could support a significant increase in our annual revenues for heavy fabrications, gearing and industrial solutions. We are working to improve our capacity utilization and financial results by leveraging our existing manufacturing capacity and adjusting capacity where we can, in response to changing market conditions.
Biggest changeOur diversification efforts are impacted in part by the end-market demand outlook. 5 ● Improve capacity utilization and broaden our manufacturing capabilities . Subject to labor availability, we have manufacturing capacity available that could support a significant increase in our annual revenues for heavy fabrications, gearing and industrial solutions.
The following table summarizes the key markets served and product offering of our three segments: Segment Heavy Fabrications Gearing Industrial Solutions Key Markets Served -Wind Power Generation -Onshore & Offshore -Combined Cycle Natural -Surface and Underground Mining Oil and Gas Fracking/Drilling Gas Power Generation -Material Handling -Surface and Underground Mining -Solar Power Generation -Oil and Gas -Steel Production -Wind Power Generation -Construction -Infrastructure -Infrastructure -Wind Power Generation -Pulp and Paper -Material Handling -Marine -Waste Processing Products -Wind Towers -Loose Gearing -Supply Chain Solutions -Industrial Fabrications: -Custom Gearboxes -Inventory Management Mining Components -Gearbox Repair -Kitting and Assembly Crane Components -Heat Treat Services -Solar Inverter Racks Pressure Reducing Systems -Solar Powered Shelters/Charging Stations Other Frames/Structures Pressure Vessels 4 Business and Operating Strategy We intend to capitalize on the markets for wind energy, gas turbines, O&G, mining, and other industrial verticals in North America by leveraging our core competencies in welding, manufacturing, assembling and kitting.
The following table summarizes the key markets served and product offering of our three segments: Segment Heavy Fabrications Gearing Industrial Solutions Key Markets Served -Wind Power Generation -Onshore & Offshore -Combined Cycle Natural -Surface and Underground Mining Oil and Gas Fracking/Drilling Gas Power Generation -Material Handling -Surface and Underground Mining -Solar Power Generation -Oil and Gas -Steel Production -Wind Power Generation -Construction -Infrastructure -Infrastructure -Wind Power Generation -Pulp and Paper -Material Handling -Marine -Waste Processing Products -Wind Towers/Adaptors -Loose Gearing -Supply Chain Solutions -Industrial Fabrications: -Custom Gearboxes -Inventory Management Mining Components -Gearbox Repair -Kitting and Assembly Crane Components -Heat Treat Services -Solar Inverter Racks Pressure Reducing Systems -Solar Powered Shelters/Charging Stations Other Frames/Structures Pressure Vessels 4 Business and Operating Strategy We intend to capitalize on the markets for wind energy, gas turbines, O&G, mining, and other industrial verticals in North America by leveraging our core competencies in welding, manufacturing, assembling and kitting.
We provide gearbox repair services and have manufactured loose gearing, gearboxes and systems, and provided heat treat services for aftermarket and OEM applications for nearly a century.
We provide gearbox repair services and have manufactured loose gearing, gearboxes and systems and provided heat treat services for aftermarket and OEM applications for a century.
We believe that execution of our investment strategy provides significant opportunity to generate stockholder value, through profitable growth and leveraging a significant unrealized economic asset, over $288 million of net operating losses (“NOLs”) as of December 31, 2022 which can be used to cover future prospective tax liabilities. ● Streamline front-end processes to operational efficiency .
We believe that execution of our investment strategy provides significant opportunity to generate stockholder value, through profitable growth and leveraging a significant unrealized economic asset, over $290 million of net operating losses (“NOLs”) as of December 31, 2023 which can be used to cover future prospective tax liabilities. ● Streamline front-end processes to operational efficiency .
Gearing We provide gearing and gearboxes to a broad set of customers in diverse markets including; onshore and offshore O&G fracking and drilling, surface and underground mining, wind energy, steel, material handling, infrastructure, marine and other industrial markets.
Gearing We provide gearing, gearboxes and precision machined components to a broad set of customers in diverse markets including; surface and underground mining, wind energy, steel, material handling, infrastructure, onshore and offshore O&G fracking and drilling, marine and other industrial markets.
According to Wood Mackenzie Power & Renewables 2022 industry data, the top four wind turbine manufacturers comprised approximately 90% of the U.S. market. As a result, although we have historically produced towers for a broad range of wind turbine manufacturers, in any given year a limited number of customers have accounted for the majority of our revenues.
According to Wood Mackenzie Power & Renewables 2023 industry data, the top four wind turbine manufacturers comprised approximately 88% of the U.S. market. As a result, although we have historically produced towers for a broad range of wind turbine manufacturers, in any given year a limited number of customers have accounted for the majority of our revenues.
In our Heavy Fabrications segment, we have expanded production capabilities and leveraged our fabrication competencies to support growth in mining, material handling, and other industrial markets. ● Pursue opportunistic acquisitions as well as organic investments.
In our Heavy Fabrications segment, we have expanded production capabilities and leveraged our fabrication competencies to support growth in mining, material handling, O&G, infrastructure, and other industrial markets. ● Pursue opportunistic acquisitions as well as organic investments.
We then pass the raw material cost through to our end customer plus a conversion margin. 9 Outside of these directed buys, we operate a multiple supplier sourcing strategy and source our raw materials through various suppliers located throughout the U.S. and abroad.
We have legal title to the raw materials and pass the raw material cost through to our end customer plus a conversion margin. 9 Outside of these directed buys, we operate a multiple supplier sourcing strategy and source our raw materials through various suppliers located throughout the U.S. and abroad.
Then in September 2020, a new trade case was brought before the USDOC and USITC, to assess whether wind towers imported from India, Malaysia, and Spain were being sold in the U.S. at less than fair value.
Court of International Trade (“CIT”). Then in September 2020, a new trade case was brought before the USDOC and USITC, to assess whether wind towers imported from India, Malaysia, and Spain were being sold in the U.S. at less than fair value.
The IRA also includes advanced manufacturing tax credits for manufacturers of eligible components, including wind and solar components (“45X credits”). Manufacturers qualify for the 45X credits based on the electricity output for each component produced and sold in the US starting in 2023 through 2032.
The IRA also includes Advanced Manufacturing Production tax credits (“AMP credits”) for manufacturers of eligible components, including wind and solar components. Manufacturers qualify for the AMP credits based on the electricity output for each component produced and sold in the US starting in 2023 through 2032.
As of December 31, 2022, approximately 19% of our employees were covered by collective bargaining agreements with local unions in our Cicero, Illinois and Neville Island, Pennsylvania locations.
As of December 31, 2023, approximately 18% of our employees were covered by collective bargaining agreements with local unions in our Cicero, Illinois and Neville Island, Pennsylvania locations.
We believe our investment in industry leading heat treatment, high precision machining, specialized grinding technologies and cutting-edge welding has contributed to our high product reliability and the consistent performance of our products under varying operating conditions. All of our core operating facilities are ISO 9001:2015 certified.
We believe our investment in industry leading heat treatment, high precision machining, specialized grinding technologies and cutting-edge welding has contributed to our high product reliability and the consistent performance of our products under varying operating conditions. All of our core operating facilities are ISO 9001:2015 certified. We will continue our efforts to achieve the highest quality standards.
Within our other industrial markets served, our customer base includes steel producers, ship builders, and manufacturers of material handling, pulp and paper and other power generation equipment. Sales to Siemens Gamesa Renewable Energy (“SGRE”) and GE Renewable Energy each represented greater than 10% of our consolidated revenues for the years ended December 31, 2022 and 2021.
Within our other industrial markets served, our customer base includes steel producers, ship builders, and manufacturers of material handling, pulp and paper and other power generation equipment. Sales to GE Renewable Energy represented greater than 10% of our consolidated revenues for the year ended December 31, 2023.
Following a renewed surge of tower imports from countries not impacted by existing tariffs, in July 2020, the USDOC issued antidumping and countervailing duty orders on imports of wind towers from Canada, Indonesia, and Vietnam and an antidumping order on imports of towers from Korea.
Following a renewed surge of tower imports from countries not impacted by existing tariffs, in July 2020, the USDOC issued antidumping and countervailing duty orders on imports of wind towers from Canada, Indonesia, and Vietnam and an antidumping order on imports of towers from Korea. The Indonesia countervailing duty order was later revoked after an appeal to the U.S.
SEASONALITY The majority of our business is not affected by seasonality. EMPLOYEES We had 499 U.S.-based employees at December 31, 2022, of which 451 were in manufacturing related functions and 48 were in administrative functions.
SEASONALITY The majority of our business is not affected by seasonality. EMPLOYEES We had 444 U.S.-based employees at December 31, 2023, of which 398 were in manufacturing related functions and 46 were in administrative functions.
The table below summarizes our employees as of December 31, 2022: Number of Employees As of Segment December 31, 2022 Heavy Fabrications 309 Gearing 134 Industrial Solutions 42 Corporate 14 Total 499 RAW MATERIALS The primary raw material used in the construction of heavy fabrication and gearing products is steel in the form of plate, bar stock, forgings and castings.
The table below summarizes our employees as of December 31, 2023: Number of Employees As of Segment December 31, 2023 Heavy Fabrications 266 Gearing 118 Industrial Solutions 47 Corporate 13 Total 444 RAW MATERIALS The primary raw material used in the construction of heavy fabrication and gearing products is steel in the form of plate, bar stock, forgings and castings.
Our OWC at December 31, 2022 was $475, or 0.3% of trailing three months of sales annualized, compared to December 31, 2021, when OWC was $18,635, or 18% of trailing three months of sales annualized.
Our OWC at December 31, 2023 was $19,408, or 10% of trailing three months of sales annualized, compared to December 31, 2022, when OWC was $475, or 0.3% of trailing three months of sales annualized.
The credit amount varies based on the eligible component, which includes solar components, wind energy components, inverters, qualifying battery components, and critical minerals. Tower manufacturers are eligible for credits of $0.03 per watt for applicable components produced. Manufacturers can apply to the Internal Revenue Service for cash refunds of the 45X credits for up to five years.
The credit amount varies based on the eligible component, which includes solar components, wind energy components, inverters, qualifying battery components, and critical minerals. Tower manufacturers are eligible for credits of $0.03 per watt for applicable components produced.
The decrease in OWC was driven primarily by the timing and level of customer deposits received for future scheduled production. 10 CORPORATE INFORMATION Our principal executive office is located at 3240 South Central Avenue, Cicero, IL 60804. Our phone number is (708) 780-4800 and our website address is www.bwen.com.
The increase in OWC was driven primarily by higher accounts receivable balances. 10 CORPORATE INFORMATION Our principal executive office is located at 3240 South Central Avenue, Cicero, IL 60804. Our phone number is (708) 780-4800 and our website address is www.bwen.com.
We manufacture components for buckets, shovels, car bodies, drill masts and other products that support mining and construction markets. In other industrial markets, we provide crane components, pressure vessels, frames and other structures.
We have designed and manufacture a mobile, modular pressure reducing system for the compressed natural gas virtual pipeline market. We manufacture components for buckets, shovels, car bodies, drill masts and other products that support mining and construction markets. In other industrial markets, we provide crane components, pressure vessels, frames and other structures.
As of December 31, 2022, the dollar amount of our backlog believed to be firm was approximately $297 million. This represents a 179% increase from the backlog at December 31, 2021. Backlog as of December 31, 2022 and 2021 is net of revenue recognized over time as described in Note 2, “Revenues” of our consolidated financial statements.
