bwen20230331

bwen20230331_10q.htm

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒

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

For the quarterly period ended March 31, 2023

☐

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

For the transition period from to

Commission file number 001-34278

BROADWIND, INC.

(Exact name of registrant as specified in its charter)

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

3240 S. Central Avenue, Cicero, IL 60804

(Address of principal executive offices)

(708) 780-4800

(Registrant’s telephone number, including area code)

Not applicable

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

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

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding twelve months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

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

Large accelerated filer ☐		Accelerated filer ☐

Non-accelerated filer ☒		Smaller reporting company ☒

Emerging growth company ☐

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Number of shares of registrant’s common stock, par value $0.001, outstanding as of May 8, 2023: 20,976,787.

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BROADWIND, INC. AND SUBSIDIARIES

INDEX

		Page No.

PART I. FINANCIAL INFORMATION

Item 1.	Unaudited Financial Statements	1
	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statements of Operations	2
	Condensed Consolidated Statements of Stockholders’ Equity	3
	Condensed Consolidated Statements of Cash Flows	4
	Notes to Condensed Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	24
Item 4.	Controls and Procedures	24
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	25
Item 1A.	Risk Factors	25
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	26
Item 3.	Defaults Upon Senior Securities	26
Item 4.	Mine Safety Disclosures	26
Item 5.	Other Information	26
Item 6.	Exhibits	26
Signatures		28

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PART I. FINANCIAL INFORMATION

Item 1.Financial Statements

BROADWIND, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

(in thousands, except share and per share data)

	*March 31,*			*December 31,*
	*2023*			*2022*

ASSETS
CURRENT ASSETS:
Cash	$	1,729		$	12,732
Accounts receivable, net		25,845			17,018
Contract assets		1,909			1,955
Inventories, net		48,543			44,262
Prepaid expenses and other current assets		3,160			3,291
Total current assets		81,186			79,258
LONG-TERM ASSETS:
Property and equipment, net		45,270			45,319
Operating lease right-of-use assets, net		15,946			16,396
AMP credit receivable		3,162			—
Intangible assets, net		2,560			2,728
Other assets		834			839
TOTAL ASSETS	$	148,958		$	144,540
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Line of credit and current portion of long-term debt	$	18,089		$	1,170
Current portion of finance lease obligations		1,663			2,008
Current portion of operating lease obligations		1,824			1,882
Accounts payable		25,794			26,255
Accrued liabilities		5,160			4,313
Customer deposits		21,751			34,550
Total current liabilities		74,281			70,178
LONG-TERM LIABILITIES:
Long-term debt, net of current maturities		6,863			7,141
Long-term finance lease obligations, net of current portion		3,976			4,226
Long-term operating lease obligations, net of current portion		16,296			16,696
Other		20			26
Total long-term liabilities		27,155			28,089
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS’ EQUITY:
Preferred stock, $0.001 par value; 10,000,000 shares authorized; no shares issued or outstanding		—			—
Common stock, $0.001 par value; 30,000,000 shares authorized; 21,191,937 and 21,127,130 shares issued as of March 31, 2023, and December 31, 2022, respectively		21			21
Treasury stock, at cost, 273,937 shares as of March 31, 2023 and December 31, 2022		(1,842	)		(1,842	)
Additional paid-in capital		397,720			397,240
Accumulated deficit		(348,377	)		(349,146	)
Total stockholders’ equity		47,522			46,273
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	148,958		$	144,540

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

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BROADWIND, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

(in thousands, except per share data)

	*Three Months Ended March 31,*
	*2023*			*2022*
Revenues	$	48,873		$	41,844
Cost of sales		41,897			39,832
Gross profit		6,976			2,012
OPERATING EXPENSES:
Selling, general and administrative		5,526			3,902
Intangible amortization		168			183
Total operating expenses		5,694			4,085
Operating income (loss)		1,282			(2,073	)
OTHER (EXPENSE) INCOME, net:
Interest expense, net		(488	)		(345	)
Other, net		(2	)		21
Total other (expense) income, net		(490	)		(324	)
Net income (loss) before provision for income taxes		792			(2,397	)
Provision for income taxes		23			7
NET INCOME (LOSS)		769			(2,404	)
NET INCOME (LOSS) PER COMMON SHARE—BASIC:
Net income (loss)		0.04			(0.12	)
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING—BASIC		20,869			19,708
NET INCOME (LOSS) PER COMMON SHARE—DILUTED:
Net income (loss)	$	0.04		$	(0.12	)
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING—DILUTED		21,387			19,708

