UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

BROADWIND ENERGY, INC.

(Exact name of Registrant as specified in its charter)

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

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

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

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

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

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

As of June 30, 2015 the aggregate market value of the Registrant’s voting common stock held by non‑affiliates of the Registrant was approximately $45,108,000, based upon the $4.24 per share closing sale price of the Registrant’s common stock as reported on the NASDAQ Capital Market. For purposes of this calculation, the Registrant’s directors and executive officers and holders of 5% or more of the Registrant’s outstanding shares of voting common stock have been assumed to be affiliates, with such affiliates holding an aggregate of 4,043,000 shares of the Registrant’s voting common stock on June 30, 2015.

The number of shares of the Registrant’s common stock, par value $0.001, outstanding as of February 18, 2016, was 15,012,789.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant’s Proxy Statement for the Registrant’s 2016 Annual Meeting of Stockholders are incorporated by reference in Part III of this Form 10-K.

BROADWIND ENERGY, INC.

FORM 10‑K

TABLE OF CONTENTS

PART I

Cautionary Note Regarding Forward‑Looking Statements

This Annual Report on Form 10‑K (“Annual Report”) contains “forward‑looking statements”—that is, statements related to future, not past, events—as defined in Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that reflect our current expectations regarding our future growth, results of operations, financial condition, cash flows, performance, business prospects and opportunities, as well as assumptions made by, and information currently available to, our management. Forward‑looking statements include any statement that does not directly relate to a current or historical fact. We have tried to identify forward‑looking statements by using words such as “anticipate,” “believe,” “expect,” “intend,” “will,” “should,” “may,” “plan” and similar expressions, but these words are not the exclusive means of identifying forward‑looking statements. Our forward‑looking statements may include or relate to the following: (i) our expectations relating to state, local and federal regulatory frameworks affecting the industries in which we compete, including the wind energy industry, and the related extension, continuation or renewal of federal tax incentives and grants and state renewable portfolio standards (“RPS’s”); (ii) our expectations with respect to our customer relationships and efforts to diversify our customer base and sector focus and leverage customer relationships across business units; (iii) our plans to continue to grow our business organically; (iv) our beliefs with respect to the sufficiency of our liquidity and our plans to evaluate alternate sources of funding if necessary; (v) our plans and assumptions, including estimated costs and saving opportunities, regarding our restructuring efforts; (vi) our ability to realize revenue from customer orders and backlog; (vii) our ability to operate our business efficiently, manage capital expenditures and costs effectively, and generate cash flow; (viii) our beliefs and expectations relating to the economy and the potential impact it may have on our business, including our customers; (ix) our beliefs regarding the state of the wind energy market and other energy and industrial markets generally and the impact of competition and economic volatility in those markets; and (x) our beliefs and expectations relating to the effects of market disruptions and regular market volatility, including fluctuations in the price of oil, gas and other commodities; (xi) the potential loss of tax benefits if we experience an “ownership change” under Section 382 of the Internal Revenue Code of 1986, as amended (the “IRC”). These statements are based on information currently available to us and are subject to various risks, uncertainties and other factors that could cause our actual growth, results of operations, financial condition, cash flows, performance, business prospects and opportunities to differ materially from those expressed in, or implied by, these statements. You should not consider any list of such factors to be an exhaustive statement of all of the risks, uncertainties or potentially inaccurate assumptions that could cause our current expectations or beliefs to change. We are under no duty to update any of the forward‑looking statements after the date of this Annual Report to conform such statements to actual results.

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

ITEM 1.  BUSINESS

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

Business Overview

We provide technologically advanced high‑value products to energy, mining and infrastructure sector customers, primarily in the United States of America (the “U.S.”). Our most significant presence is within the U.S. wind energy industry, although we have diversified into other industrial markets in order to improve our capacity utilization and reduce our exposure to uncertainty related to favorable governmental policies currently supporting the U.S. wind energy industry. The recent multi-year extension of the federal Production Tax Credit (the “PTC”) for new wind energy development projects is expected to help stabilize wind energy markets. Within the U.S. wind energy industry, we provide products primarily to wind turbine manufacturers. Outside of the wind energy market, we provide precision gearing and specialty weldments to a broad range of industrial customers for oil and gas (“O&G”), mining, steel and other industrial applications. The market for O&G equipment and mining equipment was extremely weak in 2015 and is not expected to recover in the near term. 

In September 2015, our Board of Directors (the “Board”) approved a plan to divest or otherwise exit our Services segment. The divestiture was substantially completed in December 2015; consequently, this segment is now reported as a discontinued operation and we have revised our segment presentation to include two reportable operating segments: Towers and Weldments, and Gearing. All current and prior period financial results have been revised to reflect these changes.

In 2015, 84% of our sales were linked to new wind energy installations, predominantly for towers used for new wind turbines. The market for new U.S. wind energy installations is affected by a number of factors, including: (i) economic growth and the associated demand for new electricity generation; (ii) the cost of competing energy sources, primarily natural gas; (iii) federal and state‑level wind energy development incentives; (iv) available transmission infrastructure and the proliferation of smart grid technology; (v) improvements in wind energy cost competitiveness resulting from the maturation of technologies and services within the wind energy industry; and (vi) state and federal government actions relating to regulation of carbon emissions.

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

The market for wind towers is broadly correlated to the demand for new wind turbines. However, demand for our products is also reflective of the level of market competition, the strength of our customer relationships and the proximity of our plants to wind farm development sites, as well as other factors. During 2015, sales of our wind towers were strong because of a number of factors: several domestic competitors exited the market in 2012, the 2013 PTC extension was in place to support new wind energy installations, foreign competition from China and Vietnam was limited by U.S. Department of Commerce (“USDOC”) antidumping and countervailing duty orders, and we continued working with large customers representing a significant portion of the U.S. market.

Outside of the market for new wind energy installations, we serve a number of other industrial markets, including O&G exploration and extraction, mining, compressed natural gas (“CNG”) distribution and steel production, as well as gearing for the installed wind energy base. The market for O&G equipment and mining equipment was extremely weak in 2015 and is not expected to recover in the near-term. We have reduced our workforce and other costs, and are selling excess gear cutting and grinding equipment in order to further scale back production capacity and costs in response to these depressed market conditions. Our products sold into these markets include gearboxes (both new and rebuilt), loose gearing and large industrial weldments, including CNG equipment. The following table details the percentage of our revenue generated in each sector for the past two years:

Business and Operating Strategy

We intend to capitalize on the markets in wind energy, O&G, mining, CNG distribution and other industrial verticals in North America by leveraging our core competencies in large precision gearing and drivetrains and industrial welding. Our strategic objectives include the following:

Restructuring Activities

In 2011, we concluded that our manufacturing footprint and fixed cost base were too large and expensive for our medium term needs. We executed a plan to reduce our facility footprint by approximately 40% through the sale and/or closure of facilities comprising a total of approximately 600,000 square feet. Of the $14,200 total restructuring costs incurred, approximately $4,800 were non-cash charges.