As of December 31, 2023, the dollar amount of our backlog based on unfulfilled POs and supply agreements was approximately $183 million. This represents a 38% decrease from the backlog at December 31, 2022. Backlog as of December 31, 2023 and 2022 is net of revenue recognized over time as described in Note 2, “Revenues” of our consolidated financial statements.
We believe that we take appropriate precautions to protect our employees and third parties from workplace injuries and harmful exposure to materials handled and managed at our facilities.
Occupational Safety and Health Administration Our operations are subject to regulation of health and safety matters by the U.S. Occupational Safety and Health Administration. We believe that we take appropriate precautions to protect our employees and third parties from workplace injuries and harmful exposure to materials handled and managed at our facilities.
The loss of one of these customers could have a material adverse effect on our business, results of operation or financial condition. As a result, we have an ongoing initiative to diversify our customer base. COMPETITION Each of our businesses faces competition from both domestic and international companies.
As a result, we have an ongoing initiative to diversify our customer base. COMPETITION Each of our businesses faces competition from both domestic and international companies.
SALES AND MARKETING We market our heavy fabrications, gearing, and industrial solutions through a direct sales force, supplemented with independent sales agents in certain markets. Our sales and marketing strategy is to develop and maintain long-term relationships with our existing customers, and seek opportunities to expand these relationships across our business units.
Our sales and marketing strategy is to develop and maintain long-term relationships with our existing customers, and seek opportunities to expand these relationships across our business units.
We utilize a stage gate model for new product development, which provides a framework for evaluating opportunities and commercialization. Additionally, we continue to use new customer and product revenues as metrics within our variable executive compensation programs. Our diversification efforts are impacted in part by the end-market demand outlook. 5 ● Improve capacity utilization and broaden our manufacturing capabilities .
We are leveraging existing customer relationships within each of our segments to cross sell our broad portfolio of capabilities. We utilize a stage gate model for new product development, which provides a framework for evaluating opportunities and commercialization. Additionally, we continue to use new customer and product revenues as metrics within our variable executive compensation programs.
Also, the SEC maintains an Internet site at www.sec.gov that contains reports, proxy and information statements, and other information that we file electronically with the SEC.
Also, the SEC maintains an Internet site at www.sec.gov that contains reports, proxy and information statements, and other information that we file electronically with the SEC. From time to time, we also provide additional information about the Company and its activities on the “Investors” section of our website, which we encourage investors to review.
Industrial Solutions We provide supply chain solutions, light fabrication, inventory management, kitting and assembly services, primarily serving the combined cycle natural gas turbine market. We have recently expanded our market reach into the solar power generation market by leveraging our existing core competencies.
Industrial Solutions We provide supply chain solutions, light fabrication, inventory management, kitting and assembly services, primarily serving the combined cycle natural gas turbine market. We have recently expanded into the U.S. wind power generation market, by providing tower internals kitting solutions for on-site installations, as OEMs domesticate their supply chain due to lead time and reliability issues.
The manufacturing process at our Gearing segment, for example, involves transforming forged steel into precision gears through cutting, heat treating, testing and finishing.
We maintain internal quality controls over all core manufacturing processes and carry out quality assurance inspections at the completion of each major manufacturing step to ensure the quality of our products. The manufacturing process at our Gearing segment, for example, involves transforming forged steel into precision gears through cutting, heat treating, testing and finishing.
In 2022, sales derived from our top five customers represented 69% of total sales and sales into the wind energy industry represented 48% of total sales. This is an improvement as compared to 2017, when our top five customers comprised 85% of total sales and sales in the wind energy industry represented 72% of total sales.
This is an improvement as compared to 2019, when our top five customers comprised 79% of total sales and sales in the wind energy industry represented 66% of total sales. To reduce the concentration of our sales, we have focused our product development activities and our sales force on expanding and diversifying our customer base and product lines.
To achieve high standards of production and operational quality, we implement strict and extensive quality control and inspections throughout our production processes. We maintain internal quality controls over all core manufacturing processes and carry out quality assurance inspections at the completion of each major manufacturing step to ensure the quality of our products.
QUALITY CONTROL We have a long-standing focus on processes for ensuring the manufacture of high-quality products. To achieve high standards of production and operational quality, we implement strict and extensive quality control and inspections throughout our production processes.
The IIJA provides for $548 billion in new infrastructure spending over the next five years and $650 billion in previously allocated funds. The IIJA allocated $62 billion to the Department of Energy for various projects focused on clean energy resources and expanding renewable energy.
Investment in Infrastructure In November 2021, the federal Infrastructure Investment and Jobs Act (“IIJA”) was signed into law. The IIJA provides for $548 billion in new infrastructure spending over the next five years and $650 billion in previously allocated funds.
However the timing of the award of projects funded by the IIJA is uncertain thus the impact on our business is uncertain. Occupational Safety and Health Administration Our operations are subject to regulation of health and safety matters by the U.S. Occupational Safety and Health Administration.
The IIJA allocated $62 billion to the Department of Energy for various projects focused on clean energy resources and expanding renewable energy. However the timing of the award of projects funded by the IIJA is uncertain thus the impact on our business is uncertain.
We have staffed our operations with Continuous Improvement experts in order to optimize our production processes to increase output, leverage our scale and lower our costs while maintaining product quality. During 2022 and 2021, supply chain and staffing constraints caused by the COVID-19 pandemic resulted in increased manufacturing inefficiencies.
We have staffed our operations with Continuous Improvement experts in order to optimize our production processes to increase output, leverage our scale and lower our costs while maintaining product quality. SALES AND MARKETING We market our heavy fabrications, gearing, and industrial solutions through a direct sales force, supplemented with independent sales agents in certain markets.
Removed
Our strategic objectives include the following, many of which are subject to risks and uncertainties that are, and have been, exacerbated by the COVID-19 pandemic and any worsening of the global business and economic environment as a result: ● Diversify our customer and product line concentrations .
Added
Our strategic objectives include the following: ● Diversify our customer and product line concentrations . In 2023, sales derived from our top five customers represented 65% of total sales and sales into the wind energy industry represented 49% of total sales.
Removed
To reduce the concentration of our sales, we have focused our product development activities and our sales force on expanding and diversifying our customer base and product lines. We are leveraging existing customer relationships within each of our segments to cross sell our broad portfolio of capabilities.
Added
We are working to improve our capacity utilization and financial results by leveraging our existing manufacturing capacity and adjusting capacity where we can, in response to changing market conditions.
Removed
After the first five years, the 45X credits are transferable and can be sold to third parties for cash. We are waiting for the Internal Revenue Service and the U.S. Treasury Department to provide implementation guidance for the legislation. Investment in Infrastructure In November 2021, the federal Infrastructure Investment and Jobs Act (“IIJA”) was signed into law.
Added
Sales to Siemens Gamesa Renewable Energy (“SGRE”) and GE Renewable Energy each represented greater than 10% of our consolidated revenues for the year ended December 31, 2022. The loss of one of these customers could have a material adverse effect on our business, results of operation or financial condition.
Removed
Although we have been affected by global supply chain issues that are at least partially a result of the COVID-19 pandemic, we believe that we will be able to obtain an adequate supply of steel and other raw materials in 2023 to meet our manufacturing requirements.
Added
Manufacturers can elect a direct pay option where they can receive a payment equal to the full value of the tax credits from the Internal Revenue Service anytime during the ten-year period. That election lasts for five years, after which the AMP credits can be used against tax obligations or transferred to third parties in exchange for cash.
Removed
From time to time we have faced shortages of specific grades of steel, internal packages and delays associated with other materials from foreign sources including shortages and delays resulting from the impact of the COVID-19 pandemic. QUALITY CONTROL We have a long-standing focus on processes for ensuring the manufacture of high-quality products.
Added
The information contained or incorporated on our website is not a part of this document.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

41 edited+19 added−10 removed126 unchanged
Biggest changeThe Company values input from all stockholders, including WM Argyle, and remains open to ongoing engagement with WM Argyle. However, if the Company and WM Argyle cannot reach an agreement in connection with its nomination, there will be a contested election at the Company’s 2023 Annual Meeting of Stockholders.
Biggest changeWe did not reach an agreement with WM Argyle in connection with its nomination, and there was a contested election at the Company’s 2023 Annual Meeting of Stockholders, in which none of WM Argyle’s candidates were elected as directors. The cumulative cost to the Company of responding to the proxy contest was approximately $1.8 million.
The U.S. Department of the Treasury has announced that it will conduct audits for PPP Loans that exceed $2,000 for a period of six years after forgiveness. Should we be audited or reviewed by the U.S.
Department of the Treasury has announced that it will conduct audits for PPP Loans that exceed $2,000 for a period of six years after forgiveness. Should we be audited or reviewed by the U.S.
In addition to the state and federal government policies supporting renewable energy described below, the growth and development of the larger wind energy market in North America is subject to a number of factors, including, among other things: ● the availability and cost of financing for the estimated pipeline of wind energy development projects; ● the cost of electricity, which may be affected by a number of factors, including government regulation, power transmission, seasonality, fluctuations in demand, and the cost and availability of fuel, particularly natural gas; ● the cost of raw materials used to make wind turbines, particularly steel ● the general increase in demand for electricity or “load growth”; ● the costs of competing power sources, including natural gas, nuclear power, solar power and other power sources; ● the development of new power generating technology, advances in existing technology or discovery of power generating natural resources; ● the development of electrical transmission infrastructure; ● state and federal laws and regulations regarding avian protection plans and noise or turbine setback requirements; ● other state and federal laws and regulations, particularly those favoring low carbon energy generation alternatives; ● administrative and legal challenges to proposed wind energy development projects; ● the effects of global climate change such as more frequent or more extreme weather events, changes in temperature and precipitation patterns, changes to ground and surface water and other related phenomena; ● the improvement in efficiency and cost of wind energy, as influenced by advances in turbine design and operating efficiencies; and ● public perception and localized community responses to wind energy projects.
In addition to the state and federal government policies supporting renewable energy described below, the growth and development of the larger wind energy market in North America is subject to a number of factors, including, among other things: ● the availability and cost of financing for the estimated pipeline of wind energy development projects; ● the cost of electricity, which may be affected by a number of factors, including government regulation, power transmission, seasonality, fluctuations in demand, and the cost and availability of fuel, particularly natural gas; ● the cost of raw materials used to make wind turbines, particularly steel; ● the general increase in demand for electricity or “load growth;” ● the costs of competing power sources, including natural gas, nuclear power, solar power and other power sources; ● the development of new power generating technology, advances in existing technology or discovery of power generating natural resources; ● the development of electrical transmission infrastructure; ● state and federal laws and regulations regarding avian protection plans and noise or turbine setback requirements; ● other state and federal laws and regulations, particularly those favoring low carbon energy generation alternatives; ● administrative and legal challenges to proposed wind energy development projects; ● the effects of global climate change such as more frequent or more extreme weather events, changes in temperature and precipitation patterns, changes to ground and surface water and other related phenomena; ● the improvement in efficiency and cost of wind energy, as influenced by advances in turbine design and operating efficiencies; and ● public perception and localized community responses to wind energy projects.
To address these concerns, in February 2013 we adopted a Section 382 Stockholder Rights Plan, which was subsequently approved by our stockholders and extended in 2016 and 2019 for additional three-year periods (as amended, the “Rights Plan”), designed to preserve our substantial tax assets associated with NOL carryforwards under Section 382.