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

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BROADWIND, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(UNAUDITED)

(in thousands, except share data)

	*Common Stock*					*Treasury Stock*						*Additional*
	*Shares*			*Issued*					*Issued*			*Paid-in*			*Accumulated*
	*Issued*			*Amount*		*Shares*			*Amount*			*Capital*			*Deficit*			*Total*

BALANCE, December 31, 2021		19,859,650		$	20		(273,937	)	$	(1,842	)	$	395,372		$	(339,416	)	$	54,134
Stock issued for restricted stock		480,595			—		—			—			—			—			—
Stock issued under defined contribution 401(k) retirement savings plan		146,790			—		—			—			282			—			282
Share-based compensation		—			—		—			—			192			—			192
Shares withheld for taxes in connection with issuance of restricted stock		(194,962	)		—		—			—			(411	)		—			(411	)
Net loss		—			—		—			—			—			(2,404	)		(2,404	)
BALANCE, March 31, 2022		20,292,073		$	20		(273,937	)	$	(1,842	)	$	395,435		$	(341,820	)	$	51,793

BALANCE, December 31, 2022		21,127,130		$	21		(273,937	)	$	(1,842	)	$	397,240		$	(349,146	)	$	46,273
Stock issued under defined contribution 401(k) retirement savings plan		64,807			—		—			—			302			—			302
Share-based compensation		—			—		—			—			178			—			178
Net income		—			—		—			—			—			769			769
BALANCE, March 31, 2023		21,191,937		$	21		(273,937	)	$	(1,842	)	$	397,720		$	(348,377	)	$	47,522

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

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BROADWIND, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(in thousands)

	*Three Months Ended March 31,*
	*2023*			*2022*
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	769		$	(2,404	)
Adjustments to reconcile net cash used in operating activities:
Depreciation and amortization expense		1,605			1,519
Deferred income taxes		(5	)		(7	)
Change in fair value of interest rate swap agreements		—			2
Share-based compensation		178			192
Allowance for doubtful accounts		14			(23	)
Common stock issued under defined contribution 401(k) plan		302			282
Loss on disposal of assets		—			3
Changes in operating assets and liabilities:
Accounts receivable		(8,841	)		(5,073	)
AMP credit receivable		(3,162	)		—
Employee retention credit receivable		—			497
Contract assets		46			(2,038	)
Inventories		(4,281	)		(5,690	)
Prepaid expenses and other current assets		130			179
Accounts payable		(784	)		10,538
Accrued liabilities		847			(254	)
Customer deposits		(12,799	)		(3,683	)
Other non-current assets and liabilities		(3	)		(45	)
Net cash used in operating activities		(25,984	)		(6,005	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment		(1,065	)		(492	)
Net cash used in investing activities		(1,065	)		(492	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from line of credit, net		16,945			7,207
Proceeds from long-term debt		—			125
Payments on long-term debt		(634	)		(8	)
Principal payments on finance leases		(265	)		(495	)
Shares withheld for taxes in connection with issuance of restricted stock		—			(411	)
Net cash provided by financing activities		16,046			6,418
NET DECREASE IN CASH		(11,003	)		(79	)
CASH beginning of the period		12,732			852
CASH end of the period	$	1,729		$	773

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

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BROADWIND, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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

NOTE 1 — BASIS OF PRESENTATION

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

Operating results for the three months ended March 31, 2023 are not necessarily indicative of the results that may be expected for the twelve months ending December 31, 2023, or any other interim period, which may differ materially due to, among other things, the risk factors set forth in our Annual Report on Form 10-K for the year ended December 31, 2022 and as supplemented by the risk factors set forth in Part II, Item 1A, “Risk Factors,” of this Quarterly Report on Form 10-Q.

The December 31, 2022 condensed consolidated balance sheet was derived from audited financial statements, but does not include all disclosures required by GAAP. This financial information should be read in conjunction with the consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

There have been no material changes in the Company’s significant accounting policies during the three months ended March 31, 2023 as compared to the significant accounting policies described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

Company Description

Through its subsidiaries, the Company is a precision manufacturer of structures, equipment and components for clean technology and other specialized applications. The Company provides technologically advanced high value products to customers with complex systems and stringent quality standards that operate in energy, mining and infrastructure sectors, primarily in the United States of America (the “U.S.”). The Company’s capabilities include, but are not limited to the following: heavy fabrications, welding, metal rolling, coatings, gear cutting and shaping, gearbox manufacturing and repair, heat treatment, assembly, engineering and packaging solutions. The Company’s most significant presence is within the U.S. wind energy industry, which accounted for 50% and 53% of the Company’s revenue during the first three months of 2023 and 2022, respectively.