As a result of recent weakness in some of our markets as described above and in addition to discontinuing our Services segment, we took a number of cost reduction actions in 2015. These actions included idling two facilities, reducing headcount and eliminating positions totaling approximately 10% of our workforce. We have also consolidated our industrial weldment production into our Abilene, Texas facility, and have reduced capital and discretionary spending in all areas to conserve cash. We continue to monitor these markets and our spending.

COMPANY HISTORY

We were incorporated in 1996 in Nevada as Blackfoot Enterprises, Inc., and through a series of subsequent transactions, became Broadwind Energy, Inc., a Delaware corporation, in 2008. Through several acquisitions in 2007 and 2008, we focused on expanding upon our core platform as a wind tower component manufacturer, established our Gearing segment, and developed our industrial weldment capabilities.

SALES AND MARKETING

We market our towers, gearing and industrial weldments products primarily through our direct sales force (supplemented with independent sales agents in our Gearing segment). Our sales and marketing strategy is to develop and maintain long‑term relationships with our energy and infrastructure sector customers. Within the wind energy industry, our customer base consists primarily of wind turbine manufacturers who supply end‑users and wind farm operators with wind turbines. Within the O&G and mining industries, our customer base consists of manufacturers of hydraulic fracturing and mud pumps, mining equipment, CNG equipment and off‑highway vehicles. To support the efforts of our sales force, we utilize a number of marketing tactics to build our brand and position and promote our products. Our efforts include participation in industry conferences, media relations, use of social media and other channels and use of our website to connect with customers.

COMPETITION

Each of our businesses faces competition from both domestic and international companies. The recent extension of the PTC may attract additional investment and competition in the wind energy industry. The industrial gearing industry has experienced consolidation of producers and acquisitions by strategic buyers in response to strong international competition and reduced O&G and mining demand. 

For our Towers and Weldments segment, the largest North American based competitor is Trinity Industries. Other competitors include Vestas Wind Systems, which has periodically produced towers for third party customers in addition to meeting its own captive tower requirements, and Marmen Industries, a Canadian manufacturer that has recently expanded into the U.S. market. We also face competition from imported towers, primarily from Asian manufacturers. However, imports from China and Vietnam have substantially ceased following a determination by the U.S. International Trade Commission in 2013 that wind towers from those countries were being sold in the U.S. at less than fair value. As a result of the determination, the USDOC issued antidumping and countervailing duty orders on imports of wind towers from China and an antidumping duty order on imports of towers from Vietnam. We continue to monitor wind tower imports.

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

ENVIRONMENTAL REGULATION AND COMPLIANCE

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

BACKLOG

We sell our towers under either supply agreements or individual purchase orders, depending on the size and duration of the purchase commitment. Under the supply agreements, we typically receive a purchase commitment for towers to be delivered in future fiscal quarters, then receive purchase orders on a periodic basis based upon the customer’s forecast of production volume requirements within the contract terms. For our Gearing segment, sales are generally based on individual purchase orders. As of December 31, 2015, the dollar amount of our backlog believed to be firm under our supply agreements and purchase orders awarded was approximately $94 million. This represents a 53% decrease from the backlog at December 31, 2014, which reflected a surge in tower orders related to a tight supply market and the timing of the PTC renewal and a decline in O&G and mining industry demand for gearing and weldments.

SEASONALITY

The majority of our business is not affected by seasonality.

EMPLOYEES

We had 680 employees at December 31, 2015, of which 619 were in manufacturing related functions and 61 were in administrative functions. As of December 31, 2015, approximately 14% of our employees were covered by collective bargaining agreements with local unions in our Cicero, Illinois and Neville Island, Pennsylvania locations. The current collective bargaining agreement with the Cicero union is expected to remain in effect through February 2018. The current collective bargaining agreement with the Neville Island union is expected to remain in effect through October 2017. We believe that our relationship with our employees is generally good.

RAW MATERIALS

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

Outside of these “directed buys”, we operate a multiple supplier sourcing strategy and source our raw materials through various suppliers located throughout the U.S. and abroad. We generally do not have long‑term supply agreements with our raw materials suppliers and closely match terms with those of our customers to limit our exposure to commodity price fluctuations. We believe that we will be able to obtain an adequate supply of steel and other raw materials to meet our manufacturing requirements, although from time to time we have faced shortages of specific grades of steel. Additionally, due to the globalization of the supply chain for tower steel prompted by the increasing use of “directed buys”, we faced

supply disruptions during 2015 associated with the West Coast port labor slowdowns. Such shortages have periodically limited our ability to meet customer demand and caused manufacturing inefficiencies. We have made modifications to our supply chain management practices to deal more effectively with disruptions arising from the practice of “directed buys”.

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. 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 operation, for example, involves transforming forged steel into precision gears through cutting, heat treating, testing and finishing. We inspect and test raw materials before they enter the assembly process, re‑test the raw materials after rough machining, test the functioning of gear teeth and cores after thermal treatment and accuracy test final outputs for compliance with product specifications. We believe our investment in industry‑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. Our Gearing segment is ISO 9001:2008 certified. Our tower manufacturing plants in Manitowoc, Wisconsin and Abilene, Texas are ISO 9001:2010 certified. Our Abilene tower plant experienced operating inefficiencies, high labor costs and inventory adjustments in 2015 related to difficulties experienced in meeting the quality specifications associated with one significant tower order. We are making changes to our operating practices and our capital base to minimize future production disruptions. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” for further discussion of the effects of the deficiencies.

CUSTOMERS

We manufacture products for a variety of customers in the wind energy, O&G, mining and other infrastructure industries. The majority of our wind energy industry customer base consists of wind turbine manufacturers who supply wind farm operators and wind farm developers with completed wind turbines. In the other industrial sectors, we sell our products through our trained sales force or through manufacturers’ representatives to a wide variety of customers. The wind turbine market is very concentrated. According to American Wind Energy Association 2015 industry data, the top three wind turbine manufacturers constituted approximately 88% of the U.S. market. As a result, although we have historically produced towers for most of these global wind turbine manufacturers, in any given year a limited number of customers have accounted for the majority of our revenues. Sales to each of Siemens and General Electric represented greater than 10% of our consolidated revenues for the years ended December 31, 2015 and 2014. The loss of one of these customers could have a material adverse effect on our business. As a result, we are seeking to diversify our customer base.