To address these concerns, in February 2013 we adopted a Section 382 Stockholder Rights Plan, which was subsequently approved by our stockholders and extended in 2016, 2019, and 2022 for additional three-year periods (as amended, the “Rights Plan”), designed to preserve our substantial tax assets associated with NOL carryforwards under Section 382.
We have received a notice dated January 18, 2023 from WM Argyle Fund, LLC (“WM Argyle”), which allegedly owned approximately 1.0% of the Company’s outstanding shares at the time of submission, purporting to nominate a slate of six candidates for election as directors at our 2023 Annual Meeting of Stockholders.
We received a notice dated January 18, 2023 from WM Argyle Fund, LLC (“WM Argyle”), which allegedly owned approximately 1.0% of the Company’s outstanding shares at the time of submission, purporting to nominate a slate of six candidates for election as directors at our 2023 Annual Meeting of Stockholders.
During 2022, we did not incur significant remediation costs or penalties related to environmental matters. Our ability to comply with regulatory requirements and potential environmental, social and governance (“ESG”) regulations and trends is critical to our future success, and there can be no guarantee that our businesses are in full compliance with all such requirements.
During 2023, we did not incur significant remediation costs or penalties related to environmental matters. Our ability to comply with regulatory requirements and potential environmental, social and governance (“ESG”) regulations and trends is critical to our future success, and there can be no guarantee that our businesses are in full compliance with all such requirements.
FINANCIAL RISKS We have substantially generated net losses since our inception. We have experienced operating losses since inception, except that we were profitable in 2016 and 2021.
FINANCIAL RISKS We have substantially generated net losses since our inception. We have experienced operating losses since inception, except that we were profitable in 2016, 2021, and 2023.
In addition to potential implementation of ESG laws, investor advocacy groups, certain institutional investors, investment funds, other market participants, stockholders, and customers have focused increasingly on the ESG practices of companies, including those associated with climate change.
In addition to potential implementation of ESG laws, investor advocacy groups, certain institutional investors, investment funds, other market participants, political figures, stockholders, and customers have focused increasingly on the ESG practices of companies, including those associated with climate change.
We cannot assure that government support for renewable energy will continue including any assurance regarding the adoption of any of the clean energy provisions of the Build Back Better agenda.
We cannot assure that government support for renewable energy will continue including any assurance regarding the adoption of any of the clean energy provisions of President Biden’s Build Back Better agenda.
Any failure to negotiate and conclude a new collective bargaining agreement with a union when the applicable agreement expires could result in strikes, boycotts, or other labor disruptions. As of December 31, 2022, these collective bargaining units represented approximately 19% of our workforce. Our ability to hire and retain qualified personnel at competitive cost could adversely affect our business.
Any failure to negotiate and conclude a new collective bargaining agreement with a union when the applicable agreement expires could result in strikes, boycotts, or other labor disruptions. As of December 31, 2023, these collective bargaining units represented approximately 18% of our workforce. Our ability to hire and retain qualified personnel at competitive cost could adversely affect our business.
ITEM 1A. RISK FACTORS RISKS RELATED TO OUR INDUSTRIES Our financial and operating performance is subject to certain factors out of our control, including the state of the wind energy market in North America. Our results of operations (like those of our customers) are subject to general economic conditions, and specifically to the state of the wind energy market.
RISKS RELATED TO OUR INDUSTRIES Our financial and operating performance is subject to certain factors out of our control, including the state of the wind energy market in North America. Our results of operations (like those of our customers) are subject to general economic conditions, and specifically to the state of the wind energy market.
A proxy contest or related activities on the part of activist stockholders, including, among others, WM Argyle, could adversely affect our business for a number of reasons, including, without limitation, the following: ● Responding to proxy contests and other actions by activist stockholders can be costly and time-consuming, disrupting our operations and diverting the attention of our Board of Directors (the “Board”), management and our employees; ● Perceived uncertainties as to our future direction may result in the loss of potential business opportunities and may make it more difficult to attract and retain qualified personnel, business partners, customers and others important to our success, any of which could negatively affect our business and our results of operations and financial condition; ● Action by activist stockholders may be exploited by our competitors, cause concern to our current or potential customers and make it more difficult to attract and retain qualified personnel; ● A successful proxy contest could result in a change in control of our Board, and such an event could subject us to certain contractual obligations under several material agreements, including our existing 2015 EIP agreement and certain employment agreements; ● If nominees advanced by activist stockholders are elected or appointed to our Board with a specific agenda, it may adversely affect our ability to effectively and timely implement our strategic plans or to realize long-term value from our assets, and this could in turn have an adverse effect on our business and on our results of operations and financial condition; and ● Proxy contests may cause our stock price to experience periods of volatility.
A proxy contest or related activities on the part of activist stockholders could adversely affect our business for a number of reasons, including, without limitation, the following: ● Responding to proxy contests and other actions by activist stockholders can be costly and time-consuming, disrupting our operations and diverting the attention of our Board of Directors (the “Board”), management and our employees; ● Perceived uncertainties as to our future direction may result in the loss of potential business opportunities and may make it more difficult to attract and retain qualified personnel, business partners, customers and others important to our success, any of which could negatively affect our business and our results of operations and financial condition; ● Action by activist stockholders may be exploited by our competitors, cause concern to our current or potential customers and make it more difficult to attract and retain qualified personnel; ● A successful proxy contest could result in a change in control of our Board, and such an event could subject us to certain contractual obligations under several material agreements, including our existing Amended and Restated 2015 Equity Incentive Plan (as amended, the “2015 EIP”), and underlying award agreements and certain employment agreements; ● If nominees advanced by activist stockholders are elected or appointed to our Board with a specific agenda, it may adversely affect our ability to effectively and timely implement our strategic plans or to realize long-term value from our assets, and this could in turn have an adverse effect on our business and on our results of operations and financial condition; and ● Proxy contests may cause our stock price to experience periods of volatility.
Our business is at risk from and may be impacted by information security incidents, including attempts to gain unauthorized access to our confidential data, ransomware, malware, phishing emails, and other electronic security events. Such incidents can range from individual attempts to gain unauthorized access to our information technology systems to more sophisticated security threats.
Our business is at risk from and may be impacted by information security incidents, including attempts to gain unauthorized access to our confidential data and data systems, ransomware, malware, business email compromise, phishing attacks, and other electronic security events. Such incidents can range from individual attempts to gain unauthorized access to our information technology systems to more sophisticated security threats.
We may continue to incur significant losses in the future for a number of reasons, including other risks described in this Annual Report on Form 10-K, and we may encounter unforeseen expenses, difficulties, complications, delays, and other unknown factors.
We may continue to incur significant losses in the future for a number of reasons, including other risks described in this Annual Report on Form 10-K, and we may encounter unforeseen expenses, difficulties, complications, delays, and other unknown factors. We have significant indebtedness and we may incur additional debt in the future.
Then in September 2020, a new trade case was brought before the USDOC and USITC, to assess whether wind towers imported from India, Malaysia, and Spain were being sold in the U.S. at less than fair value.
Court of International Trade (“CIT”). Then in September 2020, a new trade case was brought before the USDOC and USITC, to assess whether wind towers imported from India, Malaysia, and Spain were being sold in the U.S. at less than fair value.
If our ESG practices do not meet investor or other industry stakeholder expectations and standards, which continue to evolve, our brand, reputation and employee retention may be negatively impacted based on an assessment of our ESG practices.
If our ESG practices do not meet investor or other industry stakeholder expectations and standards, which continue to evolve, our brand, reputation and employee retention may be negatively impacted based on an assessment of our ESG practices. ITEM 1B. UNRESOLVED STAFF COMMENTS None.
In 2022, the closing price of our common stock varied from a high of $3.59 per share to a low of $1.47 per share. Stockholders may have incurred substantial losses with regard to any investment in our common stock adversely affecting stockholder confidence. Limitations on our ability to utilize our NOLs may negatively affect our financial results.
In 2023, the closing price of our common stock varied from a high of $5.92 per share to a low of $1.77 per share. Stockholders may have incurred substantial losses with regard to any investment in our common stock adversely affecting stockholder confidence. Limitations on our ability to utilize our NOLs may negatively affect our financial results.
Following a renewed surge of tower imports from countries not impacted by existing tariffs, in July 2020, the USDOC issued antidumping and countervailing duty orders on imports of wind towers from Canada, Indonesia, and Vietnam and an antidumping order on imports of towers from Korea.
Following a renewed surge of tower imports from countries not impacted by existing tariffs, in July 2020, the USDOC issued antidumping and countervailing duty orders on imports of wind towers from Canada, Indonesia, and Vietnam and an antidumping order on imports of towers from Korea. The Indonesia countervailing duty order was later revoked after an appeal to the U.S.
The IRA also includes advanced manufacturing tax credits for manufacturers of eligible components, including wind and solar components (“45X credits”). Manufacturers qualify for the 45X credits based on the electricity output for each component produced and sold in the US starting in 2023 through 2032.
The IRA also includes AMP credits for manufacturers of eligible components, including wind and solar components. Manufacturers qualify for the AMP credits based on the electricity output for each component produced and sold in the US starting in 2023 through 2032.
We used at least 60% of our PPP Loan proceeds to pay for payroll costs and the balance on other eligible qualifying expenses that we believe to be consistent with the PPP. 14 We submitted our forgiveness applications to CIBC Bank, USA in the first quarter of 2021, and during the second quarter of 2021, all PPP Loans were forgiven by the SBA.
We used at least 60% of our PPP Loan proceeds to pay for payroll costs and the balance on other eligible qualifying expenses that we believe to be consistent with the PPP. 14 During the second quarter of 2021, all of our PPP Loans were forgiven by the SBA. However, the U.S.
In 2013, the USITC determined that wind towers from China and Vietnam were being sold in the U.S. at less than fair value. Imports from China and Vietnam have declined following a determination by the USITC in 2013 that wind towers from those countries were being sold in the U.S. at less than fair value.
Imports from China and Vietnam have declined following a determination by the U.S. International Trade Commission (“USITC”) in 2013 that wind towers from those countries were being sold in the U.S. at less than fair value. As a result of the determination, the U.S.
The Rights Plan is intended to deter any person or group from being or becoming the beneficial owner of 4.9% or more of our common stock and thereby triggering a further limitation of our available NOL carryforwards.
The Rights Plan is intended to deter any person or group from being or becoming the beneficial owner of 4.9% or more of our common stock and thereby triggering a further limitation of our available NOL carryforwards. See Note 14, “Income Taxes” of our consolidated financial statements for further discussion of our Rights Plan.
A successful claim against us could have a material adverse effect on our business. Because our industry is capital intensive and we have significant fixed and semi-fixed costs, our profitability is sensitive to changes in volume. The property, plants and equipment needed to manufacture products for our customers and provide our processes and solutions can be very expensive.
Because our industry is capital intensive and we have significant fixed and semi-fixed costs, our profitability is sensitive to changes in volume. The property, plants and equipment needed to manufacture products for our customers and provide our processes and solutions can be very expensive.
Changes of administration in the U.S. federal government may affect our business in a manner that currently cannot be reliably predicted, especially given the potentially significant changes to various laws and regulations that affect us.
We face significant risks associated with uncertainties resulting from changes to policies and laws with the periodic changes in the U.S. administration. Changes of administration in the U.S. federal government may affect our business in a manner that currently cannot be reliably predicted, especially given the potentially significant changes to various laws and regulations that affect us.