Liquidity

The Company typically meets its short term liquidity needs through cash generated from operations, its available cash balances, the 2022 Credit Facility (as defined below), equipment financing, and access to the public or private debt and/or equity markets, including the option to raise capital from the sale of our securities under the Form S-3 (as discussed below).

See Note 8, “Debt and Credit Agreements,” of these condensed consolidated financial statements for a description of the 2022 Credit Facility and the Company’s other debt.

Debt and finance lease obligations at March 31, 2023 totaled $30,591, which includes current outstanding debt and finance leases totaling $19,752. The Company’s outstanding debt includes $16,945 outstanding from the senior secured revolving credit facility under the 2022 Credit Facility. The Company had $6,947 drawn on the senior secured revolving term loan as of March 31, 2023. The Company’s revolving line of credit balance is included in the “Line of credit and current portion of long-term debt” line item in the Company's condensed consolidated balance sheet.

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On August 18, 2020, the Company filed a “shelf” registration statement on Form S-3, which was declared effective by the Securities and Exchange Commission (the “SEC”) on October 13, 2020 (the “Form S-3”) and expires on October 12, 2023. This shelf registration statement, which includes a base prospectus, allows the Company to offer any combination of securities described in the prospectus in one or more offerings. Unless otherwise specified in the prospectus supplement accompanying the base prospectus, the Company would use the net proceeds from the sale of any securities offered pursuant to the shelf registration statement for general corporate purposes.

On September 12, 2022, the Company entered into a Sales Agreement (the “Sales Agreement”) with Roth Capital Partners, LLC and HC Wainwright & Co., LLC (collectively, the “Agents”). Pursuant to the terms of the Sales Agreement, the Company may sell from time to time through the Agents shares of the Company’s common stock, par value $0.001 per share with an aggregate sales price of up to $12,000. Any shares offered and sold under the Sales Agreement are to be issued pursuant to the Form S-3 and the 424(b) prospectus supplement relating to the offering dated September 12, 2022. The Company will pay a commission to the Agents of 2.75% of the gross proceeds of the sale of the shares sold under the Sales Agreement and reimburse the Agents for the expenses incident to the performance of their obligations under the Sales Agreement. During the year ended December 31, 2022, the Company issued 100,379 shares of the Company’s common stock under the Sales Agreement and the net proceeds (before upfront costs) to the Company from the sale of the Company’s common stock were approximately $323 after deducting commissions paid of approximately $9 and before deducting other expenses of $93. No shares of the Company’s common stock were issued under the Sales Agreement during the three months ended March 31, 2023. As of March 31, 2023, shares of the Company’s common stock having a value of approximately $11,667 remained available for issuance under the Sales Agreement.

The Company also utilizes supply chain financing arrangements as a component of its funding for working capital, which accelerates receivable collections and helps to better manage cash flow. Under these agreements, the Company has agreed to sell certain of its accounts receivable balances to banking institutions who have agreed to advance amounts equal to the net accounts receivable balances due, less a discount as set forth in the respective agreements. The balances under these agreements are accounted for as sales of accounts receivable, as they are sold without recourse. Cash proceeds from these agreements are reflected as operating activities included in the change in accounts receivable in the Company's consolidated statements of cash flows. Fees incurred in connection with the agreements are recorded as interest expense by the Company.

During the three months ended March 31, 2023 and March 31, 2022, the Company sold account receivables totaling $9,614 and $15,925, respectively, related to supply chain financing arrangements, of which customers’ financial institutions applied discount fees totaling $131 and $78, respectively.

The Company anticipates that current cash resources, amounts available under the 2022 Credit Facility, cash to be generated from operations and equipment financing, potential proceeds from the sale of Company securities under the Sales Agreement and any potential proceeds from the sale of further Company securities under the Form S-3 will be adequate to meet the Company’s liquidity needs for at least the next twelve months.