WORKING CAPITAL

Our primary customers are wind turbine manufacturers and wind farm operators. The industry has historically entered into customized contracts with varying terms and conditions between suppliers and customers, depending on the specific objectives of each party. As such, we produce to order rather than to stock. Our practices mirror this historical industry practice of negotiating agreements on a case‑by‑case basis. As a result, working capital needs, including levels of accounts receivable (“A/R”), customer deposits and inventory, can vary significantly from quarter to quarter based on the contractual terms associated with each quarter’s sales, such as whether and when we are required to purchase and supply steel pursuant to such contractual terms.

In analyzing our liquidity, we focus on operating working capital in relationship to revenue. Operating working capital is comprised of A/R and inventories, net of accounts payable (“A/P”) and customer deposits. Our operating working capital at December 31, 2015 was $10,241 or 7% of trailing three months of sales annualized. This is an increase of $1,998 from December 31, 2014, when operating working capital was $8,243, or 4% of trailing three months of sales annualized. The increase reflects reduced levels of A/P due in part to a shift in steel suppliers.

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.

OTHER INFORMATION

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

ITEM 1A.  RISK FACTORS

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

We supply products to wind turbine manufacturers and owners and operators of wind energy generation facilities. The U.S. wind energy industry is significantly impacted by federal tax incentives and state RPS’s. Despite recent reductions in the cost of wind turbines, wind energy may not be economically viable in certain parts of the country absent such incentives.

These programs have provided material incentives to develop wind energy generation facilities and thereby impact the demand for our products. The increased demand for our products that generally results from the credits and incentives could be impacted by the expiration of these programs. Because of the long lead times necessary to develop wind energy projects, any failure by the U.S. Congress to extend or renew these incentives could negatively impact potential wind energy installations and would likely inhibit the development of wind energy generation facilities and the demand for wind turbines, towers, gearing and related components in certain areas of the U.S.

One such federal government program, the PTC, provides economic incentives to the owners of wind energy facilities in the form of a tax credit. The PTC has been extended several times since its initial introduction in 1992. On December 18, 2015, the U.S. Congress voted to pass the 2016 federal budget, which includes a multi-year extension of the PTC. As a result, the PTC will now be extended at full value for projects commenced in 2015 and 2016, and continue at 80% of present value for projects commenced in 2017, 60% for projects commended in 2018, and 40% for projects commenced in 2019. As before, the rules will allow developers of wind energy projects to qualify so long as they start construction before the end of the respective period.

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

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

As a supplier of products to wind turbine manufacturers and owners and operators of wind energy generation facilities, our results of operations (like those of our customers) are subject to general economic conditions, and specifically to the state of the wind energy market. In addition to the state and federal government policies supporting renewable energy

described above, the growth and development of the larger wind energy market in North America is subject to a number of factors, including, among other things:

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

We are substantially dependent on a few significant customers.

Historically, the majority of our revenues are highly concentrated with a limited number of customers. In 2015, two customers—Siemens and General Electric—each accounted for more than 10% of our consolidated revenues, and our five largest customers accounted for 92% of our consolidated revenues. Certain of our customers periodically have expressed their intent to scale back, delay or restructure existing customer agreements, which has led to reduced revenues from these customers. It is possible that this may occur again in the future. As a result, our operating profits and gross margins have historically been negatively affected by significant variability in production levels, which has created production volume inefficiencies in our operations and cost structures.

Additionally, if our relationships with significant customers should change materially, it could be difficult for us to immediately and profitably replace lost sales in a market with such concentration, which could have a material adverse effect on our operating and financial results. We could be adversely impacted by decreased customer demand for our products due to (1) the impact of current or future economic conditions on our customers, (2) our customers’ loss of market share to their competitors that do not use our products, and (3) our loss of market share with our customers. We could lose market share with our customers to our competitors or to our customers themselves, should they decide to become more vertically integrated and produce the products that we currently provide.

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

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

Wind turbine manufacturers are among our primary customers. There has been some consolidation among these manufacturers, and more consolidation may occur in the future. Customer consolidation may result in pricing pressures, to which we are subject, leading to downward pressure on our margins and profits, and may also disrupt our supply chain relationships. Even if customers continue to consolidate, there can be no assurance that those customers would leverage our production capabilities by concentrating their purchasing activity with us.

We have generated net losses since our inception.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Our businesses are subject to risks associated with competition from new or existing industry participants who may have more resources and better access to capital. Certain of our competitors and potential competitors may have substantially greater financial, customer support, technical and marketing resources, larger customer bases, longer operating histories, greater name recognition and more established relationships in the industry than we do. Among other things, these industry participants compete with us based upon price, quality, location and available capacity. We cannot be sure that we will have the resources or expertise to compete successfully in the future. Some of our competitors may also be able to provide customers with additional benefits at lower overall costs to increase market share. We cannot be sure that we will be able to match cost reductions by our competitors or that we will be able to succeed in the face of current or future competition. In addition, we may face competition from certain of our customers as they seek to be more vertically integrated and offer full service packages.

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

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

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

We depend on the services of unionized labor and have collective bargaining agreements with certain of our operations workforce at our Cicero, Illinois and Neville Island, Pennsylvania Gearing facilities. The loss of the services of these and other personnel, whether through terminations, attrition, labor strike or otherwise, or a material change in our collective bargaining agreements, could have a material adverse impact on us and our future profitability. Collective bargaining agreements have been ratified by the collective bargaining units in place at our Cicero and Neville Island facilities and are expected to expire in February 2018 and October 2017, respectively. As of December 31, 2015, our collective bargaining units represented approximately 14% of our workforce.

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

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

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

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

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

From time to time, we are subject to litigation and other legal and regulatory proceedings relating to our business. No assurances can be given that the results of these matters will be favorable to us. An adverse resolution of lawsuits, investigations or arbitrations could have a material adverse effect on our business, financial condition and results of

operations. Defending ourselves in these matters may be time‑consuming, expensive and disruptive to normal business operations and may result in significant expense and a diversion of management’s time and attention from the operation of our business, which could impede our ability to achieve our business objectives. Additionally, any amount that we may be required to pay to satisfy a judgment or settlement may not be covered by insurance. Under our charter and the indemnification agreements that we have entered into with our officers, directors and certain third parties, we are required to indemnify and advance expenses to them in connection with their participation in certain proceedings. There can be no assurance that any of these payments will not be material.