For example: ● The inability or failure of our customers to meet their contractual obligations could have a material adverse effect on our business, financial position and results of operations. ● Certain customer contracts provide the customer with the opportunity to cancel a substantial portion of its volume obligation by providing us with notice of such election prior to commencement of production.
For example: ● The inability or failure of our customers to meet their contractual obligations could have a material adverse effect on our business, financial position and results of operations and in the event of a dispute, these customers may have more significant resources than we do, which could result in protracted litigation and the incurrence of material costs. ● Certain customer contracts provide the customer with the opportunity to cancel a substantial portion of its volume obligation by providing us with notice of such election prior to commencement of production.
The credit amount varies based on the eligible component, which includes solar components, wind energy components, inverters, qualifying battery components, and critical minerals. Tower manufacturers are eligible for credits of $0.03 per watt for applicable components produced. Manufacturers can apply to the Internal Revenue Service for cash refunds of the 45X credits for up to five years.
The credit amount varies based on the eligible component, which includes solar components, wind energy components, inverters, qualifying battery components, and critical minerals. Tower manufacturers are eligible for credits of $0.03 per watt for applicable components produced.
OPERATIONAL RISKS We are substantially dependent on a few significant customers and the ordering levels for our products may vary based on customer needs. Historically, the majority of our revenues are highly concentrated with a limited number of customers. Some of the markets we serve have a limited number of customers.
We are substantially dependent on a few significant customers and the ordering levels for our products may vary based on customer needs. Further, we face significant risks associated with changes in our relationship with these significant customers. Historically, the majority of our revenues are highly concentrated with a limited number of customers.
In regards to any other future acquisitions, we could fail to identify, finance or complete suitable acquisitions on acceptable terms and prices.
In regards to any other future acquisitions, we could fail to identify, finance or complete suitable acquisitions on acceptable terms and prices, particularly with interest rates at comparatively high levels.
If we fail to adequately respond to the technological changes in our industry, make the necessary capital investments or are not suited to provide components for new types of wind turbines, our business, financial condition and operating results may be adversely affected. 12 If our estimates for warranty expenses differ materially from actual claims made, or if we are unable to reasonably estimate future warranty expense for our products, our business and financial results could be adversely affected.
If we fail to adequately respond to the technological changes in our industry, make the necessary capital investments or are not suited to provide components for new types of wind turbines, our business, financial condition and operating results may be adversely affected.
Although the liquidated damages provisions are generally capped, they can become significant and may have a negative impact on our profit margins and financial results. ● A material change in payment terms with a significant customer could have a material adverse effect on our short-term cash flows.
Although the liquidated damages provisions are generally capped, they can become significant and may have a negative impact on our profit margins and financial results. ● A material change in payment terms with a significant customer could have a material adverse effect on our short-term cash flows. ● The concentration of our customer base may enable our customers to demand pricing and other terms unfavorable to us and make us more vulnerable to changes in demand by or issues with a given customer.
Additionally, if our relationships with significant customers should change materially, it could be difficult for us to immediately and profitably replace lost sales in a market with such concentration, which could have a material adverse effect on our operating and financial results.
Because of this variability, we believe that comparisons of our operating results in any particular quarterly period may not be a reliable indicator of future performance. 11 Additionally, if our relationships with our significant customers should change materially, it could be difficult for us to immediately and profitably replace lost sales in a market with such concentration, which could have a material adverse effect on our operating and financial results.
We continue to seek to strategically diversify and grow the business to improve operational efficiency and meet customer demand. Our diversification efforts into the natural gas turbine power generation, O&G, mining and other industries may require additional investments in personnel, equipment and operational infrastructure.
Our diversification efforts into the natural gas turbine power generation, O&G, mining and other industries may require additional investments in personnel, equipment and operational infrastructure.
Many of the products we sell, and related services that we provide require that we have skilled labor in our manufacturing facilities. The availability of labor in the markets in which we operate has declined in recent years and competition for such labor has increased, especially under the economic crises experienced throughout and following the COVID-19 pandemic.
The availability of labor in the markets in which we operate has declined in recent years and competition for such labor has increased, especially under the economic crises experienced throughout and following the COVID-19 pandemic and current inflationary pressures.
As a result of the determination, the USDOC issued antidumping and countervailing duty orders on imports of wind towers from China and an antidumping duty order on imports of towers from Vietnam. In May 2018, the U.S. Court of Appeals affirmed the decision from the U.S.
Department of Commerce (“USDOC”) issued antidumping and countervailing duty orders on imports of wind towers from China and an antidumping duty order on imports of towers from Vietnam. In May 2018, the U.S. Court of Appeals affirmed the decision from the U.S. Court of International Trade and at the same time excluded CS Wind Vietnam from the antidumping order.
Court of International Trade and at the same time excluded CS Wind Vietnam from the antidumping order. In April 2019, the USDOC extended the term of these duties for an additional five-year period.
In April 2019, the USDOC extended the term of these duties for an additional five-year period.
As turbines grow in size, particularly to support the development of offshore windfarms, tower manufacturing becomes more complicated and may require investments in new manufacturing equipment. For example, some wind turbine manufacturers are using wind turbine towers made partially or wholly from concrete instead of steel.
Our component manufacturing equipment and technology may not be suited for future generations of products being developed by wind turbine companies. As turbines grow in size, particularly to support the development of offshore windfarms, tower manufacturing becomes more complicated and may require investments in new manufacturing equipment.
Recent increases in interest rates will result in increased interest expense to the extent we cannot limit our debt balances. RISKS RELATED TO OUR CORPORATE STRATEGY Our plans for growth and diversification may not be successful, and could result in poor financial performance.
RISKS RELATED TO OUR CORPORATE STRATEGY Our plans for growth and diversification may not be successful, and could result in poor financial performance. We continue to seek to strategically diversify and grow the business to improve operational efficiency and meet customer demand.
In 2022, two customers, SGRE and GE Renewable Energy, each accounted for more than 10% of our consolidated revenues, and our five largest customers accounted for 69% of our consolidated revenues.
Some of the markets we serve have a limited number of customers. In 2023, one customer, GE Renewable Energy, accounted for more than 10% of our consolidated revenues, and our five largest customers accounted for 65% of our consolidated revenues.
The global markets for wind turbines and our other manufactured industrial components are rapidly evolving technologically. Our component manufacturing equipment and technology may not be suited for future generations of products being developed by wind turbine companies.
ITEM 1A. RISK FACTORS OPERATIONAL RISKS We may be unable to keep pace with rapidly changing technology in wind turbine and other industrial component manufacturing. The global markets for wind turbines and our other manufactured industrial components are rapidly evolving technologically.
The extent and duration of the war and extent and strength of the sanctions are still developing, and the corresponding effect on the Company remains uncertain. 16 We could incur substantial costs to comply with environmental, health and safety (“EHS”) laws and regulations and to address violations of or liabilities under these requirements.
Certain other geopolitical conflicts, including the war between Israel and Hamas may also lead to material disruptions to certain supply chains and volatility in prices. 16 We could incur substantial costs to comply with environmental, health and safety (“EHS”) laws and regulations and to address violations of or liabilities under these requirements.
If the supply of skilled labor is constrained or our costs of attracting and maintaining a workforce increase, our profit margins could decrease, and our growth potential and brand image could be impaired. We may be unable to keep pace with rapidly changing technology in wind turbine and other industrial component manufacturing.
If the supply of skilled labor is constrained or our costs of attracting and maintaining a workforce increase, our profit margins could decrease, and our growth potential and brand image could be impaired. 12 If our estimates for warranty expenses differ materially from actual claims made, or if we are unable to reasonably estimate future warranty expense for our products, our business and financial results could be adversely affected.
Removed
Because of this variability, we believe that comparisons of our operating results in any particular quarterly period may not be a reliable indicator of future performance. 11 We face significant risks associated with uncertainties resulting from changes to policies and laws with the periodic changes in the U.S. administration as well as risks associated with changes in our relationship with our significant customers.
Added
For example, some wind turbine manufacturers are using wind turbine towers made partially or wholly from concrete instead of steel.
Removed
The COVID-19 pandemic has had, and may continue to have, adverse effects on our operations.
Added
Additionally, if we implement emerging technologies such as artificial intelligence and machine learning into our products and services, we may not be able to anticipate vulnerabilities, flaws or security threats resulting from the use of such technology and develop adequate protection measures.
Removed
In prior periods, we experienced adverse impacts from the COVID-19 pandemic including a decline in order activity levels within the Gearing and Heavy Fabrications segments and customers’ postponement of scheduled purchases and project timing partially offset by the continued operation of our facilities as essential businesses in light of the customers and markets served.
Added
Many of the products we sell, and related services that we provide require that we have skilled labor in our manufacturing facilities.
Removed
We continue to incur manufacturing inefficiencies associated with severe supply chain disruptions and realized employee staffing constraints due to the continued spread of the COVID-19 pandemic.
Added
A successful claim against us could have a material adverse effect on our business. Cybersecurity incidents could disrupt our business and result in the compromise of confidential information.
Removed
Although availability of vaccines and reopening of state and local economies have improved the outlook for recovery from the impact of the COVID-19 pandemic, due to the ongoing global pandemic, including emerging variants, we may again experience weaker customer demand, requests for extended payment terms, customer bankruptcies, additional supply chain disruption, more employee staffing constraints and difficulties, government restrictions or other factors that could negatively impact us and our business, operations and financial results.
Added
Certain government agencies, including the U.S. Treasury, have previously implemented and may implement policies that have resulted and may continue to result in significantly increased interest rates and borrowing costs. Recent increases in interest rates will result in increased interest expense to the extent we cannot limit our debt balances.
Removed
In addition, a possible recession or market correction resulting from the spread of COVID-19 or otherwise could materially affect our business and the value of our stock.
Added
We value input from all stockholders and remain open to ongoing engagement with our stockholders.
Removed
The impacts and potential impacts of COVID-19 that could directly or indirectly materially affect our business also include, but are not limited to, effectiveness of the vaccines against the evolving variants, additional widespread resurgences in COVID-19 infections, and evolving safety protocols such as requirements for proof of vaccination or regular testing in certain of our markets.
Added
Servicing our indebtedness requires a significant amount of cash, and the terms of our current indebtedness, and the terms of any future indebtedness, may restrict the activities of the Company. We have significant indebtedness, including the indebtedness under the 2022 Credit Facility (as defined and further discussed in Note 10 “Debt and Credit Agreements” of our consolidated financial statements).
Removed
As we cannot predict the duration or scope of the pandemic or its impact on economic and financial markets, any negative impact to our results cannot be reasonably estimated, but it could be material. Cybersecurity incidents could disrupt our business and result in the compromise of confidential information.
Added
Our debt obligations could potentially have important consequences to us and our investors, including: (1) requiring a substantial portion of our cash flows from operations to make debt service payments or to refinance our indebtedness as it becomes due, making it more difficult for us to satisfy our other priorities and obligations; (2) resulting in higher interest expenses, (3) increasing our vulnerability to general adverse economic and industry conditions; (4) reducing the cash flows available to fund capital expenditures and other corporate purposes and to grow our business; (5) limiting our flexibility in pursuing strategic opportunities or planning for, or reacting to, changes in our business and the industry; (6) placing us at a competitive disadvantage relative to our competitors that may not be as highly leveraged; and (7) limiting our ability to borrow additional funds as needed or take advantage of business opportunities as they arise, pay cash dividends or repurchase shares.