If assumptions regarding the Company’s production, sales and subsequent collections from certain of the Company’s large customers, as well as receipt of customer deposits and revenues generated from new customer orders, are materially inconsistent with management’s expectations, the Company may in the future encounter cash flow and liquidity issues. If the Company’s operational performance deteriorates significantly, it may be unable to comply with existing financial covenants, and could lose access to the 2022 Credit Facility. This could limit the Company’s operational flexibility, require a delay in making planned investments and/or require the Company to seek additional equity or debt financing. Any additional equity financing, if available, may be dilutive to stockholders, and additional debt financing, if available, would likely require new financial covenants or impose other restrictions on the Company. While the Company believes that it will continue to have sufficient cash available to operate its businesses and to meet its financial obligations and debt covenants, there can be no assurances that its operations will generate sufficient cash, or that credit facilities will be available in an amount sufficient to enable the Company to meet these financial obligations.

Reclassifications

Certain prior year amounts, which are not material, have been reclassified to conform to current year presentation in the condensed consolidated financial statements and the notes to the condensed consolidated financial statements.

Management’s Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities as of the date of the financial statements and reported amounts of revenues and expenses during the reported period. Significant estimates, among others, include revenue recognition, future cash flows, inventory reserves, warranty reserves, impairment of long-lived assets, allowance for doubtful accounts, health insurance reserves, and valuation allowances on deferred taxes. Although these estimates are based upon management’s best knowledge of current events and actions that the Company may undertake in the future, actual results could differ from these estimates.

NOTE 2 — REVENUES

Revenues are recognized when the promised goods or services are transferred to customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services.

The following table presents the Company’s revenues disaggregated by revenue source for the three months ended March 31, 2023 and 2022:

	*Three Months Ended March 31,*
	*2023*			*2022*
Heavy Fabrications	$	31,593		$	27,272
Gearing		11,965			10,584
Industrial Solutions		5,423			4,073
Eliminations		(108	)		(85	)
Consolidated	$	48,873		$	41,844

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Revenue within the Company’s Gearing and Industrial Solutions segments, as well as industrial fabrication product line revenues within the Heavy Fabrications segment, are generally recognized at a point in time, typically when the promised goods or services are physically transferred to its customers in an amount that reflects the consideration it expects to be entitled to in exchange for those goods or services. A performance obligation is a promise in a contract to transfer a distinct product or service to the customer. The Company measures revenue based on the consideration specified in the purchase order and revenue is recognized when the performance obligations are satisfied. If applicable, the transaction price of a contract is allocated to each distinct performance obligation and recognized as revenue when or as the customer receives the benefit of the performance obligation.

For many tower sales within the Company’s Heavy Fabrications segment, products are sold under terms included in bill and hold sales arrangements that result in different timing for revenue recognition. The Company recognizes revenue under these arrangements only when there is a substantive reason for the agreement, the ordered goods are identified separately as belonging to the customer and not available to fill other orders, the goods are currently ready for physical transfer to the customer, and the Company does not have the ability to use the product or to direct it to another customer. Assuming these required revenue recognition criteria are met, revenue is recognized upon completion of product manufacture and customer acceptance.

During the three months ended March 31, 2023 and 2022, the Company recognized a portion of revenue within the Heavy Fabrications segment over time, as the products had no alternative use to the Company and the Company had an enforceable right to payment, including profit, upon termination of the contracts. Within the Heavy Fabrications segment, the Company recognized revenue over time of $1,858 and $2,471 for the three months ended March 31, 2023 and March 31, 2022, respectively. The Company uses labor hours as the input measure of progress for the applicable Heavy Fabrications contracts because the projects are labor intensive. Contract assets are recorded when performance obligations are satisfied but the Company is not yet entitled to payment. Contract assets represent the Company’s rights to consideration for work completed but not billed at the end of the period.

The Company generally expenses sales commissions when incurred. These costs are recorded within selling, general and administrative expenses. Customer deposits, deferred revenue and other receipts are deferred and recognized when the revenue is realized and earned. Cash payments to customers are classified as reductions of revenue in the Company’s statement of operations.

The Company does not disclose the value of the unsatisfied performance obligations for contracts with an original expected length of one year or less.