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

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

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

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

We may not be able to utilize all of our NOLs. To the extent available, we will use any NOL carryforwards to reduce the U.S. corporate income tax liability associated with our operations. However, if we do not achieve profitability prior to their expiration, we will not be able to fully utilize our NOLs to offset income. For financial statement presentation, all benefits associated with the NOL carryforwards have been reserved; therefore, this potential asset is not reflected on our balance sheet. Section 382 of the IRC (“Section 382”) generally imposes an annual limitation on the amount of NOL carryforwards that may be used to offset taxable income when a corporation has undergone certain changes in stock ownership. Our ability to utilize NOL carryforwards and built‑in losses may be limited, under Section 382 or otherwise, by our issuance of common stock or by other changes in stock ownership. Upon completion of our analysis of Section 382, we have determined that aggregate changes in our stock ownership have triggered an annual limitation of NOL carryforwards and built‑in losses available for utilization. Although this event limits the amount of pre‑ownership change date NOLs and built‑in losses we can utilize annually, it would not preclude us from fully utilizing our current NOL carryforwards prior to their expiration. To the extent our use of NOL carryforwards and associated built‑in losses is significantly limited in the future due to additional changes in stock ownership, our income could be subject to U.S. corporate income tax earlier than it would if we were able to use NOL carryforwards and built‑in losses without such annual limitation, which could result in lower profits and the loss of benefits from these attributes. To address these concerns, in February 2013 we adopted a

Section 382 Stockholder Rights Plan (the “Rights Plan”) designed to preserve our substantial tax assets associated with NOL carryforwards under Section 382. The Rights Plan is intended to act as a deterrent to any person or group, together with our affiliates and associates, 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. Under the Rights Plan, the Board declared a non-taxable dividend of one preferred share purchase right (a “Right”) for each outstanding share of our common stock to our stockholders of record as of the close of business on February 22, 2013. Each Right entitles its holder to purchase from us one-thousandth of a share of our Series A Junior Participating Preferred Stock at an exercise price of $14.00 per Right, subject to adjustment. As a result of the Rights Plan, any person or group that acquires beneficial ownership of 4.9% or more our common stock without the approval of the Board would be subject to significant dilution in the ownership interest of that person or group. Stockholders who own 4.9% or more of the outstanding shares of our common stock as of February 12, 2013 will not trigger the Rights unless they acquire additional shares. We announced on February 5, 2016 that our Board had approved an amendment extending the Rights Plan for three years. The amendment is subject to approval by our stockholders at our 2016 Annual Meeting of Stockholders. There can be no assurance that our stockholders will ratify the extension of the Rights Plan or that the Rights Plan will be effective in protecting our NOL carryforwards.  

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

We provide warranty terms generally ranging between one and five years to our customers depending upon the specific product and terms of the customer agreement. We reserve for warranty claims based on industry experience and estimates made by management based upon a percentage of our sales revenues related to such products. From time to time, customers have submitted warranty claims to us. However, we have a limited history on which to base our warranty estimates for certain of our manufactured products. Our assumptions could materially differ from the actual performance of our products in the future and could exceed the levels against which we have reserved. In some instances our customers have interpreted the scope and coverage of certain of our warranty provisions differently from our interpretation of such provisions. The expenses associated with remediation activities in the wind energy industry can be substantial, and if we are required to pay such costs in connection with a customer’s warranty claim, we could be subject to additional unplanned cash expenditures. If our estimates prove materially incorrect, or if we are required to cover remediation expenses in addition to our regular warranty coverage, we could be required to incur additional expenses and could face a material unplanned cash expenditure, which could adversely affect our business, financial condition and results of operations.

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

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

If we are unable to produce, maintain and disseminate relevant and/or reliable data and information pertaining to our business in an efficient, cost-effective, secure and well-controlled fashion and avoid security breaches affecting our information technology systems, such inability may have significant negative impacts on confidentiality requirements and obligations, and proprietary needs and expectations and, therefore, our future operations, profitability and competitive position. 

Management relies on information technology infrastructure and architecture, including hardware, network, software, people and processes, to provide useful and confidential information to conduct our business in the ordinary course, including correspondence and commercial data and information interchange with customers, suppliers, consultants, advisors and governmental agencies, and to support assessments and conclusions about future plans and initiatives pertaining to market demands, operating performance and competitive positioning. In addition, any material failure, interruption of service, compromised data security or cybersecurity threat could adversely affect our relations with suppliers and customers, place us in violation of confidentiality and data protection laws, rules and regulations, and result in negative impacts to our market share, operations and profitability. Security breaches in our information technology could result in

theft, destruction, loss, misappropriation or release of confidential data or intellectual property which could adversely impact our future results.

ITEM 1B.  UNRESOLVED STAFF COMMENTS

None.

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:

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

ITEM 3.  LEGAL PROCEEDINGS

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

ITEM 4.  MINE SAFETY DISCLOSURES

Not Applicable.

PART II

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

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

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

The closing price for our common stock as of February 18, 2016 was $1.76. As of February 18, 2016, there were 45 holders of record of our common stock.

Dividends

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

Repurchases

On October 29, 2014, our Board authorized a program to repurchase up to $10,000 of our outstanding common stock over the ensuing six-month period,  at which time the program ended. Our share repurchase program did not obligate us to acquire any specific number of shares. The common stock could be acquired in the open market at prices subject to certain pricing guidelines determined by us. We had no obligation to repurchase shares, and we could discontinue purchases at any time that we determined additional purchases were not warranted. During the repurchase program, we purchased $1,850 of our outstanding common stock.   

There were no repurchases of our equity securities under the repurchase program made during the year ended December 31, 2015.

Unregistered Sales of Equity Securities

There were no unregistered sales of equity securities for the years ended December 31, 2015 or 2014.

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 for information as of December 31, 2015 with respect to shares of our common stock that may be issued under our existing share‑based compensation plans.

ITEM 6.  SELECTED FINANCIAL DATA

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

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

As used in this Annual Report, the terms “we,” “us,” “our,” “Broadwind,” and the “Company” refer to Broadwind Energy, Inc. and its wholly‑owned Subsidiaries.

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

In September 2015, our Board of Directors (the “Board”) approved a plan to divest or otherwise exit our Services segment.  In the fourth quarter of 2015 we sold or otherwise disposed of all Services segment fixed assets and the majority of the segment’s inventory, and we currently estimate the associated total loss on disposal to be $3,600. Consequently, this segment is now reported as a discontinued operation and we have revised our segment presentation to include two reportable operating segments: Towers and Weldments, and Gearing. All current and prior period financial results have been revised to reflect these changes.