Removed
On February 3, 2022, the Board of Directors (the “Board”) approved an amendment which included an extension of the Rights Plan for an additional three years, which was subsequently approved by our stockholders at our 2022 Annual Meeting of Stockholders. See Note 13, “Income Taxes” of our consolidated financial statements for further discussion of our Rights Plan.
Added
Our ability to make scheduled payments of the principal of, to pay interest on or to refinance our indebtedness depends on our future performance, which is subject to economic, financial, competitive, regulatory factors, and factors beyond our control.
Removed
After the first five years, the 45X credits are transferable and can be sold to third parties for cash. We are waiting for the Internal Revenue Service and the U.S. Treasury Department to provide implementation guidance for the legislation.
Added
Our cash flow from operations in the future may be insufficient to service our indebtedness, including if our actual cash requirements in the future are greater than expected.
Added
If we are unable to generate the necessary cash flow, we may be required to adopt one or more alternatives, such as selling assets, restructuring debt, incurring new debt or issuing additional equity on terms that may be unfavorable, onerous or highly dilutive.
Added
Our ability to refinance our indebtedness or incur new debt will depend on the capital markets and our financial condition at such time. We may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on our debt obligations.
Added
As described in Note 10 “Debt and Credit Agreements” of our consolidated financial statements, the agreements governing our indebtedness contain covenants restricting our operations and limiting our financial flexibility. In addition, some of the agreements governing our indebtedness require that we maintain minimum EBITDA requirements, not exceed a maximum fixed charge coverage ratio and contain certain customary events of default.
Added
Our ability to comply with such restrictions and covenants may be affected by various factors, some of which factors may be beyond our control.
Added
If we breach any of these restrictions or covenants and do not obtain a waiver from the lenders or holders, as applicable, then, subject to the applicable cure periods and conditions, any outstanding indebtedness could be declared immediately due and payable.
Added
Manufacturers can elect a direct pay option where they can receive a payment equal to the full value of the tax credits from the Internal Revenue Service anytime during the ten-year period. That election lasts for five years, after which the AMP credits can be used against tax obligations or transferred to third parties in exchange for cash.
Added
We expect certain financial benefits as a result of tax incentives provided by the IRA. If these expected financial benefits vary significantly from our assumptions, our business, financial condition, and results of operations could be adversely affected. Any modifications to the law or its effects arising, for example, through (i) technical guidance and regulations from the IRS and U.S.
Added
Treasury Department, (ii) subsequent amendments to or interpretations of the law, and/or iii) future laws or regulations rendering certain provisions of the IRA less effective or ineffective, in whole or in part, could result in material adverse changes to the benefits we have recognized and expect to recognize.
Added
The extent and duration of the war and extent and strength of the sanctions are still developing, and the corresponding effect on the Company remains uncertain.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeOwned / Approximate Operating Segment and Facility Type Location Leased Square Footage Heavy Fabrications (1) Tower Manufacturing Manitowoc, WI Leased 194,000 Tower Manufacturing Abilene, TX Owned 175,000 Industrial Fabrications Manufacturing Manitowoc, WI Leased 113,000 Gearing and Corporate Gearing System Manufacturing—Machining and Corporate Administration Cicero, IL Leased 301,000 Gearing System Manufacturing—Heat Treatment and Gearbox Repair Neville Island, PA Owned 52,000 Industrial Solutions Industrial Solutions Manufacturing Sanford, NC Leased 105,000 (1) The Heavy Fabrications segment listing does not include the tower storage yards of 40 acres in Manitowoc, WI and 25 acres in Abilene, TX.
Biggest changeOwned / Approximate Operating Segment and Facility Type Location Leased Square Footage Heavy Fabrications (1) Tower Manufacturing Manitowoc, WI Leased 194,000 Tower Manufacturing Abilene, TX Owned 175,000 Industrial Fabrications Manufacturing Manitowoc, WI Leased 84,000 Gearing and Corporate Gearing System Manufacturing—Machining and Corporate Administration Cicero, IL Leased 301,000 Gearing System Manufacturing—Heat Treatment and Gearbox Repair Neville Island, PA Owned 52,000 Industrial Solutions Industrial Solutions Manufacturing Sanford, NC Leased 105,000 (1) The Heavy Fabrications segment listing does not include the tower storage yards of 40 acres in Manitowoc, WI and 25 acres in Abilene, TX.
ITEM 2. PROPERTIES Our corporate headquarters is located in Cicero, Illinois, a suburb located west of Chicago, Illinois. In addition, the Subsidiaries own or lease operating facilities, which are presented by operating segment as follows (information below is as of December 31, 2022).
ITEM 2. PROPERTIES Our corporate headquarters is located in Cicero, Illinois, a suburb located west of Chicago, Illinois. In addition, the Subsidiaries own or lease operating facilities, which are presented by operating segment as follows (information below is as of December 31, 2023).

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

0 edited+0 added−2 removed4 unchanged
Removed
We received a notice dated January 18, 2023 from WM Argyle Fund, LLC, which allegedly owned approximately 1.0% of our outstanding shares at the time of submission, purporting to nominate a slate of six candidates for election as directors at our 2023 Annual Meeting of Stockholders. We remain open to ongoing engagement with WM Argyle.
Removed
However, if the Company and WM Argyle cannot reach an agreement in connection with its nomination, there will be a contested election at the Company’s 2023 Annual Meeting of Stockholders.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

4 edited+0 added−0 removed3 unchanged
Biggest changeCommon Stock High Low 2022 First quarter $ 2.36 $ 1.58 Second quarter 2.17 1.52 Third quarter 3.59 1.47 Fourth quarter 2.83 1.57 Common Stock High Low 2021 First quarter $ 11.55 $ 4.84 Second quarter 6.41 3.97 Third quarter 4.55 2.46 Fourth quarter 3.51 1.88 The closing price for our common stock as of March 6, 2023 was $4.65.
Biggest changeCommon Stock High Low 2023 First quarter $ 5.92 $ 1.77 Second quarter 5.20 3.35 Third quarter 4.59 3.10 Fourth quarter 3.46 2.05 Common Stock High Low 2022 First quarter $ 2.36 $ 1.58 Second quarter 2.17 1.52 Third quarter 3.59 1.47 Fourth quarter 2.83 1.57 The closing price for our common stock as of February 29, 2024 was $2.48.
Securities Authorized for Issuance Under Equity Compensation Plans See Part III, Item 12 “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters” of this Annual Report on Form 10-K for information as of December 31, 2022 with respect to shares of our common stock that may be issued under our existing share-based compensation plans. 19 ITEM 6.
Securities Authorized for Issuance Under Equity Compensation Plans See Part III, Item 12 “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters” of this Annual Report on Form 10-K for information as of December 31, 2023 with respect to shares of our common stock that may be issued under our existing share-based compensation plans. 19 ITEM 6.
Repurchases There were no repurchases of our equity securities made during the years ended December 31, 2022 and 2021. Unregistered Sales of Equity Securities There were no unregistered sales of equity securities for the years ended December 31, 2022 or 2021.
Repurchases There were no repurchases of our equity securities made during the years ended December 31, 2023 and 2022. Unregistered Sales of Equity Securities There were no unregistered sales of equity securities for the years ended December 31, 2023 or 2022.
As of March 6, 2023, there were 49 holders of record of our common stock. Dividends We have never paid cash dividends on our common stock and have no current plan to do so in the foreseeable future.
As of February 29, 2024, there were 50 holders of record of our common stock. Dividends We have never paid cash dividends on our common stock and have no current plan to do so in the foreseeable future.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

45 edited+19 added−32 removed30 unchanged
Biggest changeYear Ended December 31, 2022 vs. 2021 % of Total % of Total 2022 Revenue 2021 Revenue $ Change % Change Revenues $ 176,759 100.0 % $ 145,619 100.0 % $ 31,140 21.4 % Cost of sales 166,049 93.9 % 140,108 96.2 % 25,941 18.5 % Gross profit 10,710 6.1 % 5,511 3.8 % 5,199 94.3 % Operating expenses Selling, general and administrative expenses 16,592 9.4 % 17,372 11.9 % (780 ) (4.5 )% Intangible amortization 725 0.4 % 733 0.5 % (8 ) (1.1 )% Total operating expenses 17,317 9.8 % 18,105 12.4 % (788 ) (4.4 )% Operating loss (6,607 ) (3.7 )% (12,594 ) (8.6 )% 5,987 47.5 % Other income (expense), net Paycheck Protection Program loan forgiveness — — % 9,151 6.3 % (9,151 ) (100.0 )% Interest expense, net (3,218 ) (1.8 )% (1,129 ) (0.8 )% (2,089 ) (185.0 )% Other, net 130 0.1 % 7,444 5.1 % (7,314 ) (98.3 )% Total other income (expense), net (3,088 ) (1.7 )% 15,466 10.6 % (18,554 ) (120.0 )% Net (loss) income before provision for income taxes (9,695 ) (5.5 )% 2,872 2.0 % (12,567 ) (437.6 )% Provision for income taxes 35 0.0 % 25 0.0 % 10 40.0 % Net (loss) income $ (9,730 ) (5.5 )% $ 2,847 2.0 % $ (12,577 ) (441.8 )% Consolidated Revenues increased by $31,140 during the year ended December 31, 2022 primarily due to a 92% increase in industrial fabrications product line revenue within the Heavy Fabrications segment compared to the prior year.
Biggest changeYear Ended December 31, 2023 vs. 2022 % of Total % of Total 2023 Revenue 2022 Revenue $ Change % Change Revenues $ 203,477 100.0 % $ 176,759 100.0 % $ 26,718 15.1 % Cost of sales 170,969 84.0 % 166,049 93.9 % 4,920 3.0 % Gross profit 32,508 16.0 % 10,710 6.1 % 21,798 203.5 % Operating expenses Selling, general and administrative expenses 20,705 10.2 % 16,592 9.4 % 4,113 24.8 % Intangible amortization 664 0.3 % 725 0.4 % (61 ) (8.4 )% Total operating expenses 21,369 10.5 % 17,317 9.8 % 4,052 23.4 % Operating income (loss) 11,139 5.5 % (6,607 ) (3.7 )% 17,746 268.6 % Other expense, net Interest expense, net (3,201 ) (1.6 )% (3,218 ) (1.8 )% 17 0.5 % Other, net (48 ) (0.0 )% 130 0.1 % (178 ) (136.9 )% Total other expense, net (3,249 ) (1.6 )% (3,088 ) (1.7 )% (161 ) (5.2 )% Net income (loss) before provision for income taxes 7,890 3.9 % (9,695 ) (5.5 )% 17,585 181.4 % Provision for income taxes 241 0.1 % 35 0.0 % 206 588.6 % Net income (loss) $ 7,649 3.8 % $ (9,730 ) (5.5 )% $ 17,379 178.6 % Consolidated Revenues increased by $26,718 during the year ended December 31, 2023 primarily due to a 14% increase in Heavy Fabrications segment revenues.