NOTE 3 — EARNINGS PER SHARE

The following table presents a reconciliation of basic and diluted earnings per share for the three months ended March 31, 2023 and 2022, as follows:

	*Three Months Ended*
	*March 31,*
	*2023*		*2022*
Basic earnings per share calculation:
Net income (loss)	$	769	$	(2,404	)
Weighted average number of common shares outstanding		20,869,035		19,707,815
Basic net income (loss) per share	$	0.04	$	(0.12	)
Diluted earnings per share calculation:
Net income (loss)	$	769	$	(2,404	)
Weighted average number of common shares outstanding		20,869,035		19,707,815
Common stock equivalents:
Non-vested stock awards (1)		517,979		—
Weighted average number of common shares outstanding		21,387,014		19,707,815
Diluted net income (loss) per share	$	0.04	$	(0.12	)

(1) Restricted stock units granted and outstanding of 623,191 as of March 31, 2022, are excluded from the computation of diluted earnings due to the anti-dilutive effect as a result of the Company’s net loss for the three months ended March 31, 2022.

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NOTE 4 — INVENTORIES

The components of inventories as of March 31, 2023 and December 31, 2022 are summarized as follows:

	*March 31,*			*December 31,*
	*2023*			*2022*
Raw materials	$	29,993		$	27,644
Work-in-process		16,180			13,843
Finished goods		4,575			4,916
		50,748			46,403
Less: Reserve for excess and obsolete inventory		(2,205	)		(2,141	)
Net inventories	$	48,543		$	44,262

NOTE 5 — AMP CREDITS

During the first quarter of 2023, the Company recognized Advanced Manufacturing Production tax credits (“AMP credits”) totaling $3,162 within the Heavy Fabrications segment. These AMP credits were introduced as part of the Inflation Reduction Act (“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. 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. starting in 2023 through 2032. 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, the Company relied on the megawatt rating provided by the customer. Manufacturers can apply to the Internal Revenue Service for cash refunds of the AMP credits for up to five years. After the first five years, the AMP credits are transferable and can be sold to third parties for cash. The Company recognized the AMP credits as a reduction to cost of sales in the Company’s condensed consolidated statements of operations for the three months ended March 31, 2023. The assets related to the AMP credits are recognized as a long-term asset in the “AMP credit receivable” line item in the Company's condensed consolidated balance sheets as of March 31, 2023. There are currently several critical and complex aspects of the IRA pending technical guidance and regulations from the Internal Revenue Service and the U.S. Treasury Department. Any modifications to the law or its effects arising, for example, through technical guidance and regulations from the Internal Revenue Service and the U.S. Treasury Department could result in changes to the expected and/or actual benefits in the future, which could have a material effect on the Company, results of operations, financial performance and future development efforts.

NOTE 6 — INTANGIBLE ASSETS

Intangible assets represent the fair value assigned to definite-lived assets such as trade names and customer relationships as part of the Company’s acquisition of Brad Foote completed in 2007 as well as the noncompetition agreements, trade names and customer relationships that were part of the Company’s acquisition of Red Wolf Company, LLC completed in 2017. Intangible assets are amortized on a straight-line basis over their estimated useful lives, with a remaining life range from 0 to 5 years.

As of March 31, 2023 and December 31, 2022, the cost basis, accumulated amortization and net book value of intangible assets were as follows:

	*March 31, 2023*												*December 31, 2022*
											*Remaining*												*Remaining*
											*Weighted*												*Weighted*
						*Accumulated*			*Net*		*Average*							*Accumulated*			*Net*		*Average*
	*Cost*		*Accumulated*			*Impairment*			*Book*		*Amortization*				*Accumulated*			*Impairment*			*Book*		*Amortization*
	*Basis*		*Amortization*			*Charges*			*Value*		*Period*		*Cost*		*Amortization*			*Charges*			*Value*		*Period*
Intangible assets:
Noncompete agreements	$	170	$	(170	)	$	—		$	—		—	$	170	$	(167	)	$	—		$	3		0.1
Customer relationships		15,979		(7,646	)		(7,592	)		741		2.8		15,979		(7,581	)		(7,592	)		806		3.1
Trade names		9,099		(7,280	)		—			1,819		4.5		9,099		(7,180	)		—			1,919		4.8
Intangible assets	$	25,248	$	(15,096	)	$	(7,592	)	$	2,560		4.1	$	25,248	$	(14,928	)	$	(7,592	)	$	2,728		4.3

As of March 31, 2023, estimated future amortization expense was as follows:

2023	$	496
2024		661
2025		661
2026		422
2027		320
Total	$	2,560

NOTE 7 — ACCRUED LIABILITIES

Accrued liabilities as of March 31, 2023 and December 31, 2022 consisted of the following:

	*March 31,*		*December 31,*
	*2023*		*2022*
Accrued payroll and benefits	$	3,524	$	3,110
Accrued property taxes		209		17
Income taxes payable		54		26
Accrued professional fees		197		118
Accrued warranty liability		164		149
Self-insured workers compensation reserve		35		30
Long term incentive plan accrual		619		619
Accrued other		358		244
Total accrued liabilities	$	5,160	$	4,313

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NOTE 8 — DEBT AND CREDIT AGREEMENTS

The Company’s outstanding debt balances as of March 31, 2023 and December 31, 2022 consisted of the following:

	*March 31,*			*December 31,*
	*2023*			*2022*
Line of credit	$	16,945		$	—
Other notes payable		1,060			1,094
Long-term debt		6,947			7,217
Less: Current portion		(18,089	)		(1,170	)
Long-term debt, net of current maturities	$	6,863		$	7,141

Credit Facility

On August 4, 2022, the Company entered into a credit agreement (the “2022 Credit Agreement”) with Wells Fargo Bank, National Association, as lender (“Wells Fargo”), which replaced its prior credit facility and provided the Company and its subsidiaries with a $35,000 senior secured revolving credit facility (which may be further increased by up to an additional $10,000 upon the request of the Company and at the sole discretion of Wells Fargo) and a $7,578 senior secured term loan (collectively, the “2022 Credit Facility”). The proceeds of the 2022 Credit Facility are available for general corporate purposes, including strategic growth opportunities. In connection with the 2022 Credit Facility, the Company incurred deferred financing costs in the amount of $479 primarily related to the revolving credit loan, which is net of accumulated amortization of $64. These costs are included in the “Other assets” line item of the Company's condensed consolidated financial statements as of March 31, 2023.

On February 8, 2023, the Company executed Amendment No. 1 to Credit Agreement and Limited Waiver which waived the Company’s fourth quarter minimum EBITDA (as defined in the 2022 Credit Agreement) requirement for the period ended December 31, 2022, amended the Fixed Charge Coverage Ratio (as defined in the 2022 Credit Agreement) requirements for the twelve-month period ending January 31, 2024 through and including June 30, 2024 and each twelve-month period thereafter, and amended the minimum EBITDA requirements applicable to the twelve-month periods ending March 31, 2023, June 30, 2023, September 30, 2023, and December 31, 2023.

The 2022 Credit Agreement, as amended, contains customary covenants limiting the Company’s and its subsidiaries’ ability to, among other things, incur liens, make investments, incur indebtedness, merge or consolidate with others or dispose of assets, change the nature of its business, and enter into transactions with affiliates. The initial term of the revolving credit facility matures August 4, 2027. The term loan also matures on August 4, 2027, with monthly payments based on an 84-month amortization.

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As of March 31, 2023, there was $23,892 of outstanding indebtedness under the 2022 Credit Facility, with the ability to borrow an additional $10,567. As of March 31, 2023, the Company was in compliance with all financial covenants under the 2022 Credit Facility. As of March 31, 2023, the effective interest rate of the senior secured revolving credit facility was 6.83% and the effective rate of the senior secured term loan was 7.33%. As of December 31, 2022, the effective interest rate of the senior secured revolving credit facility was 6.55% and the effective rate of the senior secured term loan was 6.80%.

Other

In addition, the Company has outstanding notes payable for capital expenditures in the amount of $1,060 and $1,094 as of March 31, 2023 and December 31, 2022, respectively, with $62 and $88 included in the “Line of credit and current portion of long-term debt” line item of the Company’s condensed consolidated financial statements as of March 31, 2023 and December 31, 2022, respectively. The notes payable have monthly payments that range from $3 to $16 and an interest rate of approximately 5%. The equipment purchased is utilized as collateral for the notes payable. The outstanding notes payable mature in September 2028.

NOTE 9 — LEASES

The Company leases certain facilities and equipment. The leases are accounted for under Accounting Standard Update 2016-02, Leases (“Topic 842”), and the Company elected to apply each available practical expedient. The discount rates used for the leases are based on an interest rate yield curve developed for the leases in the Company’s lease portfolio.

The Company has elected to apply the short-term lease exception to all leases of one year or less. During the three months ended March 31, 2023 and 2022, the Company did not have additional operating leases that resulted in right-of-use assets obtained in exchange for lease obligations. During the three months ended March 31, 2023 and 2022, the Company h

SEC Form 10-Q filed by Broadwind Inc.