We recognized sales of $199,200 in 2015, a 12% decrease compared to $225,800 in 2014. The decrease reflects lower sales in Towers and Weldments of $14,000, and in Gearing of $12,700. The Towers and Weldments segment revenues decrease of $14,000 on slightly lower volumes was due to the absence of a greater mix of larger, more complex towers sold in 2014, and a reduction in steel prices, which are generally passed through to the customer. Gearing revenues were down by $12,700 or 30%, with a substantial portion of the decline driven by a 55% decrease in sales to O&G and mining industry customers, partially offset by increased revenues from wind energy customers. We reported a net loss of $21,800 or $1.48 per share in 2015, compared to a net loss of $6,200 or $.42 per share in 2014. The $1.06 per share increased loss was due to reduced operating income in Towers and Weldments of $13,400, and increased net loss from discontinued operations of $5,200, partially offset by reduced losses in our Gearing segment and lower corporate expenses. The reduced Towers and Weldments segment results were due to a lower margin mix of tower sales, and 2015 operating inefficiency costs and inventory charges which resulted from a difficult contract at our Abilene, Texas tower facility (the “Abilene Tower Facility”). Additionally, we recorded a $900 environmental charge in our Gearing segment in 2015. These adverse factors were partly offset by lower Corporate expenses and the absence of a $1,600 regulatory settlement charge in the prior-year third quarter.

We booked $94,000 in net new orders in 2015, down significantly from $120,500 in 2014. Towers and Weldments orders, which vary considerably from quarter to quarter, totaled $69,100 in 2015, down from $77,600 in 2014 due to a reduction in steel pricing passed through to customers and lower weldments orders in 2015. Gearing orders totaled $24.9 million in 2015, down from $42.9 million in 2014 due to weaker demand from oil & gas and mining customers. In December 2015, the federal Production Tax Credit (the “PTC”) for new wind energy development projects was extended for an additional five-year period, which is expected to help stabilize wind energy markets and attract new investment. The 2015 extension phases-out the amount of the credit allowed over time based on the year when construction of the wind project is started. The phase-out schedule provides for 100% extension of the credit in 2015 and 2016, 80% in 2017, 60% in 2018 and 40% in 2019. Although the clearer investment horizon provided by the long-term extension is expected to stabilize the market for our products, it may also attract new competition in our industry. The new PTC extension also provides a longer time period to begin construction of qualifying wind projects than the previous legislation, which has caused some short-term delay in the commencement of wind farm development projects. A short-term result has been the delay of some near-term wind farm development projects. At December 31, 2015, total backlog was $93,900, down 53% from $201,400 at December 31, 2014.

As a result of recent weakness in some of our markets as described above, and in addition to discontinuing our Services segment, we took a number of cost reduction actions in 2015. These actions included idling two facilities, reducing headcount and eliminating positions totaling approximately 10% of our workforce. We have also consolidated our industrial weldment production into our Abilene, Texas location, and have reduced capital and discretionary spending in all areas to conserve cash. We plan to continue to actively monitor these markets and our spending.

We use our credit facility from time to time to fund temporary increases in working capital, and believe that our credit facility, together with the operating cash generated by our businesses, is sufficient to meet all cash obligations over the next twelve months.  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” below.

RESULTS OF OPERATIONS

Year Ended December 31, 2015 Compared to Year Ended December 31, 2014

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, 2015 compared to the year ended December 31, 2014.

Consolidated

Revenues decreased by $26,673, from $225,829 for the year ended December 31, 2014, to $199,156 for the year ended December 31, 2015. The decrease reflects lower sales in Towers and Weldments of $13,985, and in Gearing of $12,665. The Towers and Weldments segment revenues decrease on slightly lower volumes was due to the absence of a greater mix of larger, more complex towers sold in 2014, and a reduction in steel prices, which are generally passed through to the customer. Weldments revenue for large industrial customers decreased $3,355 as compared to the prior year due to weakness in the mining industry. Gearing revenues were down by 30%, with a substantial portion of the decline driven by a 55% decrease in sales to O&G and mining industry customers, partially offset by increased revenues from wind energy customers.

Gross profit decreased by $11,829, from $19,696 for the year ended December 31, 2014, to $7,867 for the year ended December 31, 2015. The decrease in gross profit was primarily attributable to 2015 operating inefficiency costs and inventory charges related to production difficulties which resulted from a difficult contract at the Abilene Tower Facility, partially offset by an improvement in Gearing segment margins due to cost control efforts and the absence of a $1,280 restructuring charge to Gearing cost of sales in 2014. As a result, our gross margin decreased from 8.7% for the year ended December 31, 2014, to 4.0% for the year ended December 31, 2015.

Selling, general and administrative (“SG&A”) expenses decreased by $660, from $18,931 for the year ended December 31, 2014, to $18,271 for the year ended December 31, 2015. The small decrease was attributable to the absence of a one-time professional fee from 2014, partially offset by higher severance and legal fees in 2015. SG&A expenses as a percentage of sales increased from 8.4% in the year ended December 31, 2014, to 9.2% in the year ended December 31, 2015, reflecting lower sales from continuing operations in 2015.

Regulatory settlement expense decreased from $1,566 for the year ended December 31, 2014, to $0 for the year ended December 31, 2015 as no material regulatory issues were open.

Net loss increased from $6,168 for the year ended December 31, 2014, to $21,807 for the year ended December 31, 2015, as a result of the factors described above, and a $5,186 increase in the net loss from discontinued operations.

Towers and Weldments Segment

The following table summarizes the Towers and Weldments segment operating results for the years ended December 31, 2015 and 2014:

Towers and Weldments segment revenues decreased by $13,985, from $184,904 for the year ended December 31, 2014, to $170,919 for the year ended December 31, 2015. The Towers and Weldments segment revenues decrease on slightly lower volumes was due to the absence of a greater mix of larger, more complex towers sold in 2014, and a reduction in steel prices, which are generally passed through to the customer. Weldments revenue for large industrial customers decreased $3,355 as compared to the prior year due to weakness in the mining industry.

Towers and Weldments segment operating income decreased by $13,363, from $18,065 for the year ended December 31, 2014, to $4,702 for the year ended December 31, 2015. We experienced $6,249 in decreased profits attributable to a lower margin mix of tower sales and higher labor and overhead costs due to production difficulties in the Abilene Tower Facility. We also experienced $3,083 in costs associated with damaged and scrapped materials, and $1,364 of increased logistics and contractor fees, primarily due to a difficult tower contract and the associated need to re-schedule production multiple times, and ultimately move some production from the Abilene Tower Facility to our Manitowoc tower facility. The contract was nearly completed in 2015, with a small amount of remaining production obligation transferred to our Manitowoc, Wisconsin tower facility in December 2015 for completion in early 2016.  Additionally, we have experienced lower volumes and lower operating profitability of $1,703 in weldments. Operating margin decreased from 9.8% during the year ended December 31, 2014, to 2.8% during the year ended December 31, 2015.

Gearing Segment

The following table summarizes the Gearing segment operating results for the years ended December 31, 2015 and 2014:

Gearing segment revenues decreased by $12,665, from $42,253 for the year ended December 31, 2014, to $29,588 for the year ended December 31, 2015. Gearing revenues were down sharply by 30%, with a substantial portion of the decline driven by a 55% decrease in sales to O&G and mining industry customers, partially offset by increased revenues from wind energy customers.