We follow the applicable pronouncement guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition related to the uncertainty in these income tax positions. 27 LIQUIDITY, FINANCIAL POSITION AND CAPITAL RESOURCES On August 4, 2022, we entered into a credit agreement (the “2022 Credit Agreement”) with Wells Fargo Bank, National Association, as lender (“Wells Fargo”), providing the Company and its subsidiaries with a $35,000 senior secured revolving credit facility (which may be further increased by up to an additional $10,000 upon the request of the Company and at the sole discretion of Wells Fargo) and a $7,578 senior secured term loan (collectively, the “2022 Credit Facility”).
We follow the applicable pronouncement guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition related to the uncertainty in these income tax positions. 27 LIQUIDITY, FINANCIAL POSITION AND CAPITAL RESOURCES On August 4, 2022, we entered into a credit agreement (as amended, the “2022 Credit Agreement”) with Wells Fargo Bank, National Association, as lender (“Wells Fargo”), providing the Company and its subsidiaries with a $35,000 senior secured revolving credit facility (which may be further increased by up to an additional $10,000 upon the request of the Company and at the sole discretion of Wells Fargo) and a $7,578 senior secured term loan (collectively, as amended, the “2022 Credit Facility”).
Pursuant to the terms of the Sales Agreement, we may sell from time to time, through the Agents, shares of the Company’s common stock, par value $0.001 per share with an aggregate sales price of up to $12,000.
Pursuant to the terms of the Sales Agreement, we may sell from time to time through the Agents shares of our common stock, par value $0.001 per share with an aggregate sales price of up to $12,000.
The Company will pay a commission to the Agents of 2.75% of the gross proceeds of the sale of the shares sold under the Sales Agreement and reimburse the Agents for the expenses incident to the performance of their obligations under the Sales Agreement.
We will pay a commission to the Agents of 2.75% of the gross proceeds of the sale of the shares sold under the Sales Agreement and reimburse the Agents for the expenses incident to the performance of their obligations under the Sales Agreement.
During 2022 and 2021, we also recognized revenue over time, versus point in time, when products in the Gearing and Heavy Fabrications segments had no alternative use to us and we had an enforceable right to payment, including profit, upon termination of the contract by the customer.
During 2023 and 2022, we also recognized revenue over time, versus point in time, when products in the Heavy Fabrications segments had no alternative use to us and we had an enforceable right to payment, including profit, upon termination of the contract by the customer.
As of December 31, 2022, we have (i) debt obligations related to our Credit Facility and other notes payable as described in Note 9, “Debt and Credit Agreements” of our consolidated financial statements (ii) cash payments for operating and finance lease obligations that are described in Note 10, “Leases” of our consolidated financial statements and (iii) purchase obligations made in the normal course of business.
As of December 31, 2023, we have (i) debt obligations related to our Credit Facility and other notes payable as described in Note 10, “Debt and Credit Agreements” of our consolidated financial statements (ii) cash payments for operating and finance lease obligations that are described in Note 11, “Leases” of our consolidated financial statements and (iii) purchase obligations made in the normal course of business.
During the year ended December 31, 2022, we issued 100,379 shares of the Company’s common stock under the Sales Agreement and the net proceeds (before upfront costs) from the sale of the Company’s common stock were approximately $323 after deducting commissions paid of approximately $9 and before deducting other expenses of $93.
During the year ended December 31, 2022, we issued 100,379 shares of our common stock under the Sales Agreement and the net proceeds (before upfront costs) to us from the sale of our common stock were approximately $323 after deducting commissions paid of approximately $9 and before deducting other expenses of $93.
In many instances within our Heavy Fabrications segment, wind towers are sold under terms included in bill and hold sales arrangements that result in different timing for revenue recognition versus shipment, due to our customers’ preference to ship products in batches to support efficient construction of wind farms.
In many instances within our Heavy Fabrications segment, wind towers as well as certain 2023 sales within our Gearing segment, are sold under terms included in bill and hold sales arrangements that result in different timing for revenue recognition versus shipment, due to our customers’ preference to ship products in batches to support efficient construction of wind farms.
We expect to fund these cash requirements primarily through cash generated from operations, available cash balances, our 2022 Credit Facility, additional equipment financing, and access to the public or private debt and/or equity markets, including the option to raise additional capital from the sale of our securities under a “shelf” registration statement on Form S-3.
We expect to fund these cash requirements primarily through cash generated from operations, available cash balances, our 2022 Credit Facility, sales of shares under the Sales Agreement, additional equipment financing, proceeds from sales of AMP credits, and access to the public or private debt and/or equity markets, including the option to raise additional capital from the sale of our securities under a “shelf” registration statement on Form S-3.
We anticipate that we will be able to satisfy the cash requirements associated with, among other things, working capital needs, capital expenditures and lease commitments through at least the next twelve months primarily through cash generated from operations, available cash balances, our Credit Facility, sales of shares under the Sales Agreement, additional equipment financing, and access to the public or private debt and/or equity markets, including the option to raise additional capital from the sale of our securities under a “shelf” registration statement on Form S-3.
We anticipate that we will be able to satisfy the cash requirements associated with, among other things, working capital needs, capital expenditures and lease commitments through at least the next twelve months primarily through cash generated from operations, available cash balances, our Credit Facility, sales of shares under the Sales Agreement, additional equipment financing, and access to the public or private debt and/or equity markets, including the option to raise additional capital from the sale of our securities under the Form S-3, and proceeds from sales of AMP credits.
Operating margin was 0.1% for the year ended December 31, 2022 compared to (9.1)% during the year ended December 31, 2021. Industrial Solutions Segment The following table summarizes the Industrial Solutions segment operating results for the twelve months ended December 31, 2022 and 2021.
Operating margin was 4.1% for the year ended December 31, 2023 compared to 0.1% during the year ended December 31, 2022. Industrial Solutions Segment The following table summarizes the Industrial Solutions segment operating results for the twelve months ended December 31, 2023 and 2022.
Investing Cash Flows During the year ended December 31, 2022, net cash used in investing activities was $3,098 compared to net cash used in investing activities of $1,674 for the year ended December 31, 2021. The increase was primarily due to an increase in net purchases of property and equipment.
Investing Cash Flows During the year ended December 31, 2023, net cash used in investing activities was $6,384 compared to net cash used in investing activities of $3,098 for the year ended December 31, 2022. The increase was primarily due to an increase in net purchases of property and equipment.
The notes payable have monthly payments that range from $3 to $16 and an interest rate of 4%. The equipment purchased is utilized as collateral for the notes payable. The outstanding notes payable have maturity dates that range from July 2023 to September 2028.
The notes payable have monthly payments that range from $3 to $15 and an interest rate of 6%. The equipment purchased is utilized as collateral for the notes payable. The outstanding notes payable have maturity dates in September 2028.
In addition, we have outstanding notes payable for capital expenditures in the amount of $1,094 and $363 as of December 31, 2022 and 2021, respectively, with $88 and $186 included in the “Line of credit and current portion of long-term debt” line item of our consolidated financial statements as of December 31, 2022 and 2021, respectively.
Other We have outstanding notes payable for capital expenditures in the amount of $1,361 and $1,094 as of December 31, 2023 and 2022, respectively, with $163 and $88 included in the “Line of credit and current maturities of long-term debt” line item of our consolidated financial statements as of December 31, 2023 and 2022, respectively.
Sources and Uses of Cash The following table summarizes our cash flows from operating, investing, and financing activities for the years ended December 31, 2022 and 2021: Year Ended December 31, 2022 2021 Total cash provided by (used in): Operating activities $ 16,643 $ (12,826 ) Investing activities (3,098 ) (1,674 ) Financing activities (1,665 ) 11,980 Net increase (decrease) in cash $ 11,880 $ (2,520 ) 28 Operating Cash Flows During the year ended December 31, 2022, net cash provided by operations was $16,643 compared to net cash used in operating activities of $12,826 for the year ended December 31, 2021.
Sources and Uses of Cash The following table summarizes our cash flows from operating, investing, and financing activities for the years ended December 31, 2023 and 2022: Year Ended December 31, 2023 2022 Total cash (used in) provided by : Operating activities $ (6,946 ) $ 16,643 Investing activities (6,384 ) (3,098 ) Financing activities 1,697 (1,665 ) Net (decrease) increase in cash $ (11,633 ) $ 11,880 28 Operating Cash Flows During the year ended December 31, 2023, net cash used in operating activities was $6,946 compared to net cash provided by operating activities of $16,643 for the year ended December 31, 2022.
The following table reconciles our non-GAAP key financial measures to the most directly comparable GAAP measure: Year Ended December 31, 2022 2021 Net (loss) income from continuing operations $ (9,730 ) $ 2,847 Interest expense 3,218 1,129 Income tax provision 35 25 Depreciation and amortization 6,060 6,336 Share-based compensation and other stock payments 2,861 2,872 Adjusted EBITDA 2,444 13,209 Changes in operating working capital 18,160 (13,573 ) Capital expenditures (3,098 ) (1,707 ) Proceeds from disposal of property and equipment — 33 Free Cash Flow $ 17,506 $ (2,038 ) 22 RESULTS OF OPERATIONS Year Ended December 31, 2022 Compared to Year Ended December 31, 2021 The summary of selected financial data table below should be referenced in connection with a review of the following discussion of our results of operations for the year ended December 31, 2022 compared to the year ended December 31, 2021.
The following table reconciles our non-GAAP key financial measures to the most directly comparable GAAP measure: Year Ended December 31, 2023 2022 Net income (loss) from continuing operations $ 7,649 $ (9,730 ) Interest expense 3,201 3,218 Income tax provision 241 35 Depreciation and amortization 6,383 6,060 Share-based compensation and other stock payments 2,220 2,861 Proxy contest-related expenses 1,780 — Adjusted EBITDA 21,474 2,444 Changes in operating working capital (18,933 ) 18,160 Capital expenditures (6,405 ) (3,098 ) Proceeds from disposal of property and equipment 21 — Free Cash Flow $ (3,843 ) $ 17,506 22 RESULTS OF OPERATIONS Year Ended December 31, 2023 Compared to Year Ended December 31, 2022 The summary of selected financial data table below should be referenced in connection with a review of the following discussion of our results of operations for the year ended December 31, 2023 compared to the year ended December 31, 2022.
As a result, our gross margin increased from 3.8% for the year ended December 31, 2021, to 6.1% for the year ended December 31, 2022.
As a result, our gross margin increased from 6.1% for the year ended December 31, 2022, to 16.0% for the year ended December 31, 2023.
For a further discussion of our capital resources and liquidity, including a description of recent amendments and waivers under our credit facility, please see the discussion under “Liquidity, Financial Position and Capital Resources” in this Annual Report on Form 10-K. COVID-19 Pandemic Our facilities continued to operate as essential businesses in light of the customers and markets served.
For a further discussion of our capital resources and liquidity, including a description of recent amendments and waivers under our credit facility, please see the discussion under “Liquidity, Financial Position and Capital Resources” in this Annual Report on Form 10-K.
The proceeds of the 2022 Credit Facility are available for general corporate purposes, including strategic growth opportunities. As of December 31, 2022, cash totaled $12,732, an increase of $11,880 from December 31, 2021. Debt and finance lease obligations at December 31, 2022 totaled $14,545, and we had the ability to borrow up to $27,351 under the 2022 Credit Facility.
The proceeds of the 2022 Credit Facility are available for general corporate purposes, including strategic growth opportunities. As of December 31, 2023, cash totaled $1,099, a decrease of $11,633 from December 31, 2022. Debt and finance lease obligations at December 31, 2023 totaled $17,678, and we had the ability to borrow up to $21,714 under the 2022 Credit Facility.