Gearing segment operating loss improved by $1,188, from $9,423 for the year ended December 31, 2014, to $8,235 for the year ended December 31, 2015. The decrease in operating loss was the result of strong cost control efforts in response to sharply lower revenues: $1,784 lower non-cash charges, $1,415 lower indirect labor costs, $593 lower restructuring expenses, partially offset by the impact of lower sales volume. As a result of the factors described above, operating margin decreased from (22.3%) for the year ended December 31, 2014, to (27.8%) for the year ended December 31, 2015.

Corporate and Other

Corporate and Other expenses improved by $1,745, from $10,083 for the year ended December 31, 2014, to $8,338 for the year ended December 31, 2015. The primary driver of the decrease in expense was the absence of a $1,566 provision to settle the SEC inquiry recorded in 2014. We also recorded separation cost of $1,154 in 2015 related to the departure of our former President and Chief Executive Officer, but this charge and higher legal fees were offset by lower incentive compensation expense and lower professional fees in 2015 as compared to 2014.

SUMMARY OF CRITICAL ACCOUNTING POLICIES

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

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

Revenue Recognition

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

In some instances, typically within our Towers and Weldments segment, products are sold under terms included in bill and hold sales arrangements that result in different timing for revenue recognition due to our customers’ preference to ship towers in batches to support efficient construction of wind farms. We recognize revenue under these arrangements only when the buyer requests the arrangement, title and risk of ownership has passed to the buyer, a fixed schedule for delivery exists, the ordered goods are segregated from inventory and not available to fill other orders and the goods are complete and ready for shipment. Assuming these required revenue recognition criteria are met, revenue is recognized upon completion of product manufacture and customer acceptance.

Warranty Liability

We provide warranty terms that generally range from one to five years for various products relating to workmanship and materials supplied by us. In certain contracts, we have recourse provisions for items that would enable us to seek recovery from third parties for amounts paid to customers under warranty provisions. We estimate the warranty accrual based on various factors, including historical warranty costs, current trends, product mix and sales.

Inventories

Inventories are stated at the lower of cost or market. We have recorded a reserve for excess of cost over market value in our inventory allowance. Market value of inventory, and management’s judgment of the need for reserves, encompasses consideration of other business factors including physical condition, inventory holding period, contract terms and usefulness. Inventories are valued based either on actual cost or using a first‑in, first out (“FIFO”) method.

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

Intangible Assets

We review intangible assets for impairment whenever events or circumstances indicate that carrying amounts may not be recoverable. If such events or changes in circumstances occur, we will recognize an impairment loss if the undiscounted future cash flows expected to be generated by the assets are less than the carrying value of the related asset. The impairment loss would adjust the asset to its fair value.

In evaluating the recoverability of definite‑lived intangible assets, we must make assumptions regarding estimated future cash flows and other factors to determine the fair value of such assets. If our fair value estimates or related assumptions change in the future, we may be required to record impairment charges related to intangible assets. Asset recoverability is first measured by comparing the assets’ carrying amounts to their expected future undiscounted net cash flows to determine if the assets are impaired. If such assets are considered to be impaired, the impairment recognized is measured based on the amount by which the carrying amount of the assets exceeds the fair value.

Due to the Gearing segment’s operating losses in each quarter of 2015 combined with its history of continued operating losses, we continue to evaluate the recoverability of certain of our intangible assets associated with the Gearing segment. Based upon our December 31, 2015 impairment assessment, the undiscounted cash flows based upon our most recent projections were less than the carrying amount of relevant asset groups within the Gearing segment, and a possible impairment to these assets was indicated under step one of ASC 360 testing. In step two of ASC 360 testing, we compared the long-lived assets’ estimated fair values with the corresponding carrying amount of the assets. Under step two of ASC 360 testing, we assumed that the assets would be exchanged in an orderly transaction between market participants and would represent the highest and best use of these assets. Based on the step two analysis, we determined that no impairment to these assets was indicated as of December 31, 2015. To the extent the projections used in our analysis are not achieved, there may be a negative effect on the valuation of these assets.

Long‑Lived Assets

We review property and equipment and other long‑lived assets for impairment whenever events or circumstances indicate that their carrying amounts may not be recoverable. If such events or changes in circumstances occur, we will recognize an impairment loss if the undiscounted future cash flows expected to be generated by the assets are less than the carrying value of the related assets. The impairment loss would adjust the asset to its fair value.

In evaluating the recoverability of long‑lived assets, we must make assumptions regarding estimated future cash flows and other factors to determine the fair value of such assets. If our cash flow estimates or related assumptions change in the future, we may be required to record impairment charges related to property and equipment and other long‑lived assets. Asset recoverability is first measured by comparing the assets’ carrying amounts to their expected future undiscounted net cash flows to determine if the assets are impaired. If such assets are considered to be impaired, the impairment recognized is measured based on the amount by which the carrying amount of the assets exceeds the fair value.

Due to the Gearing segment’s operating losses in each quarter of 2015 combined with its history of continued operating losses, we continue to evaluate the recoverability of certain of the long‑lived assets associated with the Gearing segment. Based upon our December 31, 2015 impairment assessment, the undiscounted cash flows based upon our most recent projections were less than the carrying amount of the related asset group, and a possible impairment to these assets was indicated under step one of ASC 360 testing. However, based on third-party appraisals and other estimates of the fair value of Gearing assets, we determined the fair value of these assets is in excess of carrying amounts under step two of ASC 360 testing, and no impairment was indicated. The appraised value of the assets was determined primarily using market value third-party appraisals. To the extent projections used in our evaluations are not achieved, there may be a negative effect on the valuation of these assets.

During 2015, we took a $186 charge to adjust the carrying value of the Clintonville, Wisconsin facility assets to fair value of this Assets Held for Sale to $554 as of December 31, 2015 based on negotiations that resulted in an executed sale contract subsequent to the year-end. The Clintonville facility was originally classified as an Assets Held For Sale in 2013, and due to depressed commercial real estate values we have recorded an additional impairment. We believe that the current classification remains appropriate.

The Cicero Avenue facility in Cicero, Illinois was taken offline in 2014 in conjunction with our plant consolidation completion. Due to ongoing environmental remediation, the Cicero Avenue facility is not immediately available for sale and it has not been classified as Assets Held for Sale, however in 2013, it was substantially impaired to its current carrying value of $560.

Income Taxes

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

In connection with the preparation of our consolidated financial statements, we are required to estimate our income tax liability for each of the tax jurisdictions in which we operate. This process involves estimating our actual current income tax expense and assessing temporary differences resulting from differing treatment of certain income or expense items for income tax reporting and financial reporting purposes. We also recognize the expected future income tax benefits

of net operating loss (“NOL”) carryforwards as deferred income tax assets. In evaluating the realizability of deferred income tax assets associated with NOL carryforwards, we consider, among other things, expected future taxable income, the expected timing of the reversals of existing temporary reporting differences, and the expected impact of tax planning strategies that may be implemented to prevent the potential loss of future income tax benefits. Changes in, among other things, income tax legislation, statutory income tax rates or future taxable income levels could materially impact our valuation of income tax assets and liabilities and could cause our income tax provision to vary significantly among financial reporting periods.

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

Workers’ Compensation Reserves

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

Health Insurance Reserves

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

Recent Accounting Pronouncements

We review new accounting standards as issued. Although some of the accounting standards issued or effective in the current fiscal year may be applicable to us, we have not identified any new standards that we believe merit further discussion, except as discussed below.

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014‑09, Revenue from Contracts with Customers, which amends the guidance in former Accounting Standard Codification Topic 605, Revenue Recognition, and provides a single, comprehensive revenue recognition model for all contracts with customers. This standard contains principles that an entity will apply to determine the measurement of revenue and timing of when it is recognized. The entity will recognize revenue to reflect the transfer of goods or services to customers at an amount that the entity expects to be entitled to in exchange for those goods or services. This update permits companies to either apply the requirements retrospectively to all prior periods presented, or apply the requirement in the year of adoption, through a cumulative adjustment. In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606) Deferral of the Effective Date, which amends the previously issued ASU to provide for a one year deferral from the original effective date. This update is effective for public business entities for annual reporting periods beginning after December 15, 2017, including interim periods within those reporting periods. Early adoption is permitted for annual reporting periods beginning on or after December 15, 2016, including interim periods within that annual period. We will adopt the provisions of ASU 2014‑09 and ASU 2015-14 for the fiscal year beginning January 1, 2018, and are currently evaluating the impact on our condensed consolidated financial statements.

In November 2015, the FASB issued ASU 2015-17, Income Taxes (Topic 740), to simplify the presentation of deferred income taxes. Under the new standard, both deferred tax liabilities and assets are required to be classified as noncurrent in a classified balance sheet. This standard will become effective for fiscal years, and the interim periods within those years, beginning after December 15, 2016, with early adoption allowed. During the fourth quarter of 2015, we elected to prospectively adopt this standard. The prior reporting period was not retrospectively adjusted. Note 15, “Income Taxes” of these condensed consolidated financial statements contains additional information regarding the adoption of this standard.

LIQUIDITY, FINANCIAL POSITION AND CAPITAL RESOURCES

As of December 31, 2015, cash and cash equivalents and short-term investments totaled $12,615, a decrease of $7,466 from December 31, 2014. Total debt and capital lease obligations at December 31, 2015 totaled $5,846, and we had the ability to borrow up to $9,500 under our Credit Facility (as defined below). 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 and our Credit Facility.

On August 23, 2012, we established a $20,000 secured revolving line of credit (the “Credit Facility”) with AloStar Bank of Commerce (“AloStar”) pursuant to a Loan and Security Agreement dated August 23, 2012 (as amended, the “Loan Agreement”). On June 29, 2015, the Credit Facility was amended to extend the maturity date, modify the applicable interest rate minimum quarterly interest charges and convert $5,000 of the original Credit Facility amount into a term loan (the “Term Loan”). The Credit Facility and the Term Loan each mature on August 31, 2016.

Under the terms of the Credit Facility, AloStar will advance funds when requested up to the level of our borrowing base, which consists of approximately 85% of eligible receivables and approximately 50% of eligible inventory. Under the Credit Facility, borrowings are continuous and all cash receipts are automatically applied to the outstanding borrowed balance.

The Loan Agreement contains customary representations and warranties. It also contains a requirement that we, on a consolidated basis, maintain a minimum monthly fixed charge coverage ratio (the “Fixed Charge Coverage Ratio Covenant”) and minimum monthly earnings before interest, taxes, depreciation, amortization, restructuring and share-based payments (“Adjusted EBITDA Covenant”), along with other customary restrictive covenants, certain of which are subject to materiality thresholds, baskets and customary exceptions and qualifications.  As of September 30, 2015, we were not in compliance with the Adjusted EBITDA Covenant.  Consequently, an Eighth Amendment to Loan and Security Agreement and Waiver was executed on October 16, 2015, which waived our compliance with all covenants as of September 30, 2015, amended the Adjusted EBITDA Covenant going forward and provided that the Fixed Charge Coverage Ratio Covenant would be recalculated for future periods commencing with the quarter ending March 31, 2016.

We are considering renewal of the Credit Facility and also reviewing other financing alternatives in anticipation of the scheduled expiration of the Credit Facility and the Term Loan on August 31, 2016. As of December 31, 2015, there was no outstanding indebtedness under the Credit Facility, we had the ability to borrow up to $9,500 thereunder and the per annum interest rate thereunder was 4.25%.  Also as of December 31, 2015, there was $2,799 in outstanding indebtedness under the Term Loan. As of December 31, 2015, we were not in compliance with the Adjusted EBITDA Covenant. On February 23, 2016, we and AloStar executed a Ninth Amendment to Loan and Security Agreement and Waiver (the “Ninth Amendment”), which waived our compliance with the Adjusted EBITDA Covenant as of December 31, 2015, amended the Adjusted EBITDA Covenant going forward, provided that the Fixed Charge Coverage Ratio Covenant would be recalculated for future periods commencing with the quarter ending June 30, 2016, reduced the amount of the Credit Facility to $10,000, and extended the maturity date of the Credit Facility to February 28, 2017. The Ninth Amendment also contains a liquidity requirement of $3,500 and establishes a reserve against the borrowing base in an amount equal to the outstanding balance of the Term Loan at any given time. 

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

Sources and Uses of Cash

Operating Cash Flows

During the year ended December 31, 2015 net cash used by operations was $5,512 compared to net cash provided by operating activities totaled $6,115 for the year ended December 31, 2014. The decrease in net cash provided by operating activities was primarily attributable to the timing of receipt of customer deposits and a larger loss from continuing operations in 2015. Partly offsetting this were lower accounts receivable and inventory and higher account payable levels.

Investing Cash Flows

During the year ended December 31, 2015, net cash provided by investing activities was $212 compared to net cash used in investing activities of $12,169 for the year ended December 31, 2014. The increase in net cash provided by

investing activities as compared to the prior‑year period was primarily attributable to lower purchases of available for sale securities and lower capital expenditures in 2015.

Financing Cash Flows

During the year ended December 31, 2015, net cash provided by financing activities was $2,052 compared to net cash used in financing activities of $2,767 for the year ended December 31, 2014. The increase in net cash provided by financing activities as compared to the prior‑year period was due primarily to lower repurchases of common stock and proceeds from debt in 2015.