On August 18, 2020, we filed a “shelf” registration statement on Form S-3, which was declared effective by the Securities and Exchange Commission (the “SEC”) on October 13, 2020 (the “Form S-3”) and expires on October 12, 2023.
On September 22, 2023, we filed a shelf registration statement on Form S-3, which was declared effective by the Securities and Exchange Commission (the “SEC”) on October 12, 2023 (the “Form S-3”) and which will expire on October 12, 2026, replacing a prior shelf registration statement which expired on October 12, 2023.
Year Ended December 31, 2022 2021 Orders $ 20,333 $ 19,698 Revenues 17,804 15,402 Operating income (loss) 120 (386 ) Operating margin 0.7 % (2.5 )% Industrial Solutions segment orders increased by 3% for the year ended December 31, 2022 primarily due to an increase in new gas turbine orders.
Year Ended December 31, 2023 2022 Orders $ 25,652 $ 20,333 Revenues 25,159 17,804 Operating income 3,160 120 Operating margin 12.6 % 0.7 % Industrial Solutions segment orders increased by 26% for the year ended December 31, 2023 primarily due to an increase in orders associated with new gas turbine and aftermarket projects.
On December 31, 2022, we had $0 outstanding under our senior secured revolving credit facility, $7,217 outstanding under our senior secured term loan, $12,732 of cash on hand, with the ability to borrow an additional $27,351.
On December 31, 2023, we had $4,657 outstanding under our senior secured revolving credit facility, $6,135 outstanding under our senior secured term loan, $1,099 of cash on hand, with the ability to borrow an additional $21,714.
(4) Our backlog at December 31, 2022 and 2021 is net of revenue recognized over time. (5) We define book-to-bill as the ratio of new orders we received, net of cancellations, to revenue during a period.
(5) We define book-to-bill as the ratio of new orders we received, net of cancellations, to revenue during a period.
Financing Cash Flows During the year ended December 31, 2022, net cash used in financing activities totaled $1,665 compared to net cash provided by financing activities of $11,980 for the year ended December 31, 2021.
Financing Cash Flows During the year ended December 31, 2023, net cash provided by financing activities totaled $1,697 compared to net cash used in financing activities of $1,665 for the year ended December 31, 2022. The increase was primarily due to increased net borrowings under the 2022 Credit Facility in the current year period.
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.
These non-GAAP financial measures primarily consist of adjusted EBITDA (earnings before interest, income taxes, depreciation, amortization, share-based compensation, and other stock payments, restructuring costs, impairment charges, proxy contest-related expenses, and other non-cash gains and losses) and free cash flow which help us evaluate growth trends, establish budgets, assess operational efficiencies, oversee our overall liquidity, and evaluate our overall financial performance.
Gearing Segment The following table summarizes the Gearing segment operating results for the twelve months ended December 31, 2022 and 2021: Year Ended December 31, 2022 2021 Orders $ 53,597 $ 46,081 Revenues 42,588 28,583 Operating income (loss) 43 (2,593 ) Operating margin 0.1 % (9.1 )% Gearing segment orders for the year ended December 31, 2022 increased 16% compared to the year ended December 31, 2021 primarily due to increased demand from customers in all end markets.
Gearing Segment The following table summarizes the Gearing segment operating results for the twelve months ended December 31, 2023 and 2022: Year Ended December 31, 2023 2022 Orders $ 24,814 $ 53,597 Revenues 45,408 42,588 Operating income 1,846 43 Operating margin 4.1 % 0.1 % Gearing segment orders for the year ended December 31, 2023 decreased 54% compared to the year ended December 31, 2022 primarily due to reduced demand from O&G and mining customers.
Key Financial Measures Year Ended December 31, 2022 2021 Net revenues $ 176,759 $ 145,619 Net (loss) income $ (9,730 ) $ 2,847 Adjusted EBITDA (1) $ 2,444 $ 13,209 Capital expenditures $ 3,098 $ 1,707 Free cash flow (2) $ 17,506 $ (2,038 ) Operating working capital (3) $ 475 $ 18,635 Total debt $ 8,311 $ 6,827 Total orders $ 368,027 $ 159,025 Backlog at end of period (4) $ 297,200 $ 106,383 Book-to-bill (5) 2.1 1.1 (1) We provide non-GAAP adjusted EBITDA (earnings before interest, income taxes, depreciation, amortization, share-based compensation, and other stock payments, restructuring costs, impairment charges, and other non-cash gains and losses) as supplemental information regarding our business performance.
Key Financial Measures Year Ended December 31, 2023 2022 Net revenues $ 203,477 $ 176,759 Net income (loss) $ 7,649 $ (9,730 ) Adjusted EBITDA (1) $ 21,474 $ 2,444 Capital expenditures $ 6,405 $ 3,098 Free cash flow (2) $ (3,843 ) $ 17,506 Operating working capital (3) $ 19,408 $ 475 Total debt $ 12,153 $ 8,311 Total orders $ 101,060 $ 368,027 Backlog at end of period (4) $ 183,088 $ 297,200 Book-to-bill (5) 0.5 2.1 (1) We provide non-GAAP adjusted EBITDA as supplemental information regarding our business performance.
This shelf registration statement, which includes a base prospectus, allows us at any time to offer any combination of securities described in the prospectus in one or more offerings.
This shelf registration statement, which includes a base prospectus, allows us to offer any combination of securities described in the prospectus in one or more offerings. Unless otherwise specified in the prospectus supplement accompanying the base prospectus, we would use the net proceeds from the sale of any securities offered pursuant to the shelf registration statement for general corporate purposes.
Gearing segment orders increased 16% from the prior year primarily due to increased demand in all end markets led by industrial customers. Industrial Solutions segment orders increased by 3% in 2022 from the prior year primarily due to an increase in orders associated with new gas turbine projects.
Industrial Solutions segment orders increased by 26% in 2023 from the prior year primarily due to an increase in orders associated with new gas turbine and aftermarket projects. We recognized revenue of $203,477 in 2023, up 15% from revenue of $176,759 in 2022.
Due to triggering events identified within our segments at various times in the past, we continue to evaluate the recoverability of certain of the long-lived assets. During November 2022, we identified a triggering event associated with the Heavy Fabrications segment.
Due to triggering events identified within our segments at various times in the past, we continue to evaluate the recoverability of certain of the long-lived assets. During the year ended December 31, 2023, we did not identify any triggering events within our segments and no impairment expense was recorded.
Segment revenues increased by 15% during the year ended December 31, 2022 primarily due to a 92% increase in industrial fabrication revenue due to higher recent order intake from industrial customers and revenue recognized from our PRS units in the current year. Heavy Fabrications segment operating results improved by $2,170 as compared to the prior year.
Additionally, industrial fabrication product line revenues increased primarily due to higher shipments of our PRS units in the current year. Heavy Fabrications segment operating results improved by $16,050 as compared to the prior year.
The increase in net cash provided by operating activities was primarily due to an increase in customer deposits for future scheduled production during the current year period and an increase in accounts payable as compared to the prior year.
The decrease in net cash provided by operating activities was primarily attributable to the new AMP credit receivable and a decrease in customer deposits in 2023, versus an increase in the prior year. Partially offsetting this was a decrease in inventory during 2023 as compared to an increase in the prior year.
Revenues increased 49% during the year ended December 31, 2022 primarily due to higher order intake in recent quarters from customers in most end markets, particularly O&G, partially offset by a decrease in aftermarket wind revenue. 24 The Gearing segment's operating income improved by $2,636 during the year ended December 31, 2022 from the year ended December 31, 2021 primarily due to higher sales, partially offset by higher material costs, ramp-up costs, and increased fixed costs to support higher volumes.
Revenues increased 7% during the year ended December 31, 2023 from the prior year primarily due to higher shipments of industrial and steel customers, partially offset by a decrease in revenue from mining and O&G customers. 24 The Gearing segment's operating income improved by $1,803 during the year ended December 31, 2023 from the year ended December 31, 2022 primarily due to higher sales, improved operational efficiencies, a more profitable product mix sold, and the absence of ramp-up costs incurred in the prior year.
The $497 receivable balance was collected during January 2022. 20 We use our credit facility to fund working capital requirements and believe that our credit facility, together with the operating cash generated by our businesses, and any potential proceeds from access to the public or private debt or equity markets, are sufficient to meet all cash obligations over the next twelve months.
We also incurred other miscellaneous administrative costs related to selling the credits in the amount of $254, $197 of which has been recorded as cost of sales, with the remaining capitalized and included in the “Prepaid expenses and other current assets” line item of our consolidated financial statements at December 31, 2023. 20 We use our credit facility to fund working capital requirements and believe that our credit facility, together with the operating cash generated by our businesses, and any potential proceeds from access to the public or private debt or equity markets, are sufficient to meet all cash obligations over the next twelve months.
This was primarily due to higher recent order intake from industrial customers and revenue recognized from our PRS units in the current year. Gearing segment revenue increased by 49% compared to the prior year primarily due to higher order intake in recent quarters from customers in most end markets, particularly O&G, partially offset by a decrease in aftermarket wind revenue.
Additionally, industrial fabrication product line revenues increased primarily due to higher shipments of our PRS units in the current year. Gearing segment revenue increased 7% relative to 2022 primarily due to higher shipments for industrial and steel customers, partially offset by a decrease in revenue from mining and O&G customers.
Heavy Fabrications segment revenues increased by 15% during 2022 primarily due to a 92% increase in industrial fabrication revenue as a result of higher recent order intake from industrial customers and revenue recognized from our PRS units in the current year.
Additionally, industrial fabrication product line revenues increased primarily due to higher shipments of our PRS units in the current year. Gearing segment revenue increased 7% relative to 2022 primarily due to higher shipments for industrial and steel customers, partially offset by a decrease in revenue from mining and O&G customers.
This was partially offset by an increase in proceeds from long term debt primarily related to the senior secured term loan under our 2022 Credit Facility. Contractual Obligations We enter into a variety of contractual obligations as part of our normal operations in addition to capital expenditures.
Contractual Obligations We enter into a variety of contractual obligations as part of our normal operations in addition to capital expenditures.
Segment revenue increased 16% from the prior year primarily due to the timing of aftermarket installations. The improvement in operating income during the year ended December 31, 2022 was a result of the revenue increase, partially offset by increased labor and freight costs.
Segment revenue increased 41% from the prior year primarily due to increased demand for new and aftermarket gas turbine content, in addition to revenue recognized from international customers. The improvement in operating income during the year ended December 31, 2023 was a result of higher sales and a more profitable mix of product sold.
Heavy Fabrications Segment The following table summarizes the Heavy Fabrications segment operating results for the twelve months ended December 31, 2022 and 2021: Year Ended December 31, 2022 2021 Orders $ 294,097 $ 93,246 Tower sections sold 570 747 Revenues 117,206 101,994 Operating loss (1,044 ) (3,214 ) Operating margin (0.9 )% (3.2 )% Heavy Fabrications orders increased by 215% versus the prior year as a result of increased demand for our capacity as tower customers secured production capacity through 2024 for ongoing wind turbine tower installation projects.
Heavy Fabrications Segment The following table summarizes the Heavy Fabrications segment operating results for the twelve months ended December 31, 2023 and 2022: Year Ended December 31, 2023 2022 Orders $ 50,594 $ 294,097 Tower sections sold 600 570 Revenues 133,368 117,206 Operating income (loss) 15,006 (1,044 ) Operating margin 11.3 % (0.9 )% Heavy Fabrications orders decreased by 83% versus the prior year primarily due to the timing of tower orders as a major wind tower customer secured relatively longer-term capacity during the fourth quarter of 2022 instead of ordering in more regular intervals consistent with how orders are typically placed.
We reported a net loss of $9,730, or $0.48 per share in 2022, compared to a net income of $2,847 or $0.15 per share in 2021.
We reported net income of $7,649, or $0.36 per share in 2023, compared to a net loss of $9,730 or $0.48 per share in 2022 primarily due to higher sales and $14,493 of gross AMP credits (discussed below) recognized in the current year.
Operating profit margin was (0.9%) during the year ended December 31, 2022 compared to (3.2%) during the year ended December 31, 2021.
The improvement in operating performance was primarily a result of reduced wind tower costs as a result of the AMP credits recognized of $14,493 in the current year. Operating profit margin was 11.3% during the year ended December 31, 2023 compared to (0.9%) during the year ended December 31, 2022.
(Dollar amounts are presented in thousands, except per share data and unless otherwise stated) We booked $368,027 in net new orders in 2022, up from $159,025 in 2021. Heavy Fabrications orders increased by 215% from the prior year as demand increased for our capacity as tower customers secured production capacity through 2024 for ongoing wind turbine tower installation projects.
(Dollar amounts are presented in thousands, except per share data and unless otherwise stated) We booked $101,060 in net new orders in 2023, down from $368,027 in 2022.
The operating margin improved from (2.5)% during the year ended December 31, 2021, to 0.7% during the year ended December 31, 2022. Corporate and Other Corporate and Other expenses decreased by $679 during the year ended December 31, 2022. The decrease was primarily attributable to lower salaries and benefits.
The operating margin improved from 0.7% during the year ended December 31, 2022, to 12.6% during the year ended December 31, 2023. Corporate and Other Corporate and Other expenses increased by $3,162 during the year ended December 31, 2023 primarily due to higher medical costs, increased incentive compensation, and increased professional fees associated with the contested proxy election.
Industrial Solutions segment revenue increased 16% primarily due to the timing of aftermarket installations. Gross profit improved by $5,199 during the year ended December 31, 2022 primarily due to higher sales volumes in the Gearing and the Heavy Fabrications segments, partially offset by higher material costs and ramp-up costs .
Industrial Solutions segment revenue increased 41% from the prior year primarily due to increased demand for new and aftermarket gas turbine content, in addition to increased revenue recognized from international customers. Gross profit improved by $21,798 during the year ended December 31, 2023 primarily due to the higher sales volumes within all segments and $14,493 recognized from the AMP credits.
Operating expenses as a percentage of sales decreased to 9.8% in 2022 from 12.4% in 2021 primarily due to higher revenue levels, reduced salaries and benefits and reduced legal fees. 23 Net income decreased from $2,847 for the year ended December 31, 2021 to a net loss of $9,730 for the year ended December 31, 2022.The decrease in net income was primarily due to the absence of the $9,151 benefit recognized from the PPP loan forgiveness and the $6,965 ERC benefit, both of which were recognized in “Other Income (expense), net” in our consolidated statement of operations for the year ended December 31, 2021.
Operating expenses as a percentage of sales increased to 10.5% in 2023 from 9.8% in 2022 primarily due to proxy-contest related expenses, higher medical costs, and increased incentive compensation. 23 Net income increased from a net loss of $9,730 for the year ended December 31, 2022 to net income of $7,649 for the year ended December 31, 2023.The increase in net income was primarily due to the factors described above.
Removed
At December 31, 2022, total backlog was $297,200, up 179% from $106,383 at December 31, 2021 primarily due to the aforementioned increase in Heavy Fabrication segment orders. We recognized revenue of $176,759 in 2022, up 21% from revenue of $145,619 in 2021.
Added
Heavy Fabrications orders decreased by 83% from the prior year primarily due to the timing of tower orders as a major wind tower customer secured relatively longer-term capacity during the fourth quarter of 2022 instead of ordering in more regular intervals consistent with how orders are typically placed.
Removed
Gearing segment revenues increased 49% during 2022 from the prior year primarily due to recent higher order intake levels from customers in most end markets, particularly O&G, partially offset by a decrease in aftermarket wind revenue. Industrial Solutions segment revenue increased 16% from the prior year primarily due to the timing of aftermarket installations.
Added
Partially offsetting this decrease in wind tower orders was a 14% increase in industrial fabrication product line orders primarily due to improved demand for our Pressure Reducing Systems (“PRS”) units. Gearing segment orders decreased 54% from the prior year primarily due to reduced demand from O&G and mining customers.
Removed
The decrease in earnings was primarily due to the absence of the $9,151 benefit recognized from the PPP loan forgiveness and the $6,965 ERC benefit (described below), both of which were recognized in “Other Income (expense), net” in our consolidated statement of operations for the year ended December 31, 2021.
Added
Heavy Fabrications segment revenues increased by 14% primarily due to a 18% increase in wind tower revenue as a result of a 30 section increase in tower sections sold, less customer supplied materials in the current year and increased steel content, which is generally a pass-through to customers.
Removed
This decrease was partially offset by the volume related increases discussed above. On March 27, 2020, the CARES Act was signed into law providing numerous tax provisions and other stimulus measures, including the Employee Retention Credit (“ERC”), which is a refundable tax credit against certain employment taxes.
Added
Industrial Solutions segment revenue increased 41% from the prior year primarily due to increased demand for new and aftermarket gas turbine content, and increased revenue from international customers.
Removed
The Taxpayer Certainty and Disaster Tax Relief Act of 2020 and the American Rescue Plan Act of 2021 extended and expanded the availability of the ERC. As amended, the ERC was available for wages paid through September 30, 2021 and was equal to 70% of qualified wages (which included employer qualified health plan expenses) paid to employees.
Added
In January 2023, we announced that we had entered into a supply agreement for wind tower purchases valued at approximately $175 million with a leading global wind turbine manufacturer. Under the terms of the supply agreement, order fulfillment is to occur beginning in 2023 through year-end 2024.
Removed
During each quarter of 2021, a maximum of $10,000 in qualified wages for each employee was eligible for the ERC. Therefore, the maximum tax credit that could be claimed by an eligible employer in 2021 was $7,000 per employee per calendar quarter.
Added
In early November 2023, the parties discussed their joint intent to shift approximately half of the contracted tower section orders initially planned for 2024 into 2025, while maintaining the total number of tower sections stipulated under the supply agreement. During 2023, we recognized gross AMP credits totaling $14,493, within the Heavy Fabrications segment.
Removed
We qualified for the ERC in the first quarter of the year because we experienced a reduction in gross receipts of more than 20% for the first quarter of 2021 compared to the first quarter of 2019, the relevant criteria for the ERC.
Added
These AMP credits were introduced as part of the IRA, which was enacted on August 16, 2022. The IRA includes advanced manufacturing tax credits for manufacturers of eligible components, including wind and solar components.
Removed
Since we qualified for the ERC in the first quarter of 2021, we automatically qualified for the ERC in the second quarter of 2021.
Added
Manufacturers of wind components qualify for the AMP credits based on the total rated capacity, expressed on a per watt basis, of the completed wind turbine for which such component is designed. The credit applies to each component produced and sold in the U.S. beginning in 2023 through 2032.
Removed
In the first and second quarters of 2021, we received ERC benefits of $3,372 and $3,593, respectively, and under analogy to IAS 20 “Accounting for Government Grants and Disclosure of Government Assistance” were recorded in “Other income (expense), net” in our consolidated statement of operations.
Added
Wind towers within the Company’s Heavy Fabrications segment are eligible for credits of $0.03 per watt for each wind tower produced. In calculating the eligible credit, we relied on the megawatt rating provided by the customer.
Removed
During the third quarter of 2021 due to relatively higher revenues in 2021 as compared to the third quarter of 2019, we did not qualify for the ERC benefit.
Added
Manufacturers who qualify for the AMP credits can apply to the Internal Revenue Service for cash refunds of the AMP credits or sell the AMP credits to third parties for cash, or apply the AMP credits against taxable income.
Removed
The receivable for the remaining uncollected ERC benefit was $497 as of December 31, 2021 and was included in the “Employee retention credit receivable” line item in our consolidated balance sheet at December 31, 2021.
Added
We recognized the AMP credits as a reduction to cost of sales in our consolidated statements of operations for the year ended December 31, 2023. The assets related to the AMP credits are recognized as current assets in the “AMP credit receivable” line item in our consolidated balance sheet as of December 31, 2023.
Removed
However, through December 31, 2022, we have experienced an adverse impact to our business, operations and financial results as a result of this pandemic due in part to manufacturing inefficiencies associated with supply chain disruptions and employee staffing constraints due to the spread of the COVID-19 pandemic.
Added
On December 21, 2023, we entered into an agreement to sell 2023 and 2024 AMP credits to a third party. At that time, we sold a portion of the gross 2023 credits in the amount of $6,952 and recognized a 6.5% discount on the sale in the amount of $452 which was recognized in cost of sales.
Removed
In response to the pandemic, we continue to right-size our workforce and delay certain capital expenditures. In future periods, we may experience weaker customer demand, requests for extended payment terms, customer bankruptcies, additional supply chain disruption, employee staffing constraints and difficulties, government restrictions or other factors that could negatively impact the Company and its business, operations and financial results.
Added
In addition, we wrote down the remaining receivable of $7,541 to net realizable value and recorded the expected loss on sale of $490 in cost of sales. The remaining 2023 AMP credit receivable was collected during the first quarter of 2024.
Removed
As we cannot predict the duration or scope of the pandemic, including in light of the emerging variants, or its impact on economic and financial markets, any negative impact to our results cannot be reasonably estimated, but it could be material.
Added
(4) Our backlog at December 31, 2023 and 2022 is net of revenue recognized over time. Backlog as of December 31, 2023 has been adjusted to reflect updated assumptions related to raw material pricing (which is a customer passthrough) and other variables.
Removed
Although the long-term effects of COVID-19 remain unknown, the availability of vaccines and reopening of state and local economies have improved the outlook for recovery from COVID-19 impacts. However, we continue to monitor closely the Company’s financial health and liquidity and the impact of the pandemic on the Company, including emerging variants.
Added
Wind tower revenue increased 18% from the prior year primarily as a result of a 30 section increase in tower sections sold, less customer supplied materials in the current year and increased steel content, which is generally a pass-through to customers.
Removed
We have been able to serve the needs of our customers while taking steps to protect the health and safety of our employees, customers, partners, and communities. Among these steps, we follow the guidance provided by the U.S. Centers for Disease Control and Prevention.
Added
Partially offsetting this decrease in wind tower orders was a 14% increase in industrial fabrication product line orders primarily due to improved demand for our PRS units.
Removed
This decrease was partially offset by the volume related increases discussed above.
Added
Segment revenues increased by 14% primarily due to a 18% increase in wind tower revenue primarily as a result of a 30 section increase in tower sections sold, less customer supplied materials in the current year and increased steel content, which is generally a pass-through to customers.
Removed
The improvement in operating performance was primarily a result of higher sales in the current year and the absence of one-time events that occurred during the prior year period including a weather-related event and a customer driven project delay, partially offset by costs associated with transitioning a portion of the workforce to support growth in the industrial fabrications product line and inefficiencies associated with a change to a new tower design in the fourth quarter.

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