Other

Included in Long Term Debt, Net of Current Maturities is $2,600 associated with the New Markets Tax Credit transaction described further in Note 19, “New Markets Tax Credit Transaction” in the notes to our consolidated financial statements.

Contractual Obligations

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and as such are not required to provide information under this item.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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

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

None.

ITEM 9A.  CONTROLS AND PROCEDURES

(a)Evaluation of Disclosure Controls and Procedures

We seek to maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) that are designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. This information is also accumulated and communicated to management, including our Interim Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), as appropriate, to allow timely decisions regarding required disclosure. Our management, under the supervision and with the participation of our CEO and CFO, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the most recent fiscal year reported on herein. Based on that evaluation, our CEO and CFO concluded that our disclosure controls and procedures were not effective as of December 31, 2015 because of the material weaknesses in internal control over financial reporting described below.

(b)Changes in Internal Control over Financial Reporting

We made one change in our internal control over financial reporting during our last fiscal year that has materially affected or is reasonably likely to materially affect our internal control over financial reporting. As more fully described below, our inventory cycle count procedures did not initially call for a complete count of inventory items with a low individual value (“C items”); therefore, we updated our cycle count policy to require full annual coverage of all inventory items. We did not conduct these complete cycle counts of C items in our Towers and Weldments segment in the last quarter of 2015.

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

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

Our management, including our CEO and CFO, assessed the effectiveness of our internal control over financial reporting as of December 31, 2015. Management based this assessment on criteria for effective internal control over financial reporting described in “Internal Control—Integrated Framework (2013)” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management determined that, as of December 31, 2015, our internal control over financial reporting was not effective because of the material weaknesses in internal control over financial reporting described below.

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim consolidated financial statements will not be prevented or detected on a timely basis.

Inventory Accounting

We did not maintain effective controls over the completeness, accuracy and existence of inventory during 2015. Specifically, controls over completeness, accuracy and existence regarding one specific type of inventory in our Towers and Weldments segment were not properly designed to prevent or detect material misstatements on a timely basis and, therefore, constitute a material weakness. Transactions for towers internal inventory components were not always properly recorded in our inventory records and these errors were not caught timely because our cycle count and annual count procedures did not require a complete count of inventory items with a low individual value. We began conducting these complete cycle counts of C items in the last quarter of the year. This material weakness resulted in inventory charges of $919 that were corrected prior to the issuance of this Annual Report and give rise to a reasonable possibility that material misstatements of inventory in our annual or interim financial statements will not be prevented or detected on a timely basis.

(d)Remediation Plan

As part of our commitment to strong internal controls over financial reporting, we (a) conducted an assessment of the root causes of the related control deficiencies, (b) began complete counts of related inventory in connection with our year-end closing, (c) made progress in remediating issues, and (d) will initiate other remedial actions under the oversight of the Board’s Audit Committee, including:

Inventory Accounting

We believe we have made substantial progress toward completing our remediation of the above-described material weakness in the fourth quarter of 2015 and throughout our year-end closing process by performing a comprehensive count and analysis of detailed internal inventory components, assessing the magnitude of potential out-of-period adjustments, and making required adjustments to our financial statements. We will maintain and validate the effective operation of these controls in 2016, before concluding that we have remediated this material weakness in inventory completeness, accuracy and existence controls.

We can give no assurance that the measures we take will remediate the material weaknesses that we identified or that any additional material weaknesses will not arise in the future. We will continue to monitor the effectiveness of these and other processes, procedures and controls and will make any further changes that management determines appropriate.

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

ITEM 9B.  OTHER INFORMATION

On February 23, 2016, we and AloStar executed the Ninth Amendment, which waived our compliance with the Adjusted EBITDA Covenant as of December 31, 2015, amended the Adjusted EBITDA Covenant going forward, provided that the Fixed Charge Coverage Ratio Covenant would be recalculated for future periods commencing with the quarter ending June 30, 2016, reduced the amount of the Credit Facility to $10,000, extended the maturity date of the Credit Facility to February 28, 2017. The Ninth Amendment also contains a liquidity requirement of $3,500 and establishes a reserve against the borrowing base in an amount equal to the outstanding balance of the Term Loan at any given time.

The foregoing summary does not purport to be complete and is qualified in its entirety by reference to the Ninth Amendment, which is attached hereto as Exhibit 10.49.

PART III

ITEM 10.  DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

With the exception of the description of our Code of Ethics and Business Conduct below, the information required by this item is incorporated herein by reference from the discussion under the headings “Directors and Director Compensation,” “Corporate Governance,” “Executive Officers” and “Other Matters—Section 16(a) Beneficial Ownership Reporting Compliance” in our definitive Proxy Statement to be filed in connection with our 2016 Annual Meeting of Stockholders (the “2016 Proxy Statement”).

Code of Ethics

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

ITEM 11.  EXECUTIVE COMPENSATION

Information regarding director and executive compensation is incorporated by reference from the discussion under the headings “Directors and Director Compensation” and “Executive Officers” in the 2016 Proxy Statement.

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

Certain of the information required by this item is incorporated herein by reference from the discussion under the heading “Security Ownership of Certain Beneficial Holders and Management” in the 2016 Proxy Statement.

The following table provides information as of December 31, 2015, with respect to shares of our common stock that may be issued under our existing equity compensation plans:

EQUITY COMPENSATION PLAN INFORMATION

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

The information required by this item is incorporated herein by reference from the discussion under the headings “Certain Transactions and Business Relationships” and “Corporate Governance” in the 2016 Proxy Statement.

ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by this item is incorporated herein by reference from the discussion under the heading “Ratification of Appointment of Independent Registered Public Accounting Firm” in the 2016 Proxy Statement.

PART IV

ITEM 15.  EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

1.  Financial Statements

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

2.  Financial Statement Schedules

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

3.  Exhibits

The exhibits listed on the Index to Exhibits (pages 64 through 67) are filed as part of this Annual Report.

INDEX TO FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders

Broadwind Energy, Inc.:

We have audited the accompanying consolidated balance sheets of Broadwind Energy, Inc. and its subsidiaries as of December 31, 2015 and 2014, and the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2015. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Broadwind Energy, Inc. and subsidiaries as of December 31, 2015 and 2014, and the results of their operations and their cash flows for each of the years in the two-year period ended December 31, 2015, in conformity with U.S. generally accepted accounting principles.  

/s/ KPMG LLP

Chicago, Illinois

February 26, 2016

BROADWIND ENERGY, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

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

BROADWIND ENERGY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

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

BROADWIND ENERGY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands, except share data)

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

BROADWIND ENERGY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)